Converge Asset Recovery Podcast Transcription

Transcription of the Converge "Unlocking Value Through Asset Recovery" podcast (14:25)  

Paul Gillin:
Asset recovery: it’s an issue many technology firms are not well-equipped to handle. That’s because the practice of processing returned or recovered assets from the field: testing them, obtaining warranty service, and redeploying them back to the field can be costly and time-consuming. What’s especially frustrating is that many assets returned are actually in good working order and can be re-used in other ways. However, the difficulty of testing and processing each of those components may exceed their value. As a result, technology firms often write-off equipment that could help avoid costs, or even generate revenue, through redeployment, warranty replacement, or sale.

Professional asset recovery firms can help. These specialized vendors help technology companies unlock the hidden value in recovered equipment. They’re highly-specialized firms with access to expertise, diagnostic equipment, and market channels that can help customers avoid the long lead-times involved in returning equipment to the original manufacturers, or in performing their own diagnosis.

Hi I’m Paul Gillin. Welcome to this Converge podcast on the topic of asset recovery. Over the next fifteen minutes we’re going to tell you how technology firms can uncover value in recovered equipment, and about the savings they can realize using specialized asset recovery firms.

With me is John Borrelli, Director of Asset Recovery Services at Converge. John is responsible for the direction, growth, and continuous improvement of the Asset Recovery Division, and he has more than fifteen years of experience in the reverse logistics and supply-chain services industry.

Let’s start by defining asset recovery for the purposes of this interview – what is it?

John Borrelli:
It really is the dispositioning of obsolete material, product that has gone end-of-life, scrap product, meaning product that is typically coming in from the reverse-logistics channel, which would be customer returns; you look at surplus product which is really your grade-A type of material you are going to try to get recovery from, because that is typically material that’s been on a service shelf, tested good, that is used as service spares that is no longer required – that product is no longer supported in the field, so a company then has to remove that product from their books. It’s also waste material – it’s true scrap.

How do we do this? What are the ways that we need to do this? Well first and foremost: of course, you want to minimize your environmental impact. You also want to minimize your internal costs and all your associated liabilities. In turn, of course, you want to maximize your returns. I also like to refer to asset recovery, for certain product, as “intelligently reintroducing material into the supply chain”.

Paul Gillin:
John, obviously there are a lot of variables, a lot of different types of assets to be recovered – how do companies typically handle this?

John Borrelli:
It really depends on the type of company – I deal with a lot of different organizations, and I’m dealing with original equipment manufacturers, contract manufacturers, service depots. And what I have seen, time in and time out (and I’ve been doing this for a long time) is a lot of these organizations try to do this themselves. They really try to take on what I would consider a burden for one of these organizations, because it is not their true scope of work or their core competency, and they’re trying to do it themselves. And they’re trying to do this by putting the task on a person or department within the organization that has other priorities. So it really becomes a by-product of what they’re doing.

Paul Gillin:
It really sounds almost penny-wise and pound-foolish. What are some of the inefficiencies there?

John Borrelli:
Since it is a byproduct, a lot of times it’s overlooked as quite a few inefficiencies are, number one their daily activities are not tasked or their daily activities are not aligned with the true maximization of asset recovery, they’re not out there looking at the companies the way they should be looking at them – who they’re selling this product to or dispositioning this product to, so what could happen? Product that should be recycled is going to a recycler, they didn’t do their due diligence in vetting out their processes and this product could end up in a landfill, and that could really come back to hurt them.

In addition, they may be managing multiple companies; so now you’ve got a group within an organization that has other priorities that are trying to manage 10, 15, and I’ve seen up to 20 - organizations doing asset recovery process. It just lends to all types of inefficiencies, and ends up being a liability to the organization.

Paul Gillin:
One thing that amazed me is the percentage of material coming back from the field that actually isn’t broken. What are some of those percentages?

John Borrelli:
It varies quite a bit, and I think you’d be astounded at the percentages that – from industry and from what we see as a no-trouble found (an “NTF”) or a no-fault found (an “NFF”). From a holistic approach, you really, you have NTF or NFF rates approaching as high as 77%, which is pretty unbelievable when you consider the amount of returns coming back to organizations.
But if we broke that down, and we looked at specific data across commodities or verticals, or however you want to categorize it, we’re seeing hard drives, for example, coming back with approximately 40% no-trouble found.

