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Reverse logic

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The value recovery division of Englewood, Colo.-based Arrow Electronics offers expertise in reverse logistics and related ITAD services to clients worldwide.

DeAnne Toto May 28, 2014

In the short time since Arrow Electronics, headquartered in Englewood, Colo., established its value recovery division, it has emerged as a leader in the field of IT asset disposition (ITAD), helping clients maximize the value of their end-of-life electronics while safeguarding the data stored on these devices.

Arrow, a Fortune 150 firm, has long been a leader in the computing services sector, providing products and services to industrial and commercial users of electronic components and enterprise computing solutions. Arrow serves as a supply channel partner to more than 100,000 original equipment manufacturers (OEMs), contract manufacturers and commercial customers through a network of more than 460 locations in 58 countries.

The company’s ITAD, remarketing and reverse supply chain services division, known as “value recovery,” grew out of Arrow’s desire to provide additional support to its OEM and reseller customers and in response to customer requests, says Tim Kolbus, vice president of global logistics services for Arrow.

Kolbus says Arrow includes an enterprise computing solutions division, which offers distribution services and business solutions to companies such as HP, IBM and NetApp, connecting them with enterprise and data center customers. The company’s global components team is focused on providing supply chain and logistics services to manufacturers of products that contain printed circuit boards, including devices used in medical applications, aerospace and defense and transportation as well as in alarm clocks and air conditioners.

“We are helping customers on the front end to design a product. We are helping customers on their production and go-to-market strategy. And now what we have evolved to is focusing on the end of life,” Kolbus says of Arrow’s various divisions.
 

Acquiring expertise

To grow its expertise in the area of ITAD, Arrow embarked on an acquisition strategy that focused on ITAD firms with reputations for being environmentally sound, vigilant in the area of data security and knowledgeable about the various state electronics recycling laws, Kolbus says. These acquisitions included Jackson, Miss.-based Intechra as well as Columbus, Ohio-based Redemtech; Austin, Texas-based TechTurn Ltd.; and St. Paul, Minn.-based Asset Recovery Corp.

In deciding which ITAD companies to acquire, Kolbus says Arrow turned in part to the Gartner Magic Quadrant for ITAD worldwide, assessing the benefits of each firm. Intechra (profiled in the October 2007 issue of Recycling Today, available at www.RecyclingToday.com/Article.aspx?article_id=20827) stood out among these firms as the initial acquisition on which to build Arrow’s value recovery business, he says, because the company seemed to offer the greatest value.

“We obviously look at how a company is run [and] the profitability of a company, but we also look at the culture,” Kolbus says. “It mirrored our culture,” he says of Intechra, noting the company’s high standards in the areas of quality, environmental performance and data security.

Following the integration of the acquired firms, Arrow now ranks as a leader in the most recent Gartner Magic Quadrant for ITAD worldwide, as announced in early February of this year. In response to its Gartner ranking, Arrow states on its website, www.arrowvaluerecovery.com: “We have put significant effort into integrating our ITAD facilities around the world and couldn’t be more pleased that the global analyst community has noticed. The fact that an increasing number of requests were entered for an evaluation of the worldwide ITAD market cements our belief that IT asset disposition is a global issue and ITAD vendors must be prepared with a single source solution for multinational companies.”
 

Scaling up

Arrow consolidated the Columbus-area operations run by Redemtech (profiled in the April 2007 issue of Recycling Today, available at www.RecyclngToday.com/Article.aspx?article_id=20519) into the former Intechra site in Gahanna, Ohio. Today, this location is the largest in Arrow’s network, says B.J. Karam, director of global logistics services for the eastern U.S. In addition to the Gahanna site, Arrow owns and operates value recovery facilities in the North American cities of Windsor, Connecticut; Smyrna, Georgia; St. Paul, Minnesota; Las Vegas; Reno, Nevada; Coppell, Texas; Ashland, Virginia; and Mississauga, Ontario.

Beyond North America, Arrow has value recovery facilities in Brazil, the U.K., Belgium, Germany, France, the Czech Republic, Norway, Sweden and Denmark.

Kolbus says the Gahanna site processes nearly 50 percent of the IT assets Arrow handles in the U.S. and is among the largest ITAD facilities in the world.

Karam, who formerly worked for Redemtech, says the Columbus-area plant accounts for so much of Arrow’s volume because of the area’s reputation as a distribution hub and the strong customer base Redemtech and Intechra established in the area.

Arrow sees asset recovery as one of the biggest growth opportunities in the business, Kolbus says. “The board is 100 percent behind it. Everybody in the company is totally on board with it. That is what has been exciting for me to see: how engaged everyone is in trying to make this a success,” he says of the company’s value recovery division.

