Strategic Management of Product Recovery

Abstract

A growing concern for durable product manufacturers is how to manage the products they manufacture when they reach their end of life (EOL). In part, this attention is motivated by a growing number of countries across Europe and East Asia that are enacting legislation that imposes greater responsibilities on manufacturers for managing their EOL products. Even in non-regulated markets, however, some manufacturers are engaging in product recovery to reduce production costs, enhance brand image, meet changing customer expectations, protect aftermarkets, and preempt pending legislation or regulations. This article explains when manufacturers should engage in product recovery efforts through partnerships, alliances, or vertical integration and when they should leave this task to independent firms. Technologies that enhance the productivity of product recovery, the level of uncertainty associated with reverse logistics, diverse manufacturing-related capabilities, the uniqueness of recovered assets, and the desire to avoid dependence on other organizations are key determinants that shape the industrial organization of EOL product recovery.