Recycling and refurbishment are two topics we don't discuss enough on this podcast so I thought I'd change that with this episode.
Sagent is a service provider to the telco space and it helps divert large amounts of communications equipment out of the waste stream. I invited Gordon Smith, President, and CEO of Sagent to come on the podcast to tell me how they achieve this.
We had a truly fascinating conversation and, touching on recycling, refurbishment, and the rising importance of analytics in supply chains. As is often the case, I learned loads, I hope you do too...
Here are links to some of the articles Gordon mentioned on the podcast:
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And remember, stay healthy, stay safe, stay sane!
We also run the risk. And I've had this conversation several times with our customer base and they scratch their head and say, aren't you really cannibalizing your own programs by reducing the volume that we're sending to you? But that's where we move from vendor ARB changes the relationship in that regard.Tom Raftery:
Good morning, good afternoon, or good evening wherever you are in the world. This is the digital supply chain podcast, the number one podcast focusing on the digitization of supply chain. And I'm your host, global vice president or SAP. Tom Raftery. Hi, everyone. Welcome to the digital supply chain podcast. My name is Tom Raftery with SAP and with me on the show today I have my special guest, Gordon. Gordon, would you like to introduce yourself?Gordon Smith:
Yes, this is Gordon Smith, I'm the president and CEO of Sagent.Tom Raftery:
And for people who are unaware, Gordon sagent is what...Gordon Smith:
we're a service provider to network operators. Those include Telecom carriers, cable msos, and private networks are enterprise customers of ours. In by a service provider, we do a few different things for our customer base. We have a an equipment line of business where we sell them refurbished assets, we have a testing repair line of business where we repair their technology for them and get it back to them for use in their network. We provide third party maintenance services, remote engineering support and delivery of products to site. And then we have a field service business, which is largely focused on decommissioning of network assets.Tom Raftery:
Okay, so and why is this kind of business important? Do you think I mean, what what is it about your business that you think differentiated from other businesses,Gordon Smith:
it's, it's important both environmentally and economically, to have a third party element to the supply chain. And I can probably go into those separately, the economic benefits follow, but the environmental benefit is, is something that's emerged in the last number of years. And we're very much focused on our ESG strategies, our environmental, social and governance strategy, the environmental aspect of it, this is someone by positional luck or good luck in some way by good planning and execution. But when you think about what we do in the secondary market, provide a provision of equipment. What we do is we take assets out of networks that are no no longer have a useful purpose within that one operators network. We refurbish them, and we remarket those assets. And you think well, that's fine. You're just just going to jump into a garden while you were they no longer have a useful life in that operators market. Technology migration, you know, as we move from 2g to 3g to 4g to 5g in the wireless states and the cable network space the moving from DOCSIS three Dotto to DOCSIS 3.1. In the it space, there's constant upgrades, we're on Gen 10 servers. And you know, not too long ago, we're on Gen seven servers. So what happens is there's this arbitrage that happens in the market whereby what is no longer needed from a tier one carrier, may well be needed by a tier two, maybe needed offshore, so we can extend the life of that product. And in doing so, you know, there's, there's the opportunity to lower the amount of manufacturing reduce the amount of even mining the production of highly refined glass extruding plastics, rare earth elements, which it's a market controlled 85% by China. And that's not a political statement, that's just creates a vulnerability and by doing so, if there's less everything from mining, to the manufacturing, to the transportation, the introduction of new technologies to use those technologies, and then the ultimate, ultimate disposition of those technologies, if we keep those assets working in the economy, there's less of everything. Less raw materials, less emissions, the emissions calculations are a little bit challenging for us at times. Sure, in that there's not a standard for every element of the process. Suddenly, we can calculate very accurately, emissions from transportation seems to be something that we can dial in on emissions from mining emissions from various manufacturing of different metals versus plastics versus glass. Those can be a little harder to quantify. But just by nature of what we do keeping assets in the working operators networks, longer we're making those positive contributions to the circular economy. Unlike the linear Enemy where things get built the ploy used and disposed of and they end up in an E waste stream. We're actually diverting assets from E waste streams on a daily basis.Tom Raftery:
And what does the refurbishment consist of typically,Gordon Smith:
you know, we're on the infrastructure side of the business we do very little with consumer devices. So the refurbishment is usually a functional refurbishment whereby the product has to operate correctly once redeployed, and that's through full functional testing repair as necessary. We don't really use cosmetic refurbishing as a requirement, if you're going to resell a handset, or a set top box, which we do, but it's not a major part of our business, there's usually a six foot test or a three foot test. If you can't see a scratch from three feet, it doesn't exist. That's really a consumer device that metric in the infrastructure space. You know, whether it's at&t or Verizon or Vodafone or orange, it doesn't really matter whether there's a scratch in on the heatsink of a radio, it's not important the functionality, no one's going to see it. So the refurbishment tends to be a functional refurbishment and test refurbishment. A repair is necessary but cosmetics are not important in our business.Tom Raftery:
