Monday, January 16, 2012

Holiday Spending, Returns and Need for a Closed Loop PLM System

I was reading about the 2011 U.S. Christmas Holiday Retail Data this weekend and noted some interesting points:
  1. According to the National Retail Federation, December retail industry sales (which exclude automobiles, gas stations, and restaurants) increased 4.1 percent to $471.5 billion – slightly surpassing NRF’s holiday sales forecast of 3.8 percent growth. [source]
  2. Gifts are the most common purchase that consumers make during the major holidays (nearly 50%). Top gifts categories were: Clothes, Gift cards, Electronics, Jewelry, Home and garden, Personal care, cosmetics and pampering, Toys, sporting goods and hobbies. 
  3. Shoppers are expected to return 9.9% of their Christmas purchases, which would be the highest return rate since the recession.  [source]
  4. $46 billion of merchandise is predicted to be returned, which would be a 4% increase when compared to holiday gift returns in 2010. About 33% of shoppers said they return gifts in the NRF 2011 Holiday Returns Survey. [source]
  5. Reasons for returns vary: Buyer’s remorse, better deals elsewhere, unwanted gifts, too many of certain kind, shopping error etc. [various sources]

One of the major reasons for return also is because of manufacturing defects. Usually all merchandise with manufacturing defects that are returned by customers are claimed back to the producer by retail vendors, even if this occurs after the “selling season”. Although I couldn’t get any specific data on the amount of returns due to faulty products but I assume it will be a significant amount in dollar terms. 

Managing product returns due to manufacturing defects, obsolete products and shipping errors is difficult to say the least. Manufacturers must manage the reverse flow efficiently to ensure maximum recovery, and reduced wastage. While larger manufactures due to deeper pockets might be able to withstand the financial effects of high returns, smaller manufacturers tend to lose a lot more. 

Hence it is imperative that they: 
  1. Integrate their Quality Lifecycle Management (QLM) and Reliability Management solutions with their PLM solution. This will not only trim down the cost of poor quality but also will allow them to utilize lessons learned to augment product designs (thereby closing the loop in the product lifecycle).
  2. Integrate Warranty Management into PLM so that manufactures can build an early-warning closed-loop system which will enable continuous product and service improvement.
  3. Develop strategies for End-Of-Life Management so that returned products can be refurbished, repaired or disposed efficiently and in a cost-effective manner. For high-value, high-velocity products it makes sense to integrate the Returns Management platform with PLM for better asset recovery, warranty, returns, repair, and refurbishing, packaging and repackaging services.

My 2 cents – Would like to hear your thoughts on this.

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