Handle with care
Developing a safe, responsible, and effective system for handling consumer electronics returns isn't just good for the planet. It can also be very, very good for your business.
The images remain troubling long after they've faded from the screen. Vast quantities of toxic electronic waste dumped around villages and cities in countries like Nigeria or China. Workers burning wires in an attempt to recover copper or aluminum for resale, releasing a hazardous stew of chemicals into the air. Young children playing among the scattered, and often carcinogenic, materials.
That's not a vision of a dystopian future, but an everyday reality. Our love affair with electronics—and desire to have the next new thing—has created a surging tide of e-waste. Although some is disposed of responsibly, much of that waste still ends up in local landfills or incinerators, while quite a bit gets shipped overseas by unscrupulous recyclers for "dismantling under horrific conditions," according to the Electronics TakeBack Coalition (ETBC).
The volumes are staggering. In 2010, the latest year for which numbers were available, U.S. consumers and businesses disposed of 2.4 million tons of electronics—some 384 million units, according to statistics compiled by ETBC. And indications are the numbers will only increase.
So it's probably no surprise that manufacturers of consumer electronics as well as the resellers and retailers of those goods face increasing scrutiny from regulators, lawmakers, and the public over just how discarded goods are handled. Dale Rogers, a professor of supply chain management and marketing sciences at Rutgers University who has long studied reverse logistics and sustainability, reports that at least 27 states now have laws governing e-waste.
The challenges of reverse logistics are hardly news to the industry, however. Major electronics OEMs and their retailers have long understood the need for a safe, responsible, and effective system for managing returns. Such programs are important from both a regulatory compliance and social responsibility standpoint, of course. Beyond that, careful and aggressive management of the process enables companies to turn trash into cash, reselling some products and recovering valuable parts and materials from others—essentially, capturing value rather than producing waste.
"Years ago, manufacturers did not look at returns management from a recovery standpoint, but as a cost of doing business," says Joseph King, a vice president at ModusLink Corp., an international third-party logistics and supply chain services company. "We've seen a much greater focus on trying to minimize losses, improve recovery, and ensure that practices are environmentally responsible."
A JOB FOR PROFESSIONALS
But how do you go about setting up a safe, responsible, and effective system for recycling and managing e-waste? Rogers says it begins with the people. "The first thing you need to do is spend time with someone who understands this stuff and where it's going," he says. It's also important to understand that with recycling and sustainability initiatives, you're in in for the long haul, Rogers adds. "This is not just a short-term problem. You need to do this well," he says.
Rogers recommends that any company that must deal with electronics returns devote at least one employee to the problem. He suggests choosing an engineer who is familiar with design and understands the complex mix of components, chemicals, and minerals in today's electronics.
Whether they maintain in-house expertise or not, many companies opt to partner with a qualified expert. There are a number of third-party logistics service providers (3PLs) that specialize in returns management. These 3PLs not only will handle tasks like refurbishment, disassembly, recycling, and disposal on behalf of their clients, but they'll do it in a way that complies with the customer's own business rules, says Mike Baker, vice president of business development for Genco ATC, a third-party logistics company that specializes in product life cycle logistics.
Providers say an important part of their job is establishing systems that carefully track goods from the shipping facility through final disposal. That's partly to ensure that customers receive the full benefit of the resale of any goods or components, and partly to ensure that all materials are handled responsibly throughout the reverse supply chain. "We track every device by serial number and a customer compliance code," says King of ModusLink.
Chad Burke, director of supply chain excellence for Ryder System Inc., also underlines the importance of maintaining a strict chain of custody for every product and commodity from receipt to ultimate disposition. That includes requiring certificates of destruction for goods sent into the waste stream, down to the serial number level.
BACK ON THE MARKET
Whether a shipper opts for the DIY approach or contracts with an expert, the recovery and disposal process will follow the same basic pattern. When goods come into the facility, says King, the initial step is "triage," that is, determining the best way to handle each product.
