Wednesday, September 9, 2009

eWaste: Is Recycling a Value-add EMS?

Electronics manufacturers differentiate themselves in the marketplace and for contract customers with value-added services, traditionally design, final assembly and ship, or quality testing. As end of life (EOL) management gains importance — poor EOL control takes on a specter similar to that of an in-field recall — EMS providers and OEMs are considering recycling and environmental programs when signing contracts.

Ted Gardham, director, sales and business development for EMS provider Elcoteq, notes a 10× increase in OEM interest in electronics recycling. “This will spike coming out of the recession, as environmental programs will meet government and consumer demand,” he adds. A recent survey of manufacturers by the Society of Manufacturing Engineers (SME) reveals that nearly 20% have been asked to provide “environmental footprint” information to their OEM. As far as end markets go, Celestica’s Mike Andrade, senior VP and GM, North America, notes that while consumer demand/awareness and non-government organizations (NGO) pressure has led consumer electronics manufacturers to be the first companies heavily focused on green, other electronics companies such as those in the server, storage, and communications space are quickly catching up. Regional differences are also prominent. For European OEMs in particular, electronics recycling is an expected service, not necessarily a value-add. Therefore, the quality of your recycling program is evaluated against peers’. Elcoteq partners with Li Tong, a recycling company based in Hong Kong. I’ll cover the various recycling models, and what to look for when partnering with a dedicated recycler, in next week’s segment.

For an EMS provider managing the EOL process, traceability on the back end mirrors the look of a front-end supply chain. Customers are demanding this level of visibility to avoid damaging PR after botched recycling jobs and also to closely monitor costs and resources. The damage poor disposal does to a brand is yet to be fully understood, but the EMS providers I spoke with all saw it as comparable to a product recall: bad press, negative brand recognition, and a destroyed EMS/OEM relationship. Kimball Electronics pays special attention to the recycling of cathode ray tubes (CRTs) due to the high lead content, and cold cathode fluorescent tubes used in LCD displays. Celestica also focuses on data protection when products they manufactured enter the waste stream.

“A recycling strategy is not a stand-alone,” notes Andrade of Celestica. Design for the environment (DfE), modular products that can be upgraded rather than replaced, use of less toxic materials in product build, and limiting the transport involved in the supply chain are all environmental initiatives that should be promoted along with EOL disposal. An environmental management service was a “natural outgrowth of RoHS” for Celestica. The knowledge that EMS providers have built up through lean initiatives is easily transferable to environmental programs, such as eliminating waste (this time, carbon or energy waste) in operations. “A lot of suppliers need to understand that implementing lean to green practices can also help with the bottom line by eliminating waste,” says Mark C. Tomlinson, executive director and general manager of SME. The Society runs the Lean to Green Manufacturing Conference, September 28 to 30 in Austin, TX.

Reduce, re-use, recycle programs are consistently cited by OEMs as a service either expected or desired from their contract electronics manufacturing partners. Environmental initiatives are on many OEMs’ roadmaps, though it will not become a buying criterion for a few more years, Andrade says. “It’s clear that being a green manufacturer will be the entrance fee for suppliers in the years to come,” agrees Tomlinson, SME. Since OEMs face internal and outside pressure to implement green initiatives, they are turning to those partners with a demonstrable skill at managing supply chains, tracing multiple products through multiple use stages, and controlling costs. In many ways, the supply chain overhaul that started with RoHS ideally prepared EMS providers to take this next step and add EOL to their offerings. Once you have a sound, functional system in place, be sure to promote your program and the benefits it can provide for the customer. If you are competing in a market where the other EMS providers also have green programs, note the differentiators in your system, whether that be global reach, monetary returns, data protection, etc. Avoid “green washing,” where the client doesn’t get any tangible data on the benefits of your environmental program.

In the next segment of this eWaste series, I’ll look at different electronics recycling business models and the reverse supply chains involved. Finally, we’ll examine the environmental program one OEM implemented, and how they involved the internal workforce in shaping their green initiatives.

Meredith Courtemanche, managing editor

Miss the first post? Read it here: eWaste: Turning the EOL Burden into Profitable Revenue Streams

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