Okay, superb. And you mentioned data analytics capabilities. How does that work?Gordon Smith:
You know, the five years ago now, we realize that the visualization of data we collect is becoming increasingly important. If you receive a SQL database, or 1000, or a million cell Excel file or whatever CSV file flat file, it's really tough to determine what the trends are associated with what's going on in a carrier network. So we developed the data analytics platform which we brand new sage and insights, whereby we use that as a communication method to our customers provide them actionable data, things, they can really use. places they can see trends. And we've got a couple of good examples I can give you of how powerful it can be super. During our test and repair process, we collect on average 50 to 60 data points during the repair process, everything from the time and insert Doc, through our lab, what components are changed, what tests were run, what signal is weak, what were you know, whether a filter failed or whether a power supply failed and what were replaced. And so there's a tremendous amount of data we're collecting on a single repair, you know, a single repair might be $300. But we've got the 60 data points, we have all the information, how can we provide that back to our customers in meaningful way. So what we started to do is collect that data, start looking for trends in the data. And what we found. Interestingly, once you have platform in order to present the information, we found that 30%, on average of all repairs that flow through our facility are what we classify as avoidable. And that could be something as simple as a no trouble found was operating in the field that the technician might have thought, well, something's wrong. So I'm going to replace this part. Okay, that's kind of an easy one. There's other avoidable repairs, like there's a software profit, well, the technician on site could have reflash, the software would have fixed the issue, it didn't need to be pulled from the network. It could be a configuration issue where the technician, I'm picking on technicians, and I'll get off at the second because they're very competent at dealing with tremendous amounts of technology, which is, I mean, these are brilliant guys, but they can't be expert in every single thing within a network. But it could be a configuration issue. And when you're configuring whether it's a radio or whether it's a Cisco router, or switch, there's steps to be followed anything are supposed to follow steps 12345 and you do 12354 that's what we call breaking the unit or making it unusable. And it has to come in from repair. So that could lend itself to a training issue. We've been able to identify manufacturing defects, changes in manufacturing process. And again, I'm not picking on technicians or the manufacturers but when you have the data tells you the story. So when we came up with the analysis, and this is carrier over carrier, that we can avoid 30% of all repairs, we only account for an a repair lab 10% of the outage in terms of cost, our average repair might be 300 $350. On a $20,000 unit. Where the cost comes in is you might have to roll a truck to site you might have to climb a tower, you've got freight, you've got logistics, all of those costs end up being you know an average of and in US dollars 30 $500 per average, not including any customer impact or dissatisfaction from your customer base. We're charging $350 of a 30 $500 outage. We're only costing 10% of the total. If we can save them 30% of their outages. We're actually saving our customers three dollars for every dollar we're charging, that becomes pretty powerful. And we couldn't do that without a very robust data analytics tool. We bring that sagent insights because we actually give them true insights into their network. You know, our causes know what your network knows. And that's really what we're trying to help our customers do. The Another example would be what we provide on the environmental side, we've got large asset disposition contracts with a number of mainly domestic in the United States, suppliers, we do have a couple international as well, where we're pulling assets from their network and remarketing those assets on their behalf. And when we do that, we can give them very accurate data as to how many pounds and the millions of pounds of E waste were diverted waste streams, because we put it back into the back into the economy. This becomes important, it's one thing you know, most major companies public or private have sustainability groups and they want accurate data on sustainability organization, we can provide that back to them in a very tangible way. We know what every product we handle, we know not just what the weight is, what the composition is, we know if it's 80% steel, when 10% copper and 3% fiber optics, we can tell them exactly by pound, what they've learned from the waste stream, which is important for their reporting and their their social positioning within the economy. So they get, they get to report to the consumer base and with the green fin, or the financial investments that are being made. Now, the environmental conscious consciousness of investors is very prevalent at this moment, so they can report back exactly what they're doing. So this is just a couple of examples of how the data analytics plays to the commercial benefit, where they're reducing their, their outages, they're reducing their their costs, and also making positive contributions to the circular economy. They all work together the data analytics and environmental strategy,Tom Raftery:
and they're all part of this sage and insights package that you that you talk about.Gordon Smith:
Yes, yes, they really are. We can do other things with the analytics as well. For example, we move, you know, millions of assets per year back into the back into networks, we can provide our customers with spot market information where we can tell them exactly this product was worth, you know, if you were to resell it today, it was it would be worth, you know, $600 sell it next month, it's gonna be $400. We can watch those trends, we can provide those insights to them, where they can say, Well, I was just gonna retire this product in place, I'm already paying for the real estate, so I don't want to move it. Well, your return on that asset is going to diminish over time. Or in this crazy world where we've got chip shortages. No people need semiconductor microprocessors, ICS, and manufacturers can't get that product to the market. Sometimes it's not an appreciating market. Sometimes it's actually appreciating where these products can actually be more more benefit several months down the line. And we can see where that that market crunch is coming just based on trends.Tom Raftery:
