RETURNS MEAN TROUBLE and expense at either end of the supply chain, and the larger the business, the larger the potential headache of returns. Just ask Tellabs, a telecommunications equipment and supplies corporation based in Naperville, IL. Despite an impressive $1.3 billion in sales, returns processing represented an annual cost of $30 million. To improve efficiency, Tellabs turned to collaborative commerce channel management software and services provider Click Commerce, headquartered in Chicago.
The pivotal issue was clear immediately, says Nancy Koenig, vice president of product operations and marketing for Click Commerce. “Managers could just look at product lying around and tell that there was a significant returns problem. It was relatively easy to see what ROI might look like after implementing a dedicated returns network.”
A LITTLE HELP FROM YOUR FRIENDS Click Commerce experts worked for a month to develop a business plan, discovering in the process $9 million in unresolved returns and another $2 million worth of inventory held in transit every month. The first phase, simply automating credit returns, reduced what had been an average 45-day process to 2-3 days.
In the second phase, Click Commerce facilitated the establishment of a returns network with third-party applications partners, including Sanmina-SCI to handle Tellabs’ repair and replace functions, MCA Solutions to handle parts planning and optimization, and DHL to handle Tellabs’ physical infrastructure as a 3PL. The new returns network helped the firm reduce spare parts stocking levels by $5 million, slashed in-transit inventory by approximately $1.76 million per month, decreased cycle time by 88%, and changed the rate of return requests that are handled automatically to the 90% target — with the added benefit to Tellabs of moving inventory held by the network partners off Tellabs’ books
DON’T TRY THIS AT HOME “In order to establish a network,” Koenig says, “you need to be sure you have a good process as the basis. She cites Click Commerce’s secure, Internet-based portal for process optimization, adding, “We’ve gone back to our roots.” Koenig believes that more companies are willing to use Web-based applications these days, and she credits the Sarbannes-Oxley law for part of that impulse: Several Click Commerce customers have reported that they believe they were able to pass their Sarbannes-Oxley Section 404 audit simply because they had automated their business processes.
QUICK STAT
| ($ millions) | ||
|---|---|---|
| Year | 2003 | 2005 |
| Transponders | 554 | 853 |
| Readers | 272 | 683 |
| Software/Service | 301 | 594 |
| Source: Venture Development Corporation | ||