To develop knowledge and methods to help companies, we research how companies can transform their organisation and supply chain so that the potential of take-back is maximised. The research is carried out together with a number of ambitious companies experimenting with take-back programmes such as Danfoss, Danish Down, Novo Nordisk and Windowmaster.
Experience shows that it is difficult to get proper scale and a viable business model in take-back programs. An important reason is that it places great demands on companies to create consistency between the take-back strategy and the companies' operational organisation. The company is often not 'tuned' to handle and implement a take-back strategy in practice.
Two strategies to choose from
Take-back programs are particularly challenging because of organisations' current "one-way design" where they extract, produce, consume and throw away. Take-back means that companies must take on activities that are new to them.
There are two basic ways to go around take-back strategies, where you either pursue the functional or material value of the products. The functional value strategy means that the products are collected for repair and upgrade so that they can come back to the market again and be recycled. The material value strategy means that products are collected and crushed so that the basic materials are utilised in recycling.
The two strategies place very different demands on companies and how take-back is organised most effectively.
A functional value strategy typically places high demands on internal organisation and resources. For example, companies must have the capacity to disassemble products and test, replace or upgrade components to preserve their identity and function.
This requires knowledge of the different product variants that are returned and which components are included in these. Here, a simple thing like serial number can be a challenge because organisations' IT systems do not accept the reuse of a serial number at the product or component level.
Another challenge is KPIs, which typically support low inventory binding, where take-back of products increases inventory binding.
Conversely, the material value strategy places great demands on partnerships with external actors such as logistics companies and waste management specialists. A typical challenge for companies is to find partners for large-scale recycling, just as it is not straightforward to ensure data and quality throughout the chain to avoid accusations of greenwashing.
While the functional value strategy is about building new internal competencies, the focus of the material value strategy will be to establish an ecosystem with external partners that handle the majority of the take-back program.