Seagate describes its “closed-loop” strategy

Editor’s Note: Reverse logistics, once thought to be a very minor piece of the supply chain, has evolved to the point where these services, whether they are managed internally or outsourced to a professional returns company, are considered to be a significant part of managing product flow in the supply chain.  For a good number of years, returns have been managed in a very mechanical and labor-intensive way, but with the adoption of the latest in technology, and more flexible operating systems, reverse logistics is taking on a whole new look – one that is adapting to the needs and changes that are taking place in the marketplace.

This is an exclusive interview with Dennis Omanoff, Senior Vice President, Supply Chain and Procurement, Seagate Technology

Logistics Management: What is the first step a shipper should take when securing its supply chain?

Dennis Omanoff: We work with our Logistics partners to ensure that the same security requirements that are in place for our outbound freight are also in place for our reverse logistics freight.  We hold monthly, security-centric reviews with all of our partners, and we leverage the learnings between the two supply chains (outbound and reverse) in order to ensure that any identified best practices are put into practice on a global basis, regardless of their origin.  I think that it is also important to partner with Logistics providers that have both the capability and the commitment to supply-chain excellence, in order to ensure that the overall supply chain — outbound and reverse — is subject to global best practices and benefits from leading- edge technologies (such as advanced GPS and RFID utilization).  Finally, it is important to have metrics that measure the important and tangible KPI’s that drive a successful supply chain to be visible internally as well as with our partners, to be a central part of our monthly supply-chain reviews, so that corrective action, if necessary, takes place in a closed-loop manner.  Metrics-driven performance is a hallmark of continuous improvement, and that is central to Seagate Logistics and our entire supply chain.
  
LM: How many “scalable solutions” exist for them to consider?

Omanoff: When working with our partners, we do not try to limit any solutions from an input perspective.  You might call this the “no idea is a bad idea” philosophy.  Now once the idea or solution is provided we will of course undertake our due-diligence, ensuring that we do not optimize one area at the expense of another.  We will also try to come up with any “unintended consequences” of implementing a solution or a new idea.  Again, we do this so that at the end of the day, if a new solution or methodology is implemented, that Seagate overall, and by extension its customer base, is better off than before.  That is the fundamental guiding principle that drives our behavior along with the behavior of our logistics partners.

LM: Can you describe a “worst case” scenario for Seagate?

Omanoff: The two worst-case scenarios that I can think of align the outbound and reverse logistics functions closely.  The first one is to have a scenario such that could have existed during the height of the Thailand flood impact on the disc drive industry the last quarter of 2011.  That “worst-case” would be to fulfill the demand of our customers.  We have done much work over the past few years in areas of co-planning to really make the term “partnership” a meaningful one with respect to our alignment with our customer base.  As a result of this, as-well-as with the scalability of our own logistics partners, we were able in large part, to meet the demand requirements of our customer base even though overall supply was significantly affected.  This meant that the triad of Customer-Seagate-Logistics Provider had to be linked seamlessly so that critical supply allocation and delivery could be successfully completed.  This would not have been possible without the foundational work that had been done in previous years associated with our supply-commit process as-well-as our product fulfillment process.

The second scenario that Seagate, its customers and its supply chain partners work to eliminate, would be shipments to “banned” countries.  We have developed, along with our logistics partners, a multi-layer process to prohibit shipping to countries that are embargoed by the United States.  This includes IT solutions that link between Seagate and our logistics providers that have many layers of redundancy so that failure of a single check, even though that is a very remote possibility, would not lead to an overall failure of our system.  These IT solutions are backed-up with constant training and re-training of those individuals, be they Seagate employees or employees of our logistics partners.  We are constantly looking at how entities in embargoed nations try to circumvent our processes in order to proactively stay ahead of them, rather than react to them.??

LM: How do you ensure that such a disaster does not occur in the reverse loop?

Omanoff: We have pro-active monitoring by regional teams, return SPC monitoring, returns forecast versus actuals monitoring, routine communications with major accounts and returns mitigation screening to prevent improper returns in high-risk areas.  If you go back to the initial question, you will recall that the outbound and reverse logistics supply chains are closely linked so that what is learned in one area is rolled out to the other.  There is no wall between these supply chains.  They are intertwined so that we both optimize on cost as well as on controls, processes, procedures and best practices.  That is the only way that we know of to make sure that there is no “weakest link” in our supply chain.

LM: Finally, what other questions should we be asking when evaluating the current state of reverse logistics?

Omanoff: I think that security, repeatability, conformance to governance, customer satisfaction, and of course, cost, all play a role in evaluating a reverse logistics supply chain.  And that is no different from an outbound supply chain. So I think that if you can “marry” the two, propagate best practices regardless of origin, truly partner with your logistics providers and foster an environment that places real importance on the value of metrics and data analytics, you can work toward best-in-class performance.  And as long as you are never satisfied with the status-quo, and understand that “best-in-class” is an ever changing target, then you and your customers can enjoy the benefits of a supply chain that is highly responsive, no matter what direction (outbound or reverse) that it is moving in.