New Ideas for Handling Electronic Product Returns

Global eco-directives and customer demands are changing how electronic product returns are managed.

"They [the mandates] are basically driving product stewardship across the entire supply chain," says Richard Kubin, chair of the National Electronics Manufacturing Initiative (NEMI) project on Materials Composition Data Exchange and vice president of E2open (Redwood City, Calif.). E2open's software collects, maintains and reports data about the contents of electronics products for compliance with emerging environmental and hazardous materials rules and regulations. Kubin says the EU mandates are changing the way people think about business and the way materials will be managed and tracked through the supply chain. Some companies are starting to plan for recycling parts, investigating the possibility of using RFID tags for example to make sorting parts easier.

Managing the electronics waste stream has begun in the United States too. The California state legislature is considering State Bills 20 and 50 that deal specifically with laptops, and CRT and LCD monitors. Word has it that rules for disposing cell phones are next. California already applies a $15 recycling surcharge on new laptop and monitor purchases. The stores selling the equipment are required to collect end-of -life products.

The U.S. Environmental Protection Agency (EPA) is taking a leading role in recycling electronic products. The U.S. government reportedly buys seven percent of the world's computers. In fiscal 2005, it will spend $60 billion on IT equipment and related software and infrastructure. Every week, according to the EPA, the government discards approximately 10,000 computers.

With its Recycling Electronics and Asset Disposition (READ) program, the EPA is creating a turnkey solution for federal government agencies to resell, recycle, breakdown or dispose electronic assets in an environmentally responsible manner. The proceeds from the sale of items are shared with the agencies and are used to offset recycling costs. Private companies run the program, giving agencies end-to-end services with a single point of contact. The EPA has awarded eight one-year government-wide acquisition contracts, valued at $9 million, to companies like Washington D.C.-based Liquidity Services, Inc. (LSI) to run the READ program.

"We generate greater financial returns for sellers," explains Bill Angrick, LSI's CEO. LSI has the tracking software, online auction Websites, and warehouses used exclusively for the receipt, storage and preparation of assets for resell and recycling. LSI picks up used equipment at EPA collection centers and takes them to regional LSI warehouses. The used items are sorted for donation, reuse, refurbishment, or are taken apart and the components are recycled or properly disposed.

Useable items are marketed and resold through LSI's online auctions that reach 250,000 professional buyers. It handles all buyer-related payment collection, customer service and shipping the assets to buyers. LSI creates an audit trail containing chain-of-custody information to track recycled components from start to finish.

LSI works with private companies like GTSI Corp. (Chantilly, Va.). It supplies federal, state and local governments as well as prime contractors with IT products and services. Paul Liberty, GTSI area v.p., Corporate Affairs, says his company uses LSI to dispose of obsolete and used assets that cannot be marketed to its customers or returned to suppliers. "We get higher recovery from our old and used inventory because of LSI's expertise in the secondary market," he says. "LSI provides complete asset remarketing services—it handles the transaction from beginning to end which frees up GTSI resources."

Data from two years of online sales for GTSI shows that LSI sold 266,000 individual electronics items valued at $564,000 gross. The items were sold in 191 auctions, and the auctions received an average of 46 bids. Almost 9,000 bids were created in the past two years. The average bid was just under $3,000; the highest bid was $14,500.

For some companies, returns management can offer a competitive advantage. Two years ago, executives at hard diskmaker Seagate Technology LLC (Scotts Valley, Calif.) realized customer service was going to be a key market differentiator in the future because many of its products were very similar to its competition. "It's one of the reasons we looked at the service side of reverse logistics when we kicked off our Six Sigma project," says Jay Remley, Seagate's senior director of worldwide sales operations.

Seagate sells its drives to Dell, HP and other companies that build PCs, DVRs, cassette top boxes for cable, and gaming devices. If these devices fail, consumers return the drives directly to Seagate. As part of a Six Sigma project, Seagate did a benchmark study of its customers and found the majority of them wanted to be able to return their disks online, and they wanted fast returns approval. Seagate uses eBoomerang, Inc. (San Jose, Calif.) Returns Manager software as a front end to its Oracle ERP system for the order entry and receiving of returns.

"We were looking for a commercial software application that could scale to support our global customer needs, whether that is the needs of the end user returning our drives to Seagate all the way up through the Dells and HPs of the world returning a thousand drives at a time," Remley explains.

Hard disk-maker Seagate uses commercial software to manage its returns process.


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