Hosts: Mike Ogle and Rodney Apple

In This Episode:

Tony Sciarrotta, Executive Director and Publisher of the Reverse Logistics Association shares his supply chain career journey, starting with a successful sales career at Sony and Philips, where he was asked to manage returns, to finding out it takes a director level to effectively manage returns and reverse logistics in an organization. Tony also shares his top three nuggets of advice to navigating reverse logistics, plus how to work effectively with the 800-pound gorillas in the industry, and shares the value of pursuing a cross-organization career like reverse logistics, the ability to unlock great financial opportunities, and the ability to help the planet in an age of increasing e-commerce and the circular economy.

Tony Sciarrotta Bio:

In 2016, Tony took over the RLA and became the Executive Director and Publisher after 12 years of active involvement on the Advisory Board and on Committees. In his 35 plus years in the consumer products industry, Tony has held various positions including 15 years in returns management at Philips. During his Philips years, Tony developed new reverse logistics strategies and implemented many new returns initiatives. He worked with retail partners and industry groups on best practices still being used. Tony then became an evangelist for improving the customer experience to reduce returns and their associated costs. Today, Tony is considered a subject matter expert in reverse logistics and speaks for the industry at conferences all over the world.
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Transcript:

Well, it’s a scary story because I was a very happy sales guy. I worked for Sony for five years. I worked for Philips for a number of years. And one day while I was at Phillips in the sales and marketing group, senior management, I thought they pulled my name out of a hat, but apparently, they did resume research and they literally sat me down and said, we want you to fix the returns problem. We were a $2 billion company with about 12% returns. And it was the late nineties, the digital days of nothing worked with anything. The nightmare of returns was skyrocketing up to that 40 to 50% return rates because things didn’t play nice with each other. 

So, here’s a guy who was a samurai, successful salesmen at Sony, and they said, go fix the returns problem. And I didn’t know a damn thing about returns, except that it was deducted from my monthly sales totals. That’s when the world really opened up for me and began. And I was very fortunate.   

A gentleman named Bill Stewart, famous consultant out of Nashville, Tennessee, very focused on how to make the customers happy, so you can reduce your returns, which I learned was more important than customer experience. Another mentor, a gentleman named Dale Rogers. And Dale Rogers is one of the grandfathers of the reverse logistics industry. Along with Dr. Ron Lemke from the University of Nevada who’s on our standards committee. They wrote this little book called Going Backwards. And it was free. I literally sat there at the printer, printed out 200 pages of a book for free. And I’m telling you it’s a textbook and it’s applicable just as much today as it was 20 years ago. 

So back in 1998, that is how I came to the world of reverse logistics. And I didn’t call it that I considered it returns management, which to me is a little more encompassing. So those are the two biggest influences in my life. And many, many others.  

Well, one I’ll add, when I was told to go fix the returns problem, the engineer said everything you’re taking back there’s no technical problems. So you’re letting the retailers get away with sending stuff back. So I’m like, okay, I’m innocent. I’ll go out there and talk to the big guys. When you get in a room with the 800-pound gorilla, sometimes known as Walmart. And you say, guys, you’re returning too much stuff and there’s nothing wrong with it. And they’re like, it’s because you make stuff that people don’t like. That was a whole radical shift from six Sigma to net promoter score. And that’s when I started to make an impact at Phillips. I took everything and ran with it. And so, there was some major influences from the 800-pound gorilla, from the academic side, and from the consulting side.

It’s interesting, for example, and by the way, I think it’s clear I didn’t come from the supply chain world. And at Phillips, when they finally gave me this position and we’ve started to frame it, who do you report to Tony? Um, I don’t know. Who should I report to? Well, how about credit? What? Credit? Okay. I’ll report the credit. Um, okay. Let’s move you from credit this year to sales operations. Okay. Sales, operations, you know what? You’re kind of connected to the service group. This year we’re putting you in the service group. That’s the problem with reverse logistics and they did at one point, throw me into supply chain as well. Okay. So, they kind of worked me around, but, I’ve held one position in at least four different silos in the company.  

