High-tech giant Hewlett-Packard is placing a new emphasis on reverse logistics. And it's not just because of the high return rates that have historically plagued the electronics industry (although that remains an issue). It's also because the more outmoded electronics and print cartridges HP recovers, the closer it comes to its corporate goal of recycling 2 billion pounds of electronics by the end of 2010. Last summer, the company reached a major milestone in its recycling program when it collected its first billion pounds of recycled material, hitting that target a full six months ahead of schedule. Buoyed by its initial success, HP immediately upped the ante, setting a new target of recovering its second billion pounds by 2010.
What HP is doing is turning trash—items that once might have ended up in dumpsters or gathered dust in the corner of a distribution center—into treasure. Instead of automatically shipping the unwanted items off to a landfill, the company mines valuable metals and other materials from them, which it then recycles into new products. In fact, the company's Long Lifecycle Business Desktop PC computer line, unveiled last summer, is made from 95 percent recycled components.
HP's recycling programs are now in effect in more than 40 countries. The programs seek to reduce the environmental impact of IT products, minimize the amount of waste that ends up in landfills, and help customers dispose of unwanted products in an environmentally sound manner. The plastics and metals recovered by HP have been used not just in the manufacture of new electronics, but also in items ranging from auto body parts, clothes hangers, and plastic toys to fence posts, serving trays, and roof tiles. The company says it is the industry leader in recycling. It recovered 187 million pounds of electronics globally in 2006—almost double the 108 million pounds recovered by its closest competitor, IBM.
Green genes
As for what's driving the recycling push, it's all part of an aggressive sustainability program at HP, which has the company using alternative energy at its plants and distribution centers, working with supply chain partners to measure carbon footprints, and placing a major emphasis on design-for-logistics initiatives. HP's team of logistics professionals is at the center of the effort.
"Obviously, recycling such a large quantity of material requires a significant reverse flow for products that can be refurbished for re-use and for those destined for recycling," says Dr. Judy Glazer, director of HP's global, social, and environmental responsibility operations. "So our logistics team has an important role in helping us to identify cost-effective ways to do both of those things."
In addition to supporting the recycling program, the company's logisticians have contributed to HP's sustainability initiatives (and its bottom line) through a few simple changes in packaging. By switching from wood pallets to plastic pallets, for example, HP eliminated 300,000 cubic feet of packaging material annually for shipping laptop computers in Europe.
HP made the change for a number of reasons. For starters, the wooden pallets from Asia that it used previously were poorly built and had to be treated with pesticides, so the wood was not reuseable. In addition, plastic pallets are thinner and more durable than their wooden counterparts, allowing HP to pack more products on a pallet and then to reuse that pallet several times.
The biggest savings have come from the use of plastic pallets for air shipments. "Because [plastic pallets] are thinner, we could get more products into a container, which improved logistics costs dramatically," says Glazer. "When you reduce package size and weight, very good things happen to logistics."
That's obvious when you look at the changes HP made to its process for shipping the more than 1.3 million ink jet cartridges it sells each day. By changing the way those cartridges are delivered, HP eliminated more than 6 million pounds of PVC last year, which Glazer says resulted in a huge financial savings. (The PVC reduction is equal to taking 2,800 cars off the road for a year.) By switching from large clam-shell packaging to a tri-fold cardboard package, HP reduced the weight of the package by 45 percent. "So you can assume there was a pretty significant financial impact for us as well," says Glazer.
The company plans to expand its use of plastic pallets within North America this year. It is currently working with its suppliers and customers to prepare them for the changeover. "We have found some of our distribution partners to be extremely receptive," says Glazer. "Others are open to the idea, but need to work through some of the operational changes that need to be made in terms of handling a pallet with a different shape, and working out how the reverse flow of the pallets happens. We have to work with the people we are handing [product] off to and make sure they can deal with it in their system."
The payoff
Although some of HP's sustainability programs have been driven by internal initiatives, others are the result of customer requests. For example, Glazer reports that over the years, customers have approached HP with requests for energy-efficient equipment. "We have customers that are very concerned about energy use in the data center and are coming to us for help in solving that problem," she says. In July, HP announced a new data center solution aimed at driving energy efficiency to reduce operational costs for customers. "You can imagine that if you meet a customer need like that, the return on investment is very substantial," she says.
