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How supply chain managers are looking at sustainability

  
  
  

iStock 000011494683Small webSome of our executives recently attended SCM World Live in Miami. While the reprieve from winter was probably appreciated, the key driver for our attendance is that the organization brings together a large number of innovative, successful, front-line supply chain practitioners who openly discuss problems and solutions. It’s not your typical trade show and we consistently learn a lot from these SCM World events. In the opening presentation in Miami, there was considerable reference to the SCM World Chief Supply Chain Officer Report 2013, a year-long study looking at “perspectives and practices of supply chain management around the world.”

One of the summaries that struck me was in the area of sustainability – something we’ve written about on this blog quite a bit over the last couple of years.

  • Almost 1 in 3 supply chain managers and executives polled say their business has already generated cost savings from managing energy efficiency, waste, supplier diversity and/or resource scarcity.
  • 80% are motivated by an enhanced image, although the true business case for implementation of programs rests more on savings than on the benefits of improved brand perception.
  • Most interestingly, the report indicates that we are moving away from on-the-surface programs – perhaps the most readily available and more easily implemented image builder activities – to systems and processes that are deeply woven into the daily execution of getting products to market.

We are certainly seeing this meaningful change among our clients, particularly those who are involved with groups like the Electronic Industry Citizenship Coalition (EICC), which accomplishes its aggressive goals through collaborative efforts and accountability all the way down the supply chain. Publishing corporate social responsibility KPIs and follow-up reports
helps drive sustainability efforts into standard operating procedure.  As we can see from the data, this benefits both brand and the bottom line.

Another data point in the extensive CSCO Report indicated that 89% of client sourcing and supplier management teams view strategic vendor and partner engagement as a competitive advantage. That’s the way we approach our business – by acting as a strategic business partner. The goal is to help our clients differentiate themselves from competitors through a tailored mix of supply chain and logistics programs that integrate efficiency, cost savings, brand objectives and customer expectations, from factory to doorstep delivery.

And this collaboration extends to sustainability in our own operations and by helping clients achieve their goals. Success comes through services that make a discernible difference in costs and on the environment, such as package design, optimized transportation networks and final product configuration close to the customer. For more specifics, download our most recent CSR
report
or for a shorter read, take a look at how we helped Toshiba Electronics Europe save money and improve their use of resources.  

 

Losing dim weight

  
  
  

dimweightI have held previous positions where there was a separation between packaging engineering and logistics. “We design what the customer wants, then it becomes logistics’ responsibility to calculate and figure out the method and costs for moving it around.” Over the past year at ModusLink I have had several dimensional weight projects come across my desk that show how these two disciplines are so clearly interrelated. 

For those not familiar with the term “dimensional weight,” let me explain. When carriers ship parcels by air, there are two different ways to cost the freight. These two categories are actual weight and dimensional weight. Actual weight is basically that—the actual weight of the item. In order to avoid losing money by shipping air in a too-large container, carriers will also calculate the dimensional weight of a parcel. This is often done with a formula such as (length x width x height)/constant. The two numbers are compared and the one that is larger is what the carrier will charge. 

In the submitted case study for our most recent Green Supply Chain Award, our client was using a stock package for shipments that were predominantly orders for a single phone, although the box could accommodate more. As a result, they were shipping unnecessary amounts of air and being hit by the larger dimensional weight shipping costs. By designing size-appropriate packaging, ModusLink was able to have shipments charged at actual weight. This relieved the client of the dimensional weight surcharge for over 90% of their orders. 

Another benefit with this redesign is the elimination of unneeded bubble wrap. Not only is this a material and labor costs savings, but the lack of excess packing material also gives an improved out of box experience. By removing bubble wrap, which the customer ultimately has to throw away or try to reuse or recycle, and reducing the shipping box’s size, our client was also able to achieve a reduction in the carbon footprint for the packaging by decreasing the CO₂ generated to produce the packaging materials. 

Combining packaging engineering with logistics is the smart approach. In this case, it checked all the boxes (pun intended) and provided a package that was less costly to ship, less costly to source, measurably more sustainable, easier to assemble and a better experience for the customer.