But prior to that, when I was a sales guy at Sony, the samurai program that they had for the best of the best, and I hit that, I never thought about returns. Again, it was just a number at the end of the month as a deduction and Sony was successful because the prestigious brands actually have less returns than the medium brands.  Phillips return rates were higher than Sony because Sony gives the impression of being a premium brand, people’s expectations, as long as they’re met, people think I’ve got a Rolex, why would I ever return that? You know, it’s like, I’ve got a Sony, I’m going to figure out a way to make it work or keep it. 

But Phillips was a mid-tier brand, so they had a lot more returns. So, I went from sales at Sony to sales at Phillips and I handled major accounts. I was just a regional manager, but eventually I worked up to an operations manager. When you talk about roles, operations is what got me in front of the organization at Sears at the time was kind of big, training around the country, listening to the stories about, yeah, we love selling your stuff, but you got some problems here. 

So when I moved into the position, and we called it the director of returns management, and importantly, they knew it had to be a director grade position. If you’re going to go walk into the biggest retailers in the world or in North America, you better have a title to go with it, or they’re going to throw your butt out. So a director of returns management you’d go into Target and say, you sent back 200 systems that were supposed to be new. Well, 47 of them were open and trash we’re billing you back. So you can imagine how that conversation went. But because I came from the sales side, I knew the buyer was going to say, we’re going to hold your purchase orders. And then I’d say, yeah, but look at these pictures and then we’d settle it.  

Coming from sales and marketing and turning me into a supply chain person was a match made in heaven for me, because of my passion for the customer, for the customer experience, whether it’s the end consumer or whether it were the customers like the Targets and the Costcos or the Walmarts. So that’s what I learned along the way. Very, very big transitions.  

You have to have influencing skills because you’re really trying to move a mountain. You’re going across departments and give you an example. We talked about that six Sigma nightmare. My God, the engineer’s killed me. We’d be in front of the senior team and the engineers would just flogged me for taking things back if it weren’t defective, that DVD player, it worked, there’s nothing wrong with it. Why are you taking them back? And I got flogged to pieces, but you kind of learn. Net promoter score was just starting to take off, and Amazon knew all about it. Make the customer happy, exceed their expectations. That’s the driver. 

And that’s what Sony was able to do is exceed the expectations of the customers because I’m one of the few guys who actually did surveys of consumers who returned things. I did it with the University of Nevada. Students who’d call up people and say, we’re doing a student project. We’d like to know why did you return that? And then we learned 75% of them were returning things, they knew it wasn’t defective, but it didn’t meet their expectations. Or the instruction book for the clock radio was in 12 languages and they didn’t understand any of them because it wasn’t English. So, there were a lot of learnings along the way that net promoter score helped drive. And again, if you come from supply chain, no one thinks as much there about net promoter score.

Well, I will tell you, based on, for example, LinkedIn, last time we took a look, there’s 130,000 employees. People who have the term reverse logistics in their title or their job description, online 130,000. And I’m upset because I only have about 30,000 in the RLA database, but 130,000 people around the world think that they’re doing reverse logistics. I love the title. I love the term, but because it does get some attention. Whereas if you call yourself director of returns management, doesn’t resonate as well. It is actually what you’re doing. And what’s important to do because when you say returns management, then you talk about starting at the front end of the chain as well as going through the backend, as well as becoming circular, which is what our focus is. We think that reverse logistics is where the circular economy lives because it has to be through us. So titles are important. Director title is critical if you’re going to talk to those big companies about what to do, you’re not going to get the time with those people. A manager title isn’t enough. 

This position is important enough. And again, to throw out numbers that I love to focus. I told you Phillips was a $2 billion company in around the year, 2000. When I took over 11 to 12% return rates. Within three years, by working with Walmart, Costco and Target, we had it down under 6%. And that’s job security to right? Knock the numbers down and it makes a difference.

