Asset Recovery Management

8803 Business and the Environment

Beril ToktayCollege of Management

Georgia Institute of Technology

Xerox Life Cycle Design

Infrastructure Development Need to develop cost-effective regional recyclers Need to develop a collection infrastructure

Markets for Recycled and Remanufactured Products Market Acceptance Developing Slowly Government Purchasing is Key

Cost-Effective Recycling of Raw Materials Partnerships required

Industry-wide Alliances with suppliers

Need to restructure thinking and organization

Manufacturer Product Recovery Strategies (PC example)

Do nothing

Promote market Gateway donation program

Sponsor EOL event at Best Buy

Long-term contract Dell packs customer PCs and ships to contracted recyclers

Joint venture with recycler HP partnership with Micro Metallics for recycling facilities

Industry consortium EU, Japan

Integrate into recovery Dell PC recycling facility

IBM Asset recovery centers

Profitability of Recovery We want to make recycling profitable:

Profit = Revenue – Cost

Revenues are obtained from: High value (high demand), undamaged recovered reusable

components. Additional processing (cleaning, inspection, upgrading,

reassembly, and redistribution) adds to costs. High value, uncontaminated scrap materials.

Any contamination which reduces material properties depreciates the material value.

Energy recovered and sold from incineration or pyrolysis. Lowest revenue of all.

Common Cost Factors Buy back of product ($/product)

Dependent on condition and value of product type. Transportation costs ($/km)

May also dependent on weight and damage tolerated. Tip/storage fees ($/product), also for landfilled residue.

Strongly influenced by location of facility and local legislation. Labor cost ($/hour)

Dependent on level of skills required and location. Equipment investment cost ($)

Influenced by need for special (expensive) equipment. Equipment operating cost ($/car, $/hr) Time necessary to recover parts and materials (hr/product)

STRONGLY INFLUENCED BY PRODUCT DESIGN !

A Quick Costing Example Recovery of a dashboard:

Removal of dashboard from car = 35 min. Removal of dash components = 35 min. At $20/hour, labor cost $23

In order to break even with material recycling, more than 10 kg of copper (most valuable scrap material in table) would have to be recovered

Or, dash components (gauges, etc) would have to be sold for re-use. Big questions: What is the market willing to pay for recovered

dashboard components? How much value would remanufacture add to

recovered components?

Material Mass Virgin price Scrap price[ kg ] [ % ] [ $ / kg ] [ $ / kg ]

Steel / Iron 1004 72.38 0.12Aluminum 71 5.12 1.32Zinc 9 0.65 1.07Copper 23 1.66 2.20Lead 10 0.72 0.25Polyurethane foam 12 0.87 2.20 0.00Polypropylene 15 1.08 1.10 0.11Poly Vinyl Chloride 11 0.79 1.00 0.22ABS 13 0.94 2.50 0.73Nylon 10 0.72 3.00 0.00Polycarbonate 9 0.65 3.30 0.66Polyurethane 10 0.72 3.50 0.00Polyethylene 5 0.36 0.90 0.40Polyester 20 1.44 3.30 0.00Rubber 61 4.40 2.45 0.05Other polymers 5 0.36 2.30 0.06Gasoline 15 1.08 0.30Oil 5 0.36 0.05Antifreeze 5 0.36 0.06Other hazardousfluids

5 0.36 0.00

Glass 39 2.81 0.00Plastic ReinforcedFibers

5 0.36 0.00

Plastic CompositeFillers

5 0.36 0.00

Miscellaneous 28 2.02 0.00Total weight of car 1395 100

Typical 1990 vehicle material mix

Remanufacturing Today

Remanufacturing is a $53 B industry in the US. e.g. motor vehicle parts, office furniture,

engines, tires, copiers, cell phones, heavy equipment, PCs, toner cartridges, single- use cameras

73,000 firms, 480000 direct employment.

Both OEMs and third parties remanufacture.

http://www.remancentral.com/about_reman_industry.htm

My Research

Forecasting product returns for Kodak single-use camera

Procurement for Kodak single-use camera Joint pricing of new and remanufactured

products Effect of competition on recovery strategies Taking into account diffusion effects in new

product introductions

Manufacturer’s Decisions

Price evolution of both products Capacity evolution of both products Remanufacturability level Capacity structure (flexible vs. dedicated) Reverse channel responsiveness

Investing in Remanufacturability

0

0.1

0.2

0.3

0.4

0 0.25 0.5 0.75 1

slow diffusion

fast diffusion

0

0.005

0.01

0.015

0 0.25 0.5 0.75 1

fast diffusion

slow diffusion

Optimal remanufacturability level q* Profit difference V(q*)-V(0)

Value of Flexibility

0

0.005

0.01

0 0.25 0.5 0.75 1

fast diffusion

slow diffusion

Profit difference between flexible and dedicated capacity

Reverse Channel Responsiveness

-0.015

-0.01

-0.005

0

0.005

0.01

0.015

0 0.25 0.5 0.75 1

fast diffusion

slow diffusion

-0.015

-0.01

-0.005

0

0.005

0.01

0.015

0 0.25 0.5 0.75 1

fast diffusion

slow diffusion

low disposal cost high disposal cost

Change in profits as a result of speeding up returns

Single sales peak

Remanufacturing potential

Dedicated capacity appropriate

e.g. diesel engine

Likely single sales peak

Highest remanufacturing potential Remanufacturability most valuable

e.g. copiers

Some sales fluctuations

Lowest remanufacturing potential

Rapid returns most valuable

e.g. high-tech cell phones

Sales fluctuations

Needs high capacity investment

Flexible capacity most valuable

e.g. radial tires

low repeat purchase rate

high repeat purchase rate

slowdiffusion

fastdiffusion

Policy Implications