So this is product – of course there’s a lot of due diligence that needs to be done: data security methods, data wiping, erasure, possibly white-labeling, if need be; but we’re seeing 40% of that material as no-trouble found – that some folks along the way were scrapping once upon a time when this could actually become a revenue stream for that organization.

In addition, look at a couple of other high-running commodities, if you will: memory – we’re seeing a 64% rate on no-trouble found; CPUs - 70%. So there’s quite a bit of product that can be re-introduced (and I like to say intelligently re-introduced) back into the supply chain. And when I say supply chain, I’m talking typically the service-supply chain – this is not product that you would put back into a production environment; it’s product that can be moved back into a service environment.

Paul Gillin:
Well John I guess two questions come to my mind there. One is, “What can companies do on the front-end to prevent this high rate of return of good products?”, and secondly, “What does typically happen to that stuff when it does come in from companies that aren’t using recovery services?”

John Borrelli:
I’ll give you a real-world example as to how we end up – or how we’re seeing such a high percentage of “no trouble found”: let’s say you’re sitting at your house, you’ve got your desktop or your laptop and it breaks, and you have whatever manufacturer it may be. You have an on-site warranty. You’re going to call out the technician. They’re going to come to your home, and they’re going to have a basket of goods, so to speak; they’re going to come out with a kit – that they’re ready to fix pretty much whatever problem you’re having with your system.

But they’re not really going to diagnose everything – they don’t have the time to sit there and diagnose every single problem on your system. So they do a lot of swap-outs. So they might pull out four pieces of memory modules and replace four memory modules, not knowing which, if any of those memory modules are the original problem. So there’s four memory modules they just pulled out of your system; they end up aggregated back in a warehouse, when in fact maybe only one of those was truly bad. So right there you have a – you potentially have a 75% NTF rate on your memory, if only one of those modules were bad.

So typically companies are really about customer satisfaction – they want to take care of us as the consumer. So what do they do? They do whatever they need to do to make sure your system is back up and running, even if it means replacing parts that may not be defective within those systems.

So these companies will aggregate these types of materials within their organizations – typically at one or two hubs in North America – and what we do for organizations is go in and offer the testing and screening services to go through this material, to look for material that is “no trouble found”, and if it is “no trouble found”, do they need that material back? Are they still supporting that product in the field? If “yes”, that product is routed back to them. If “no”, then it can go out for asset recovery, where they’re going to benefit by leveraging the resources of an organization to resell that product and maximize their returns.

Paul Gillin:
Now an alternative is using a specialized company, such as yours, to screen those returns – test and screen and redeploy them. What are the benefits of doing that?

John Borrelli:
Well, again, it’s all about reintroducing product into the supply chain, which is, you know, part of the ‘green initiative’, if you will, right? Part of recycling and the green initiative is re-use – it’s a very important part of the supply chain. Inasmuch as we can re-use product, the better for everybody. But when we’re re-using product, you have to make sure that that product is tested and screened to ODM specifications. And when I say “ODM” it’s Original Device Manufacturer – you can’t just take a memory module, plug it into a computer, and if the computer turns on you say, “Yeah, great it works!” That’s not the case. Any specialized company should have ODM-specific testing requirements and criteria that they’re testing to. That way that product can be comfortably and confidently re-introduced back into the supply chain and re-used.

Paul Gillin:
John, what is it about the high-tech industry itself that makes asset recovery so tricky?

John Borrelli:
It’s really having expertise in many different areas. And when you look at these large organizations: the ODMs, the OEMs, and the CMs – they have a specific focus – they have a core competency. And guess what? The core competency of an asset recovery, that would be a byproduct of anything that they’re doing. So the tricky part for these organizations is trying to come up with a plan that fits their model. It’s not putting the burden of asset recovery on a different division within their company that already has a task.

It’s really finding a company that has the testing and screening capabilities – they have relationships with the ODMs to be testing to that criteria or specification. It’s finding a company with a global presence so they can re-market material into emerging markets, let’s say. If product is end-of-life here in the United State, or in North America, it may not be over in EMEA (Europe, the Middle East and Africa), or in Brazil or Latin America or Africa – there are places to bring this product that are going to get the best return. So globalization or a global company is very important.

