June 29, 2010

Top three ways to increase IT asset residual value

Cost controls can be an important part of an IT asset disposal (ITAD) program, with cost-mitigation techniques often enabling the program to pay for itself. One of the most practical approaches taken is the remarketing of retired equipment, which is not only a green initiative, but also one that helps mitigate IT disposal costs.

Remarketing can return significant capital to your organization, especially if your equipment or components have residual value. Value is directly related to the assets’ age and condition, but there are other factors that you can influence to increase their net worth and the overall return rate. Here are the top three ways you can save money and help increase the value of your equipment even before it reaches your IT asset disposition partner:

1. Keep detailed records.
If you don’t know what equipment you have, you can’t anticipate the remarketing value or apply a strategy to your remarketing efforts. Plus, a thorough list of retired assets can decrease your ITAD vendor’s reconciliation costs and will provide extra security if there are ever discrepancies.

Make it a policy to catalog information such as manufacturer/model, hard-drive capacity, memory configuration, CPU type, optical drives and other relevant information.

2. Pack units yourself for safe shipping.
Logistics preparation, including packing and palletizing, is one of the biggest expenses incurred in the proper disposal of assets. Simply packing your equipment prior to pickup could reduce freight costs by 50 to 90 percent. And some ITAD companies, Converge included, will send preconfigured packing kits to clients to make the process extremely simple.

3. Keep machines clean and in working order.
Equipment that needs to be tested, screened and repaired will draw away value, and in the end it may even be cost-prohibitive to remarket. When machines are properly maintained and serviced throughout their life cycles, your ITAD partner will be able to remarket them easily, providing the best return opportunity. The end result is a greater return from your investment.

Start today by implementing even just one of these strategies. You’ll immediately start to save money and maximize the value of your end-of-life IT assets.

June 28, 2010

Recognizing inventory risk in technology manufacturing

Carrying too much inventory is a risky situation, yet it’s a common occurrence for many computer manufacturers, EMS providers and service depots. Excess product is easily accumulated during the ebb and flow of the forward and reverse supply chains, and problems arise when overvalued, obsolete or expired products are no longer needed and become a fiscal liability. In the typical overstock scenario, excess inventories are typically liquidated for pennies on the dollar.

Sources of Excess Inventory
Surplus inventory tends to pile up from several sources:

  • Inaccurate forecasting
  • Service spares excess
  • Customer returns
  • Order cancellations
  • Out-of-warranty or scrap product
  • Product recalls

How It Happens
There are many reasons why inventory becomes a liability, but some of the more prevalent ones are purely driven by demand for excellent customer satisfaction – the product must be manufactured on time, shipped on time and serviced on time. This means having the right parts on hand at all times. What is typically lost in translation here is the fact that although supply on hand ensures total customer satisfaction, it also has the tendency to result in excess inventory accumulation. This is due in part to canceled orders, poor planning and forecasting, a lack of dedicated internal resources to monitor pockets of supply and, ultimately, overbuying.

In addition, customer returns or materials returned from field service are not screened, tested and recertified to ODM specifications for reuse in the service supply chain. This leads to an increase in spend on new service spares that companies may already have in their possession but are not leveraging.

Valuing Excess Inventory
Once excess inventory is properly assessed, it can be grouped into three types of material: leading-edge technology, common technology and trailing-edge technology. Prices in all groups are directly affected by market conditions, and as they change, technology values change as well.

Forward-thinking organizations can minimize inventory risk by implementing asset reallocation processes that maintain, test and authenticate excess product in order to take full advantage of market spikes or to increase efficiencies in the service spares environment. A limited number of supply chain specialists such as Converge exist to manage the risk caused by excess inventory. These supply chain partners have experience in both the forward and reverse supply chains and offer validated excess inventory management programs that can reduce inventory risk and optimize the supply chain for computer manufacturers and OEMs.

For more information on this topic, I invite you to download our white paper, Excess Inventory Management.

June 15, 2010

Set-top box builders' substantial returns rate

Recently, I posted some solutions for managing the long life cycles in the set-top box industry. While this equipment sits in a home for years, many of its internal components become obsolete, thus having a direct effect on managing the service spares inventory for these products. I’d like to discuss another area where additional improvements can be gained, related to the substantial return rate of set-top boxes.

Even though set-top boxes have a long life cycle, they tend to be returned a lot. For instance, they can break, service requirements change or, quite often, the end user simply changes residence. These high field return rates are not just a characteristic of product failure but also of simple address change. Multiply this occurrence by tens of millions of users, and the quantities returned are dramatically high.

Now these boxes are widely deployed – logistically they can be located anywhere. As equipment is returned to local and regional distribution centers, the returns are often palletized and trucked cross-country to a single processing center. This process inflicts additional harm, as electrical components such as fans and hard drives are much more susceptible to damage when transported in a hot truck under less-than-ideal circumstances.

