What is Flex doing in the field of ‘circular economy’? How does this business operate? How do they help customers reduce their environmental footprint and maximise value recovery? To find answers to these questions, Rahul Chopra spoke to Nikhil Rao, General Manager, Global Services and Solutions at Flex in India. Here are the key excerpts of the discussion.
Q. Can you share a bit about your experience at Flex?
A. I started my career with Flex 17 years ago as a graduate engineer trainee and now I head one of the business verticals for Flex, called Global Services and Solutions, which offers circular economy solutions, focusing on aftermarket services like repair to spare parts management, forward and reverse logistics. To elaborate further, at Global Services and Solutions in India we provide returns and screening, complex repairs, CO2 reporting and analytics, asset recovery and parts harvesting. Flex is an amazing company that gives you great opportunities to work and have a great career. I completed my Senior Executive MBA from the Indian School of Business (ISB) and I was supported by Flex in managing time and work.
Q. How has the electronics sector evolved over the years in India?
A. Fifteen years ago, all the companies in India were struggling to get a foothold in electronics manufacturing, but since then, it has taken great shape. Our investments in the space in Bangalore, and specifically Chennai, have been very interesting. We’ve remained invested, and we knew that the time would come when India would grow as an electronics repair hub. We are happy to have been through this journey. There were tough times when we tried to convince customers to come and place their business here. But today every customer wants to look at India as an alternative to a manufacturing hub. They are very interested in working with us, and a good amount of business is also coming into India in electronic repairs and refurbishing. Today, I can proudly say that India has transformed into a manufacturing hub and is in the phase of transforming into an international repair hub.
Q. Can you help us to understand the focus of the Global Services and Solutions (GSS) division?
A. We have been doing repairs for the biggest brands for more than 20 years now and the expansion to areas like Bangalore in 2004 is a testament of our global reach. Today, we have two state-of-the-art repair/refurbishment sites, also called the Circular Economy hubs. Here, we are focused on providing circular economy solutions for products that are not only coming from domestic market but also imported internationally for repairs and return, and we usually do a lot of complex repairs. We import defectives from 50 to 60 countries across the world, which arrive in Bangalore, where we repair and send them out to their respective destinations. It’s a circular economy repair hub, which serves certain customers and products across the world. We are bringing in high technology products and training our technicians, getting them up to speed to repair such kinds of products.
Q. How would you define the circular economy? Are you referring to products that can be refurbished and resold?
A. Generally, products have linear product life cycles, that is, you build, you use, and scrap. This is how products were designed in the past. But now, many companies are working toward ambitious sustainability goals, like net-zero and zero waste, and looking at solutions to help them deliver on their commitments, including exploring circular practices. Today, products can be designed to support more circular product life cycles and progress can be made through aftermarket services. Companies are putting in extra efforts to design products with components which are sustainable. After that, there is use followed by reuse, which in a linear model used to be scrapped. This reused product can be repaired, or refurbished, and it can be resold, or recycled in itself. So, from a linear product lifecycle, what has evolved today is a circular product lifecycle. As far as the circular economy is concerned, what we are focused on is related to repair, refurbishment, and getting the best economic value through the entire product lifecycle. That’s the focus of Flex’s Global Services and Solutions.
Q. How do these products come to the OEMs and how are they captured and returned?
A. OEMs who sell their products are giving warranties and out-of-warranty services. When it comes to warranty service, the OEM is responsible for the repair, refurbishment, or replacement of the product. Hence, a large portion of the returns that are coming to us are warranty based. At the same time, for out-of-warranty returns also we use standard repair and test process and genuine spare parts and make the products more reliable. Even the out-of-warranty cases come back to us, but 70%-80% of the cases are in warranty and 20% of the cases are out of warranty. We convert these products (given by our customers) into reusable products which are as good as new. Our portfolio consists of diversified products such as smartphones, hard disks, computing equipment, high-end routers, switches, telecom, 5G or 4G type of base station products, as well as spares of large format presses which have mechanical and electromechanical parts. Now, it depends on how the customer wants to reuse these products—repair or get a replacement.