Paul Gillin:
Now if you’re going to try to do this yourself, what kind of resource commitments are you looking at?

John Borrelli:
Very few companies want to dedicate a specific department to doing this, or a specific group of individuals to managing this. So it really comes with having an organization or a partner that has many, many years of expertise, not just with re-marketing of this type of material that we spoke about – the obsolete scrap, surplus, that type of material, that’s a specialty that comes with experience – it’s not something that you learn to home-grow, if you will, if you’re an OEM. It’s totally outside of the scope of their business.

Paul Gillin:
What kind of efficiencies does a firm like yours bring to the process, and what’s the ROI?

John Borrelli:
It’s our expertise in all those areas that I just mentioned. It’s really having an organization that has been doing this for a long time, that has expertise in stream-lined processes, relationships with the ODMs (the original device manufacturers) to make sure that the testing and screening is to that same criteria; it’s having a sales force that is global, that can bring products to regions that some companies may not have exposure to; it’s about having commodity management that understands the pricing trends of all the different commodities that we talked about; it’s also for ease-of-use for a large company that has asset recovery needs, to call into a single company, have a single point of contact, has financial stability, has the reporting capabilities and robust reporting capabilities on a global basis, that’s going to allow them to do this efficiently. So then it can be the task of a single person within an OEM or an ODM or a CM to be that liaison, the contact, and to really tapping into the entire network of a company like Converge.

Paul Gillin:
So describe the internal testing process that you use when you’re working with your customers?

John Borrelli:
So the internal testing process will vary, depending on the type of commodity that we’re working with. So every single -- as a matter of fact there’s no company in my space right now that can say this -- every single process that we have internally, whether it’s for hard drives, whether it’s for memory, whether it’s for CPUs – these are all ODM-approved processes. We’re doing this testing for the ODMs; we’re doing this testing for the OEMs; and we’re doing it on a daily basis; we’re doing it across multiple sites, around the globe; and we’re doing it in large volumes. So it’s very specific: it’s working with test engineers from these ODMs to setup our test platforms; it’s working with their IT departments to setup the behind-the-scene IT integration and the software applications that are necessary, and also the platforms. So it gets very in-depth, but to sum it up I’d say it’s working within the ODM specifications and working on their platforms.

Paul Gillin:
This all sounds very sophisticated, John, and probably difficult for many customers to figure out on their own. What criteria should they use in evaluating an asset recovery firm?

John Borrelli:
They want to look at a number of different things. Everything’s in the basics, which would be financial stability: is the company going to be around for a long time? Has the company been around for a long time?

They need to do their due diligence; they need to vet out the organizations that they’re considering; they need to look at multiple companies – they can’t just go look at one. I don’t suggest anyone just walk in the front door of a company and say, “Hey, nice building – we want to do business with you”; it’s really looking at all the internal processes of that organization: financial stability, global presence – there’s a lot of companies out there that are small organizations. They try to present themselves as something that they are not. They try to present themselves, maybe, as a multi-national company, when in turn they’ve got one guy sitting over in an office, somewhere remotely, and that’s the extent of it. So, a global footprint is very important – especially when you’re trying to replicate your processes and procedures with these large organizations.

It’s having streamlined processes, so something that’s happening for an organization in North America; they may want to do the exact same thing in EMEA. Can that happen? Is the company you’re choosing capable of doing that? Look at their ISO certifications – very important. Do we follow – do companies follow standard practices across all regions? Look at their environmental certifications – again very important in this day-and-age. Every company needs to be environmentally conscious, and if you’re not, you’re going to be left behind – you’re going to be left way behind.

Reporting: what are the reporting capabilities? What kind of reports can you share with me? Are they real-time? Can I log in? Do you have to e-mail them to me? How is that going to work? Process controls: you want to look at who is involved. So you want to meet not just a salesman, so to speak, within the organizations you’re evaluating. Meet with the entire teams – meet with their IT department; meet with their finance department; meet with their operations; meet with their process control folks. So there’s a lot you need to do to vet out the process.

Paul Gillin:
Well thanks to John Borrelli for his insights on the topic of asset recovery, and the cost-savings and revenue benefits that firms can realize by using specialized asset recovery companies.

And thanks to you for joining us for this Converge podcast on the topic of asset recovery. My name is Paul Gillin.

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