Rather than ship boxes across the country to one location, forward-thinking cable service providers and manufacturers can save money on freight by relying on partner-managed, centrally located processing centers, such as those handled by Converge. This type of outsourced solution can utilize packaging and product planning techniques to minimize transit time and ensure that equipment is not damaged further. Once the set-top box arrives at its destination, it is tested to strict standards and reconditioned for redeployment, and components are harvested for reuse/resale or responsibly recycled.

I’ve noticed two opportunities that manufacturers often fail to take advantage of:

1. Cross-utilization of parts in processing. Since a high number of set-top boxes are returned simply because of a move, they typically have a high yield or pass rate. In a heavy-return/high-yield environment, there is significant opportunity to repair failed units with NTF (no trouble found) parts harvested from other returned units. This practice decreases the need to purchase additional service parts inventory if implemented in the decision-making process properly.

2. Often the only reason set-top boxes cannot be immediately returned to service is CID (customer-induced damage), such as scratches or other blemishes on the surface of the unit. For example, maybe someone placed a plant on top of the unit, leaving dirt and a water mark. Damage such as this can be easily fixed with harvested shell components or minor cosmetic touch-ups such as paint or cleaner, enabling the manufacturer to return the box to service quickly and at low cost.

Because of the unique nature of these high returns and the potential to reuse parts, it is surprising to me that many vendors are still running old-school processing centers that do not take advantage of these opportunities to save time, money, logistics costs and repair costs.

Do you have additional ideas? Let me know if you have any other low-cost ideas that can have high financial impact.

June 3, 2010

The evolution of computing

Last week I attended an industry event attended by many of the computing industry's heavy hitters. Among the many notable speakers was one who made a significant impression on me because his topic undeniably spoke to the changes that have happened and continue still, shaping the industry and the way we do business.

The key takeaway from the presentation revolved around the evolution of computing from the 1990s into the new millennium and up through and after 2010. The role of hardware and software has continuously evolved over time, and it has forever changed the way we manage the supply chain for enterprise computing.

To review history: Through the 1990s and into the early 2000s, most enterprise computing was vertically scaled, with expensive individual computers containing heavily specialized hardware running very proprietary computing environments. A by-product of this situation was that manufacturers had to run almost completely different supply chains for the enterprise versus the non-enterprise products, simply because the two platforms didn't have much in common. They weren't ever meant to share hardware or applications.

During this time the hardware itself was a differentiator — it was so unique that it was what made the enterprise special. But the challenge came in that the enterprise environment was usually very expensive to implement and maintain compared to the desktop environment.

Due to the uniqueness of enterprise products, manufacturers typically built higher volumes of non-enterprise products, which were more cookie-cutter in design and therefore less expensive. However, the heavy cost burden was on the enterprise side.

This meant that computer manufacturers had virtually no leverage through volume in the enterprise computing environment, because the materials lists were so different and the volumes so small. On the other hand, the non-enterprise products shared many components, allowing the computer manufacturers to negotiate volume rates.

Over the course of the past two decades there's been an increase in server farms, with the term "cloud computing" evolving to represent this. While in the 1990s hardware was the differentiator and a single enterprise computer running a specialized operation was the norm, the enabler for cloud computing now heavily rests with software as a strategic differentiator.

Today, enterprise computing has evolved to a collection of low-cost computers running a range of highly available software that is sold or allocated in portions — the current state of cloud computing. This industry trend offers an opportunity for computer manufacturers and service providers to implement lean planning and to optimize overall supply chain practices.

When you think about it, software technology and edge-of-the-network routing intelligence have come a long way to enable concepts like the cloud computing model. With this new environment in place, manufacturers have the option of cross-using the same set of parts that can be borrowed from lower-end products. Maximizing part sharing is an opportunity to build traditionally non-enterprise components into enterprise footprints.

Since the application layer has become a greater differentiating factor between enterprise and non-enterprise hardware, the underlying hardware platform is simplified and its components can be interchanged across multiple platforms. In turn, this strategic shift implies the merging of enterprise and non-enterprise supply chain management processes.

In short, the evolution of computing has led us to the present day, when hardware is becoming shared more and more across platforms. This translates into cost savings in both forward and reverse supply chains. Speaking specifically to service spares for this new footprint, this model helps to increase efficiencies by lowering inventory and operating costs. It also allows supply-chain managers to leverage their non-enterprise volume muscle to support enterprise platforms.

Along with R&D efforts currently under way furthering software development progress, we predict this trend of sharing parts between desktop and server to continue all the way through edge-of-network and infrastructure devices.