From Bins to Billions :The “Reverse” Supply Chain story of GREENDUST

THE MESSAGE

“Your FlipKart “replacement” consignment with Tracking ID DXXXXXXX is out for delivery and will be delivered before 7.00 pm today. Thank you and we hope you continue shopping with us “.

My phone buzzed.                 

“That was fast “, I thought. This “replacement” parcel was a substitute for a pair of speakers I had bought through FlipKart. But unfortunately, the original speakers were delivered with a loose wire detached from one of the speakers. I called up the FlipKart customer care for a replacement, completed the formalities and what do you know! Next afternoon, I had the brand new speakers delivered at my doorstep. 

The Flip Kart guy asked me to hand over the defective speakers.

“So, what are you going to do with them?” I asked him

“They go back to the manufacturer!” he replied

“Ok. And what does he do with them?”

“No clue!”
                That got me thinking. Where do these “returned” products go? Are they just treated as ‘orphans’ that lay in a warehouse corner gathering dust and loosing value? When I decided to dig further into this I found that many a times the gadgets which we have returned,  due to the device developing a technical snag , sit idle at the manufacturer’s warehouse, taking away a lot of time, space and money. Moreover this also adds up a lot of costs which include the maintenance of warehouse space , returns processing cost,  decrease in  productivity and, above all making sure that its reuse & recycle policies are compliant with government’s e-waste regulations. 

          The further I went, even more interesting it became. And it brought me to a relatively new and untapped business sector which runs on a unique yet quite logical proposition called “ Reverse Supply Chain “.

                                           

What’s that?

Now, when one is asked to define “Supply Chain “, the Wikipedia definition states that

A supply chain is a system of organizations, people, activities, information, and resources involved in moving a product or service from supplier to customer.

Correct? Well only partly. This is just 50% of the answer.                               
                             A supply chain is divided into two parts. The first is the Forward Logistics which talks of the movement of goods, services and products from manufacturer to customer, where wiki definition is spot on. However we miss out on a very obvious yet crucial activity which happens in a supply chain – The Return of Goods. And that is “Reverse Supply Chain”

A reverse supply chain can be defined as the process of moving a product from the consumer to its typical final destination i.e manufacturer, the point of origin, for return, re-use, or for the purpose of capturing value otherwise unavailable, or just for the proper disposal of the products.

                                         

The Potential

                     In an ideal world, reverse logistics would not exist. But with large scale demand and reduced product lifecycle, dis-functionalities are bound to happen. And that results in large scale returns. In the US the size of the reverse supply chain industry can be gauged by the statistics that for every 100 products forwarded to the customer, an average 10 come back to the manufacturer. Comparing this with India, for every 100 items supplied by Indian companies, about 4-5 items come back across all categories. Taking into consideration all the goods produced in India and the returns, the opportunity size for reverse logistics is estimated around $15-20 billion (Rs 74,287 crore-79,226 crore). Most companies in India have overlooked the tremendous potential that this market offers. The reason the return rate in India is lower than that in the US is because Indians don’t believe in customer service. Companies fail to understand that a good return experience can actually increase revenue. Research indicates that 80% of the customers do not buy from the brand again if they have had a bad return experience.

                            

 Weakest Link?

                     It is said that a supply chain is only as strong as its weakest link. And in India “reverse supply chain” is the weakest link of most manufacturing companies. Most companies don’t even have “Reverse Supply Chain Managers”. Every day you hear about variation of new products launched, just months after the first. Look at Samsung mobile phones. It started with Series S, followed by S1, S2, S3 and then moves on to Note, again followed by Note I, Note II and now they are back with the earlier series with the launch of Samsung S4. The rapid progresses in technology and rigid e-waste regulations have made professional management of this sector a must.

What’s stopping them?

The obvious questions that crops up is “Why have companies till now refrained from effectively handling returns?”

                  Well there is a business reason for their reluctance. Individual companies do not have enough return volume to justify the cost involved in doing returns management the right way. As discussed before, managing returns involves a lot of additional costs above the item costs like:

• The transportation costs of moving the items from the retail stores to distribution center.
• Repackaging of serviceable items for resale.
• Cost of warehousing the items.
• Cost of disposing of items that are unserviceable, damaged, or obsolete.

For companies to invest such a huge amount in bringing back faulty products just doesn’t make any business sense.

