Everyone's seen the ugly images: outdated mobile phones, obsolete monitors, and dated laptops discarded in landfills. There's value in those piles, it turns out.
“Reverse logistics” can mean a lot of things — resale, refurbishing, or harvesting parts — but the simple way to think of it is recycling. The electronic supply chain, however, has long had an uneasy relationship with the idea. Last year's mobile phone went to the landfill because the profit from recovering components from old or damaged goods wasn't worth the cost to implement a recycling strategy.
Older screen technologies, for example, really weren't worth the cost to recover. But flat-screen technologies do have valuable, re-usable parts. Touch screens even more so. As technology advances, companies are finding it harder and harder to see the mix of components entering each point of their supply chain as one-and-done propositions.
Reversing the electronics supply chain comes with its own difficulties, though. Valuation and tracking are the two main headaches. In a traditional “forward” supply chain, supply responds to demand. If everyone wants your new phone, you manufacture components to meet the estimated demand. The hard part is getting the estimate right, and sourcing what you need.
Reverse logistics adds a variable to the supply side. If you manufacture tablets, and want to mix in a reverse-supply effort to bolster chip stocks, you've got to estimate how many returns you're likely to get seven, nine, or 12 months out. That's not impossible. But it's not easy.
Recycling is great, but consistency isn't as easy to come by. If you're planning 10 percent of the supply of a particular chip will come from goods moving back the way they came along the chain, you'd better hope enough final products get returned. If they don't, you're left looking for those components on the regular forward supply chain — where you already placed your order six months before.
That brings us to valuation. What's a reverse-sourced component worth? Lots if it's scarce. But who can predict scarcity? In fact, the regular supply exists precisely to solve that problem. In theory, your supply chain eliminates scarcity by correctly calculating demand and going after the supply needed to meet it.
Put recycled material into the mix, and you're left with an unpleasant choice. Either you have to hope the supply of recycled goods is consistent enough to always meet demand, or you have to predict that lots of products turn out to be defective, and get returned. The first of those options is a calculation, but still subject to market whims.
The second of the options is, or is vulnerable to being, basically a Hail Mary.
So it's no shock electronics, as an industry, has looked wary on reverse logistics. Even to the point of letting obsolete products head to landfills uninspected or accounted for. But that's no longer a luxury OEM's can afford.
Scarcity is starting to make reverse logistics a possible profit center. The amount of touchscreen glass the world can manufacture in a year is limited, and the amount already showing up in the garbage is hard not to notice. No one's yet measured the size of the reverse logistics market with any specificity. Still, the conversation has started.
Besides being more environmentally appropriate, reverse logistics to give old and broken products a second, even a third life, makes more and more economic sense. OEMs are eyeing it and no longer have the luxury of relying just on the outgoing supply chain.
Ten years ago, OEMs could stress efficiency, get a product to market with the lowest production costs possible, and forget it. Now, OEMs have to keep tracking their products, and when they've given all they have, take them back to break down and resell. Building those systems will take time, and ideas — tracking, acquisition, perhaps discounts.
Many manufacturers have successful recycling programs now. We'll see more in the future.
Nobody likes a landfill. But finally, it's becoming easier to see them less as piles of last year's work, than as promises of next year's profits.