-Tyler O’Neill is a packaging engineer at ModusLink

 

ModusLink takes EICC leadership role

  
  
  

l. to r. Patrick Neyts, EICC Validated Audit Program Manager; Blake Cambey, ModusLink; Robert Lederer, EICC Executive Director; Tim Mohin, EICC Board Chair, AMD I’ve written before on our company’s work with the EICC. (Reminder, that’s the Electronics Industry Citizenship Coalition.) What I love about being so engaged with this group is that the work leads to valuable, measurable and visible results.

A lot of very dedicated people from the top electronics companies in the world are involved in ensuring we as a global industry not just meet the minimum criteria, but continually improve efforts around the use of natural resources and providing safe, healthy working conditions. EICC membership is currently at 89 companies, 40% of which we are proud to call clients!

Last fall, I led a sub team from the EICC’s Validated Audit Program (VAP) workgroup that created the EICC Facility Recognition Program. I officially launched the program at the EICC membership meeting in Taiwan last March.

We wanted a way to recognize those facilities managed within the EICC framework that took the extra effort to complete the entire VAP audit process, including what may be the most important phase – implementing corrective actions where necessary. This is no easy task and completion really shows a deep level of commitment and transparency in the electronics supply chain. And it’s not a “one and done” scenario, because the recognition is valid for a maximum of 2 years, ensuring the continuous nature of continuous improvement.

To date, the EICC Facility Recognition Program has recognized 10 global sites including facilities in the US, Mexico, the UK, Thailand, the Philippines, Hungary and Malaysia. Companies receiving recognition include Seagate, International Rectifier, Onsemiconductor, IBM, Ureblock and ModusLink. ModusLink currently has 3 facilities that have earned recognition: Raleigh, NC, and Miami, FL in the US, and Penang, Malaysia. 

You can read more about the EICC Facility Recognition Program and other details on the coalition in the 2012 EICC Annual Report.

-Blake Cambey is a Regional Quality Manager at ModusLink

 

The links between CSR and operational efficiency

  
  
  

describe the imageCorporate Social Responsibility or “CSR” today goes far beyond a feel-good message. As my colleague Doug Cutler discussed in a recent article for Supply & Demand Chain Executive magazine “it is in many cases a fundamental business requirement for ModusLink as a supply chain provider to be heavily engaged in the same environmental, health and safety programs as our clients.” The fact is more and more companies are looking at global CSR-based initiatives like EICC and incorporating those principles not only into their own operations, but also into their supplier requirements.

This is obviously moving large numbers of companies in an excellent direction toward real and measurable improvements in ethical and environmental standards. And in many cases, there can be clear synergies between CSR initiatives and business-driven initiatives.

For example, we recently worked with Toshiba Electronics Europe on a packaging redesign (you can read the full case study here.) The engagement resulted in a best of both worlds situation.

The company experienced clear bottom-line cost savings by overhauling its memory products’ packaging—in some cases with up to 80% less material. By carefully taking stock of the environmental impact in all aspects of their business, Toshiba naturally measured the sustainability impact of this efficiency project. The company can report that not only did they save considerable money by reducing materials use and improving the shipping density of their products, they also realized a 31% reduction in annual CO2 emissions as a result.

I believe this will become a norm as enterprises begin to routinely think about operational improvements and CSR initiatives in tandem. What better place to start than with your supply chain?

 

Working for meaningful corporate social responsibility

  
  
  

EICC Logo resized 600ModusLink joined the Electronic Industry Citizenship Coalition (EICC) as an applicant member two years ago with 70+ global electronic company members, including many of our own clients. Together, the coalition is working for meaningful social, ethical and environmental change in the industry. The EICC Corporate Social Responsibility Code of Conduct includes Labor, Ethics, Health & Safety, Environmental, & Management Systems—all elements which ModusLink has adopted. This is a broad scope of significant issues and there are many different things that must be implemented and monitored to ensure compliance and achieve the desired results.