Solution: The GreenDust way

So what do we do with all those faulty products which have no takers and are just lying in the warehouses costing millions of dollars to the company?
Well Simple .We repair and sell them off these factory seconds to Indian consumers who are extremely value conscious and are constantly on the lookout for quality deals.

That’s what US return Microsoft ex-employee and IIT Roorkee alumnus, Hitendra Chaturvedi, thought of doing. And thus “Greendust” was born.
                                       

Green Dust is a “one of its kind” reverse logistics outsourcing (RLO) company in India which has successfully able to cash-in on the lack of reverse logistics systems in the Indian scenario. This company basically enables retailers and manufacturers to focus on their Key Consumer Benefit factor of building core products and making them available to their customers while outsourcing their entire reverse logistics process.

 GreenDust manages the entire process from customer pick-up, call center management of returns, warranty management, repair, refurbish, repack of returned items, and then resale as refurbished items to end customer.

Hitendra spent 17 years in the US working for companies like Ernst & Young, A.T Kearney, and Microsoft. He came to India in 2006 via Microsoft. In India he saw the dire need of an outsourced reverse logistics model and when the time came to go back to the US he decided to take the entrepreneurial plunge and started the brand GreenDust in 2008.

                         

How does it work?


Greendust basically earns in two ways.

First it acts a Reverse Logistics Company to its clients handling the entire Reverse logistics process from customer, back to the producer.
And second, they take the rejected / defective / unsold / returned products from the OEMs, refurbish them, provide a year's warranty from their side, and finally sell them as factory seconds through the brand Greendust.
Greendust.com is their online shopping portal where customers and bulk buyers are given the option to purchase unused, branded factory seconds, surplus, overstock, and refurbished products at guaranteed lowest prices. When you visit the online website you will be pleasantly surprised to see the variety of items stocked up in their menu ranging from rice cookers, hair dryers to mobiles, laptops and television set at 25-30% off the current market price. I even saw some products which were discounted up to 50% of their price. A great bargain , even by Indian standards.

                                

They went offline a year ago, with brick-and-mortar stores in the country when they realized that the Indian customer would like to touch and feel a factory seconds product before buying. Once this trust is established in the market, they plan to ramp up their online model as well. 

                            

The Risk

One would ask, “What’s the guarantee that these products will work?” According to the company, the GreenDust logo on their product is similar to an ISI mark. The product will still be a factory seconds but when it goes through their 50-point strict inspection process they fix any small problem using genuine parts from the company and put a ‘certified GreenDust’ sticker on it. Thus reassuring the customer that they are getting a branded product that is certified by GreenDust and comes with a 1 year warranty. 

Results

Well, for now their results seem promising. The company started with a seed capital of 60 lakhs, a 800sqft warehouse in Mumbai and 3 employees, and in three years the company has grown to become a Rs 300 crore business venture with stores in Delhi and Bangalore for sourcing, refurbishing and distributing returned products. It also has 15 distribution centers across Jaipur, Cochin, Chennai, Mumbai, Lucknow, Hyderabad and Ahmedabad (which store and re-distribute the finished goods), around 40 franchisees and 1,000 dealers and over 400 employees. Hitendra is optimistic that the company will break even in the next two years. The company aspires to be No.1 Logistics Company in emerging markets touching the 1 billion dollar mark in the next 5 years.


GreenDust  bagged Future Bazaar as their first client , for reverse logistics outsourcing and now have an enviable clientele with LG, Sony,Samsung,Lenovo, HomeShop18, Dell, HP, LG, Samsung, Toshiba, Phillips, Panasonic, Wipro and Acer – managing their reverse logistics functions and sourcing products. It currently claims to have more than 5,000 SKUs across 11 categories (further divided into sub-categories), including mobile, laptop, camera, electronics, and kitchenware and personal care items, among others. With efficient returns management rapidly gaining a spot on the CXOs’ agenda, the companies have found solace in GreenDust’s business model of providing compliant, cost effective and environmentally responsible reverse logistics solution


The Larger Good

And as all MBA stories end with a “Social Message” so does GreenDust’s. The company has brought over five lakh returned products back to life from the verge of being scrapped and by providing them a new home the company has decreased the amount of pollutants that would have gone into the environment. The company has also raised awareness and knowledge about waste management and the benefits of green initiative amongst manufacturing organizations. By  entering a space dominated by the unorganized sector : dealers and individuals who buy damaged/old consumer goods at throwaway prices and channel them to grey markets or salvage components in environmentally unsafe ways before disposing off the rest, Greendust has paved way for a safe, sustainable and standardized supply chain of  returned goods.

