Waiting for a wave

Before the COVID-19 pandemic, the information technology asset disposition (ITAD) business experienced the start of an evolution as more clients viewed these services as essential rather than an afterthought. Companies were closely monitoring legislation regarding data privacy, such as General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA).

Brent Berry is executive director of ITAD and reverse logistics at Ingram Micro Commerce & Lifecycle Services, Irvine, California. He highlighted these trends and changes occurring in the ITAD space just prior to the pandemic in the keynote presentation at the ITAD Summit Nov. 19-20, 2019, in Scottsdale, Arizona. Berry has worked in ITAD for more than 25 years at companies including Arrow Electronics, Dell and Express Point Technology Services in addition to Ingram Micro.

Since the pandemic, Berry says, the ITAD business has evolved from traditionally serving corporate clients at their offices to serving these clients at their employees’ home offices.

“We’ve gone from a very centralized environment with our customers—what I mean by that is a lot of Fortune 1000 customers had internal support mechanisms within their buildings. Those buildings are no longer populated by their employees, and those employees are now dispersed throughout really the globe,” he explains. “So, the question becomes: How do we transition our service capabilities to really align to support those customers and how they have to transition and start managing their assets, their risk and their data on that global, more work-from-home type environment?”

In the past 12 months, Berry adds that demand for depot services, which are services performed on end-user devices that require exchange, repair, shipping, receiving or storage, has increased. Berry says Ingram Micro has offered depot services for a long time but has seen a “huge influx” in demand for those services since the pandemic began.

Berry connected with Recycling Today in February to talk about the impact the pandemic has had on ITAD providers and what that means for the near-term future.

Recycling Today (RT): Based on your experience at Ingram Micro, what has it been like on a day-to-day basis providing ITAD services during a pandemic?

Brent Berry (BB): Eleven months ago, we had an environment where we had customers who had 10,000 resources and 10,000 people sitting in a building. In that building, the bottom floor was their IT support infrastructure. Overnight, those folks went to that remote environment. And our customers brought a need to us to support those remote employees, not only from a data management perspective, but again, [from] the depot scenario: How am I going to get new assets out to employees? Because hiring didn’t just completely stop across the board. They still had to hire people and then get those assets out to those employees who were new. So, we had a lot of customers come to us with that piece of it.

It’s a unique scenario today where we are now seeing ITAD get connected to depot, and they go together as one really kind of global service delivery option for our customers. Customers are saying, ‘Can you manage the warehousing, imaging, asset tagging of all of our new stuff, distribute that out to all of our employees on a need basis?’

Refresh cycles may have gotten extended a little bit, but they didn’t go away. They were taking employees who had workstations [and] desktops who are now going remote. We got to the point where we were bundling desktop kits with monitors and desks because there was a shortage of laptops. ...

Then the secondary piece is continuing to manage the returns of those assets—the management of that data and that asset back through the reverse supply chain to ensure we are mitigating risk. That, in the last [11 months], has taken a forefront in our business. Not that ITAD is not at the foundation, but ITAD has changed at the foundation.

RT: How do you think the pandemic shaped the industry?

BB: It’s been dramatically changed. Our service is very labor-intensive. ... We are always going to have this labor-intensive, high-touch service.

When COVID came along, we saw a really big strain put on the global labor market. That kind of falls into multiple buckets. We have a big female workforce in our facilities, and, all of a sudden, moms were having to stay home because their kids were home. That put a strain on that subset of the labor force.

Then, just COVID itself—the safety, people not feeling comfortable with going into work and being in that kind of an environment. At some point, it didn’t matter if you were an essential service or business, it comes down to people, right? It’s making sure that you’re putting together an environment where your people feel safe, new people feel safe coming to work for you, and you have all the pieces of that puzzle put in place to create a really good, healthy environment where people know they’re going to be protected and taken care of to the best of our ability.

From a customer perspective, these big retailers—like Amazon—their volumes are skyrocketing because everybody’s at home, nobody wants to go out. They’re ordering everything on Amazon and different sites. So, what did Amazon and these websites have to do? They had to go out and drive their labor intake up as well to cover their increase in volumes. They’ve also always paid at a very high level from an operational warehouse environment, which drove labor rates up. If you’re an ITAD provider, you weren’t in the upper echelon from a pay perspective because you’re trying to manage your business the right way. And that put a big strain on your ability to be competitive in the labor market as well.

RT: What were some of the biggest trends before the pandemic?

BB: Thinking back to 2018 and pre-COVID, and back to the days [when] I worked at Arrow Electronics in the value recovery group, there were lots of acquisitions. So, the consolidation of the ITAD market was continuing to happen from a service provider perspective. That really slowed down quite a bit, but there was still a bit of activity into 2019 and 2020. Then, when COVID hit, you saw this really quick stop of any of that activity. The consolidation activity slowed down quite a bit.

I think you saw a shift toward partnerships—people trying to find ways to be more effective and efficient in their businesses. Even as one of the larger companies in the space, we have really strong global relationships and partnerships with folks who do other things in the space that we don’t do because we had to change our model a little bit during this time. So, I think that was a big shift.

