The Measure of Value Adding Asset Disposition

By Robert Houghton

The inherent risks of technology retirement have led many companies to be satisfied merely if nothing bad happens. At the same time, industry consolidation has removed many best-in-breed ITAD vendors from the field, eliminating competition and further diminishing customer expectations. Today the common denominator for value recovery, lifecycle service options, and environmental results has never been lower.

Asset managers often tolerate this wasteful status quo for lack of objective metrics to measure and benchmark ITAD vendor performance. Establishing a few Key Performance Indicators (KPI) for your asset disposition program will enable continuous improvement in financial and environmental terms, and allow you to hold your ITAD vendor accountable to a higher standard.

KPI #1: REUSABLE YIELD

(total assets retired—total assets recycled)/total assets retired

The shredder is the enemy. Reusable Yield is that percentage of all devices removed from service still suitable for further use, whether for resale, redeployment, donation, or any other purpose requiring the original utility of the thing. This is the uber-metric for driving superior financial and sustainability outcomes. And Reusable Yield is simple to measure; simply track the number of assets that get recycled versus everything other disposition.

The current norm is for ITAD vendors to recycle a majority of what they receive—sometimes a large majority. This devolves from a common triage process which recycles everything requiring repair, anything with significant cosmetic damage, and everything below a certain technology level often called “the cut line.”

The best practice is to evaluate every device for its economic and utilitarian potential, and when “value appropriate,” repair and refurbish for further reuse.

KPI #2: AVERAGE SALES PRICE (ASP)

total resale revenue/number of assets resold

ASP combined with Reusable Yield determines the financial performance of your asset disposition program.

Every repurposed device is ultimately destined for an end user, making the optimal resale price whatever an individual end user is willing to pay. But the ITAD industry default practice is to remarket in bulk at wholesale prices, requiring that every gadget pass through multiple hands on its way to said end user and diluting value recovery for everybody. The typical ITAD vendor simply divides the pie into too many pieces!

Elevating ASP to end user levels requires that merchandise must be “end user ready,” including all accessories, consumables, and software needed for operation. The cosmetic condition must be superior, and the item must be packaged for individual sale.

The investment required to bring a used device to this state of retail readiness should be proportional to the increase in value over selling the item in bulk, so an accurate understanding of wholesale and retail market values is necessary to calculate the ROI from refurbishment. Research using online retailers such as NewEgg and Amazon can provide guidelines. SageBlueBook.com is the largest continuously updated repository of used electronics values online, listing both retail and wholesale values according to product condition, and making it the definitive reference for asset managers and ITAD vendors.

TOTAL COST of OWNERSHIP

After security, your CIO cares about total cost of ownership (TCO).

As a general rule, minimizing TCO can never be accomplished by maximizing the proceeds from an ITAD program. Longer lifecycles do reduce TCO, but also reduce value recovery upon retirement. Redeployment programs that refurbish and reuse existing enterprise inventory are tremendously cost effective compared to buying new, but also divert inventory away from ITAD value recovery efforts. Other dispositions such as technology donations or employee sales may produce tangible value for your business, but likewise reduce remarketing returns. The highest ITAD value for your company may therefore best be realized by planning for lower value recovery.

Finding the sweet spot in lifecycle planning terms gets complicated, because longer lifecycles also reduce Reusable Yield and ASP. Often the best answer is to plan for less value recovery at retirement, even budgeting for your ITAD program to incur net costs in order to realize the lowest possible TCO. Improving Reusable Yield and ASP always boosts financial results, so work to improve these KPIs directly reduces total cost of ownership, regardless of your company’s lifecycle choices.

About the Author

Bob’s work has always been an expression of his passion for the environment, first as an executive in the adventure sports industry, and more recently as an electronics refurbisher and recycler. He believes that the best ideas, combined with a strong business case and an appeal to our most noble spirits, can change everything for the good. Bob founded Redemtech in 1998, and as President led the company to industry preeminence until its sale to Arrow Electronics (ARW) in October, 2012. He is an expert on sustainable computing and off-network security best practices, including issues of e-waste management, computer reuse, secure reverse locations and verified data destruction. Favorite quote: “Be not simply good— be good for something.” – Henry David Thoreau