All that ends well

With 100s of e-commerce companies cropping up almost daily on the internet, this model is a breather -- a brilliant execution example of reverse supply chain. And with 20,000 visitors a day, and a conversion rate of 3 per cent, the company already is doing almost 18000 transactions per month, which shows that the customers are interested in buying such products. A 1 crore investment  aspiring to be a billion dollar company itself talks a lot about this untapped potential and doing it all from e-waste that would have otherwise would have gone to the scrap yard ?

That’s what I would call making billions from dust, or should I say GreenDust! 

References:

• Reverse Logistics , Ratan KR Paul, Cargo Talk
• The Goods Samaritan of Electronics, www.forbes.com
• Greendust, www.greendust.com
• Greendust: Ecommerce Company , www.wooler.com
• Hitendra Chaturvedi on making money out of refurbished factory seconds : www.techcircle.in
• Reimagining Supply Chain : Vidhi Chaoudhary , www.livemint.com
•  Love for environment , Rajat Bhatia , www.merinews.com

When facilitating SHIT becomes INNOVATION

 

I know the title of the post sounds weird, but mind you the story is even weirder. I first came across this unique case study at Porus Munshi ‘s seminar on “ Busting the myths of innovation “ at the L & OD conference held at Essar House last month. The focus of the seminar revolved around Frugal innovations and one of the important lessons that has stuck on to me is:

“If you rely on customer feedback for innovation, you will only get suggestions to make a better product. However if you really want to innovate, observe your customers. What they do with your product, how they use it and that is when you will realize, what they really need! “

He elaborated this factor by describing a case study of a Toilet paper company called Renova and their peculiar innovation which made them one of the largest sellers of toilet paper in Brazil. I took to this case study for two important reasons:

         
 

•  First, because  it discussed one of the industries that hardly ever finds mention in B-school curriculum and 

 

• Second, to explain that it is not always advances in “technology” that can bring about real innovation. Most often than not it is necessity and curiosity that leads to an idea, and eventually it is that idea that leads to innovation.

The year was 2006. The Brazilian toilet paper industry was saturated with bigger and larger multinational companies like P & G, Kimberley-Clark, J&J and other national players. Renova a small family run company was starting to lose market share, which it majorly held for several years, to these colossal manufacturers. The management was going bonkers, how the hell can we increase our market share. The only logical solution seemed “asking people to poop more “!!

An impossible solution: \

 There had to be another way, a new solution to this problem.

The company decided to approach this problem by studying “potty” characteristics of Brazilian population and comparing them with other countries. Some interesting findings were as below:

•  In Brazil a toilet paper roll lasted for average 5 days

•  Brazilians on an average used  5.6 sheets per toilet  trip , about 40 toilet rolls (of 200 sheets each) per year

They compared these habits with other inhabitants of this world and came up with the following data comparison:

British used 110 rolls of toilet paper a year, followed by Americans who used 98 rolls and the Germans who used an average of 73 rolls per year.

An interesting fact was observed that German soldiers used a whopping 10 rolls a day or 3650 rolls per annum. Don’t make any second assumptions. No, the German soldiers did not have any suspicious potty activities. However they believed that the toilet paper was the best way to clean small-caliber weapons.

After looking at all the facts the company came to the conclusion that, the only way to increase the sale of toilet paper is by making Brazilians use “more toilet paper per visit”. This obviously was going to be a daunting task.

The company was so desperate and it was ready to go to any lengths to get its sales up. And they thought of something, that no company in any sector would ever think of doing. 

Install cameras in toilets to record Brazilian toilet habits. :O

A ridiculous solution. However the company could see no other way out .And went ahead with the installation. They found 1000 willing volunteers who were ready to be shot on camera when they “Did It”.

                                        

 

The first few weeks of the tape were straight shown the door. The activities of the volunteers were too conscious to be recorded as anything peculiar. However as months passed and volunteers became used to the cameras, analyst played and replayed the tapes to see if they record anything important.

And finally a few important clues emerged.

                            More than 90% of Brazilian population read while they shed

 

A detailed observation revealed majority of them liked to keep themselves updated by reading “Newspaper” as a part of the daily ritual. A more zoomed camera angle suggested that all of them read the “Comic Strips” on the last page of the newspaper. It seemed jokes facilitated other businesses than just laughing ;)

So what next? What can be done with this piece of information.