We’ve always been in a high-touch, high-end customer-engagement environment, but we shifted to zero travel [during the pandemic]. That adjustment from an engagement model and how we as service providers engage with our customers was a big shift for us. I think the folks that hadn’t had really good, connected customer engagement probably felt the pain during the shift because those relationships got relied on very heavily in 2020 because of all these moving parts and our customers trying to figure out how to stabilize their businesses during this time of uncertainty.

”On the ITAD side, our volumes are trending in the right direction back to pre-COVID levels.” – Brent Berry, executive director, Ingram Micro

Then how companies addressed labor is an ongoing shift in our space. That’s not something that’s fixed, that’s not something everybody’s figured out. That’s something that will be ongoing as long as we have COVID in our environment. From a global perspective, the labor shift and change is going to be significant. In the last six months, hourly labor rates across the globe, specific to services industries, have gone up over 30 percent—that’s a huge impact. So, how do you manage your P&L? It has to be managed differently.

On the customer side, one thing we saw is a reliance on more single-source opportunities. Customers are coming to me and Ingram Micro to do more and broaden our scale and scope and reach into their ecosystems because of the uncertainty of how overall COVID was going to impact their ability to function, grow and expand and do more internally versus outsource more. If you look at a lot of the larger companies, their hiring is pretty flat right now. So, they looked at how do I put my arms around all of this and manage it more efficiently and with more impactful, single-source suppliers? That certainly doesn’t mean we had customers transition away from a dual approach. Most customers kept a core, primary service provider and a secondary backup. But what we’ve been asked to do as a core, primary service provider has really broadened in scope and the scale.

Another piece of it is the [IT service management] side of it. How do you manage your entire asset life cycle and make it automated and get it tied to your asset management tools? That’s something we continue to see—this evolution of ITAD getting connected to the bigger asset management conversation.

The last thing, and this is a good trend, we continue to see our customers, our prospective customers, trend ITAD up the priority chain. ITAD has always been a secondary service, if you will, and now we are a core service. It’s something that our customers are paying a lot more attention to. They’re trying to control their entire asset management ecosystem from end to end in a new environment today.

RT: What did the pandemic economically do to ITAD businesses?

BB: This is just my opinion—I don’t know all of the details of finances for other companies and competitors—but what I’ve heard in this space was very, very positive so far. Certainly, we were all impacted at some level financially, whether it be from a slowdown of income or volume, which ultimately impacts top-line revenue and trickles its way down to bottom-line revenue, or labor and not being able to get labor so the throughput in our facilities has been condensed, and backlogs have been created. So, there’s a lot of different motions that from a financial perspective played into the environment that we are in; but, overall, when you keep it relative to the greater global market, I would say ITAD has fared extremely well.

There was certainly a moment of great hesitation in March of last year [and] in that [following] three-to-four-month range, where everybody almost panicked a little bit and didn’t know quite what was going to happen and how to react and what to do. But I think, for the most part, our industry is filled with really smart people, really intelligent financial minds and really savvy and smart business owners. So, from that side of it, I think as an industry we fared very well.

That doesn’t, by any means, take away from some of the impact that we have all felt [in the ITAD sector]. We have all felt certainly some shrinkage and some condensing from a growth perspective.

If you look at 2017, 2018 and 2019, the industry was on this big trending trajectory—just grow, grow, grow. Everything was moving fast and going, going and going. And we hit a wall. It was full-speed ahead 100 miles an hour to 10 miles an hour. And we all felt that at some level. But for the most part, you haven’t heard about a ton of the shutdowns or closures or major layoffs that we’ve heard about in other industries.

I think the industry will come out on the other side of it better and faster. Again, this is my opinion—when our customers hit their brakes, that trickled down to us. For us, volumes are coming back to pre-COVID levels now.

But there’s a wave coming. There’s a whole bunch of customers still sitting on assets out there. … [A]nd we all need to be prepared for that wave. Because the labor piece of it, to me, is the biggest risk for our entire industry right now. How do we manage labor to ensure the services that we commit to, that we’re supposed to provide to our customers in the time frame that we’re supposed to [provide them in] are executed appropriately?

RT: When do you think that “wave,” as you call it, is coming?

BB: To be honest with you, it feels like it’s starting now. But I think by midyear, we’re going to be knee deep in it.

And, for [Ingram Micro], we’re in peak season. We have the largest retailer out there, and I have three different facilities supporting that customer. And, the volumes, they haven’t stopped. It’s just crazy. It has not slowed down at all. And then you throw this peak season on top of it and then the labor cluster, [and] it’s a very interesting time for sure.

But, on the ITAD side, like I said, our volumes are trending in the right direction back to pre-COVID levels. We certainly see by midyear that wave being in full effect again.

RT: Data breaches have been a big concern in recent years, and it seemed to be a concern during the pandemic as well. Could you talk about concerns people had with transporting assets for ITAD services during a pandemic?

Brent Berry is the executive director of information technology asset disposition and reverse logistics at Ingram Micro Commerce & Lifecycle Services, which is based in Irvine, California. For more information about Ingram Micro, visit www.ingrammicro.com.