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SPECIAL ISSUE: GLOBAL SUPPLY CHAIN PARTNERSHIPS

Isuzu Motors: Automaker Grabs Control of Dealer Parts-Return Program

Automakers get a steady stream of old parts coming back from dealers for recycling and remanufacturing. But the returns aren't always suitable for that purpose. There's even the occasional box of bricks.

That's an extreme example, of an unscrupulous dealer counting on the manufacturer's failure to check the shipment before issuing a credit. More often, the returned item simply doesn't qualify for remanufacturing, either because it's not the right part or wasn't made by the automaker in the first place. "Millions of dollars are issued for credits on things that aren't part of the program," says Joan Starkowsky, president of Roadway Reverse Logistics Inc. (RRL).

Hudson, Ohio-based RRL was instrumental in helping Isuzu Motors America Inc. take control of its returns process. The U.S. division of the Japanese automaker had been relying on a public warehouser to handle parts coming from its network of approximately 1,000 dealers. The dealers themselves were responsible for booking transportation, says Lana Ware, operations manager at Isuzu America's headquarters in Cerritos, Calif.

Roadway Express, the nationwide less-than-truckload carrier and parent of RRL, had been hauling shipments for Isuzu for some 15 years. About four years ago, RRL offered to help consolidate the movement of "cores" - large structural units such as engines and transmissions which can be stripped down, refurbished and put back into the production line for substantial savings over the purchase of brand new components.

RRL had some experience in handling returns of heavy-duty industrial products such as power tools and lawnmower parts. But it also had a team of automotive experts, who could inspect cores and related parts, and determine whether they were eligible for remanufacturing. "They gave us the outline of a program," says Ware, "and we signed up."

The way it works now, an Isuzu dealer dials the RRL call center via a toll-free number. RRL prepares the bill of lading, dictates which carrier will be used (Roadway Express, whenever possible), and determines whether there's a need for vehicles with liftgates or other special features. It then notifies the chosen carrier, and follows up to make sure the pickup was actually made. All parts moving under the program go to one of three RRL inspection and distribution facilities - in Grove City, Ohio (near Columbus); Carrollton, Tex. (Dallas); or Salt Lake City, Utah.

Afterwards, RRL audits the freight bill and pays the carrier. It sends Isuzu regular consolidated bills. As for the dealers, they get two free shipments per month, a setup that encourages them to consolidate parts and build cost-efficient truckloads.

Following sorting, inspection and certification of returns, RRL, too, assembles truckloads for shipment to the remanufacturer. On the back end, RRL supplies Isuzu with credit, inspection and inventory reports on all of its activities. Remanufacturers are kept in the loop about incoming parts, so that they can draw on inventories to meet particular needs.

Everyone benefits from the arrangement, says Starkowsky. Isuzu avoids the cost of moving parts that aren't eligible for recycling, while saving on overall production expense. Remanufacturers are better able to schedule production. Dealers get paid faster, with credit cycles coming down from a high of 60 days before the current program, to as low as five days now. As a result, they're less tempted to fob off old parts on independent core brokers, who resell the components at a stiff markup.

Isuzu and RRL are working to cut the credit cycle even more. Dealers will soon be able to access a web site to get their returns pre-approved. Credit could come on the very same day. Isuzu, meanwhile, will do a better job of weeding out ineligible parts, Ware says. The site was scheduled to be up and running by the end of June.

RRL is also working to set up a "core bank," to compare what the dealer bought with what it's allowed to return. In effect, returns would be allowed on a one-for-one basis, says Starkowsky. That innovation could come in late summer or early fall.

The whole cycle could be further accelerated by identifying the fastest-moving parts, and routing them through RRL's facilities on a flow-through basis, Starkowsky says. And, with its expertise in parts inspection and qualification, the vendor could even take over the actual credit process. "That could happen down the line," she says. "It's a logical progression."

Automakers get a steady stream of old parts coming back from dealers for recycling and remanufacturing. But the returns aren't always suitable for that purpose. There's even the occasional box of bricks.

That's an extreme example, of an unscrupulous dealer counting on the manufacturer's failure to check the shipment before issuing a credit. More often, the returned item simply doesn't qualify for remanufacturing, either because it's not the right part or wasn't made by the automaker in the first place. "Millions of dollars are issued for credits on things that aren't part of the program," says Joan Starkowsky, president of Roadway Reverse Logistics Inc. (RRL).

Hudson, Ohio-based RRL was instrumental in helping Isuzu Motors America Inc. take control of its returns process. The U.S. division of the Japanese automaker had been relying on a public warehouser to handle parts coming from its network of approximately 1,000 dealers. The dealers themselves were responsible for booking transportation, says Lana Ware, operations manager at Isuzu America's headquarters in Cerritos, Calif.

Roadway Express, the nationwide less-than-truckload carrier and parent of RRL, had been hauling shipments for Isuzu for some 15 years. About four years ago, RRL offered to help consolidate the movement of "cores" - large structural units such as engines and transmissions which can be stripped down, refurbished and put back into the production line for substantial savings over the purchase of brand new components.

RRL had some experience in handling returns of heavy-duty industrial products such as power tools and lawnmower parts. But it also had a team of automotive experts, who could inspect cores and related parts, and determine whether they were eligible for remanufacturing. "They gave us the outline of a program," says Ware, "and we signed up."

The way it works now, an Isuzu dealer dials the RRL call center via a toll-free number. RRL prepares the bill of lading, dictates which carrier will be used (Roadway Express, whenever possible), and determines whether there's a need for vehicles with liftgates or other special features. It then notifies the chosen carrier, and follows up to make sure the pickup was actually made. All parts moving under the program go to one of three RRL inspection and distribution facilities - in Grove City, Ohio (near Columbus); Carrollton, Tex. (Dallas); or Salt Lake City, Utah.

Afterwards, RRL audits the freight bill and pays the carrier. It sends Isuzu regular consolidated bills. As for the dealers, they get two free shipments per month, a setup that encourages them to consolidate parts and build cost-efficient truckloads.

Following sorting, inspection and certification of returns, RRL, too, assembles truckloads for shipment to the remanufacturer. On the back end, RRL supplies Isuzu with credit, inspection and inventory reports on all of its activities. Remanufacturers are kept in the loop about incoming parts, so that they can draw on inventories to meet particular needs.

Everyone benefits from the arrangement, says Starkowsky. Isuzu avoids the cost of moving parts that aren't eligible for recycling, while saving on overall production expense. Remanufacturers are better able to schedule production. Dealers get paid faster, with credit cycles coming down from a high of 60 days before the current program, to as low as five days now. As a result, they're less tempted to fob off old parts on independent core brokers, who resell the components at a stiff markup.

Isuzu and RRL are working to cut the credit cycle even more. Dealers will soon be able to access a web site to get their returns pre-approved. Credit could come on the very same day. Isuzu, meanwhile, will do a better job of weeding out ineligible parts, Ware says. The site was scheduled to be up and running by the end of June.

RRL is also working to set up a "core bank," to compare what the dealer bought with what it's allowed to return. In effect, returns would be allowed on a one-for-one basis, says Starkowsky. That innovation could come in late summer or early fall.

The whole cycle could be further accelerated by identifying the fastest-moving parts, and routing them through RRL's facilities on a flow-through basis, Starkowsky says. And, with its expertise in parts inspection and qualification, the vendor could even take over the actual credit process. "That could happen down the line," she says. "It's a logical progression."