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Inventory Optimization Strategies Q&A with Omur Bagci, Director Global Services at ReSolve, a subsidiary of Arrow Electronics

Inventory Optimization Strategies Q&A with Omur Bagci, Director Global Services at ReSolve, a subsidiary of Arrow Electronics

by Omur Bagci, Leader, Global Services Team, Resolve

Reverse Logistics Magazine, Edition 65

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As a leader in the reverse supply chain industry, Omur Bagci is an expert on risk mitigation and helps manufacturers and retailers maximize reward within the supply chain. Specifically, he has decades of experience in how companies can optimize spare parts inventory for service supply and for product returns and repairs. In this interview, Omur Bagci will discuss how inventory risk management and use of lean principles can reduce the risk of overstock and optimize service spares management.

RLM: Omur, an increasing number of companies seem to be employing asset reallocation strategies. Why is managing the supply chain such an issue for technology manufacturers?

OB: The service supply chain is complex and often confusing. Typically, an OEM does not have the proper, dedicated resources needed to streamline the overall process. Forward-looking companies are realizing the value that can be captured with new or increased efficiencies added to processes currently in place. This untapped value will result in greater customer satisfaction levels, cost avoidance opportunities and increased revenues.
The inefficiencies within the reverse supply chain alone are costing some technology manufacturers millions of dollars each year. Most OEMs just don’t have the bandwidth to develop and execute best practices to optimize the reverse supply chain.

RLM: We understand that the management of service spares inventory is a constant struggle. What is the most common pitfall OEMs face in managing service spares?

OB: Traditionally, to avoid facing inventory shortfalls and ultimately unhappy customers, technology manufacturers usually find themselves erring on the side of caution by keeping an ample amount of service spares inventory on hand. Unfortunately, this strategy time and time again leaves companies with excessive inventory positions that are just not needed once warranty support for a particular platform is no longer required. The situation often ends with the need to liquidate unused inventory at great discounts in the open market. This is a risky proposition for many reasons, the obvious one being that liquidation of excess inventory at steep discounts is causing the company to incur unnecessary losses to its bottom line when the inventory was not needed in the first place. ReSolve recommends adopting a customized lean planning methodology to address this issue.

RLM: So the first step is lean planning. What does this involve, and how does it relate to service spares?

OB: Instead of a traditional planning system that takes long-term inventory positions, lean planning is the practice of focusing on the operations that create value for the end consumer only. It is a practice that is based on continuous flow principles and economies of scale. The purpose of this flow is to ensure that parts moving through the supply chain are shifting when and where they are needed. The result is a streamlined service supply chain and more efficient integration of the inventory optimization process within the overall company. In service spares, the necessity to meet service, inventory and last-time buy requirements has inflated inventory levels. Lean planning can reduce the pressure to carry excess inventory and can eliminate the risk of last-time buy requirements.

Among other things, lean planning can provide the service spares environment with just-in-time delivery practices, market insight and intelligent sourcing techniques for component inventory.

RLM: What intelligent sourcing techniques do you recommend for service spares?

OB: Intelligent sourcing begins by looking at alternative channels often overlooked in the supply chain. For example, the reverse supply chain is often receiving fully functional materials back into its facilities from consumer product returns and service depot returns. Our experience has been that a significant percentage of these materials or components within what is known as “no trouble found” (NTF) are in good working condition. By introducing a rigorous testing and screening process into the returns process to identify materials and components that not only are NTF but meet strict manufacturer specifications, the materials can be intelligently reintroduced back into the service supply chain, providing significant cost savings.

To accomplish this, I recommend employing a reverse supply chain partner that will offer the service provider a proper strategy, methodology and tools to implement such a program. This will allow the service provider to focus on its own particular areas of expertise. And a strategic asset reallocation program will address and help mitigate the risks associated with carrying excess inventory.

Overall, the major benefits realized come from the money saved by reducing service spares inventory levels while maintaining customer satisfaction levels, reducing recycling costs and freeing up revenue that is no longer needed to procure new parts.

RLM: Now, on to more specific inventory optimization strategies. What are the offerings of a supply chain specialist?

OB: Optimized inventory is the practice of taking key data points and analyzing them to ensure that just the right amount of inventory is available in the right places at the right time. It depends on the presence of an efficient lean planning system. Measurement is also a key factor. Frequent measurement allows for these data points to be constantly evaluated and adjusted.

By optimizing excess inventory through a supply chain partner’s asset reallocation program, the burden of inventory liability is removed from technology companies and transferred to reverse supply chain specialists that have strategies designed to address inventory management.

RLM: What specific services will impact the bottom line?

OB: I think that there are three optimization strategies in particular that stand out for their impact on the bottom line. First is product identification – classification, testing and refurbishment. Second is reconciliation and reporting, and last is reverse fulfillment.

RLM: Can you give us a quick summary of each?

OB: Sure. Product identification helps to define the product’s quality and restrictions, which informs the tasks necessary to maximize a product’s value by testing and recertifying it to ODM or OEM standards. Reconciliation and reporting is important because it gives specialists the ability to reconcile products at any stage in the life cycle, thanks to real-time reports. And finally, reverse fulfillment brings the excess inventory or customer returns back into the supply chain for service spares.

In reality, employing any of the strategies I’ve mentioned earlier will improve a company’s excess inventory issue. These offerings will help organizations to reduce inventory liability, maximize revenue and reduce operational costs – all while maintaining customer satisfaction.

RLM: Omur, we know you were formerly Converge, which has now become ReSolve. What is ReSolve?

OB: You’re right. As a subsidiary of Arrow Electronics, the Converge name has taken on a new meaning. Arrow has expanded its supply chain services to meet the growing needs of customers, and under the Converge brand will have access to the extensive electronic components distribution services it has been providing for over 30 years. With ReSolve, the former reverse supply solutions division of Converge has grown into a new segment focusing strictly on reverse logistics solutions. Overall, ReSolve offers reverse logistics management for technology-driven companies around the world, providing worry-free service spares inventory, product returns management, and the intelligent redeployment of assets.

RLM: Thank you for your time!

OB: My Pleasure.
As the leader of the ReSolve global services team, Omur Bagci is responsible for ensuring the implementation, execution and expansion of ReSolve’s strategic service offerings. He develops customer solutions for service spares and product returns management that reduce the need for excess service inventory and help companies recover value from their return products stream. Omur previously developed reverse supply chain solutions under Converge for the past 12 years and has worked at Alliance Consulting Group. Omur holds a degree in physics with a background in computational physics.
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