And then it dawned to the company .

The entire case rested on two things

1)      The only way to increase consumption was to increase the per visit usage of toilet paper.                        
 

2)      The fact was that a great majority of the Brazilian population read the daily cartoon strips on the pot.

 

Combining these two factors the company decided that all toilet paper rolls should be printed with the most popular cartoon strips after obtaining necessary copyrights. This way, the consumer will keep unrolling the toilet rolls to view the cartoons as he relieves himself; and will unroll even more as the cartoons continue to amuse and hold him spellbound. At the end of it all, the user will unwind much more paper than he usually does or actually needs for his requirement. And will end up using the entire length of unrolled tissue for his ablutions.

Thus was born " Comic Strip Toilet Paper "

 

And it worked. The company came out with toilet papers printed with cartoon strips and sales just zoomed past leaving all the competitors literally “behind”.

I feel examples like these pave the way to understanding how by mere observation of the customer’s habits one can deduce what kind of product they would want. Also the example shows how no matter how ridiculous an idea sounds (installing cameras in toilets!!) things that need to be done , just need to be done ;)

I believe that it is difficult for the customers to actually articulate what they exactly want. And it is the Company’s job to see and understand their customer’s real needs. Companies like Apple work on Steve Job’s principle “Customers don’t know what they want, until you show it to them “. The tremendous success of Ipod , Iphone and Ipad stands testimony to his belief.

And when I think about listening to customers for their needs, I am always reminded of a famous quote by  Henry Ford , the father of modern day automobiles . He said,

“If I had asked people what they wanted, they would have said faster horses."

Sources :

INSEAD casestudy on Renova Toilet paper
What happens in Brazilian toilets : by Sunil Vaishnov
www.citeworld.com :Customer Driven Innovation Limits 

The Innovation Circus in an Organization

                 

Recently while reading Thunderbolt Thinking : Innovation Fundamentals , by Grace McGartland , I came across a very interesting metaphor for “how organizations handle innovation ”. She depicts organizations and their processes regarding innovation  in a short yet effective example of a “Circus with 3 rings”.I found the example to be very apt in its description of how any organization in this world has departments or divisions which handle innovation  exactly according to one of these 3 rings.

Let us consider an Organisation X , a circus with 3 rings.

Ring 1 : 

This first ring has a "Fire Loop" activity on. The Tigers in this ring are jumping through one fire loop after another , with a single aim in mind "I have to cross this loop and land on the table" . Once the tiger crosses this loop and lands on the small table, its next target is to jump through another loop of fire to the next destination  another table.

The tigers in this activity are jumping so fast , racing one after the other that they only have the time to focus on the exact spot where their two front  feet are going to land. And then they immediately get ready for their next leap.

Ring  2:

This ring is the Clown Ring . Here the clowns fall over one another in an random unorganized haphazard comedy of errors. Their act is laced with mistakes and miscommunication. They hit each other, cry , laugh and fall creating an utter chaos in the ring

Ring 3 :

In the last ring we see two trapeze artists who appear to just fly gracefully through the air in a spellbinding performance, carrying out breathtaking stunts mid air. This amazing performance looks deceptively simple and captures everyone’s attention in the audience for the moment.

Now this entire scenario would look just perfect in any circus , but if this is how  "Innovation program" is carried out at the various departments at  Organization X, then for X,  it spells doom

In the three separate rings , 3 distinct sets of activities are going on. All these activities have 3 different outcomes .Let us analyse these rings in terms of corporate behavior.

Ring 1 :

In this ring we see that individuals are driven by the need to finish the current target and move as quickly as possible to the next one(through the loop on the table). They are largely  driven by external constraints (the fireloop & the ringmaster) and that keeps them focused only on the short-term . No long term goal is in sight and all the efforts are concentrated on completing the task assigned at the moment.

Ring 2 :

This ring is more about a hit-and-miss, trial-and-error atmosphere which is void of any formal channelized communication or feedback system. There is a lot of misplaced competitiveness and there is absolutely no positive constructive team effort.

Ring 3 :

It is only in this ring that we get to see a committed and well aligned team which gives a graceful outcome and perform effectively. However this performance last only for a few minutes, The processes and teamwork are perfectly in place, however the performance is not sustained for a long time. It lasts only for a while.

