Completing the Circle of Life
When most people talk about lifecycle management (LM), they think about product design, materials sourcing, manufacturing and forward distribution.
But more and more, especially in the high tech, electronics and telecommunications sectors, companies must consider what happens to their products after they leave the loading dock. This means thinking about not just installation, but also recovery, reuse, recycling, reallocation and/or disposition of the asset and all of its sub-components. It means taking a holistic approach to managing an asset's entire lifecycle.
In their 2002 book entitled "Cradle to Cradle: Remaking the Way We Make Things", architect William McDonough and chemist Michael Braungart write about a world of "cradle to cradle" design where everything industry produces can either be composted, reused or recycled into something else.
"The philosophy," observes Michael Burkett, a vice president with AMR Research, "is to design with the assumption that waste is not an option."
The more mainstream business term for this concept of "do no (or as little as possible) harm" is sustainability. The U.S. Environmental Protection Agency defines sustainability as the ability to achieve continuing economic prosperity while protecting the natural systems of the planet and providing a high quality of life for its people. More and more companies in all walks of industry are adopting sustainability policies.
This movement toward better environmental stewardship will irrevocably affect LM. In particular, sustainability has significant supply chain implications for companies.
In the not-to-distant future, companies won't have the luxury of choosing to ignore their products' end of life.
In fact, that day has already dawned in the European Union (EU). The European Commission (EC) recently issued two new directives on electronics waste that will have a far-reaching impact on supply chains. These are the Waste from Electrical and Electronic Equipment (WEEE) Directive and the Restriction of Hazardous Substances (RoHS) Directive. The two directives are in the process of being codified into law within the various EU states.
WEEE requires electronics companies to take back products from consumers at the end of their useful life. The RoHS directive aims to remove six toxic substances from electrical and electronic equipment. Companies must document proof of compliance; otherwise, regulated countries can bar entry to their products.
In the United States, California, Maryland and other states are pursuing a host of new environmental regulations requiring some form of recycling, takeback, end-of-use tracking and the like for high tech products.
The New Lifecycle Management
The new environmentally sensitive LM that is emerging as a result of these environmental regulations focuses on managing the entire life of a product as a closed loop or circle. The second half of the product's lifecycle—the return loop—needs to be controlled as effectively and cost efficiently as the first half.
From the point of initial design, companies ideally should consider what and how materials and components will be reused, recycled, refurbished. They must create the supply chains to handle these reverse/return flows.
This includes creating asset disposition centers to collect the returned goods, inspect them, make decisions about what to do with the items, execute those decisions, and track all of these activities electronically.
Easier said than done. Performing these activities is highly challenging for an organization that is not set up to manage this reverse flow of material. It is network- and information-intensive, and getting more so all the time.
An Outsourcing Candidate
The complexity of reverse-flow supply chains makes them ideal candidates for outsourcing. Third party logistics service firms like NAL Worldwide that specialize in providing the physical, process and IT infrastructure needed to manage these reverse product streams effectively—and capture the value of the returned assets.
For example, a major global telecommunications equipment maker uses NAL Worldwide to deploy its new infrastructure to installation sites and manage the disposition of the old, replaced infrastructure.
This includes bringing the equipment back to NAL's regional distribution facilities, inspecting it, removing components for reclamation (spare parts), reconfiguring for redeployment at other locations or direct resale and de-kitting for material resale and recycling certification.
Throughout these processes, NAL tracks the equipment and its components by item number, thereby providing an unbroken chain of information custody.
End-of-life supply chain management does not have to be a loss leader for a company. There is value in the recovered material, and there is a tremendous opportunity to manage the reverse portion of the product's lifecycle so as to capture and maximize this value.
With the help of a reverse supply chain solutions provider like NAL Worldwide, the closed-loop supply chain can become a competitive advantage.