Case Study #1 – Major Manufacturer

 

 

Maximizing Recovery Value for At-risk Inventory without Channel Conflict

 

OEM Profile: Manufacturer of PC Accessories/Software; Fortune top 3 consumer electronics and software manufacturer with a well known and respected brand image, majority market share and a well established presence in Tier 1 Distributors and CE Retailers world-wide.  Segue has entered its eighth year of consecutive partnership with OEM.  Segue is responsible for all customer/retail/disti product returns.  Volume of units is 40-100K units per month.

 

Issues and Challenges

·         Customer Returns, excess and obsolete inventory was not being sold due to previous years experience of cannibalization and erosion of A-stock sales and margins due to  channel conflict issues

·         High costs associated to redundancies of inventory management between multiple geographic touch points (distribution center, returns center, processing center, recycling center:  accounting, reconciliation, freight movement, management, etc.)

·         Inventory was accumulating in warehouses with carrying costs exceeding 16% per month (industry average is 14%) with no plan for eliminating these costs

·         OEM did not have the appropriate resources, process or desire to manage the wide variety of models/SKUs of returns and E and O inventory

 

Desired Outcomes/Key Performance indicators

·         Recover maximum asset recovery while mitigating channel conflict

·         Reduce associated carrying costs of E and O, customer returned inventory

·         Eliminate redundancies within inventory management process

·         Protect brand image and reputation

·         Efficient and automated process with minimal OEM management time required

 

Segue Solution and Deliverables

·         End-to-end solution including return center, Inventory processing and Remarketing

o    Took fiscal and physical ownership of all E+O and customer returns inventory

o    OEM carrying costs reduced to “O”, substantially increasing return recovery

·         Established automated purchase price of inventory loads (guaranteed % vs. COGS)

o    Reduced monthly management negotiating issues

o    Provided the OEM the ability to forecast asset recoveries/set reserves

·         Established end-to-end full supply chain solution consolidating RC/RL/Remarketing into one geographic location

·         Established inventory processing operations increasing yield and quality of customer returned product resulting in increased asset recovery dollars while protecting brand

·         Leveraged closed, authorized sales channel maximizing recovery, protecting channel

o    Premier buyers are attracted to a controlled, authorized channel

o    Product margins stabilized over extended period of time

o    Return against COGS to OEM increased year over year as customer base evolves and Segue processes and efficiencies improve

o    Open book price reviews are conducted to measure conformance to plan

o    Segue provides self managed warranty; OEM benefits from customer

 

Value Delivered by Segue

·         Over $100mm of CMI effectively managed for OEM

·         Over $40mm in returned recovery to OEM

·         Return against COGS 3X industry average

·         Significantly reduced OEM operational costs through operations consolidation

·         Customer returns to Segue post remarketing: <1%

·         “0” Channel conflict issues/complaints from inception of program to date

·         No measurable impact to A-stock values