Now in company X if each of these rings represents a different part such as marketing, operations and R&D and the company is running a Innovation program throughout , then this is a perfect recipe for disaster . Company X is at a huge risk because :

• They have focused on excellence in innovation in only one area of the company (Ring 3 , R&D)
• They have failed to create an organization-wide definition for innovation
• They have not linked innovation to their overall strategic business goal

The organization therefore will not be able to inculcate a innovation culture which is stable , sustainable , replicable and in congruence throughout the company.

I believe this metaphor of company as a circus  goes a long way in explaining how large organizations should look at implementing the entire process of transforming an organization to become innovation centric by focusing on the behavioral aspect of its departments.

Second Generation Entrepreneurs : The India story

Almost  85% of all businesses in India are family run businesses. Prestigious institutes like IIM A , IIM B ,  ISB and SP Jain starting Family Managed Business Courses and running them successfully for over last 5 years is a testimony to the fact that  families today pay a lot in terms of attention and premium in grooming and making the next generation ready to take over business. I  have seen that a number of my close friends (who come from  business families and are planning to join it ) are skeptical and insecure of what lies ahead in their path. Especially when it comes to second generation entrepreneurs (SGEs) they have a lot to face in terms of  meeting family & employee expectations , lack of self-belief, being unsure about how to work with and convince the older , more experienced lot in the company , attempting to change former business processes in order to keep pace with the their right here right now attitude and aligning business focus with innovative practices.

Through my interaction with  corporates visiting IIM Ranchi (most of who were a grey haired lot), I tried to understand what they felt about the younger generation. I had a very interesting conversation about SGEs with one particular HR head who had been working  in an Indian - MNC for the past 26 years. This leading Pharma company had recently changed hands from father to the next generation London educated young and dynamic daughter (I guess I have given enough clues ;))  He said,

“Today’s generation has a lot of ideas and new changes which they want to implement as soon as they come into the organisation. They feel that they can just turn the organization head over heels by these changes. They may be capable of doing it, but a organization has some deep rooted values and culture and any change is going to disrupt the organization's normal functioning."

This may well reflect a general sentiment of employees working in a "Family Firm ".They believe that the young generation, who have had it easy and have been served the business empire on a silver platter, is rash and overtly ambitious at taking decisions. However those who believe that life of second generation entrepreneurs is a bed of roses should bother thinking again!!

Being a SGE is a double edged sword. On one hand you have been handed over a well-established platform, a legacy which you are to develop and enrich. On the other hand you are entrusted with living up to the brand name, maintaining the standards and level of trust and expectations of the people. However SGEs must understand that this the whole challenge of it. You have been lucky enough and more privileged than 1st generation entrepreneurs in a number of ways:

1)  You have been brought up in an environment where working was all about passion, hard work, risks and rewards. This culture has been inculcated in you right from toddler-hood

2)  The hardest part of the organizations growth life-cycle is over, the business is set up. You have to make sure the business grows and matures. This part though not easy is definitely less challenging than starting an entire business from scratch.

3)  You have not only inherited the business , but you have also inherited a legacy , a name , a brand each of which takes a fair share of perseverance , hard work and to a certain extent luck.And the best part , customers trust you already !

4)  And finally , you have the luxury of working from a decent office while your forefathers started off in a “Garage” :)


The most important function of SGEs is to have a daring and ambitious growth strategy. However I believe that though SGEs can be bold, they have a limit for their boldness as they do not want to lose ,what their forefathers have achieved,  just because of their bad decisions. As a result by comparison SGEs most of the times would be less risk taking than the earlier generation who had absolutely nothing to lose.

Our country has seen likes of hugely successful second generation entrepreneurs such as Mukesh Ambani, Azim Premji, Anil Ambani and Naveen Jindal. However with more than 85% business in India governed by families by 2013, for SGEs to survive this highly competitive environment  to develop skillset necessary to manage and organize business. A 2013 survey conducted by PWC about family businesses in India quotes that over 72% family businesses do not survive above 3rd Generation.Thus it is the responsibility of the SGEs to ready themselves to take up this challenge and the onus to professionalize the business and make it compatible to the global standards, to recognize the need to separate family & firm and to strive for continuous innovation lies on their shoulders.

And with increasing importance of these objectives the SGEs may very well be the reflection of a nation which is changing for better.