Fascinating, interesting. Well, we're seeing now the whole shift to 5g is is that impacting telcos and their retirement of older equipment?Gordon Smith:
It definitely is, in you know, from our perspective, as long as there's technology change will always have a place in the market. The reality of 5g is it's where most investments going. But in terms of carrying customer traffic, it will be 2025 projections are before the majority of traffic in developed countries actually traveling across 5g networks. So 4g is still you know, the backbone of most of the traffic. 3g is still remarkably important to carriers networks, even though the introduction was going on, you know, 18 years ago for 3g, and 2g really came out in 1994, with GSM or CDMA. And we're even working still on some old CDMA networks that were deployed in 1994 1995. And the reason is, they're functional, they serve a purpose. They're not necessarily carrying consumer traffic, but they're carrying machine and machine traffic. And they're, they're fully you know, amortized. They're not costing the carrier anything that I'm investing in technology, and they work. So 5g is important. It's the most important wireless technology right now. But 4g has a major place in the market as the as the two and three to a lesser extent, supporting those legacy networks or current technologies I would refer to it is extremely important because you can't just snap your fingers and move everyone to 5g. It's a migration force time and sensor designed to handle that they can ride on 3g, 4g 5g, and for a long period of time, if you're in a dense urban area, there's a likelihood that you'll be on 5g now, or very soon. When you start traveling to the suburbs or rural areas, you're going to find that that just my phone said bye jeenode says LTE, which are the 4g technology, or might say UMTS, which is a 3g technology to see your phones moving around network network, and they're all important to keep the, the service in place.Tom Raftery:
Okay, and you mentioned selling some of this equipment offshore. So I assume what that means is you're taking equipment from the local carriers, you're based out of Texas, and maybe sending that to a carrier that's, you know, up and coming in a developing country, or is that how you operate?Gordon Smith:
Yeah, there's a natural progression of markets. And you might look at Europe and, and some of the more developed countries in Asia and the North American market as being always fairly close to each other. Within those markets. There's often what we call tier two carriers, tier three carriers, there's two of them. Now, Europe now there's been so much aggravation throughout the world. You know, in the United States, we have three carriers. Now in most countries, you have three, sometimes four. Officially, we probably have four, but the fourth one may never take hold. But beneath which there's usually a tier of smaller carriers, which are handling regional operations, and they don't have the capital or the financial wherewithal or the business need to move as quickly for 5g technology or DOCSIS 3.1 technology. So when a carrier, a tier one carrier, major market decides to dispose of their assets that no longer needed in the network. Those are the ones we'll refurbishing often sell offshore and then, and country, we sell a lot in the Latin America who are depending on the technology, maybe two years behind North America. In that case, you know, they might very much need to be augmenting the 4g network, and it's an existing network, but they want to grow it and why would you pay, you know, leading edge prices for something that's not leading edge might as well use all this capacity that's built up from decommissioned assets. So we do a lot of sales in Latin America, Central America and the Indian region, in particular, the Caribbean, which tends to be a little bit further behind the rest of Latin America, we sell on six continents, albeit, a lot of the product sales now go 40% and probably go to Latin America, like 40% domestically 20% to Asia, Europe and Africa.Tom Raftery:
Okay, so you're, you're setting them, essentially second down equipment, they don't need to then buy new equipment. So you're saving on, as you mentioned earlier, the manufacturing and mining and everything to create that new equipment. And you have refurbished it, obviously. So it's nearly new, I guess, going going into these these markets. Yeah. And yeah, we're saving emissions and and manufacturing. That's, that's really impressive.Gordon Smith:
Yeah. Any anything, even back to the example I gave on saving 30% of the repair events are average events within the network, even that's reducing the need for manufacturing. Because what happens when a carrier has a high rate of failures within their network, they're having to hold more stock, they have to hold spares, because they can't just take something out of the network, they take something out and they have to put it back in within a certain timeframe. Often it's five minutes, sometimes it's an hour, but they need that spare spool. So even the spares pool gets reduced by better data analytics and better processes. And we can point our customers to very tangible examples. You know, I talked with the technician training issue, we've had evidence that witness with a major carrier within the United States, we've been showing them that you have a training issue in the New York area. And despite the fact that New Yorkers can sometimes have strong opinions and told us we don't have a damn training issue, we were able to show them that. Yes, this is the repeat failure. We can even show them, what technicians were having the challenge and we can provide them configurations and installation procedures, we can actually have classes with them, bring them up to speed more on the technologies that they've been handed within that region weren't seeing the same outages and the same avoidable repair rates in other parts of the country. Similarly, you know, we