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Sometimes the Best Way Forward Is Reverse

Everyone's seen the ugly images: outdated mobile phones, obsolete monitors, and dated laptops discarded in landfills.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.

17 comments on “Sometimes the Best Way Forward Is Reverse

  1. DocRogers
    July 23, 2013

    Interesting article and the author is correct about several things. However, reverse logistics is not even close to being the same thing as recycling. He could've said that recycling is an important part of reverse logistics within the electronics industry. And, there are not enough good recycling solution.

  2. prabhakar_deosthali
    July 24, 2013

    The parts recovered by recycling of products received thru reverse logistics need not go into the main forward supply chain.

    A manufacturer could set up a separate secondary assembly line which uses only the recycled parts . This could be a mix of recycled parts and virgin parts.

    This way the forward supply chain planning remains intact and the recycled parts could be used for low priority/low cost products which do not have to move as fast as the main supply line.

  3. SP
    July 24, 2013

    Ewaste recycling is extremely important and looks like the need of this time with the amount of electronic gadgets a common man uses. But sadly not many companies are in the business. Its very important for countries like India where many people still dont know the difference between ewaste,organic waste and rejects. Hope people change their behavior in how they throw things.

  4. Nemos
    July 24, 2013

    “Older screen technologies, for example, really weren't worth the cost to recover. But flat-screen technologies do have valuable, re-usable parts” 

    Could you explain that point a bit more why that is happening ? 

  5. Nemos
    July 24, 2013

    This approach is much more Eco and environmental friendly and maybe if all the OEMs start to follow this could solve a lot of “ethical” problem that the supply chain already is facing (materials from conflict areas). All products have an “expired day” and nothing is trash.

  6. ahdand
    July 24, 2013

    Yes indeed I think the reverse engineering is something which is similar to this. It works only on a given time period. Not everytime.

  7. syedzunair
    July 25, 2013

    You are right, DocRogers. The purpose of reverse logistics is to recapture value or ensure proper disposal. Recycling is something a little different. 

  8. Taimoor Zubar
    July 25, 2013

    @DocRogers: I think when companies reuse the brought back components in some form other than the original, this comes under recycling. However, when they use their own components in exactly the same form as use before, this probably would be classified as reverse logistics. Yes, the difference between them is not so significant though.

  9. Taimoor Zubar
    July 25, 2013

    Interesting post, Marc. I think it's important to consider the logistics cost of bringing the component back and putting it into use again. With the high transportation and fuel costs, getting stuff back may prove to be greatly expensive. Also, as you mentioned, the environmental costs of bringing it back need to be considered. Sometimes these added together may amount to be greater than the cost of the component itself.

  10. elctrnx_lyf
    July 25, 2013

    Pcb electronics may be hard to go into the final new products, but the displays and touch screen are definitely reusable and some times even without recycling. Probably the first businnes would be coming from buying back mobile phones and seggregating the right displays for reuse.

  11. Mr. Roques
    July 25, 2013

    Well, maybe they should look at standardization – not only in the technology but among the components. Instead of making them useless for any other product. I know they want to sell new devices but they could also create a phone that you can update just as a PC does (more RAM, better CPU, etc)

  12. Taimoor Zubar
    July 29, 2013

    “Probably the first businnes would be coming from buying back mobile phones and seggregating the right displays for reuse.”

    @elctrnx_lyf: The problem with reusing the diplays in their exact form is that the display technology is growing at a very rapid pace and displays are constantly getting better in terms of their resolution and screen size. Hence, the newer models need better displays than the old ones. I don't think companies can really reuse displays these days.

  13. SunitaT
    July 31, 2013

    Reverse logistics allows a dealer to receive products back from the customer or send unsold merchandise back to the producer to be taken apart, sorted, reassembled or recycled; reducing overall costs for an organization.   This can be valued in increasing product lifecycles, supply chain complexity, maintainable practices and consumer preferences; which have to be enhanced on to maintain productivity and growth.

  14. Hailey Lynne McKeefry
    August 6, 2013

    @SP, I think there is a role of consumers in making manufacturers care about this sort of thing. If recyclability and green are major parts of the buying criteria (and consumers are clear and vocal about it) only then wil manufacturers make it a big priority.

  15. Hailey Lynne McKeefry
    August 6, 2013

    @DocRogers, its an important distinction… and the capturing value focus of reverse logistics makes it more palatable to the manufacturer.

  16. Hailey Lynne McKeefry
    August 6, 2013

    @Mr Roques: Reverse Logistics Association ('RLA”) Standards Committee is making efforts in the direction of standards creation. The charter of the group: The Reverse Logistics Standards Committee is organized to explore and promote cross industry standards that facilitate reverse logistics process optimization. It is a venue for all of the reverse logistics stake-holders to develop a common vocabulary and data-set upon which standards can be based. Its work is presented in the wiki below: Reverse Logistics Terms and Definitions. Contact one of the committee members also listed below for comments or suggested edits to these documents.

     

     Learn more here: https://rltshows.com/~reversel/company_focuscommittees_index5.php?showlist=true&FC=14

  17. Hailey Lynne McKeefry
    August 6, 2013

    I'm willng that the standards and certifications would have to change quite a bit from industry to industry. Anybody have thoughts on what a good standard might look like?

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