Supplementing the Reverse Supply Chain One Board at a Time

Distributors that specialize in sourcing and supplying repair parts for consumer electronics, appliances and other goods are continually faced with ensuring adequate inventory, especially once the production cycle ends for a particular model. Meeting the demand can be challenging, and distributors must seek different ways to keep vital parts flowing to the service industry.

Printed circuit boards, a key component of many electronic devices such as televisions, are particularly valuable in the reverse supply chain. New boards are often assigned a “core value” on top of their wholesale price, which works like a deposit to encourage servicers to send back used or defective boards (also known as cores) that they replace during repairs. Once recovered from the field, cores can be rebuilt and placed back into service – a process pioneered in the automotive industry.

The concept of repairing and recycling printed circuit boards grew out of the economic reality of declining product price points and legal requirements imposed on manufacturers to provide aftermarket support for repairs. There is a finite supply of these boards because manufacturers are continuously developing new models with different features using different factories.

Manufacturers provide their distributors an opportunity for a “last time buy” right before they halt production of a model. Distributors must then decide how much parts inventory they need to procure to ensure they can meet customer demand for another five to six years, while minimizing risk of the parts becoming obsolete before they can be sold.

Encompass Supply Chain Solutions, Inc., a provider of forward and reverse logistics headquartered in Lawrenceville, Ga. outside of Atlanta, has implemented an innovative process to limit last time buys of boards and supplement the reverse supply chain. Leveraging the capabilities of both its distribution division (Encompass Parts Distribution) and its high-tech repair unit (Encompass Service Solutions), Encompass remanufactures and quality tests its own boards for select OEM brands and then makes them available for sale to its customers.

“Being able to repair boards ourselves enables us to buy much less than we would normally have to as part of a last time buy,” said Jim Scarff, Encompass Vice President of Customer Service who oversees the board repair program. “This gives our customers access to parts they could otherwise have a hard time finding, and reduces our obsolescence risk.”

Encompass remanufactures television and appliance boards for Philips, Funai and Haier as the company manages the entire parts supply chain for these manufacturers – from procurement to warehousing to fulfillment. Encompass additionally performs contract work for other manufacturers for board repair on specialty products like medical devices.

Scarff estimates the technical team remanufactures 1,500 to 2,000 boards a month just for its parts logistics clients.

“We are doing this to extend the life cycle of the products for the brands for which we own the supply chain,” said Scarff. “Once cores are out of inventory following a last time buy opportunity, that’s it; you can’t buy anymore.”

Every week, Scarff analyzes data on Encompass parts sales so he can identify boards with the highest run rates, as well as those in dwindling supply. He then works closely with the Service Solutions team to ensure they prioritize these specific boards so they can be made available to customers as quickly as possible. This also helps Encompass meet the high fill rate requirements set by its supply chain management clients.

“We strive to have the techs working on a balance between boards with high demand and those we are in danger of going on back order for,” said Scarff. “The key is to make sure we don’t stock out.”

In addition to augmenting the parts supply chain, Encompass is able to assist its manufacturer clients by providing failure data.

“We report common failures back to the manufacturers to feed through their engineering staff so they can make improvements in production of subsequent models,” said Scarff.

Encompass also works with all its customers to recover cores from the field and return them to the manufacturers that it represents for eventual reinsertion to the supply chain.

“It’s an ongoing cycle ultimately meant to keep parts available as long as possible to support products after the sale and strengthen consumer loyalty for manufacturer brands,” said Scarff.

Kristin Hurst joined Encompass in 2009 as director of Marketing and Communications and is esponsible for marketing, sales support, public relations and internal communications efforts for the company. She has more than 20 years of experience in the marketing and communications field. Most recently, she served as Director of Brand & Communications for HD Supply, a $10 billion wholesale distributor and spin-off division of The Home Depot.