For the good of the world and the good of the business, electronics OEMs have to figure out what to do with the products they make once the consumer is done with them. Most, however, aren't taking advantage of the potential benefits of a closely integrated reverse logistics process.
“Managing multiple vendors in an ad hoc fashion and running multiple RFQs per year to find reverse logistics vendors in an effort to get the best value simply adds to the daily challenge of the work,” said Linda Li, executive director and corporate vice president of the Li Tong Group, at the recent Hi-Tech & Electronics Supply Chain Summit. Many organizations believe that by getting the best deal in each moment, they can get the best deal overall. It's a misconception. “It's a big myth,” she said. “In the long run, it's more costly. You have fluctuations in the market.”
Further, in a traditional reverse logistics system, organizations face a variety of challenges. First, of course, is cost. Especially in organizations with a global reach, take back programs and the logistics involved with those efforts remain prohibitively expensive. In trying to act independently, organizations lose the potential economies of scale offered by a more collaborative approach, such as working with a reverse logistics partner.
Perhaps most importantly, organizations are concerned about security around intellectual property, as well as with maintaining process integrity and environmental compliance. “If you push the envelope a little bit, and start to see things in a more holistic and integrated way, you will have high impact in terms of management cost reduction and maximum return on value,” said Li.
For best results, organizations need to partner with a single reverse logistics provider rather than diluting the process across multiple vendors. “Typically, organizations start thinking about reverse logistics when obsolete product and scrap are occupying too much space, then they go to a local vendor who put in a bid and has minimum qualifications,” said Li. “They take the products away and no one knows what happens after that.”
The typical OEM has products coming back to them from a variety of sources. First, 3% to 5% of manufactured products are scrapped before they even reach the customer. “It can be excess material from production, or product that doesn't pass quality control and can't be fixed,” she explained. In addition, there is a volume of product created by post-consumer take back programs. The volume of this product is harder to manage and predict.
Li points to a variety of benefits associated with this more integrated way of managing reverse logistics. “You want to maximize the life cycle value of investment in the services and hardware throughout your supply chain,” she explained. The potential gains include:
- The opportunity to reuse and reapply parts and components to new products
- The ability to recover high-value engineering materials
- The enhancement of asset management capabilities
- The prospect of increasing the success of remarketing efforts
An integrated reverse logistics program can translate into the vast majority of product being recovered and used in new ways. “We can enable reutilization, remanufacturing, remarketing, or repurposing of parts in a way that ensures that 90 percent of the time we can find a second life for it,” said Li.
Has your organization tackled reverse logistics yet? What are your biggest challenges? Let us know in the comments section below.
— Hailey Lynne McKeefry, Editor in Chief, EBN