It is no secret that e-waste is one of the biggest issues facing the high-tech supply chain. Shorter product lifecycles, the proliferation of mobile devices, the complexity of these devices, and the Internet-driven media boom have dramatically increased the number of electronic devices produced each year. In turn, the amount of e-waste that is generated per year has dramatically increased as well.
According to a study published in 2012 by the Nicholas School of Environment at Duke University, in the United States 3 million tons of e-waste is produced every year. The study goes on to state that on a global basis, e-waste generation is growing by 40 million tons per year.
To put a visual to that number, the study suggests that this would be the equivalent of filling approximately 15,000 football fields six feet deep with waste.
In an attempt to tackle the problem, manufacturers of electronics are employing teams of people and spending millions of dollars in order to track, trace and document their returns flows. This is an effort to keep their e-waste stream in check, compliant to current laws and consistent with public opinion.
More than likely, your company is deeply engaged in the same or a similar process. In most instances, these processes are nothing but cost centers that are a burden on your product line’s gross margin. In addition, they extract countless hours from your management teams.
This being the case, what if there were a way to optimize portions of your e-waste process so that your company remains compliant but also increases efficiency, reduces procurement cost and increases customer satisfaction?
Feel the Flow
One of the largest sources of e-waste for your organization is the flow of returned products. These products have names like “field returns,” “RMA” (returned material authorizations), and “defectives,” among others. This returned material contains more than defective product.
If you have an effective returns process you already know that this material flow is rich with usage data to improve the development and manufacture of future products. But is your process optimized to lower your procurement costs and improve your customer satisfaction?
A typical returns process contains these basic elements. It gets more complicated than this example when you look at the output of the validation points in the process, but the basic steps of the process are fairly static:
- Customer entry point;
- Complaint logged / validation;
- Warranty evaluation / validation;
- Product return logistics;
- Inbound product test and inspection / complaint validation;
- Replacement parts procurement and product repair;
- Replacement shipped to client; and
- Defective product scrapped and enters the e-waste stream.
This returns process is straightforward and gets your customer on the path to resolution, but it also subtracts from your gross margin and adds to the growing e-waste stream.
By adjusting some of the product flows and carefully adding some process steps, you can optimize this traditional flow in ways that will lower costs, improve customer satisfaction and reduce downstream e-waste.
The first optimization point is right at step number one, the customer entry point. Electronic devices are complex products made up of many integrated parts. The compatibility of these parts as well as the software that makes them work can cause even the savviest techie to scream, “It’s broken!” and thus begin its journey to the e-waste stream.
Resources such as online product help, user forums and even pay-for-tech-support work streams not only reduce the likelihood of returned material, but also keep you close to customers while enabling a revenue stream. Most customers don’t want to return products, but by helping them to keep the products they have purchased, you can reduce costs as well as waste while improving the customer experience.
The second optimization point is at step No. 5, inbound product test and evaluation. This is the point in the process where you are already capturing failed product data to be used in product revisions or future product development. But what are you doing with the products that test good?
Are you sending them to the scrap heap anyway? If you haven’t developed a process for reselling these tested-good items, you are literally throwing money away and adding to the e-waste stream. You are already touching the product once. If it tests good, you could add a buff-and-repacking step to the process.
Get your sales teams involved and make the product available to existing customers at a discount or to leverage new customers. Even selling it online makes more sense. Thinking commercially in this step will help defray costs and reduce e-waste.
Step number six contains the most compelling but also the most overlooked opportunity. You might ask, what does replacement part procurement and repair have to do with reducing the e-waste stream, not to mention reduce cost? For the answer, you need to further optimize step five. We already have looked at a scenario for tested-good products. In practice, the percentage of products that ultimately test good should be a lower percentage than the test-failed products. In a traditional process, a fail result will trigger either a repair or replace decision, which will in turn trigger a replacement part procurement process in the case of a repair decision, or a scrap process in the case of a replace decision.
A parallel to the repair process is the spare-part procurement process. In its simplest form, your procurement team looks at your failure data to forecast which spare parts to buy and how many. This team then places purchase orders with product vendors.
These steps add additional costs and increase cycle time, which also lowers customer satisfaction. If spare parts are no longer available, this process can get extremely complicated and expensive, and it can happen really fast. Not to mention the fact that increased cycle time destroys customer satisfaction.
Now let’s optimize the process. You already have product failure data from your current inbound test process. You currently use this data for spare part procurement. You also have a steady stream of spare parts and it is right in your company’s returns center – it is your scrap unit.
The optimized step is using your current procurement demand signals internally and harvesting these spare parts from your defective or scrapped units. By doing so, you not only reduce procurement costs by avoiding the need to externally procure from third parties, but you also reduce the amount of e-waste through your own internal consumption. An additional benefit is the increased customer satisfaction levels through reduced repair cycle times.
In summary, by optimizing your current returns material process, you can reduce cost, reduce e-waste, and improve customer satisfaction. I have used a simplified returns process in order to illustrate the optimization process.
Your processes are going to be more complex, but this should not change the outcomes. I have been involved in the deployment of these techniques, and the cost savings alone can be worth the effort.
Lastly, this entire process is a good candidate for outsourcing to third-party service providers. There are many fully capable one-stop organizations that can handle it from call center to replacement, and the logistics in between and their leverage can further reduce your costs. Regardless, these re-use methodologies can pay big dividends in the effort to reduce your amount of e-waste.
Frank Cavallaro is the Founder and CEO of Fronetics Strategic Advisors, a strategic advisory firm designed to help companies and private equity firms involved in the global high-tech supply chain, electronic asset disposal and integrated logistics industries optimize go-to-market strategies to grow their businesses and drive shareholder value. For more information, visit www.fronetics.com.