Mike, thanks for asking that. I happen to be incredibly proud of my board. Extremely happy that I’ve got 12 of the largest corporations in the world involved, including an academic, by the way, from Georgia Tech, which is a pretty large institution as well. But you’re right about having a team, a staff, and that’s the differences as well. I’ve got a staff the back office, right. And then I’ve got a business team to interact with the members. And then I have a board of directors because at the end of the day, I am not doing this for my own gain. So, I don’t do it for that. I do it because this is planet threatening. This is important stuff. We need to be responsible for this. And I think of this association as an association, focused on the members first, and the members understand we have to do something about this because what we’re doing today is not sustainable. And my board of directors holds me accountable for that.  

I would tell you that how you manage it is good communication. I give them a monthly report card of how things are going up or down, including did we get more ads in a magazine, but did we get more articles? Do we get more white papers? Do we have more keynote speakers or presentations of importance? So that’s generally a report card. We generally talk quarterly on a WebEx kind of a thing. We generally meet once or twice a year in person. And I can call up any of them on their mobile phone and ask a question. And that’s an important relationship. 

So, although 12 is kind of a lot for board of directors. They represent the retail world, the manufacturer and the solutions provider and the academics, and those are the areas of importance. I’d say I manage and facilitate those relationships by calls, by communications, by regular updates. And then having them throw back and say, what are you doing about this? 

Like the example of what are you doing about education certification? Well, we now have a partnership with APU on our website, and they’ve been asking for that for a while. Remember I’ve I took over late 2016, 2017. So, I’ve had four years or so to make all of these magic things work. And we needed a new website first that also helps with the communication. 

The website allows me to connect with the board very easily. I’m very lucky though. Remember a board of directors they’re not paid. We’re a non-profit organization. So, we don’t pay our board of directors. They’re volunteering their time and support. They’re giving money to the RLA to help it continue its mission. So, you have to be really appreciative when global companies like Amazon and Walmart and Dell and Cisco find a way to give you funding, because they understand how important this is too.

Oh, the board members are all as passionate. I wouldn’t want someone on my board who’s not passionate about this. And, by the way, that’s a good question about, you need to find a right person. At a company. I mean, imagine Amazon how big they are, Walmart or Dell. You got to find the ones who have that passion. And when you find them, like I’ve been able to hang on to them for life as much as you can and try to acknowledge that. But I don’t know that passion can be taught. Passion comes from inside and when you understand how complex the reverse logistics world is, it either inspires you to say, wow, I can make a difference or, wow, I can’t do anything with this. I’m so proud that the board members have this passion. And they keep coming up with new things. Like when are you going to have a certification program?  When are you gonna have a standards program? When are you going to have education? When you have a directory so people know who all these companies are? And since returns are growing, everyone wants in on this and wants to do something and make a difference. And we can, we do make a difference.

I’ve had the fortune of being asked to speak to groups of students at universities. And I say, if you’re in my space, you will never be out of a job. Robots can’t replace you. On the forward side, robots are replacing people. On the reverse side, they really can’t because the way the ceiling fan goes out in a nice box that a robot can pick up and ship. And when it comes back and nobody put the blades back in the box, they left them sticking out. Robots can’t handle it. Not today, not ever. And you cross over many different areas. I’m not saying somebody from sales is ideal for reverse logistics. It just kind of happened in my case, but I would say to the supply chain people, get the knowledge in reverse because you’re going to work for a company someday that hasn’t got a clue of what they’re doing in reverse. And if you have a clue, you have a chance to become a hero at that company. And my numbers at Phillips showed it. I got a chance to become a hero. You take returns down $40 or $50 million a year. That’s hero territory. And it satisfies so many areas of being a career professional because I can be a tree hugger, I’m trying to help save the planet by reducing returns and throwing less stuff away. 

You get to interact with all departments, right? Credit is a factor because the interface is people aren’t deducting when they send things back and you got to give them money and you got to reconcile. So, there’s that area. The service side, what calls are coming in? What products are getting bad raps that we have to do something about. The marketing side, don’t put that product out to market. It’s not going to interface with this line of Dell computers. That’s that interconnectivity nightmare. And that’s what you do in your role. 