Q. Are there different teams that specialise in different kinds of equipment, or can you train similar people to handle different types of equipment?
A. When these products come to us at our repair centre, we need the best technicians, who have that specific knowledge about a product. Our technicians undergo intensive training for two to three months to understand the product, the debugging and the testing process. As it’s a very different service from manufacturing, the skill set required for the repairs is very different. We train people to ensure they have the specified product knowledge and subject matter expertise. At the same time, we also do some cross-training. We take some of the best technicians and move them into other product lines as well. For example, if a team of technicians is repairing a 5G or 4G base station, we take a few technicians and move them into the router and switches project, after one or two years, so that they can understand that part as well. For this switch, they have to go through training for approximately three months and when they need to go back to the 4G repairs, they are again put through refresher training. This way we are creating a technician talent pool that has the experience of managing diversified products.
Q. How do you manage CO2 reduction when the product is coming from some other destination by flight to India and then going back by flight to that country?
A. Let me explain by sharing an actual case study. Bangalore was established as a repair hub for one of the OEMs which collected all these returns from Asia and shipped them to Europe or the US. There was no Asia repair hub back then, but now all the Asian defectives are coming to Bangalore. The distance and time taken to send a product for repair in India is much less as compared to sending it to the US or Europe. The argument could be why not in-country repairs? However, please keep in mind that not every country can set up their repair shops. There is a huge investment needed to test equipment and invest in capital expenditure. Countries with lower volumes of repairs cannot set up a repair hub. You have to consolidate it and send it to a country where there is a repair hub. In Asia, Bangalore and Futian are strategic repair centers for many of our customers in consumer devices, lifestyle, cloud enterprise and computing (CEC) and industrial segments. Our customers found that it was not economical to repair some products in Europe and the US because of the labour rates and the time it takes to repair them. India’s labour rates are much lower than the US. As such, products that have been declared as beyond economical repair can be repaired here. We are thus reducing CO2 emissions via our regional repair hub and focussing on reducing scrap by enabling cost-effective repairs.
Q. What are the most common issues in non-circular designs that you encounter and wish the OEM or the design team had thought about this?
A. The placement of components is very close. Let’s take the example of a Ball Grid Array (BGA)—if you keep it too close to some of the other components, it becomes extremely difficult to repair or rework. Sometimes the design is such that they place a certain component which has a higher failure ratio or choose certain components and products from the market which are not reliable. A lot of components that are being sourced for some products are very customised, and the possibility of circular economy or repairs becomes an issue. In such cases, we recommend to OEMs to try and make the components more agnostic so that component sourcing does not become a huge challenge. At times, you don’t get the specific component that failed and need only that specific one which is not in the market, then the whole product will have to be scrapped. So, we continue working with and advising our customers to think about design for circularity best practices for easier repair and reuse.
Q. Do most of the repair products sent by global customers go back?
A. The mandatory requirement for any product that comes for repair is that it needs to be returned. It’s a customer-related policy, which we strictly follow. So, 100% of these units have to go back including the scrap. If you are getting 100 products with 100 serial numbers, you will need to send these 100 products back, because you cannot scrap or use these products here.
Q. To what factors do you attribute the rising demand for repairing and refurbishing electronic products in companies such as Flex? What other segments will have high growth potential?
A. The mindset of OEM companies has changed from linearity to circularity, which will bring volumes into companies like Flex, allowing us to repair their products. Then there are environmental and economic advantages of repairing and refurbishing a product, instead of scrapping it. Customers are maximising the value of their products and components in addition to the environmental upside. Reduction in disposals reduces CO2 and waste. This is going to drive the circular economy and volume, which is our focus. Emerging products of the future, such as EV batteries, will also create a huge demand in both domestic and international markets.