Kolbus adds, “I look at it as a huge opportunity. Our desire is for this space to be as big as the forward side.”

Karam says he believes the ITAD industry is still in its infancy and has the potential for “tremendous” growth as consumers satisfy their hunger for the latest and greatest technology.
 

Honoring the hierarchy

Kolbus says he sees the rapid upgrading of technology as an opportunity for consumers in other regions of the world. “It allows us to leverage our strength because we are global, and there are not a lot of other players out there that are global like us.” 

Karam adds, “I think it is an opportunity to do more reuse, repair and resale as opposed to recycling because the technology turns so much quicker.”

Approximately half of the 100,000 units processed per month at Arrow’s Gahanna plant are reused, he says, while the rest are disassembled for recycling. “We want to reuse, repair and resell as much as possible,” Karam adds.

Kolbus says Arrow’s value recovery strategy is to reuse products to the greatest extent possible. Jeff Hutchinson, vice president and general manager of global logistics services for Arrow’s value recovery business, adds that the company works diligently to extend the life of assets.

“For us, recycling is a last resort,” Hutchinson says. “We have developed a process to break assets down to as close to commodity as possible, allowing us to keep tight control over all materials.”

Kolbus adds, “Recycling is a necessary part of what we do—it is a byproduct of what we do—but our first priority is reuse; whereas, other companies in this space, their roots are in recycling. Their approach is feeding the machine.”

Hutchinson adds that Arrow avoids shredding where possible, though at times customers require the shredding of data-bearing media. However, he adds, “as a rule, shredding destroys value, and we work hard to make that a last resort.”

Kolbus says, “Our roots are in forward distribution. How do we reuse this product and resell it? That is what we want to do with it.”

The focus on reuse allows Arrow to provide more value to its customers, which tend to be Fortune 1,000 companies, according to Karam.

Ensuring data security is Arrow’s primary focus when it comes to reuse, Karam says. “That is the first thing we have to do to protect our customers.”

The company uses software from Blancco, with U.S. offices in Marietta, Ga., to overwrite data, making it inaccessible to new users. This service can be performed at a customer’s site prior to the transport of the assets, Kolbus adds.

“We excel at data security—providing a spectrum of data destruction solutions that protect our customers at their sites or ours,” Hutchinson says. “Proper data security protocols help return value through resale of equipment.”

For Arrow, data security begins long before the company overwrites data on or destroys a hard drive, Kolbus says. Good data security starts with good physical security from the time an asset is picked up through to its processing.

Once a device’s data has been overwritten, Arrow has several reuse options based on customer preferences, Karam says.

“We perform repairs when we believe it is value appropriate and when we are going to be able to regain our investment in the resale of that product,” he says. “We are a Microsoft Authorized Refurbisher, so we can put a certified, licensed image back on these machines, which will help us increase the resale value.”

In addition to resale, Arrow offers to redeploy assets for customers. “If a customer sends us equipment that they would like us to potentially hold for a certain period of time and then redeploy back into their corporate structure somewhere, we can certainly do that,” Karam says. Arrow offers additional services, such as equipment upgrades, for redeployment customers.

Lean and green

The IT asset disposition (ITAD) division of Arrow Electronics, Englewood, Colorado, known as its “value recovery” business, has applied much of the knowledge that has accumulated throughout the years from the company’s manufacturing side to its ITAD operations, according to B.J. Karam, director of global logistics services for the eastern U.S. This extends to facility layout as well as to incorporating Lean Six Sigma methodologies.

Lean Six Sigma is a continuous process improvement methodology that combines lean manufacturing and Six Sigma tools. It uses statistical analysis and waste observation to improve the performance of certain processes while reducing waste and costs.

A visit to the company’s processing facility in Gahanna, Ohio, near Columbus, reveals the effects of this effort. The company’s largest facility, the clean and tidy 400,000-square-foot building flows in a linear fashion from the receiving docks at one end to the shipping docks at the other. Processing stations are clearly defined, and all the tools employees need to perform their jobs are easily accessible.

Each processing station also features a board that includes information detailing the processes undertaken at that station as well as performance metrics and how the team is measuring up.

The facility, which operates 24 hours per day for five days per week, features video surveillance and is access controlled. Employees are not allowed to bring electronics devices into the processing facility, Karam says.

The company also works with customers on employee purchase programs as well as on charitable donations.

“Arrow truly partners with customers to develop programs that over time optimize return,” Hutchinson says. “We can act as their outsourced repair/refurbishment/redeployment partner, their remarketer and their donation facilitator—always protecting data, workers, the environment and brand, working to return value wherever possible.”

