Intel has undertaken an ambitious program to eliminate waste from its manufacturing process, and prevent all used and returned materials from ending up in landfill. In this conversation with SupplyChainBrain Editor-in-Chief Bob Bowman, Intel Supply Chain Manager Greg Skrovan explains how the new focus is transforming the giant chipmaker's reverse logistics supply chain.
SCB: How does Intel define the circular economy?
Skrovan: There are so many different definitions, but we adopted it at a high level. It’s the transformation from "make, use, dispose" to "make, use, recover, reuse, reclaim." It’s about keeping products, materials and resources in use for as long as possible. And when we're no longer able to reuse them, finding a sustainable way to dispose of them.
SCB: So theoretically, nothing goes to landfill in the end.
Skrovan: That is our ultimate goal.
SCB: What was the genesis of this particular project? And why now?
Skrovan: We kept hearing and seeing so much about the circular economy over the last few years. The belief was that the supply chain function had most of the ownership in trying to enable the transformation from a linear to a circular economy. A lot of the core activities around recovery and reuse, and trying to avoid putting products and materials into a landfill, ties to what we've been doing as reverse logistics professionals for years. It became an opportunity for us take what we've already been doing in many cases, but look at it through the lens of the circular economy and adopt industry metrics in that space — use it as a catapult to put more focus on it. And by doing that, we created more momentum. People were eager to come in with innovative ideas. It became kind of a groundswell, a bottom-up approach, as well as looking it from the top down.
SCB: What did you consider to be the biggest challenge to be addressed in this effort?
Skrovan: We wanted to avoid, at all costs, having to put anything into a landfill. That's our overriding goal in focusing on anything that's coming back: How can we find a better way to reuse it? In many cases, Intel could be considered an ingredient supplier, and we don't necessarily have the end product that goes right from our manufacturing line to the consumer. So it's a more complex situation where we're dealing with OEMs [original equipment manufacturers] that will be using our components in their products.
Another challenge is understanding the composition of our products and where they end up, then trying to figure out different ways that we can create that closed-loop process. We go through a hierarchy of decision-making: How can we get the maximum value from this product? If it meets certain criteria, can we reuse it as inventory? Can we repurpose it and use it in different areas of our business? And if we can't reuse it, can we extend its life? Can we repair it? Can we invest in more advanced screening to figure out what was wrong with it, and get it back to operating? We've been looking at extended warranties, to keep the product in use longer. We start looking at resale. Is there another life for this product on the secondary market? Then we get to that point of reclaim. Can we take precious metals from this? Are they valuable? Are they resources that can be smelted down and reused as raw materials for other products and industries? And lastly, we work with Intel-approved vendors to recycle all the variable components.
SCB: How did you go about securing the participation of all of your supply chain partners, which would be absolutely necessary to make this work?
Skrovan: It kind of varies. We have our external partners, our third-party logistics providers that run our reverse logistics, depots, and hubs. That’s where a lot of the most important decisions are made. They have the eyes and ears; they see what's coming back into our return centers. They help us identify where we can make the best decisions, where we can improve processes so that the products coming back are of better quality, and we have a better chance of doing something with them. We've had strong partnerships over the years with our recycle and reclaim vendors, to understand how we can increase their ability to recycle and reclaim more of the materials they pick up from us.
SCB: What about internally within Intel?
Skrovan: We work closely with our Intel resale corporation, which has a whole network of secondary vendors that it utilizes. We work with our product business unit groups by consulting and influencing them in how they set up warranty and repair for new products, and design for reusability and circularity. Because people see the connection to the circular economy, and hear so much about it, it has helped to bring them to the table with a motivated interest to contribute, and make something new happen.
SCB What results have you seen so far?
Skrovan: From a reverse logistics perspective, we've seen step-function improvements. For example, of the product that comes back to us today, about 99% of returns are either reused or reclaimed, and less than 1% ends up in a landfill. What we can’t reuse — about 44% — we reclaim. Last year, we recognized about $30 million in value from some of these decisions. We've been able to generate revenue from that — it's increased roughly 5% to 10% each year, and we're expecting it to continue to go up.
SCB: And you’re doing all this even as you're attempting just to keep up the supply of chips and integrated circuits to the industry. That itself is a challenge, right?
Skrovan: It is. It has provided a whole other level of motivation. Any time you can get to a situation where everyone throughout the organization feels a connection and that they can do a small part, you see the benefit. As we experience supply constraints, we work to maximize reverse logistics as an alternative form of supply. Granted, we're not going to make monumental changes and impacts because we're dealing with the return prior to coming in, but it's highlighted the fact that if we can find new ways to recover product, it's going to do its small part to alleviate a constraint in the exchange inventory, and allow us to repackage and repurpose inventory and use it for different parts of our business. It helps to mitigate some of the dependencies and impacts of the constraints we're seeing across the supply chain. It's about understanding the role that reverse logistics can play beyond just historically managing the return of faulty product, which is totally not what we do anymore.
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