Electronics asset disposition is in demand as corporate partners seek to maximize value from existing assets. From assessments to data security and on to remarketing, reselling or recycling, asset disposition is viewed as smart revenue management, and as critical to answering today's requirements for environmentally aware e-waste management.
A common strategy for most any corporation is margin improvements and maximizing value from existing assets. At the core of this strategy is the extension of reverse logistics opportunities; particularly those opportunities to be captured from the timely and successful disposition of assets, the value recapture of aftermarket and used IT equipment and components.
The semiconductor value chain is no exception to the quest for healthier margins. Thus, EMS and larger distributors are adding reverse logistics or aftermarket services to their offerings to meet these needs. Critical to successful reverse logistics strategies is finding a value partner with the market expertise, agility, and customer base to truly evaluate the remaining value and legal disposition of your assets while certifying the complete erasure of data to industry and government standards.
What are Reverse logistics and Asset Disposition?
While not a new concept, reverse logistics is experiencing new growth and interest from all industries. Reverse logistics is, quite simply, the last stage of a product value chain, initiating at the point of product consumption and continuing through to product return, recycling or recapturing of value through the proper disposal of the product through resale or as recycled scrap (waste) (cf. the white paper, "What is Reverse Logistics?" by Karen Hawks for the Reverse Logistics Association (RLA) and this summary by RLA).
As the Reverse Logistics Association (RLA) summarizes, "We refer to the term 'reverse logistics' as all activity associated with a product/service after the point of sale, the ultimate goal to optimize or make more efficient aftermarket activity, thus saving money and environmental resources."
Source: Reverse Logistics Association
Corporations are increasingly recognizing the value of their IT equipment and components at the end of that equipment's lifespan. The main drivers are twofold: (1) customer demands and expectations for easy return, disposal and recycling of equipment (in part due to regulations pertaining to electronic waste (e-waste) disposal such as RoHS and WEEE); and (2) the opportunity to harvest additional value from existing assets.
In the case of returned IT equipment and components, customers are increasingly demanding simple and responsible return paths for products at the end of their lifespan (whether consumers or end-market supply chain partners). The value of providing clear, simple and ecologically responsible return procedures is now part of many customers' evaluation of product features. Furthermore, customers are also evaluating return policies and recycling procedures as a means for choosing corporate brand loyalty, again whether as a consumer or a supply chain partner. A corporation's promotion of social and corporate responsibility through return acceptance, regulatory compliance with RoHs and WEEE, and reduced ecological footprint from waste are serious criteria demanded by today's 'greener' customer, be they consumer or supply chain partner.
Beyond customer demands and corporate attention to social responsibility, corporations are also recognizing that value still exists in their equipment, products and components at the end of their lifespan. This second reason for increased interest in reverse logistics spans all industries, from heavy equipment industry leaders such as Caterpillar to consumer electronics retailers' e-waste recycling programs such as Best Buy, among many others. Harvesting value from end-of-life equipment and components (also called 'aftermarket') entails understanding where the value lies and how it is recaptured: while equipment may have reached the end of its capabilities or usefulness, the components which make up that product still contain value; sometimes, significantly greater value individually than as a single sum of parts.
For IT equipment and components, timing and accurate asset evaluation must be considered hand-in-hand with remarketing opportunities to maximize the value for component resale to the 'aftermarket' supply chain. Collaborating with a value chain partner who is well-versed in the marketability of your components and who can provide strategic recommendations for asset recovery will return the highest, secured value. These critical skill sets and capabilities are precisely why many corporations turn to value chain partners who provide these services or they create an independent division to oversee and execute their reverse logistics strategies, particularly for asset disposition.
Asset disposition is a subset of reverse logistics, focusing on the evaluation of market value for assets and the development of asset recovery strategies. While reverse logistics covers the entire set of services and solutions for products and components after it has been delivered to an end user or end-market supply chain partner, asset disposition is the more focused act of the orderly destruction or transference of value of equipment or components.
Narrowing our focus to the semiconductor and electronics value chains, we will only consider electronic equipment and components, more commonly referred to as IT equipment or IT assets. The reason for the 'IT' label is because these equipment items frequently also contain data that are also an asset but that must be properly erased and destroyed should the hardware be eligible for remarketing.
The question of transference of value for IT equipment generally encompasses the decommissioning of IT equipment. This equipment will then have any stored data permanently erased, and the IT equipment itself can then be torn down into components to be sold to recover some of the original value. In some cases, there are laws or corporate policies regarding the handling of extremely sensitive data, mandating the destruction of the IT equipment in which those data are stored. In this case, the product or components (here the IT equipment) must be destroyed through mechanical shredding of the device so that no data can ever be recovered. The resulting scrap material is then available for recycling.
IT asset disposition, therefore, includes the following processes: turn-key asset management, asset evaluation and recovery strategy creation, data erasure and security services, equipment teardown, asset remarketing and reselling, donation, environmental resource identification, equipment destruction and recycling services.
Understanding the flow of IT assets, in reverse
Extending corporate asset strategies through the full lifecycle of a product, equipment item, or component also extends the value that can be gained from that asset. No longer is an asset 'off the books' once it has been sold or reached the end of its functional lifespan.
As more companies demand reverse logistics solutions, service companies in the electronics supply chain have added these offerings to their docket. For example, many EMS companies have expanded their service offerings to provide 'aftermarket services.' Most notably are those provided by the major EMS companies who have acquired companies or spun-off divisions to provide these solutions, as recently reported by Manufacturing Market Insider (MMI) in their September 2010 issue.
Why the interest from EMS providers? As elegantly summarized by MMI, the reverse logistics (or aftermarket services (AMS)) sector "offers outsourcing-driven growth, especially from the least penetrated segments. This is music to an EMS provider's ears. Providers also like the financial metrics of AMS activities, which typically offer a favorable margin mix." (cf. MMI Vol. 20, No. 9, p.2) As MMI further offers, a looming question is, however, whether or not these traditional EMS providers who are beginning to offer turnkey solutions that extend to reverse logistics services, are equipped to handle the product mix and the "spare parts management" necessary to be successful.
Others in the electronics value chain, have been providing these turnkey services to their clients, often previously under the class of supply chain services. When considering your reverse logistics business outsourcing, double check your supply chain partner's capabilities, history and knowledge in reverse logistics management by conducting an on-site audit, for example.
Implementing the appropriate reverse logistics strategies and ensuring the most qualified and knowledgeable value chain partners for your reverse logistics needs are equally critical to the strategies and partners for your product development, materials management, and manufacturing and distribution value chain (i.e., your forward logistics).
Similar to forward logistics strategies and criteria for partner selection, reverse logistics requires the careful screening of partners who have market expertise, product and component knowledge, the ability to accurately and quickly evaluate the value of your assets, and have an extensive and agile network through which they can quickly recover value from your assets. Additionally, when remarketing of assets is not an option due to requirements on handling highly sensitive data or the greater return on the asset through donation or disposal, trust and knowledge from your reverse logistics partner are critical capabilities.
In sum, asset disposition for electronics is quickly rising in demand from consumers to corporate supply chain partners. While there are many service providers in the reverse logistics domain, partnering with a trusted, knowledgeable, agile, and long-standing company is critical to ensuring the proper disposition of your assets. From assessments to data security and on to remarketing, reselling or recycling, the ability to recover final value from your assets is not only smart revenue management, but is also critical to answering today's requirements for environmentally aware e-waste management.