Kolbus says Arrow’s ability to offer a variety of solutions is another benefit it achieved through ITAD acquisitions, as each firm specialized in a particular area.

The product categories that hold the most potential for reuse to consumers via e-commerce are desktops and laptops, Karam says. However, he says he sees considerable potential in the data center server and mass storage device product lines.

Kolbus adds that smartphones and tablets also lend themselves to the reuse market.  “We are at the beginning of that wave,” he says. “It is growing tremendously.”

Arrow uses a number of resale channels, including wholesale and resale outlets. The company uses eBay, Amazon and ArrowDirect.com for direct-to-consumer sales. Arrow is able to capture more value for devices through direct sales than through a reseller, which allows it to pass more value on to its customers in the end, Kolbus says. 

 

Raising the bar

In addition to allowing Arrow Electronics, headquartered in Englewood, Colo., to quickly expand its resale options for customers, its ITAD acquisitions also gave the company input into certifications available to ITAD firms and electronics recyclers. When Arrow acquired Intechra and Redemtech, the company continued their work in guiding the e-Stewards and R2 (Responsible Recycling Practices) standards forward, says Tim Kolbus, vice president of global logistics services for Arrow Electronics’ value recovery services.

Despite the company’s work with the organizations that house these standards (the Basel Action Network, Seattle, for the e-Stewards Standard and R2 Solutions, Boulder, Colo., for the R2 Standard), Kolbus says, “There is no right single industry standard yet.”

Because of this, Arrow’s value recovery operations are certified to both the R2 and e-Stewards standards as well as to the Transported Asset Protection Association (TAPA) standard for trucking security. (Arrow’s truck fleet handles roughly one-third of the company’s value recovery transportation needs, Kolbus says.)

He adds that a single stringent standard may emerge for the electronics reuse and recycling industry eventually; however, in the meantime, Arrow has established its own global standard for value recovery that, according to Kolbus, goes above and beyond currently available standards for electronics remanufacturing and recycling operations.

“If we settled for the standards that exist today, we would not be where we need to be,” he says.

The company’s internal global standard is managed by Scott Venhaus, director of global quality and compliance.

“Arrow had the unique opportunity to combine EHS (environmental, health and safety), data security and recycling standards that were already compliant with R2 and/or e-Stewards in addition to other standards through the acquisitions made over the past four years,” Venhaus says. “By combining those internal standards and leveraging the voice of our customers, we developed what we believe to be a best-in-class globally consistent program.”

Venhaus says inconsistencies with published certification standards make maintaining quality compliance in the ITAD industry challenging. However, these inconsistencies also provide a client education opportunity, he says.

The company’s internal standard helps to distinguish Arrow’s value recovery services from those of its competitors, he adds, by exceeding the published standards.

“As both standards are supported by our clients,” he says of R2 and e-Stewards, “our clients may require one of the two or even both as they relate to recycling practices,” Venhaus says of R2 and e-Stewards.

"In addition to recycling, there are standards being adopted within our industry, including ADISA (Asset Disposal and Information Security Alliance), NAID (National Association for Information Destruction), TAPA, ISO 27001 (information security management), etc., that focus on data security and compliance that are facing the same challenge—which ones will our clients adopt," Venhaus says.

He adds that Arrow’s internal standard  Our program must be able to meet or exceed all globally.”
 

Looking ahead

While Arrow’s value recovery business was built on acquisitions, the company plans to grow through acquisition as well as organically, Kolbus says.

He points to Arrow’s Brazil location, which opened in 2013, as a recent example of organic growth. The plant has the distinction of being the first R2 certified site in South America. It also is certified to the Recycling Industry Operating Standard (RIOS), developed by the Institute of Scrap Recycling Industries Inc., Washington, as well as to the Occupational Health and Safety Advisory Services (OHSAS) 18001 and ISO 9001 and 14001 standards.

Hutchinson adds, “Arrow plans to leverage its presence around the globe to establish Arrow-owned facilities to better serve our global customers. We are in the Leader’s Quadrant in Gartner’s Magic Quadrant for Global IT Asset Disposition, where we are shown as having the most expansive vision, even superior to the OEMs. We are truly the ‘value recovery’ arm of Arrow, where we aim to shift the market away from immediate recycling to getting the most use and value out of usable/remarketable IT equipment.”

The company sees opportunities to work more directly with OEMs to facilitate reuse and recycling opportunities, Kolbus says. Arrow has long worked with design engineers from major OEMs on its global components side, he says, and those relationships are beginning to extend to the value recovery division as designers start to think more about design for recycling.

