As the electronics industry increases its commitment to the environment, businesses and consumers are looking for cradle-to-grave management of products. After-market handling -- repair, return, disposal, and recycling -- has largely been left to a highly fragmented set of companies that may or may not be familiar with the electronics supply chain.
Avnet Inc. (NYSE: AVT), one of the world's largest electronics distributors, is launching a business today that will provide complete lifecycle management of electronic goods. Avnet Integrated Resources, built through a series of acquisitions, will offer repair, refurbishment, and disposal of electronic products, including consumer goods.
Steve Church, president of Avnet Integrated, told us that the business is a natural extension of Avnet's core distribution business.
"We are always thinking about what is next," Church said. "Industries mature, so you always want to be looking for the next wave. Our litmus test is, can we leverage our core competency and offer something of value? We looked at the after-market and decided we could leverage our scale and scope to offer supply chain services in the opposite direction" of procurement and fulfillment.
Avnet Integrated will offer a suite of services ranging from on-site field repair to recycling and disposal. In some cases, the business will step outside the typical electronics distribution model by dealing directly with retailers and consumers. In Brazil, for example, Avnet repairs cellphones through a drop-off storefront business. Avnet Integrated's revenue model also differs from a typical distributor's. Depending on the service, a consumer may pay for a repair, or an OEM may contract Avnet Integrated to handle extended warranties.
According to Avnet, the suite of services includes:
- On site field service technician network supporting 10,000+ field events a month, including field repairs and install, move, add, change (IMAC)
- Integrated technical call center supporting a 4,000+ field-service technician network with training, call dispatch, and customer service
- Service part logistics, including warranty and spares pool management
- Board level repair centers of excellence with capabilities that include hardware and software engineering design, test and repair development, failure analysis, high pin count component-level repair, product refurbishment and diagnostic testing
- R2 [responsible recycling] certified asset recovery and reclamation, IT asset disposition (ITAD), demanufacturing, secure data destruction, remarketing and recycling
The acquisitions that comprise Avnet Integrated are:
- Round2 (asset recovery and recycling)
- Pinnacle Data Systems Inc. (OEM repair and technical services)
- Broadband Integrated Resources (cable TV equipment repair, refurbishment, and disposal)
- CenterCell (mobile phone repair and refurbishment and board repair)
- Nexicore (depot repair, onsite repair and installation, and repair part management).
The business will serve "all electronics verticals, including IT hardware, mobility, telecommunications infrastructure, and consumer electronics," Avnet said.
In some cases, Avnet Integrated might service brands sold through Avnet's other businesses, such as Avnet Technology Solutions (TS), which sells IBM, HP, Oracle, and other systems to VARs. The brand owners could contract with Avnet Integrated to handle warranties and extended services.
"There is a nice synergy with Avnet Technology Solutions: While TS sells new equipment, their VAR customers face the issue of 'What do I do with the equipment when it reaches end-of-life?'" Church says. "We are already looking at ways to work together to take back old equipment and share revenue with TS and their VARs. But, really, we are a year to 18 months away from this scenario of delivering our services through TS."
Avnet Integrated will allow suppliers to pull sales and after-market services under one umbrella. "In some cases, suppliers handle warranty repairs. In other cases, they certify someone to do it," he said. The market for such certifications "is very fragmented -- when we looked at it, there are hundreds of companies with revenue under $100 million." As a $26 billion global company, Avnet can help suppliers consolidate service relationships under a single organization. PDSi, one of the acquisitions that formed Avnet Integrated, provides OEM repair and other after-market services in Tiel, the Netherlands, and Singapore, paving the way for the global expansion of the new business.
Product obsolescence is another consumer challenge that Avnet Integrated addresses. "Take the Apple iPad," says Church. "You buy an iPad 2, and then the iPad 3 comes out." Avnet Integrated will take trade-ins, give customers credit, refurbish and clean the items, and resell them at a discount. The process enables suppliers to retain some value from older products and reach markets in which consumers may not be able to afford brand-new devices.
Perhaps the most significant aspect of Avnet Integrated is recycling and disposal. On the front end of the supply chain, in components, a significant portion of parts consigned to the scrap pile end up being sold as counterfeit parts. Church says Avnet Integrated, as part of a distribution company, understands how failure to dispose of products damages the supply chain. "We make sure [products] are disposed of properly." Since the products contain elements that can be reclaimed and recycled, Avnet Integrated will handle that, as well.
Avnet Inc. expects to reap the benefits of the acquisitions as facilities are consolidated with Avnet's hubs and service centers. Strategic local and regional facilities will be maintained. As a corporation, Avnet will become a bigger customer to its freight carriers and reap consolidation savings in that regard.
"We know how to buy good companies and integrate what needs to be integrated," Church says. "In addition, we have been able to take these companies that offer part of a solution and create a total solution." As more and more environmental mandates are enacted around the globe, the opportunity for cradle-to-grave services is considerable. "As a global business, we can more than just comply. We can lead."