Written by Lisa Ann Cairns, Ph.D.
Getting a product to market requires the alignment of business strategies, manufacturing solutions, and especially supply chain partners. This alignment can become especially tricky when looking at the cycle in reverse. The balance is one of maximizing financial assets while protecting the supply chain from fraud. The solution to improving margins and environmental awareness while reducing counterfeiting can be found in secure IT asset disposition (ITAD).
Getting a product to market requires the alignment of business strategies, manufacturing solutions, and especially supply chain partners. This alignment can become especially tricky when looking at the cycle in reverse. But reverse logistics (RL) has long been a core business process. Over the past few years, demand for improved RL solutions that can improve return on investment (ROI) has increased quickly, especially for those solutions that also balance service and warranty requirements alongside e-waste regulation adherence.
The balance is one of maximizing financial assets while protecting the supply chain from fraud. On one hand, reverse logistics solutions need to improve margins and lower inventory and risk exposures, plus handle product efficiently and profitably (from service and warranty requirements to internal corporate IT hardware obsolescence). On the other hand, responsible reverse logistics must support counterfeit mitigation (particularly regarding e-waste) and corporate sustainability goals. This balance is no small task. It requires simultaneously meeting a significant set of requirements and demands in a single business event, and yet it is part and parcel of daily business. Done well, not only can all of these requirements be met and significant improvements in anti-counterfeiting be made, but improved margins through asset disposition can also be realized. However, for many today, the agility and deep expertise necessary to be successful in asset disposition often fall outside of the domain of purchasing and/or logistics departments. As a result, many companies have turned to trusted supply chain partners for these service solutions.
So what IS Asset Disposition?
Asset Disposition (AD) is a part of regular business processes. It falls under multiple domains, yet represents one simple, critical requirement: the proper disposal of end-of-life (EOL), obsolete, and/or decommissioned IT equipment or components - that is, IT Asset Disposition (ITAD). While most large corporations have specialized AD programs in place, there remains a significant need for AD service programs for medium to small businesses. Yet, regardless of size, one shared issue of AD is that logistics handling is typically split depending on incoming or outgoing processes in organizations. Unfortunately, in the case of AD, the end result is the creation of silos whereby the decision-makers for asset management may not be as aware of the various issues pertaining to e-waste harvesting concerns, ITAD counterfeit mitigation strategies, and the latest environmental regulatory requirements. Simultaneously, those typically involved in purchasing, while likely aware of counterfeit issues with sourcing and preventative strategies, do not necessarily have the tools or agility to maximize ROI in RL situations. The solution, therefore, has increasingly been to look to experienced supply chain partners with these skill sets, experience, and market agility.
In the case of IT equipment, or ITAD, every business holds significant assets in such equipment that continuously reaches EOL points and must then be properly disposed of as per required standards (e.g., U.S. Department of Defense [DoD]). Computers, servers, networking equipment, hard drives, monitors, etc., fill the closets of many buildings, and require that both business data and environmental regulations be dually managed. With increased regulations for ITAD (especially for those handling government, defense, and financial data), the requirements for safe data handling, wiping, and component destruction necessitate the use of specialized laboratories that have industry-recognized security systems, data erasure, shredding, and destruction methods with verification.
Even consumers find themselves in this quandary, as a recent Wall Street Journal article points out, noting that an average US consumer typically has 1 or 2 old smartphones, and 11% have four or more such devices. The reasons are similar to the corporate situation, ranging from not really being sure how to best dispose of these devices, either for data safety or for environmental reasons, or simply not having found the best disposition solution.
While some requirements necessitate complete DoD level data wiping and/or shredding, there are significant amounts of IT and component inventory that hold value when properly handled and remarketed. In these cases, the ability for companies to realize ROI for assets that would otherwise be recycled or destroyed can have meaningful benefits for today's squeezed margins.
