Executives and middle managers concern themselves with optimizing their organization’s forward-oriented logistics that they often fail to recognize the reverse flow of goods and materials can be just as critical. This oversight is not surprising given that, in many industries, it becomes “not my problem” once the customer takes custody. However, in the realm of IT Logistics, overlooking Reverse Logistics can have a devastating negative impact.
Unlike traditional manufacturing supply chains where the onus is typically on the consumer to dispose of products once consumed, IT managers must consider a full suite of Reverse Logistics activities when their assets reach end of life. Reverse Logistics tasks for IT assets can include but are not limited to
- Collecting/shipping assets from end user to central location in a cost efficient manner
- Conducting functionality tests to determine if the asset has remaining useful life
- Executing repairs on assets if a positive business case exists for doing so
- Forwarding the asset to aftermarket distribution channels for potential resale and value recapture
- Ensuring compliance with data security requirements such as destruction of data storage media
- Complying with environmental regulations related to disposal of hazardous substances
Failing to properly consider the implications of any one of these activities can result in financial loss, brand damage, or even legal trouble for an organization. Below are the top 3 risks you need to consider when evaluating the effectiveness of your existing IT Reverse Logistics solution.
A failure on the part of your organization’s Reverse Logistics function can spell disaster from a data security perspective. Just one mishap can cause irreversible damage involving anything from intellectual property to brand image. There are a variety of methods malicious actors can exploit in poor Reverse Logistics practices to expose your organization’s internal and sensitive data:
- Resale: refurbished assets can be resold by unreputable channel partners without properly purging the storage media.
- Repair: counterfeit parts are a serious concern in the IT industry, and there have been serious incidents where nefarious sub-tier suppliers injected tainted hardware into the repair supply chain to gain backdoor access to secure systems.
- Reclamation: there’s a chance your assets that have little to no resale value may be dumped directly into landfills. While prosecution for this activity typically focuses on improper disposal of hazardous materials and/or violating environmental regulations (more on this later), it creates a vulnerability for your data that only requires someone willing enough to sift through discarded e-waste.
By implementing a robust Reverse Logistics program, you can ensure that your data is safely wiped from used devices, assets flow only through reputable supply chain partners, and intellectual property is kept secure.
Legal & Regulatory Risk
Complying with myriad municipalities’ legal and regulatory requirements for hazardous material disposal and storage media destruction can create a minefield of byzantine statutes and guidelines to traverse. It is estimated that less than 17% of e-waste is properly disposed, opening a host of unexpected liabilities for organizations whenever regulatory offices review the origin of discarded e-waste in landfills. And while each municipality has their own rules and enforcement agencies, the one thing they have in common is that generally responsibility cannot be outsourced. In the United States alone, 25 states and the District of Columbia have enacted differing sets of environmental laws. Keeping up with these alone can become a full-time job for an organization’s compliance teams, depending on the scope of your operations.
And that’s just the environmental and hazardous substance disposal part of the equation. When you start to consider state, federal, and international laws and rules surrounding safeguarding Personally Identifiable Information (PII), the landscape becomes even more treacherous. Think of all the information your organization stores on its IT assets about your employees and customers. Your organization probably expends significant resources protecting this data from an online hack. What, if any, measures do you have in place to defend against a Supply Chain hack once assets are retired?
Compared to the other risks described above, the money wasted on ineffective processes may seem trifling, but the total cost of supply chain management can increase considerably when Reverse Logistics are ignored. There are near limitless ways a poorly functioning Reverse Logistics strategy can impact the bottom line. A good strategy should include effective processes for achieving the following functional outcomes, at a minimum:
- Optimize return on repairable assets
- Maximize resale value and value share of refurbished assets
- Minimize time to aftermarket distribution channels to avoid obsolescence write-offs
- Consider pursuing tax benefits by donating equipment to charitable organizations
- Expedite repair cycle time to limit investment in idle rotable inventory for break-fix
Implementing an improved Reverse Logistics strategy has valuable benefits for your organization. Is your supply chain ready to move in reverse? For more information on how to start a reverse logistics strategy at your organization, contact us here.