For example, we achieved full membership in EICC by meeting substantial membership compliance program requirements:

  • Active participation in EICC bi-annual membership meetings
  • Completing EICC Self-Assessment Questionnaire (SAQ) risk assessments for all ModusLink Solution Centers
  • Actively participating in EICC Tools & VAP (Validated Audit Process) workgroups and leading sub-teams on SAQ review & EICC site recognition
  • Completing VAP audits at 5 Solution Centers in conjunction with various EICC member/customer requests with an additional 3 VAP audits already planned
  • Completing global supplier high-risk evaluations
  • Completing EICC Carbon & Water Reporting System and  Carbon Disclosure Project reporting

I believe one of the most important elements of compliance and moving the needle toward significant improvements is participation in the EICC’s work groups and we have a high level of involvement. There are many dedicated people working behind-the-scenes and continually shaping and growing the coalition. ModusLink has bought into EICC’s Code of Conduct from top to bottom and we’ve altered our business operations to ensure compliance. The EICC’s vision is a core part of our business plan, and has been implemented into the solutions we build for our clients.

-Blake Cambey is a Regional Quality Manager at ModusLink

 

Defining Sustainability

  
  
  

describe the imageWhen I ask friends, family and colleagues how they view the topic of sustainability, I usually get the expected buzzwords—green, environmentally friendly or recycling are leading answers. In the academic environment, I had more than one instructor quote the Seven Generation Iroquois proverb and push the ideal of giving back and correcting more than you have taken away and have destroyed. At this point one may still be left asking “What is sustainability, how do we convey it and how can you possibly measure it?”

Personally, I view sustainability as larger than just an environmentally friendly stance or a corporate mission statement. To be sustainable you must have an objective and path forward that promotes survival. For a business, this means making decisions in its own self-interest, while also being conscious of the environment. There is a balance that must be achieved between the planet and business, preservation and growth. Building a business and profits while also being able to limit one’s adverse effect on the environment should be the global sustainability goal of a company. Often a dichotomy exists between business and the environment that is unnecessary and unproductive. Packaging can be a tremendous asset for a company’s sustainability goals and is a great example of these two principles working together.

Whether it’s been fashionable to promote or not, package engineering is a discipline that has always worked towards sustainability. Of course it can be deviated from when not properly conducted, but the science of package engineering is not new and its goal of achieving optimal packaging supports business growth and resources. Distilled down, it is the minimal amount of packaging that is required to deliver a product undamaged to a customer. As engineers, we have specific tests and standards that we follow to scientifically determine if a package is within this optimal zone. Different materials, shapes, technology, marketing, deadlines and emotions will inherently play a role in the outcome, but science helps to dictate the optimal packaging solution which is the most sustainable.

Let’s see how packaging is a player in promoting sustainability and brings it full circle into helping a business’s bottom line. The proper selection of material equals less cost, which helps increase profits. Satisfied customers receiving functional items equal fewer returns and repeat business, which also translates into future profits. Minimal material and the use of recycled and/or renewable material helps reduce the impact on the environment. Together, these elements clearly play a huge role in achieving a business’s global sustainability goals.

Going back to science, it is through tools such as the WalMart Scorecard that we can assess and determine the amount a CO2 that is generated within the lifecycle from raw material(s) to one of our solution centers, where the product is packaged. Sustainability isn’t just CO2 or reduced or recycled materials, it is also reflected in other areas like pallet densities. For example, how much more can we fit on a shipping pallet through package size reduction? Any improvements will result in freight savings, which will result in reduced gas consumption – again, both a cost savings for the company and an environmental benefit.

A global view of sustainability well executed can almost always circle back to the company through profits, allowing the business to succeed and grow and implement even more new sustainable ideas. The integrated view best helps people realize the importance and understand the meaning and impact of corporate sustainability.

-Tyler O’Neill is a packaging engineer at ModusLink where he works with clients across the globe to develop new packaging designs that improve sustainability.

 

Ecosystem, service and lifecycle – predictions for mobile in 2013

  
  
  

describe the imageAs the holiday season nears, the product launch cycle of the next new things is coming to an end. We are now tempted by a range of faster, thinner, lighter and brighter devices and of course they have bigger screens. However, with mature markets reaching a saturation point, stimulating demand for new devices has to extend beyond the simple creation of desire for the latest products and the industry must look at emerging customer expectations.