You’re really focused on how can we reduce returns? How can we process them quickly and efficiently? And how can we collect something for them, the asset recovery. So, when I talk about reverse logistics, not really being part of supply chain world, it’s because of those different areas, what can you do to help reduce returns and prevent them gatekeeping, but then what do you do with them in a building where they all look like crap. And you want them to look good by the end of the day, so that at the end of the day, somebody can sell them and make money. Let me change that, you never make money in returns. You lose less, but you never really make money in returns. You lose money in returns because it was a sale. As a new good. And now it’s not a sale as a new good. And you’ve touched it a lot more time.  

You have to be very passionate and willing to learn about these other areas we’ve talked about because you’re going to be standing in front of CFOs and you’re going to have to explain the numbers. Why is there so much coming back? Why is it in the building? Why does it cost so much to move them? Why don’t you just give an allowance. There’s all these different silver bullets in your gun. You have to figure out which ones are going to really do the trick. I would I tell you, you need time. You need to mature because unlike the finance world where the whiz kids with the MBAs can appear like geniuses. In the reverse world, you have to know all these different areas and it simply takes time and maturity to get that experience. 

But as a career, the reward is huge. The reward is huge. I used to stand on stage and say, my job is to work myself out of a job, but we all know that’s never going to happen because there’s always going to be returns. So, it’s an interesting career. And I’m telling you, it gives you the opportunity to travel the world. Literally, even if it’s just traveling from one return center to another and getting to view what’s going on in those places.  

And, by the way, that’s an aspect of the basics of reverse logistics. Every company should have one meeting a year. In their return center with senior management. And that’s what I did. And that helps open eyes. And you have to be passionate about willingness to do that. I’m not sure that always supply chain people think that way, but if you think of your career as what do I want to be a VP of supply chain logistics, or do I want to be a director of returns management, make a huge difference in the company and in the world? That’s your choice.

Well, when you say influences, we’re looking at the technology side probably a lot, right? Because, on the forward side we have electric vehicles that can drive themselves, robots that work 24/7 filling up trucks, pulling off the shelves. So there’s that technology aspect that’s a big influence and I don’t pretend to be an expert at it. I’d say another influence is, you need to know finance. You need to know how to deal with numbers because they will be used against you. Now the supply chain side is really a game of pennies and nickels. If you can save a few pennies here and there on boxes, on rates and so on, you’ll save some money, but on the reverse side, you’re going to make huge differences. I would say that if you don’t know finance well enough, find a drinking buddy to be your friend and teach you about finance.  

Nobody really understands end to end because it’s in different silos. The shipping of returns versus the touching to this positioning, the resell, nobody knows the numbers because it’s all in different silos. You have to know how to talk to people and that’s not technology or finance crunching. You have to know how to talk to people. Learn everything you can about net promoter score and go out there and preach it to your company. And if they start to pay attention and learn, the company will be better. The Trader Joe’s and the Costco’s of the world and Apples of the world who have very high net promoter score are also successful financially. So it’s not a bad gospel to learn and to teach it. So I would focus on technology. I’d focus on finance and I focus on understanding net promoter score, because those are going to be the winners in the future. 

Well, I love the fact that Apple made a statement to the world that they intend to manufacture most of their phones in the future from materials from return phones. It’s said that a certain weight of mobile phones are worth their weight in gold because they use gold in them. And nobody knows how to get it out very easily, but Apple’s working on it. And if Apple’s working on it, I think the rest of the world probably should too. So those are changes and I love the way you said that Rodney, it is true. If we focus on the world becoming circular instead of linear, and that makes reverse logistics the pivot point of the circular economy, because getting it back to the right place and doing the right thing with it, that’s where we live in reverse logistics. 

