Repair or Replace: Not Just a Matter of Money

Why Repairing is Always Better Than Replacing

Maybe you recognize it: your customer has received the requested product in the right quantity at the right time. A lot of time and attention has been devoted to achieve this. Yet, the customer gives you a call. The product does not meet the specifications and needs to be repaired or replaced. This is where the dilemma begins. Replacing the product is cheaper than sending it back and repairing it. Most companies will choose this option. But is this really the better option? In this blog, we explain why it is better to repair products rather than replace them, and how to make the repair process as efficient as possible to achieve your intended financial goals at the same time.

Where Do Those Emissions Come From?

To find out where the emissions in your company originate from, you first need to collect data and analyse it. We explain more on this subject in our fist blog in the series on circular processes. We explain how you can measure your emissions with Product Footprint Management and how to turn these insights into real actions.

When the analysis shows, for example, that more than 85% of your emissions are caused by the procurement of goods, it is important to address it to lower the percentage. Below, we explain how to reduce these emissions by repairing products instead of replacing them.

Reduce the Procurement of New Materials

So, how do you limit the procurement of new goods? You take defective or poorly functioning products from your customers and repair them. In other words, instead of sending a new product to substitute, you repair the current one. Your customer will experience this as an additional service and identifies you as a company that values quality. Win-win.

What Does Your Ideal Repair Process Look Like?

When you start repairing your customers' products, you obviously want to monitor the process from start to finish. The goods must arrive via the appropriate channel, at the right place, at the right time. They are checked, the warranties and insurances are examined, and the correct follow-up process is determined. There are several options at this point. You pass the product on to a repair department within your organization, or you send the product to a third party that will take care of the repair work. You or the third party carries out the repair so that the product is ready to be sent back to your customer. If necessary, you can send the invoice to the customer. Sounds good, doesn't it?

How Can SAP Support You in This?

You are probably wondering how your ERP system can support this process from start to finish. With SAP S/4 HANA, you can carry out this process seamlessly, with a complete overview. And without additional development costs. By combining a number of SAP Best Practices, you are able to perform your repair process. From returns from your customer to repairing, shipping, and possibly invoicing the repair activities. The below overview shows the process flow in SAP S/4HANA, where you can see the status of each document.

The repair process starts with the creation of a return sales order. With this document, you are able to book the product back from the customer into your system and initiate follow-up actions. One of these follow-up actions is repairing the product. When you choose this option, an In-House Repair document is activated.

You activate a check in your warehouse, to find out how the product can be handled. If it turns out that the product can be repaired, a Repair Order is activated. This is the basis for carrying out the repair process.

The repair order ends up with the repair planner. The planner determines which department will repair the product, on which day/time, how much time will be spent, etc. When the planner releases the order, the repair team can get to work. The repair technician picks up the order, gets to work, and then enters a confirmation of his work. Based on that confirmation, the repair order is reported complete and follow-up actions can be performed again.

The repaired product is ready to be sent back to the customer. This is achieved by actiavting an outbound delivery and processing it further. In addition, you also have the option to invoice the customer for repair activities. After this, the process is completely finished.

Utopian or Realistic?

Of course, setting up such a repair process involves more than just setting up your IT system. Agreements must be made with customers, suppliers, employees, and other stakeholders. You also need to account for your repair capacity and you possibly will need to set up agreements with external repair partners.

In addition, there is the cost component: can I repair something for the same price as delivering a new product? The fact that you can now run this process from start to finish smoothly is a first good step towards reducing costs. Setting up smart agreements with your stakeholders is a second. Outsourcing the repair work, if done smartly,  can further reduce costs. This will ensure that you spend no more money on a repair than on delivering a new, replacement item. In addition, you can also raise the price of your products, since this additional service will make them more valuable to your customers for longer.

McCoy's Vision on Sustainable Operations

Do you want to lower the CO2 emissions of your operations with these and other simple improvements? Then read our Digitalisation and Sustainability whitepaper for more ideas.

This blog post contributes to our blog series on Sustainable Best Practices. Check here[SP1]  for the next blog post in this series on Returnables.

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