Decision making in remanufacturing: The role of technological uncertainty

Here is the latest post of my series on the decision making in remanufacturing. The new readers can read the previous posts on the other variables here and here.

I have already started talking about uncertainty. I proposed that there are two types of uncertainty, and told you in detail about the volume uncertainty. Today, I disclose the second type of uncertainty: the technological uncertainty.

In some industries the technologies used to manufacture the new products are evolving faster than the technologies remanufacturing them. When the specification of a product changes very frequently or the product life cycles are very short, such as in cellular phones and computers, the technological uncertainty poses a problem for the remanufacturing. The inability to forecast accurately the new technical or design requirements in disassembly creates adaptation problems between departments or between the suppliers and the firm. The consequence will be high renegotiation and coordination costs. So, it could be a good alternative to vertically integrate into the remanufacturing activities to avoid the repeated coordination costs arising from the need for sequential decision-making.

But coordination costs are not the only peril of the high technological uncertainty. The rapid technological change increases the probability of obsolescence in technological investments on knowledge and routines. It may be a wise decision not to invest in any specific assets in the face of high technological obsolescence. The market mechanisms work better under high uncertainty: the suppliers that already have the technology or the scale to adapt the new technological assets can be readily available. Go ahead and partner with these companies and shift the risks to another party, who has the scale.

These variables -individually- are never powerful enough to guide the decisions about remanufacturing. It is the big picture, including these variables and others specific to the firm's industry, its product, and its organizational culture, that enables them to make the right decisions.

The series will continue with a new variable soon.