Today’s targeted device replacement cycles are considerably shorter than the products’ useful lives, therefore providing consumers with a user-friendly mechanism to realize the value of their old products is an important part of financing new device sales. Trade-in programs are here to stay, but delivering true value to the market requires reliable refurbishment, data wiping and greater assurance to the customers of refurbished devices.

As functionality has increased, the customer experience extends beyond the physical hardware to include an ecosystem of software, content and applications. Consumers expect synchronized mobile, tablet, traditional computing and gaming experiences, as well as integration between business and social environments. As if on cue, the rise of cloud-based solutions helps achieve that synchronization and also provides protection for the increasing value of content on the devices.

Finally, with new devices costing up to $700 USD without a carrier subsidy, the issue of repair must be addressed. Out-of-warranty issues such as cracked screens or devices dropped in water may not be the fault of manufacturers, but loyal consumers will expect more than a “not our problem” response from leading brands. An important extension to service and repair programs will be an easily accessible out-of-warranty service.

Today’s devices are tools for photos, video, email, social, mapping, gaming and yes, they can even make phone calls. Consumers buying the latest devices expect more than just the initial thrill of a shiny new package. It’s up to manufacturers, carriers and their reverse logistics partners to work together to manage the expanding ecosystem and address the increasing service expectations that come along with that yearly purchase.

 

3 Old Razors, 2 Blackberries and a Nokia 6110

  
  
  

There’s a lot of news around Apple’s record 5 million new iPhone 5’s flying out of stores in the first three days. It’s a great business story, clearly a technology story and I’m happy to see that more than a few journalists are using it as an opportunity to write about the issue of electronics recycling.

I am not particularly anxious to get my hands on every new gadget that comes along. I am quite happy with the first iPhone I bought almost a year ago– the 4, sans Siri. Yet, even as a pretty restrained technology consumer, there’s still a box in the basement full of old Razors, Blackberries and more than a few oddball, decades-old handsets. If there had been the opportunity to easily trade in these phones when they were replaced, I definitely would have done so. A bit of extra cash or credit toward the new contract would be great, but so would the ability to easily get rid of an item that would serve no purpose in the future, can’t be thrown away and has no value in a yard sale.

So now that e-recycling is top-of-mind and more and more companies like Sprint are making it simple and worthwhile to trade-in, what really happens to that collection of yesterday’s technology? Given today’s general rate of phone turnover, the technology considered “old” at trade-in simply isn’t that old and there are a lot of folks who would like to have it, especially at a cost much lower than the brand new model. Additionally, many of the individual items turned over are still in good operating condition. The scenario is a lot like trading in a 2008 Accord for a new Acura. The new owner simply wants something newer, a bit flashier, perhaps with more horsepower and an updated GPS. Nothing wrong with that! And there’s also likely nothing wrong with that Accord, either, and it will go on to be a fine vehicle for the next owner.

eRecyclingCorps, one of ModusLink’s clients and a fellow founding member of the Device Renewal Forum, is putting this concept in action with mobile phones. eRC has a comprehensive program that works with retailers and carriers on trade-in programs and then evaluates, renews or recycles the devices. CNN recently visited ModusLink’s Bloomington, IN facility to see the renewal process in action. It may be too late for one of my old flip phones, but it’s not too late for your iPhone 4S!

 

Repair May Be the Needed Fix to Increase “Return on Returns.”

  
  
  

RepairImageReturns, especially consumer electronic devices, are a big business. According to a 2011 study by Accenture, between 11% and 20% of all consumer electronics (CE) devices purchased in the U.S. are returned. With volumes like that, it’s important for both retailers and manufacturers to manage returned items in ways that maximize their bottom line.

The unopened box items are easy to process, but what can be done with items that have been opened, used or even damaged in transit or during the returns process? Years ago, you would simply pay someone to recycle them and take the financial hit, but today there is such a growing aftermarket for these refurbished products that retailers and manufacturers would miss a real opportunity for resale, and therefore a larger yield, if they continued their outdated recycling process.

