Making Reverse Logistics Circular Requires Forward Thinking | GreenBiz

This article originally appeared in GreenBiz

It’s difficult for manufacturers to give a product a second or third life if they’re not returned. And as any company building a circular economy strategy knows, building an effective reverse logistics strategy takes plenty of upfront planning and close collaboration across a value chain — whether the good in question is a consumer product or one used in a commercial setting.

The Capital Equipment Coalition, an initiative under the Platform for Accelerating the Circular Economy (PACE), was established to help establish metrics for business-to-business procurement of items often designed to last for several decades — elevators, telecommunications infrastructure, medical equipment and office machinery, including computers. These items contribute an estimated 6.5 percent of total greenhouse gas emissions, according to coalition estimates.

During last week’s Circularity 21 conference, executives from three North American members of the coalition — leasing company DLL and enterprise software companies Microsoft and SAP — said improving reverse logistics will take cooperation early in the business to business (B2B) sales cycle. 

"Our goal is before a server even shows up in a Microsoft data center, we have already determined five years from now each channel that every single part will take, including the screws that hold everything together," said Paul Clark, general manager of Microsoft Cloud Supply Chain Sustainability.

Microsoft decommissions and manages more than a quarter-million servers annually. One of the most challenging aspects of this process is a lack of metrics and standards for how to report on the potential carbon reductions enabled by diverting items such as components from a computer server from the electronic waste (e-waste stream) into a more useful purpose, such as becoming parts in children’s toys or televisions, Clark said.

How can companies across the B2B value chain accelerate a shift to a more circular approach to reverse logistics? 

DLL is helping the manufacturers it represents rethink the life cycle of their products, sometimes encouraging customers to refresh equipment more frequently before it becomes obsolete. Sometimes, it’s about changing the terms of ownership and encouraging buyers to consider shorter-term arrangements for their capital equipment, said Rob Herb, vice president and global asset manager for healthcare and clean technology at DLL. 

"In terms of the reverse logistics, it’s working with the manufacturer, sharing portfolio information, putting together strategies that are tied to a new product introduction. Or maybe there’s an opportunity in the marketplace for them to pull back, refurbish and deploy equipment. It’s really working through the life cycle," he said.

An ophthalmological equipment manufacturer that DLL represents, for example, makes collecting older systems part of the process of delivering new ones. "They have a third-party logistics company that takes the new equipment out," Herb said. "At the same time, they take back the old equipment, and the packaging is designed so that it accommodates both the old and new unit. So, it’s one trip out there, using the same packaging." 

From the customer’s point of view, Microsoft works closely with suppliers to build reverse logistics considerations into its purchasing contracts for data center servers — so corporate procurement and sourcing teams need to be engaged in the negotiation process, Clark noted.

Some companies don’t actively advertise their take-back programs for capital equipment; but those that don’t have these processes in place may be willing to develop them for a valued customer, he said. "It is a relationship that you have to build."

That relationship also includes sharing detailed data about the materials makeup of a given product, as well as its maintenance or service history. That information is critical for life-cycle planning and for determining the value that various components — or the entire product — might have as it reaches certain stages of the life cycle. 

A manufacturer might engage its sales and marketing teams, for example, to set strategies for reselling refurbished medical equipment into new markets where it doesn’t traditionally have a presence. It could have the same clinical quality as newer equipment, but at a lower price point, Herb said.

"I think technology can be … a big enabler in all of this," noted Natasha Pergl, director and global circular economy lead for SAP. "It is all about creating that visibility, that transparency and ultimately connecting buyers and sellers and other organizations to make reverse logistics happen more seamlessly."