HP's internal sustainability programs may not do as much to drive sales, but they nonetheless make a substantial financial contribution. "The vast majority of the projects that have been internally driven have delivered a significant cost benefit as well as an environmental benefit," Glazer reports. "That's very much true in the whole packaging and transportation area, where many of the things you look at that reduce waste and increase efficiency also deliver a lower cost because they have less environmental impact. You are either using less fuel per product shipped or less material per product shipped. We have many examples of packaging changes and design-for-logistics efforts that have delivered just that."
The company is saving greenbacks in other ways as well. HP expects to trim $750,000 from its energy budget over the course of a 15-year renewable energy contract it signed with SunPower to provide renewable energy to HP's R&D and manufacturing site in San Diego. The $8 million contract will include 5,000 solar panels atop five of the seven buildings at the San Diego campus. The panels will convert the sun's energy into 1.6 million kilowatt-hours of electricity—enough to provide more than 10 percent of HP's energy use at the campus.
HP is currently enlisting its suppliers in its green crusade. As part of its contracting process, HP is working with suppliers on measuring their carbon footprint, and asking them to participate in initiatives like the government-sponsored SmartWay program, a collaboration between the Environmental Protection Agency and the freight industry to increase energy efficiency while significantly reducing greenhouse gases and air pollution. The company is also in discussions with key carriers and industry peers on how to reduce the environmental impact made by freight carriers in and around the Port of Los Angeles.
"Environmental responsibility is good business," said Mark Hurd, HP's chairman and chief executive officer in a July 2007 statement detailing HP's progress toward its recycling goals. "We've reached the tipping point where the price and performance of IT are no longer compromised by being green, but are now enhanced by it."
It uses only organic cotton in its sportswear, pledges 1 percent of its sales to environmental causes, and was the first outdoor apparel retailer to sell fleece made from recycled soda bottles, so it's probably no surprise that Patagonia's newly expanded DC represents the last word in green. When the company built a 170,000-square-foot addition to its DC in Reno, Nev., it used the U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) standards to guide its design and construction. Last March, the retailer learned that its efforts had paid off. The council granted the expanded facility a gold certification— making it only the second distribution center in the United States to earn that designation.
The DC, which incorporates building materials with recycled content, includes features like waterless urinals, waterefficient landscaping, and a system for managing stormwater runoff. It also boasts radiant heating systems, energyefficient fluorescent lighting, and skylights, which have helped hold down energy costs in the DC, which now measures 340,000 square feet. And although it wasn't factored into Patagonia's application for LEED certification (which is based on a point system), even the center's material handling equipment is contributing to a greener operation.
Take the new package sorter and conveyor system that were installed during the DC expansion project, for example. The C-L100 package conveyor, which was supplied by systems integrator Dematic Corp., features the ability to turn itself off when it's not needed. That alone has the potential to generate big energy savings. "Traditional belt conveyor is a heavy consumer of electricity and often runs 24/7, even when there is no product on it," says Gregg Vandenbosh, product manager for conveying products at Dematic Corp.
Along with that "green" feature, the C-L100 offers a number of other advantages. For one thing, it's designed to be easy to assemble: The conveyor is a modular solution and can be assembled by snapping pieces together like Legos. For another, the conveyor is engineered so that each section has its own control logic and internal wiring. That feature eliminates the need for the time-consuming electrical cabling typically associated with conveyor implementations.
In addition, the C-L100, which is able to handle goods of different sizes and weights, has intelligent controls that allow specific sections to speed up or slow down. As a result of the improvements, Patagonia is able to process outgoing orders with 3.5 fewer workers than in the past. At the same time, accuracy has soared, and returns have been minimized.
Working in conjunction with the new conveyor is a new narrow-belt package sorter from TGW-Ermanco. The sorter, which can accommodate a wide variety of package weights and sizes as well as difficult-to-convey items, can process a bag or box every 2.2 seconds. It's not hard to guess what kind of impact the unit will have on the DC's operations. "There's no way a person can operate that quickly," says Dave Abeloe, Patagonia's distribution center director.
Gartner, Inc.
