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The aftermarket offers high-tech manufacturers huge opportunities to improve products, margins, and customer service. Here’s how they’re responding.

High-tech and electronics manufacturers are realizing that it’s more important than ever to get control of their reverse logistics processes. They’re becoming acutely aware of the value to be derived from recovering, reusing, and responsibly disposing of used products, components, and raw materials.

Tighter regulations and growing environmental concerns are forcing manufacturers to act. Yet the adoption of an efficient asset-recovery program can also yield huge benefits to the corporate bottom line.

Extracting the full value from high-tech asset recovery is no easy task, however. The elements of a reverse supply chain are often scattered geographically and controlled by multiple parties that don’t communicate with one another, let alone coordinate their activities. So it’s vital that companies take the initial step of integrating key processes.

That means treating the forward and reverse supply chains as aspects of one continuous flow of both finished goods and components. A holistic approach will link the traditional “forward” tasks of assembly (including elements such as kitting, co-packing, and configuration) with key activities related to a product’s return.

In order to properly manage the latter, companies need access to the full range of aftermarket technical services. These break down into two main pieces: global asset recovery (GAR) and repair.

The primary purpose of GAR is to increase the value of end-of-life equipment. It involves the recovery, redeployment, resale, and recycling of materials, in line with regulations such as the European Union’s Waste Electrical and Electronic Equipment (WEEE) Directive, as well as local legislation. But it’s more than a question of compliance. As much as 60 percent of the assets that make up high-tech products have resale value, according to Watson.

Five Stages of GAR

GAR is actually a five-stage process: evaluation of the opportunity, consisting of initial analysis and asset valuation; recovery, including de-installation, logistics, sortation, and inspection; inventory management, involving asset tracking, handling, and storage to ensure full visibility of recovered assets; product evaluation, including redeployment, resale, and recycling whenever possible, and reporting, with complete lifecycle analyses, audit trails, and details of environmental compliance.

The repair side of aftermarket technical services comprises product and component screening, testing, upgrading, and refurbishing. Given that up to 50 percent of returned electronic products are not defective in any way; this is a crucial exercise for companies to get right. They’re looking for the ability to put perfectly good product back on the market as quickly as possible.

Tying all of the pieces of asset recovery together is a network of warehouses and carriers that can move items expeditiously, regardless of whether they’re marked for resale, reuse, or disposal, or are being returned to retail shelves.

Other considerations further complicate the picture. Companies should take care in differentiating between business-to-consumer and business-to-business customers, says Watson. The latter present opportunities for deriving even greater value from recovered assets. B2B products often are incorporated into network infrastructure or enterprise equipment for banks and Internet service providers. As such, they are likely to be costlier at the outset than consumer-related items, and will retain greater value at the other end of the chain.

Yet another best practice among leading companies, Watson says, is the creation of asset-recovery teams within manufacturing organizations. Such an initiative can help companies to get a better handle on the real value of assets, as well as to identify opportunities for their reuse. Ideally, those individuals will work closely with others in the company who make end-of-life decisions, so that the optimization of assets extends all the way back to the product-design stage. “It’s something that our customers are recognizing and starting to organize,” Watson says.

Insource or Outsource?

At the same time, many companies are coming to the conclusion that there‟s only so much they can do internally to address the challenge of asset recovery. As with virtually all aspects of supply chain management, they find themselves debating the question of whether to seek an outside expert to perform key processes related to that task.

One concern that might tip the decision toward outsourcing is that of objectivity. Large contract manufacturers, which tend to operate on extremely thin margins and are geared toward maximizing output, might not be the best parties to identify quality issues in the production phase. Nor are they necessarily the ideal judges of where a defective item should be repaired.

The debate always seems to circle back to the need for process integration. There’s no lack of qualified service providers in discrete areas such as transportation, warehousing, and product configuration. The trick lies in bringing all of those pieces together, to fashion a smoothly running supply chain in both directions. In all cases, the manufacturer and distributor are seeking to minimize inventories, which tend to build up wherever multiple, disaggregated partners are involved. At the same time, they’re determined to maintain a high level of customer service – which, after all, is the primary rationale for an effective reverse supply chain.

As regulatory, environmental, and economic factors bring reverse logistics to the forefront, it becomes even more vital that this essential link in the chain be handled by an expert who can oversee the entire process, including that information technology (IT) systems needed to make it all work. Whether that party resides inside or outside the company will depend on a host of factors that are unique to each manufacturer. But one thing seems certain: by paying proper attention to asset recovery and reverse logistics, high-tech and electronics companies can better cope with issues such as growing customer expectations, shrinking product lifecycles, intensifying cost pressures, regulatory compliance, and heightened environmental awareness.

This is the second part in a three part series looking at Asset Recovery. To read part one, "How asset recovery is increasing the worth of high tech products‟, click here.

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