Burke warns that this involves more than an at-a-glance assessment of the incoming items. Ryder, for example, goes through an extensive testing and disposition process for products returned to facilities it manages for clients, including a functional and cosmetic evaluation to determine whether a product is worth refurbishment or repair. As part of that process, it compares the estimated resale value with the cost of getting it to market.
Burke notes that as much as 50 to 75 percent of the electronics goods returned to manufacturers have nothing functionally wrong with them, and that as much as 70 to 80 percent of their value can be recovered in resale. But to recapture that value, you have to act quickly, he warns. Given the short life cycle of many of today's consumer electronics products, getting refurbished goods back on the market right away is imperative.
Many of the products that come back through the reverse logistics chain can be resold nearly as is, or with some refurbishment. But there's one step that can't be skipped: The party responsible for refurbishment must scrub every last bit of the previous owner's data from the device before it is returned to the market.
"One of the programs we're seeing explode is trade-ins for handsets, tabletop computers, and laptops," King says. "The big thing there is data wiping. There's a lot of liability around that."
Products that don't make the cut then go through an extensive process to recover as much value as possible from components—circuit boards, power supply, plastics, ferrous metals, copper or aluminum, chemicals, and minerals—what King calls "parts harvesting."
This isn't just a matter of squeezing every last penny from returns. It's also about conserving minerals that are crucial to electronics manufacturing but are becoming increasingly difficult to obtain. For example, China has imposed export restrictions on rare earths used in high-tech products. While a significant proportion of electronics manufacturing takes place in China, mitigating the issue to some degree, manufacturers are nonetheless concerned about access to that important source of supply.
Further limiting the availability of materials needed for manufacturing is the recent crackdown on the use of "conflict minerals"—minerals that come from areas associated with conflict or human rights abuses, such as the Congo. In August, the Securities and Exchange Commission issued a rule requiring companies to disclose the use of conflict minerals that originated in the Democratic Republic of the Congo or adjoining countries. "Electronics companies are going to have to show where their minerals come from and prove that nobody was harmed in mining them," Rogers says.
Both of these developments have created powerful incentives to recover as many minerals as possible from existing products. "One of the big issues in reverse logistics is the potential shortage of rare earth," says Alan Amling, vice president of marketing, global logistics, and distribution for UPS Supply Chain Solutions. "This is where over the long term, we have to look at the concept of bringing sustainability and conservation of resources into reverse logistics. How do we tie reverse logistics back into the manufacturing process? How can we connect reclaimed materials like rare earths with manufacturing at the point where they are needed?"
TAKE CHARGE OF YOUR WASTE
Once a company has harvested everything of value from the returned product, there may still be waste to recycle or dispose of. Although plenty of contractors offer recycling and disposal service for electronic products, just picking a provider at random is a lot like playing Russian roulette. "Ownership of the waste is important because manufacturers can be held liable for improper disposal," says Amling. That means they must make it their business to know just how those recyclers handle products.
Fortunately, at least two programs for certifying electronics recyclers can help point the way.
Best known is the Responsible Recycling Practices, or R2 program. The R2 certification is a program offered by R2 Solutions, a nonprofit company that promotes environmentally responsible practices in the electronics recycling industry. To date, more that 200 facilities around the world have attained the certification.
The second is the e-Stewards Standards, created by the Basel Action Network, a Washington state-based nonprofit that focuses on environmental and sustainability issues.
The Environmental Protection Agency (EPA) has endorsed both initiatives, noting on its website that "these programs are based on strong environmental standards which maximize reuse and recycling, minimize exposure to human health or the environment, ensure safe management of materials by downstream handlers, and require destruction of all data on used electronics." Both certifications require companies to be audited by independent third parties.
It's important to note that when you go to contract for recycling services, you need not steer clear of a third-party service provider just because it isn't certified. While 3PLs may not be certified themselves, many make it a point to work with certified recycling companies on behalf of their customers.
Editor's note: Senior Editor Toby Gooley contributed to this report.More articles by Peter Bradley
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