The strategy of Asset Disposition
End-of-life management is a challenging yet essential function of good inventory management. Faced with tight inventory controls and even tighter margins, EOL management is one of the more recent harvesting grounds for new margin improvements. But because this specialized category, ranging from near-EOL to obsolete products, is both tricky to assess value for and to remarket properly, maximizing ROI often means turning to those along the supply chain with deep semiconductor supply chain expertise, particularly in the open market.
Near-EOL and EOL parts do hold value, particularly for those with long-life end-products needing part replacements, as covered under service and warranty agreements. Yet matching the proper parts, testing, and certification with the appropriate businesses and then ensuring quality, security, traceability, and best pricing requires understanding market values at particular times, while also being able to ensure adherence to various certification standards and sourcing requirements so that the product can be appropriately targeted for remarketing as refurbished through reputable channels.
Smith's nearly-thirty years of experience and market knowledge serve our customers from both sourcing and disposition positions. More specifically, when provided with an asset list from a customer, including model numbers, configurations, original purchasing information, etc., or based upon an onsite inventory evaluation, Smith will determine the residual market value for these assets. Based on the depth and breadth of our rich historical- and commodity-based datasets, Smith provides a range of market views for understanding the opportunities available to our ITAD clients. The asset evaluation acts as a basis for providing asset disposition solutions that offer various strategies for asset recovery. Typically, these strategies include a combination of services that include refurbishing, remarketing, and recycling, as well as destruction. The asset evaluation also includes the regulatory requirements around the disposition of the particular lot(s). In this manner, Smith's experienced commodity professionals target the best ITAD opportunities. There are two critical elements to this market capability: Smith's component data for the latest regulatory requirements, plus highly targeted commodity trending overlaid with our global network of partners and adherence to quality.
Responsible disposition: anti-counterfeiting and environment
One of the most important issues facing the semiconductor and electronics industry is the rise in counterfeit and fraudulent parts that continuously enter our supply chain. While there are many original source (e.g., overruns, substandard quality parts reclaimed rather than destroyed, etc.) and counterfeit manufacturing events that criminals use to create their illegal inventories, this is not the primary path that counterfeiters use simply because of the access and costs of these venues.
The primary source for counterfeit semiconductor and electronics parts is through reclaimed e-waste. When electronics are discarded, whether through recycling events and locations or simply being thrown away, there is a risk of these devices ending up in "backyard recycling" situations. As we have reported on before, "backyard recycling" refers to the illegal dumping and hazardous tear-down of electronics, and is found particularly in the emerging markets. While various world governments continue to pass legislation to restrict the international trade in e-waste to both cut off this major supply source for counterfeiting and safeguard human and environmental health, there is still quite a ways to go.
What this means is that choosing the right disposition methods and especially partners is a critical component to counterfeit mitigation, as well as sustainability management. Smith's quality framework, SmithSecure, coupled with being a recognized e-Stewards enterprise, ensures not only complete data security and wiping, but also a dedicated commitment to ensuring that no product is fraudulently represented, among the most stringent counterfeit mitigation processes, and, finally, the use of only e-Stewards recyclers to support environmentally-aware equipment and component disposal that does not contribute to global toxic waste and cannot be fraudulently harvested and added to the counterfeit problem.
Balancing corporate strategies can be more complex than it may seem at face value, but, as departments and businesses are increasingly focused on their core strengths, partners with complementary core strengths are seeing an increase in requests for service programs that can meet goals and improve margins. The solution to improving both margins and environmental awareness can be found in secure IT asset disposition (ITAD). However, the most important step is ensuring that your supply chain partner for reverse logistics and ITAD services has deep experience in the global, semiconductor supply chain and the ability to adhere to the most stringent data and product security to ensure excellent counterfeit mitigation. Counterfeit product in our supply chain is everyone's problem, and improper and unsecured disposition and reverse logistics chains are, unfortunately, prime targets for criminals to gain access to our industry's products and then fraudulently and illegally place counterfeit parts back into our chain.