The key to optimizing the CE returns process and yielding the greatest return on returns is to truly understand the current market value of the item. Many CE products have a significant aftermarket value and it is worth the money to consider not only refurbishing damaged products, but also repairing them. It’s also key to have clear guidelines about where to draw the line between cost-effective repair versus potential value in the recovery of materials.

ModusLink leads the industry in reclaim services. Part of that process is strict evaluation and grading, then multiple levels of repair capability. Here is a breakdown of repair efforts:

LEVEL 1: No Fault Found
At this level, the unit is tested and inspected and if it passes the full functional test, the item can be repackaged and kitted for resale. This simple process is simply to ensure the unit is working properly. According to the 2011 Accenture study, 95% of all U.S. returned CE products will pass this level.

LEVEL 2: Software Upgrade
In addition to level 1 repair, some units may benefit from a software upgrade. This assures that when the product goes back out into the market it functions at the highest level for that product and support requirements for the product will be minimized.

LEVEL 3: Minor Repair
This level means that during the inspection process, the unit failed, but that failure is assumed to be a typical problem that can be remedied quickly. This may include repair or replacement of basic electronics or cosmetic parts. Once this repair is completed, extensive testing of the unit is performed again. If it passes, it goes on to resale. If it fails, it goes to Level 4 Repair.

LEVEL 4: Component Level Repair
In-depth diagnosis and repair is required to identify and fix damage all the way down to the circuit or component level. Years of experience and certifications are required as well as specialized equipment such as microscopes, temperature controlled soldering stations, heat guns, and BGA repair stations. Often times a small repair from an experienced technician on a valuable device, can increase yield to levels not thought possible before.

While many CE companies are taking this route to maximizing returns, a good number more can benefit from a proper feasibility study regarding repair options, parts availability and repair costs. This, coupled with a good market valuation study on the particular product, can help outline a specific plan for optimization of returns and added support for the bottom line.

 

A look at solving the e-recycling problem

  
  
  

OldMonitorsIt’s a growing problem with no easy solution: with the expansion of technology, an increasing amount of electronics waste is ending up in developing countries such as Ghana, India and parts of China. Most of this e-waste comes from the US and Europe, while only a small amount of it is produced locally. Africa is seeing a slightly different trend, where the burgeoning access to PCs and cell phones is creating a domestic e-waste problem. According to the UN Africa will produce more E-waste than Europe by 2017.

Although under the Basel Convention, the export of hazardous materials to other countries is prohibited, waste electrical items are routinely exported as functioning equipment or bundled with other products such as used cars. There is potential benefit to be found as most of the products are stripped to get at the high-value metals such as copper and gold. However, the toxicity of these materials directly and significantly affect the health of the people involved and pollute the landscape, soil and water for years to come. In these developing areas there are virtually no locations where the products can be processed and recycled in a safe and environmentally friendly manner. In response to this illegal dumping and the hazards it presents, many countries have put programs and legislation in place to manage waste recycling. The WEEE Directive, which puts recycling goals in place, and RoHS, which restricts certain materials use in the manufacturing of electronics, is two examples.  Recognizing the problem and the opportunity to play a part in solving it, many of the largest consumer electronics companies, including HP and Samsung, have set up recycling and take back programs that manage and audit the returns and recycling process so the products are dealt with in an environmentally responsible way.

Going a step further, ModusLink is working with several entrepreneurial companies that have developed various business models based on managing the return, reuse and recycling of electronics. They represent a merging of sound business opportunity, social responsibility and even humanitarian effort in bridging the digital divide with lower cost refurbished products.

For companies looking to develop programs, several best practice points to consider include:

  • Where the WEEE Directive is in place, join the local recycling group.
  • Where legislation is not in place, adhere to guidelines set up by the Basel convention on the certification and testing of waste electrical equipment and get any waste recycled in a certified manner.
  • Set up an accessible and efficient reverse supply chain in your country of operation.
  • Work with retail and distributor channels to incentivise customers to recycle when purchasing new products.

Is your company addressing this issue in a new, unique way? Tell us about it.

 

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