John,
The customer is always the next guy in the chain, so, yes your disty would be your immediate customer.
However, unless they actually "use" the product, will they know if it is faulty ? Obviously "customer returns" will come from the end user, through the disty and back to you.
A good place to start would be to monitor customer returns, either at your end or maybe at the disty.
You could express this as a % of shipment in either quantity or value.
However, your returns will be probably out of phase with shipments i.e. stuff you get back today, may have been built some weeks/months ago.
Are the products serial numbered ? Have you or disty's got a buffer stock for "swap-outs" in case of returns ? Have you got a database you could use for tracking ?
This feedback could also help identify batch problems, maybe allow you to have a product recall procedure etc;
Hope this bit of on the fly rambling helps........going home now
Have a good Christmas.
Regards,
Chris May
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