5 Key Benefits of using 3rd Party Logistics (3PL) Partners for Returns & Repairs

by Charlie Mantione, EVP & Chief Revenue Officer

Effective management of the Returns & Repairs piece of your manufacturing business can generate huge returns as discussed in our previous article (here).

But coordinating all the parts of a successful repair operation is complex and if the flow of items to be repaired is inconsistent (dozens one week, zero the next) then batching those repairs will probably become the standard procedure.  The problem is that performing repairs in a batch process will expand your turnaround time and may diminish valuable customer goodwill. (and send them to Twitter or Facebook where they’ll trash your hard earned reputation all over the Internet).

Operating expenses associated with running an active Returns & Repairs operation are a huge factor; Facility, Workers, Management, Training, Supply Chain are a few of the pieces of this puzzle that can hammer your budget.

An on-demand model for handling a company’s Returns & Repair

A solid alternative is bringing a 3rd Party Logistics partner (3PL) aboard to handle your Returns & Repairs.  Hiring a 3PL to manage your repair process can yield enormous benefits, it could also cause the mother of all headaches if the right match isn’t made.

When working with a 3PL, the key traits should be:

1. Experience repairing, not just replacing, expensive components.  Repairing circuit boards vs. just swapping them can significantly help manage your Op Ex.
2. Clear form of communications – with you as the manufacturer and with your client.  Delays happen; parts don’t show up, etc. your customers need to know the status of their product’s repair (even if it’s bad news)
3. Most importantly; Fast Turnaround Time. Batching a number of orders or slow processes create unacceptable turnaround times, your vendor needs to commit to a sub 10 day turnaround and then need to do whatever necessary to keep that commitment.

3PL’s are the missing puzzle piece in the strategic picture.

So what exactly is a 3PL and how do they deliver value?

To really get into what they are, it’s best to visualize and consider what it is they do for clients.  3rd Party Logistics Partners provide a turnkey process; total management of a niche – your specialized and controlled process – such as Returns & Repairs.

Many 3PLs have diversified and specialized their service offerings enough to be true experts within many logistics-based market niches.  With Returns & Repairs management, 3PLs act as a sole-source partner that handle everything from managing returns, performing repairs, monitoring and managing inventory, and most importantly handling the entire logistics process (from inception to completion).

Your 3PL is a vested strategic partner. This 3PL partner must align their core competency with yours in order to be successful. The better they manage your operation, the more both parties prosper.  3PLs have unique expertise which enable them to improve your Returns & Repair process, shorten turnaround time, create happier customers and improve management of operational expense.

5 Key Benefits Gained By Using A 3PL:

1. Better margins and a stronger bottom line

• The most important subset of total repairs is the approximately 9-10% of products returned to your firm under warranty.
• If the repair cycle is short and high quality, your customers will be more receptive to supporting your brand and buying more products – sometimes even at the point of repair.
• Dedicated and specialized 3PL partnerships can generate more revenue by opening a second sales window.

2. Reductions in Operational Expenses

• Returns & Repair handled in-house require large capital and operation investment, facilities, staff, training, parts sitting on the shelf waiting to be used.
• Working with a 3PL eliminates 100% of that capital expense and can significantly reduce the operational expense particularly if repair staff is not required full time.
• Working with a 3PL who offers increased visibility, your expenses will be much simpler to monitor and improve upon

3. Streamlined operational throughput

• 3PLs have the advantage of constructing a process around both customer and client needs, granting the flexibility to offer dynamic repairs with high visibility.
• Returns are the customer’s first exposure to your company after the initial sale, and it is also when the perception of your brand can be most critical.
• Developing faster repair cycles with a solid 3PL turnkey partnership is an opportunity to create a ‘value-added’ activities rather than nurturing or ‘preventing’ potential negative customer experiences with existing extended cycle times.
• Better business process visibility eliminates the “Where is my device?” customer perception problem and changes it to positive feedback and sales opportunities.

4. improved customer satisfaction due to shorter process turnaround

• 3PLs specialize in total process management – every repair that is trackable, fast, and high quality will prompt some percentage of customers to post a positive online review, or share experience via word of mouth.
• 3PLs eliminate the risk of low quality warranty repair through consistency, visibility and process adaptability. This reduced risk over time will lead to reduced operational expenses and help to promote your brand.
• Customers are more likely to view your product as being of a higher quality if the return and repair cycle is quick and the repair was done right.

5. Continuous improvement opportunities

• When a 3PL uses six sigma and ISO 9001 during process integration, they will be looking at every repair opportunity uniquely.
• Fostering an adaptive focus by partnering with a 3PL is the best way to eliminate process specific resource waste. Waste in the repair and warranty arena is of course best measured in the most valuable resource… Time.
• Less variability and dedicated process management reduces overall error potential in logistics, processing, and customer exchanges.
• Commitment to continuous improvement brings both firms closer to Six Sigma (less defects) incentivizing synergistic growth.

These benefits show how valuable the right 3PL can be for process, time management and op ex management. Faster turnaround time in product repair and warranty is critical for maintaining long-term customer loyalty with an important subset of your customers.  According to Forbes, customers have never been less brand loyal then they are today,  delivering the highest quality post sale service helps manufacturers differentiate themselves from their competitors.

Conclusion

Optimizing the in-warranty repair lifecycle certainly doesn’t receive as much attention as product design, research, manufacturing or launch but the in-warranty repair is your customer’s first interaction with your company post sale.

A quality 3PL partner can reduce your repair and warranty cycle time from industry averages of over 20 days to just 4 days.   Shortening the Returns & Repair cycle is one of the most critical pieces of the strategic puzzle by helping your company promote competitive advantage by promoting brand loyalty.

PanurgyOEM offers quality 3rd Party Logistic (3PL) services to consumer electronics, industrial control and office automation vendors worldwide.   Located in Rockaway, NJ and founded in 1984, PanurgyOEM is the industry’s premier partner for 4-Day Turnaround repair cycles.