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Everyone's seen the ugly images: outdated mobile phones, obsolete monitors, and dated laptops discarded in landfills.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.
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.
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.
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.
“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 ?
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.
Yes indeed I think the reverse engineering is something which is similar to this. It works only on a given time period. Not everytime.
You are right, DocRogers. The purpose of reverse logistics is to recapture value or ensure proper disposal. Recycling is something a little different.
@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.
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.
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.
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)
Linda, counterfeit products/components are there is market for a long time and personally I feel it's difficult to filter out because customers are encouraging such products. Quiet some time back, I read that even in NASA, they had found counterfeit components because of the negligence of the people who are handling components for space application.
You cannot control introduction of counterfeit into supply chain by having few people rigorously screen such parts. Human beings make errors unknowingly. Additionally, the man power that construction industry is going to employ to mitigate the counterfeits mights just be so extensive that it wuld make sense to manufacture the products domestically. By having domestic competition and mass production and manufacturing done in rural areas of US where cost of living and payscales are lower compared with cities, it is possible to cut down the costs significantly. Besides such measures would more importantly reduce US trade deficits with LLCs and help domestic economy.
“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.
The fake goods that enter the supply chain result from mishandling and retesting of the raw materials when they are bought. As the article explains, this is not necessary as the fake goods come from trusted vendors complete with its papers and legal documents, which is a huge setback. Moreover, in a world of competition, companies often recommend goods that are fake, to each other, which when bought will result in the wastage of money, and unsatisfied customers.
Black markets that exist in China, India, Japan are the main suppliers of the fake goods, directed at a western based industries. These areas are teeming with experienced con artists who can fake even the most complicated electronics, (e.g. Use poor quality materials) without getting caught. This again is due to the sit-back-and-watch attitude of the government, which has double standards: one one hand, it makes profits from the black markets, as dealers often bribe officials to ensure their safety from raids, and on the other hand, the government tries to affiliate an industry.
The zero tolerance policy may sound good on paper, but accomplishing it is a difficult task, mostly because of corruption at different levels. A healthy percentage of the fake goods come from trusted dealers, which either fail to recognise the fake goods, or are just bribed. Imparting education and removing corruption at each level would need the joint efforts of the ones who are concerned, and also a huge sum of money to carry out such a plan.
I realize how the Counterfeiting can affect the quality of the final product. And I believe that everybody that is involved in the supply chain knows now how the low cost supply policy can damage their businesses.
Every manufacturing concern has to rely to some extent or the other on distributors and wholesalers as it cannot reach out itself to customers and retailers itself. This is where the loop-hole lies. Frequent audits of distributors and thorough background checks before agreements are made is also one way to go to fight against counterfeiting.
Tirlapur, no company would want the counterfeit of its products' parts are being sold as there is only a disadvantage of doing so. If the company wants to reduce the price of its product then it can buy cheaper parts from other manufacturers and fix it into its products; the difference being that that would not be called counterfeiting.
“You cannot control introduction of counterfeit into supply chain by having few people rigorously screen such parts. Human beings make errors unknowingly.”
Apek, basically I would like to know that, what are counterfeit products/components? Everybody has a right for manufacturing their products or components, am I right. Other than branded items, everything comes under the purview of local/un branded and not counterfeits. Customer has the right for selection, based on their financial impact.
The counterfeit or the second quality parts creep into the supply chain and enter into the production line mainly because of laxity on part of the inward inspection procedures. Normally in large assembly lines the material from the approved vendors is accepted based upon “Self-certification” by the vendor. This allows for the entry of second quality parts to be mixed along with the genuine parts either knowingly or unknowingly.
The remedy would be to have a random sample pick up from these self certified batch of parts and do a thorough inward inspection of the same. If a counterfeit is detected then reject the whole batch and also penalize the vendor.
Counterfeit sources that creep into businesses' supply chains and used as building blocks can extremely compromise the quality of end products and post severe impacts to the businesses. There must be anti-counterfeiting strategies on both fronts – supply source counterfeiting and end product counterfeiting.
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.
@Waqas: Yes nobody wants that to happen but it cannot be stopped as well since we do not have a control as such in it.
I think it is possible to eliminate the counterfiet components with each and every buyer and seller along the supply chain verify the integrity of the parts or components or materials till all the way down to raw materials such as reare earths. But every buyer should be ready to pay a little extra cost to the seller to ensure the highest standard of quality.
“I think it is possible to eliminate the counterfiet components with each and every buyer and seller along the supply chain verify the integrity of the parts or components or materials till all the way down to raw materials such as reare earths.”
Elctrnx, what am suggesting that instead of categorizing it as counterfeit components mark it as second quality and some of the peoples may interested to use .
“Yes nobody wants that to happen but it cannot be stopped as well since we do not have a control as such in it. “
Nimantha, its happened only because of the negligence from responsible peoples. I think if the filtering process got automated, such things can be avoided up to an extent.
“The counterfeit or the second quality parts creep into the supply chain and enter into the production line mainly because of laxity on part of the inward inspection procedures.”
Prabhakar, you are right. it's happening only because of the negligence from inspecting and filtering peoples.
I do agree that training and education are key to fighting this issue. It is also important to have an effective audit strategy in place for your company.
Suggestions: Employ rigorous regular inspection procedures (accompanied by random spot checks) on all purchases. Yes, I know this is expensive:so is your Reputation! When “Deliberate Counterfeit Products” are discovered, contact the vendor imediately to reject shipment/stop payment, then PUBLICISE THE VENDOR!!! The counterfeiters cannot tolerate any 'spotlight' on their operations, & the vendors will also be forced to have more rigorous inspection procedures to stay in business. It will only require a few such inforcements for “The word to get out” that there is a “zero-tolerance for counterfeiting”: if you get caught, no one will buy from you, as you will now be a “known counterfeiter” &, as such, “untouchable”.
@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.
@DocRogers, its an important distinction… and the capturing value focus of reverse logistics makes it more palatable to the manufacturer.
@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
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?