Component Redistribution: Can It End Overproduction in Electronics?
The environmental impact of an electronic device is closely tied to manufacturing all of its internal components, including chips. The carbon footprint of even a single chip extends throughout its entire lifecycle, starting with the extraction of raw materials and extending through the power-hungry manufacturing process. These steps contribute to carbon emissions—even before factoring in the electricity used by the final product over its operating life.
In that context, electronics companies are examining the possibility of recovering chips and other parts from devices at the end of their useful lives and reusing them in new products, creating more of a circular economy in the process.
But wouldn’t it be more practical in terms of sustainability to reduce new production in the first place? That’s the focus for Component Sense. The company serves as a sort of “redistributor” of excess components and obsolete parts, giving companies the opportunity to recover the value of these unused parts. By reallocating inventory instead of focusing on reusing or recycling components at the end of their lives, Component Sense said it helps prevent overproduction—a major contributor to carbon emissions in electronics.
While a number of other electronics distributors work in the world of excess, obsolete, and end-of-life (EOL) components, Component Sense said it stands out by matching companies that have unused inventory with those that could use it. Even though it deals in new, unused components that are fully traceable to the original manufacturer, it also runs a rigorous quality-assurance process with more than 100 checkpoints to make sure that the parts are genuine.
CEO Kenny McGee said redistribution is also about preventing these parts from being discarded and turning into electronic waste that can pose environmental hazards. He pointed out that fully circular electronics industry depends on “ensuring all surplus and obsolete materials are used, redistributed, or ethically recycled. Closing resource loops like this prevent waste and minimize the need for the extraction of finite materials.”
McGee, who started Component Sense over 20 years ago, sat down with Electronic Design to discuss the intricacies of the electronics supply chain and why the broader industry is struggling with sustainability.
This discussion has been edited and condensed for clarity.
What inspired you to start Component Sense?
Over 23 years ago, I was working for a global component manufacturer in mainstream distribution. At the time, I stumbled across warehouses with large quantities of parts surplus to requirements and collecting dust. I didn’t know it at the time, but this stock was classified as excess and obsolete (E&O).
This E&O inventory often resulted from over-forecasting and was bound for landfills. It made no sense to me to scrap brand-new components while others were producing identical parts. Back then, electronic waste didn’t get the same attention that it does today, but I was aware it was becoming more of a problem. So, I set out to start a company that encouraged a common-sense approach to inventory management and procurement.
It also became clear that electronic manufacturers are holding as much as 10% of their overall revenue in E&S inventory. If approached in the right manner, I knew we could recover this value for the owner.
Can you define what circularity is in the context of the electronics industry?
The traditional supply-chain model breaks down into procuring raw materials for the product, manufacturing it, and then disposing of it. But a circular supply chain adds collection, reuse, redistribution, and recycling steps to the process.
In the electronics industry, circularity aims to maximize the lifetime value of materials while reducing waste. In the case of components, this generally means the valuable rare-earth elements inside the product. But it can also cover the reuse of entire electronic components.
Component Sense has a role to play in the redistribution stage of a circular supply chain. We want to make it as easy as possible for OEMs and electronics manufacturing services (EMS) companies to keep E&O parts in circulation and make sure that they get used as originally intended. We act as a marketplace, connecting those with surplus parts to redistribute with buyers.
What do you think are the biggest obstacles to making the electronics industry more sustainable?
Often, companies choose not to operate sustainably because it is not seen as financially viable. Without enough return on investment, it is difficult for them to dedicate funds to research and development (R&D).
In the specific case of preventing e-waste, there are challenges regarding recycling and recovering metals. Currently, only a small group of precious metals in e-waste can easily be recovered or are even worth the effort, leaving the remainder to be disposed of. Others are challenging to extract from electronic devices, unlike copper and gold, which are heavy and generally sink through the recycling process.
Not to mention, common recycling processes for electronics, such as smelting, generally require a lot of electricity. Ultimately, I don’t think most standard recycling methods for electronics are financially viable or scalable.
How can redistributing unused and obsolete components contribute to solving these problems?
It doesn’t make sense for new electronic components to be manufactured if perfectly good E&O components are already on the market.
Electronic components are made from valuable, finite resources, and they consume significant energy during the manufacturing process. When companies prioritize E&O parts, unnecessary new production is avoided, reducing e-waste. We don’t want buyers to pay anything extra for these chips, either.
For me, the ideal scenario is that people choose sustainability first and use pre-existing components before ordering new ones. But right now, we are often a last resort for some buyers after the material requirements planning (MRP) process brings up an exception report for a particular component.
What economic opportunities could the circular economy create for the electronics sector?
I would prefer it if companies wanted to make a sustainable difference without financial incentives. However, I understand that profit can be an important lever for creating change.
For electronic manufacturers with E&O inventory, redistributing stock simply puts cash back into their business. Our long-term solutions identify E&O early and facilitate sales over time. This allows us to help manufacturers recover up to 100% of the cost—and sometimes more. Not to mention, warehouse space is freed up for higher-value parts to capitalize on more profitable projects. Manufacturers also avoid paying disposal fees and insurance on stock they do not intend to use.
E&O components procured on the secondary market are often cheaper than alternatives that are available directly, reducing costs for anyone filling in the blanks of a bill of materials (BOM). A hard-to-find or discontinued part sourced on the secondary market can also prevent costly redesigns.
How can companies work with suppliers and manufacturers to adopt more sustainable practices?
Companies wield significant buying power and can influence supply-chain partners to adopt more sustainable practices. But if a supplier fails to meet your sustainability standards, it’s important not to simply remove them from your vendor list. Instead, collaborate with them and encourage them to make the right changes in their business.
In electronics, the environmental footprint of a product adds up over its entire lifespan—from manufacturing to decommissioning—so the circular economy is most successful when businesses share and collaborate.
What are the most impactful steps electronics companies can take to reduce electronic waste in their supply chains?
Short answer: Better inventory management. More accurate forecasting is important to reduce the potential for E&O stock in the first place and, thus, reduce waste in a company's supply chain. That said, sometimes, over-forecasting cannot be avoided.
Identifying surplus parts as early as possible can reduce electronic waste in the form of E&O stock. This will allow the parts to reach a wider audience, as some tier-one electronic manufacturers have a two-year date code restriction for everything they buy.
To identify excess at the earliest possible stage, there are tools such as Component Sense’s InPlant system that use standard reports from a company’s MRP system. Even though it presents other challenges, recycling can be explored as a last resort to ensure components don’t end up in landfills.
