I will be travelling in the next couple of weeks. I will continue blogging but less frequently...Please continue sharing your thoughts, by leaving comments or by sending e-mails.
Happy 2007!
Tuesday, January 2, 2007
Decision making in remanufacturing: The role of strategic assets
Companies, most of the time, consider the financial feasibility as the only decision variable for product recovery activities. You can't make me deny the role of financial feasibility, but there are other issues to consider when making decisions in remanufacturing domain.
To determine the right path for your remanufacturing activities, there is no universal rule. The decisions to engage in remanufacturing, and then the decision to outsuorce or internalize remanufacturing activities are definitely contingent upon the industry, the product, the environmental characteristics, and even the geographic position of operations: "remanufacturing" is perceived different in Europe and US. Although one cannot propose a rule of thumb, she can propose a framework to consider what factors are more important to consider under diverse circumstances. Therefore, I begin my attempts to portray decision making in remanufacturing. Please share your thoughts with me! Today, the first blog of the series feature the strategic assets in remanufacturing decisions.
I propose that two types of strategic assets that should be taken into account. First one is brand name: the accumulation of investment in reputation creates a brand name capital. When an OEM with high brand name capital, like Bosch, and decides to outsource remanufacturing, costs of controlling the contractor increases remarkably as both parties must maintain the reputation of a shared brand or OEM has to control the contractor very closely. The main consequence of companies with high brand capital is to internalize the product recovery to decrease control costs. A simple example is catridge remanufacturing: low level of quality in refilled cartridges can deteriorate brand-name OEMs reputation.
In my opinion, second important strategic asset is the proprietary technology (let's generally call it intellectual property-or IP) embedded in products and processes. There are particularly two consequences for remanufacturing when IP content is high. First, the need for highly skilled labor increases and second, the disassembly of product exposes flow of this proprietary information increasing the possibility hazards from contractual relationships: like IP leaks. Know-how pertaining to brand-specific production processes which arise during disassembly and remanufacturing processes is an important determinant in remanufacturing decision making. Consumer electronics remanufacturing, for instance, is prone to IP leaks.
I will talk about more variables in remanufacturing decision making in my next posts...
To determine the right path for your remanufacturing activities, there is no universal rule. The decisions to engage in remanufacturing, and then the decision to outsuorce or internalize remanufacturing activities are definitely contingent upon the industry, the product, the environmental characteristics, and even the geographic position of operations: "remanufacturing" is perceived different in Europe and US. Although one cannot propose a rule of thumb, she can propose a framework to consider what factors are more important to consider under diverse circumstances. Therefore, I begin my attempts to portray decision making in remanufacturing. Please share your thoughts with me! Today, the first blog of the series feature the strategic assets in remanufacturing decisions.
I propose that two types of strategic assets that should be taken into account. First one is brand name: the accumulation of investment in reputation creates a brand name capital. When an OEM with high brand name capital, like Bosch, and decides to outsource remanufacturing, costs of controlling the contractor increases remarkably as both parties must maintain the reputation of a shared brand or OEM has to control the contractor very closely. The main consequence of companies with high brand capital is to internalize the product recovery to decrease control costs. A simple example is catridge remanufacturing: low level of quality in refilled cartridges can deteriorate brand-name OEMs reputation.
In my opinion, second important strategic asset is the proprietary technology (let's generally call it intellectual property-or IP) embedded in products and processes. There are particularly two consequences for remanufacturing when IP content is high. First, the need for highly skilled labor increases and second, the disassembly of product exposes flow of this proprietary information increasing the possibility hazards from contractual relationships: like IP leaks. Know-how pertaining to brand-specific production processes which arise during disassembly and remanufacturing processes is an important determinant in remanufacturing decision making. Consumer electronics remanufacturing, for instance, is prone to IP leaks.
I will talk about more variables in remanufacturing decision making in my next posts...
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