Reverse Logistics Is Fundamentally Logical

In the past few years, many electronics companies have begun to embrace full lifecycle management of their products.

Programs are in place to collect and recycle end-of-life goods as required by the EU's WEEE Directive. Attention to corporate social responsibility has also led companies to support product collection and recycling in other regions. Better yet, the useful life of prior-generation products is being extended by redeploying them for other purposes, like making cellphones available for emergency communications.

Reverse logistics has become a way to recover otherwise lost profits and thus is gaining acceptance.

While controlling the internal cost of quality nonconformance is very clearly a business activity, it has not always been so clear who benefits from controlling the overall costs across a product lifecycle. One of the reasons for this is that environmental externalities, which may include effects of pollution, carbon footprint, solid waste, etc., are not traditionally allocated to the cost borne by the manufacturer, or included in most accounting ledgers. In some industries, including the occasional electronic manufacturing plant, fines have been levied to make up the external cost differences after the fact. As a result, end-of-pipe solutions have largely given way to pollution prevention.

Some would go so far as to argue that lack of accounting for external environmental costs is a flaw in the free market system itself. Paul Hawken, for example, in his book, The Ecology of Commerce, says it this way: “Markets are superb at setting prices but incapable of recognizing costs.”

But costs can work two ways. Aside from being a negative factor, resources that are considered waste can become a positive value if recovered for further use.

Given a positive spin (read: profit), previously unaccounted-for external costs are now beginning to be a part of everyday product management. There are good reasons for reverse logistics completing the circle initiated by, well, forward logistics. Foremost, resources — like any purchased materials — have value. Waste, on the other hand, is a negative cost. The net benefit of waste recovery depends on how it is collected, how far it is transported, how it is treated, and its inherent value. Many of our waste streams unintentionally (and unbeknownst to many) contain precious metals that are more concentrated than ores mined from the earth. These resources are termed “urban ore.” Electronics scrap is typically a relatively rich source of urban ore.

Electronics goods contain precious metals (silver and gold) and other metals like copper, aluminum, and steel, all of which have established recycling streams. These processes are not perfect, since there are offsets like energy use, while ways to economically recover critical shortage metals like indium, used in flat-panel displays and touch screens, are in need of development. But most states now have electronics recycling laws, and when one understands the overall cost sheet it is surprising that we ever just tossed our old equipment in the trash.

Electronics OEMs know this now and are vigilant about taking care of their precious metal, including getting it back after goods have shipped and become obsolete. Many have established contractual arrangements with reverse logistics partners. Individuals can also find ways to save their old cellphones and batteries from landfill with organizations like Call2Recycle. And you can find outlets so that a wide variety of other goods do not becoming a lost cost either, for example at Earth911.

Fundamental logic has not escaped the notice of environmental standards for electronic product assessment. EPEAT, for example — based on the IEEE 1680 family of standards — includes criteria to enable separation of different materials for recovery. Markets for recycled metals date back hundreds of years, while uses for plastics regrind are maturing. Disassembly is not always as easy it looks, though, since gold plating on a connector or wire bonds in an IC will require professional size reduction and separation. But the steps remain the same as we have heard about in our home life: reduce, reduce, and recycle.

When balance sheets represent full lifecycle costs, logistics will work effectively — both forwards and backwards. When it comes to paying for resources and their external costs, complying with regulatory requirements, and meeting voluntary standards, everyone agrees: Reverse logistics is fundamentally logical.

1 comment on “Reverse Logistics Is Fundamentally Logical

  1. MaxRecovery
    December 17, 2012

    I completely agree that reverse logistics is logical. Not only does it make economical sense for retailer/OEM, but it increases the likelihood that value will be recovered from returned goods through recycling or resale. I know it's a business cliche, but it truly is a win-win solution for the stakeholders and the environment. I jsut recently learned that ECS Refining is a great example of a company that has turned burdensome returns into a revenue stream for a big box retailer while providing a sustainble recycling solution for equipment that could have otherwise gone to waste. Check out another Reverse Logistics story here.

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