And so, those are the changes that are coming. We’re not going to stop returns. Okay. In fact, they’re going to increase because of e-commerce where return rates are higher, but, you need to help be the change about what do we do with this stuff, make it circular. How can we efficiently process it to recover the most value? And that value includes reusing it where possible. And every day, I feel like I read stories in the press about this company and that company announcing take back programs. My God, Patagonia, North Face, Nike and Adidas. They’re taking back used shoes and they’re reselling them. I’m sorry. The concept of that is radical. 10 years ago nobody would think of that. They throw them away and they were trying to figure out how to not throw them away. Nike came up with Nike track, they shredded shoes and turned it into athletic sports field material, which is cool. The other exciting part about that is the shift in the mentality of the millennial generation, for example, in the younger people who say, yeah, sure, I’ll buy the Air Jordans for half price. I don’t care. They’ve been worn. They look good. Nike says, they’re good, I’ll take them.  

And we stopped using the word used as much previously owned, certified pre-owned, we’re coming up with some better terms, it’s great to see. And it’s going to change the world when you have these major companies willing to sell used materials and take it back. it’s a change that is just beginning and again, reverse logistics. You’re going to be a part of that and it’s really cool. 

Mike. I love that term. I haven’t seen it used too much, but, everyone’s looking for those magic buzzwords, because sustainability and sustainable, they’re kind of passe, but if you can say experienced shoes available for those who want to be part of the circular economy.  I mean, come on certified pre-owned they charge a lot more for the vehicle than if they just called it used. And how much difference is there? Yeah, so we need terms like that.

I’m sorry to say, I’ve done this long enough now for 20 years, I’ve gotten a little bit jaded, but let me go back 20 years ago when I didn’t know anything. It’s like returns? What do you do with returns? And I started reading and reading and following and listening. So the RLA for example, on our website rla.org, we provide research materials. We provide podcasts like this. We provide video, recordings of keynote speakers. So reading the magazine, and again, there’s only one magazine about reverse logistics. So we’ve got that. I consider it a responsibility, but we’ve really focused on news briefs. We send out every week and it links to stories. And if you go down the rabbit hole, And you click on a story you’ll probably see other links in there that all relate to the information about returns management and reverse logistics and what can you do? And there’s some very creative, clever ways. And I’m proud to say that that was part of the secret at Phillips is I go to some conference and I’d hear two or three different speakers with different ideas. But in my head, I put them together and say, well, why can’t we combine them and do this? That’s the magic of figuring out solutions in reverse, where there’s so many opportunities.  

I would say, read, read, read, listen to the podcast. And, it’s easy because you’ve got one home, RLA where it’s all available. So, if you’re new at this and you want to learn more, go to that. And if you don’t like reading a magazine, you may not be cut out for a career in reverse logistics. But if you like what you read, you have an incredible career opportunity in front of you.

We talked about mentorship a little bit. The mentors that I had and the mentoring that we try to do in the RLA and, I listened to academics who have a lot of knowledge, but not necessarily practical advice until I found someone who did both, which is wonderful. A consultant who had been in retail and then I had a mentor who just gave me a chance to turn it loose and go figure out what I wanted. So, the best advice I have is learn to play with the 800-pound gorilla first, because if you can fix the problems at a big guy, the other guys are going to come a lot easier. I learned that the hard way you get beat up a little bit, but, at the end of the day, if you understand what their needs are and their needs are what their customers want or their members want. And if you take that back up and learn from that, you can be a winner. And again, there is no better feeling in the world than the opportunity to be a true hero at your company. There’s nothing that compares to it. 

So I will tell you, go for it, figure out how to work in the returns area and you will get a chance to be an absolute hero. I wish everyone could have the chance to feel how that feels. Nothing compares to it and the magnitude of being a hero in reverse logistics is 10 times the other section of the company, it really is. Marketing and innovation is important, but if it all comes back, you can make a real difference.  

I think the biggest is don’t be afraid to go in a room with the 800-pound gorilla, whoever the name is, if you’re on the manufacturer side, go into Dell, go into HP, go into Cisco and wrestle with them because you come out of that with a lot more understanding of yourself, of your partners and of the world. I think that’s probably the best supply chain career advice I can offer. Don’t be afraid to go in that room. I think in supply chain, a lot of people are sheltered, because they’re not exposed to the customers. This role, you have to recognize the customers. And there’s two of them, of course, the end customer and the middle customer, the seller. But you have to get out there. You really need to go out there and that will help you accomplish your goals.

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