we've ended up with the identification within a certain region where there was corrupted software that was that was issued to the technicians incorrectly by the manufacturer. It was a bug fix, which wasn't working. And they were applying it and it was causing on a regular basis outages. And that's no fault of the technician that use the software that they punish you were able to zero in exactly on what's happening within a market even rate down to a technician often it's not the technician it's the region. And it could be a training issue could be software issue. It could be in some cases a manufacturing issue. But because you have the data, we make it visible actionable. Then we can sit down with the Operations Group and say hey, this is what we're seeing. This is what's going on in the data tells A story we're not the bad guys with me procedures that sometimes but you know, here's the data tell us if we're doing something wrong because this is what we're seeing, let's make the operational changes, we also run the risk, and we've had this conversation several times with our customer base, and they scratch their head and say, aren't you really cannibalizing your own programs by reducing the volume that we're sending to you. So that's where we moved from vendor changes the relationship in that regard.Tom Raftery:
Okay. And obviously, you're not giving away the data analytics solution free, it's, it's, it's something that they, I assume subscribe to on a monthly basis, or an annual basis or something like that, it's kind of an additional service that you offer,Gordon Smith:
is it, it comes down to how the program is sold, if we have a multi year contract, or testing, repair, or third party maintenance, we will bundle in the data analytics split that typically. So it's it, it's it's on a subscription basis. But often, you know, if we have a volume commitment from our customers, we don't upcharge for the service. And the reason part is a we want to be a better partner. But secondly, we're collecting and presenting all that data internally for our own purpose. There's not an additional fee, go the extra mile for the customer, often just because we haven't we needed to be better operation ourselves. So providing back to the customer isn't there's no cogs element to it that way.Tom Raftery:
Okay. There's a movement towards predictive maintenance in this in in every kind of maintenance field, is this something that you guys are seeing as well,Gordon Smith:
we are. And we get to that through the trend analysis as to an analysis of mean time to failure is the metric we use. We don't proactively monitor networks within our operation are companies that do that. Some manufacturers do it some with great success, somewhat limited success. But because we're very focused on the cable networks and the the edge devices in that space and wireless networks, radio heads, we're not actually monitoring those networks for them. Now, we can give them all sorts of data about you know, this, this is the meantime carrier for this unit. And within that anything manufacturer between certain dates was manufactured in a in a different manner, use different capacitor use different diode, we recommend that those come out of network sooner, and we can provide you what we call a signature repair that if anything fails, in that radio, in that modem, you know, in that server, we're going to not just repair the failure, we're going to make what we call signature repair everyone that comes in, we're also going to repair this known common defect, right? So we can we can provide them that data, I'd stopped short of saying that we're doing predictive failures because we're actually not monitoring the network, but we can show them all the trends associated what's failing and why. Interesting.Tom Raftery:
Okay. Gordon, we're coming towards the end of the podcast. Now, is there anything I haven't asked that you wish I had, or any topics we've not mentioned that you think it's important for people to be aware of?Gordon Smith:
Well, probably just the, if I could just speak a bit about the the extent of our repair operation or lab operation, we we repair up to 800,000 units per year within our what is now a 20,000 foot repair lab in another 20,000 square foot repair lab being built in California at the moment. And what is we like to play home games, we like our customers to come and see what we do, because we've made the financial investments, capital investment, when they come to our facility, they see, wow, that's, that's the same we have in our test lab or we have in our network. And the breadth of technologies that we cover through both telecom and cable networks, is what gives us the market position we have, there's a number of different companies can repair your phone and repair a microwave unit. I don't mean a cooking device and telecom microwave unit. But just the breadth of everything that we can cover within a repair lab and everything we sell in terms of our equipment side of the business runs through our lab. So we are testing so you're getting a high quality product and warranty product when it gets back to you. superTom Raftery:
great. Okay, Gordon, if people want to know more about yourself, or about seijun, or any of the things we discussed in the podcast today, where would you have me direct them?Gordon Smith:
Yeah, the best place is simply our website sagent dotnet. But in addition to that, we've written a couple of papers recently, both on the green market or the environmental sustainability aspects of our company as well as the data analytics offering and how robust that can be. So why don't I send me those links down?Tom Raftery:
Perfect. I'll include them in the show notes so people have access to them. Great. Very good. Thanks, Gordon. That's been excellent. Thanks so much for coming on the podcast today. I appreciate it. Thanks for your time. Okay, we've come to the end of the show. Thanks everyone for listening. If you'd like to know more about digital supply chains, head on over to sa p.com slash digital supply chain or, or simply drop me an email to Tom Raftery at sa p.com. If you'd like to show, please don't forget to subscribe to it and your podcast application of choice to get new episodes as soon as they're published. Also, please don't forget to rate and review the podcast. It really does help new people to find the show. Thanks. Catch you all next time.