“It is happening,” he says of design for recycling, “but it will occur more often as the end of life of electronics becomes more top of mind.”

In terms of partnering with OEMs on end-of-life solutions, Arrow has a point-of-sale arrangement with Lenovo, a maker of desktops, laptops and tablets, Kolbus says. When an individual purchases a new Lenovo laptop from the company’s website, he or she has the option to purchase recycling of that device in the future, which Arrow manages for Lenovo. “It is OEM-led to try to figure out how to support the customer on the back end as well,” he adds.

Arrow understands this philosophy, as the same desire to support its customers throughout their products’ life cycles led to the establishment of Arrow’s value recovery business.

“Arrow prides itself on its ethical standards and exists as a trusted partner to more than 100,000 OEMs, contract manufacturers and commercial customers,” Hutchison says. “Our vision of ‘Five Years Out’ reflects our commitment to sourcing and protecting the electronics industry through diligent life cycles services, from source through end of life. Wherever the technology market goes, Arrow works from original design through final disposition all the way downstream through trusted partners to ensure that nothing is wasted.”

 

Radio roots

The company that would become Arrow Electronics was founded in 1935 by Maurice Goldberg on Manhattan’s Radio Row as Arrow Radio, where it sold used radios and radio parts. The following timeline tracks the milestones in the company’s 80-year history.
 

1940s Arrow began selling new radios.
 1946 The name Arrow Electronics was introduced when the company started seeking franchises to sell new parts for manufacturers like RCA and Cornell Dubilier.
1950s  Arrow began selling electronic parts to industrial customers.
 1956  A second store/sales office opened in Mineola, Long Island.
 1961 The company completed its IPO and listed its shares on the American Stock Exchange. Its sales equaled $4 million, more than half of which came from industrial sales with the remainder resulting from retail sales.
 1960s Arrow moves its headquarters to Farmingdale, Long Island, and opens branches in Norwalk, Conn., and Totowa, N.J.
 1968 Glenn, Green & Waddell, a partnership formed by three recent graduates of the Harvard Business School, B. Duke Glenn, Jr., Roger E. Green and John C. Waddell, led a private investor group that acquired the controlling interest in Arrow.
 1969 With $9 million in annual distribution sales, Arrow ranked no. 12 among U.S. electronics distributors.
 1970s Arrow wins key semiconductor franchises and opens sales offices in more than 20 U.S. cities, growing its electronics distribution business at an average annual rate of 34 percent. By the end of the decade, Arrow’s electronics distribution sales had climbed to $177 million, making it the second largest electronics distributor in the U.S. Arrow also discontinues its retail operations and becomes the first company in the industry to use a real-time, integrated computer system to track inventory and facility remote order entry.
 1979 Arrow was listed on the New York Stock Exchange and acquired Cramer Electronics, providing it access to markets in the western U.S.
 1980 Thirteen members of Arrow’s senior management, including Glenn and Green, die in a fire at a hotel conference center.
 1982 Stephen P. Kaufman, formerly of McKinsey & Co., joins Arrow as president of its Electronics Distribution Division.
 1986 Kaufman succeeded Waddell as CEO.
 1994 Kaufman succeeded Waddell as chairman.
 2000 Kaufman stepped down as CEO.
 2002 Kaufman retired as chairman to be succeeded by Daniel W. Duval, a company board member of 15 years. During Kaufman’s time with Arrow, he lead the company’s consolidation of the U.S. electronics distribution industry and its expansion into Europe and the Asia-Pacific region. He also launched the company’s national distribution of commercial computer products through the acquisition of Gates/FA Distributing.
 2003 William E. Mitchell, former president of the Global Services Division of Solectron Corp., joined Arrow as CEO.
 2006 Mitchell became chairman. During his six years at Arrow, sales climbed to $17 billion as the company increased shareholder returns, achieved record operating efficiencies and completed 17 acquisitions.
 2009 Michael J. Long succeeded Mitchell as CEO. Long joined Arrow in 1991 through the Lex acquisition and served in a number of senior management positions before becoming CEO.
 2010 Long succeed Mitchell as chairman, and Arrow completed 29 strategic acquisitions that further expanded its global components and computer systems businesses, extended the company into the unified communications arena and added reverse logistics and end-of-life management to Arrow’s product-life-cycle services.
 2013 Arrow ranked No. 141 on the Fortune 500 list (based on 2012 sales of $20.4 billion).

 

 


The author is managing editor of Recycling Today and can be contacted via email at dtoto@gie.net.

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