In the face of a global recession and a recovery that could take years, minimizing the costs of raw materials and supplies is becoming a higher priority among manufacturing-company executives. “Product reconstruction” in particular—the recovery of used goods, their processing and their resale—looms as an excellent way for a company, perhaps your own, to enhance revenue, profits and market share. Reconstruction, which covers a continuum of activities from recycling to refurbishing to remanufacturing,1 allows companies to sell goods at lower prices than if they were to assemble nearly identical new products. In most cases, the prices of remanufactured products are 50 to 75% lower than those of new ones.2 Despite lower prices, however, reconstruction provides customers with high-performance goods.
The leading question
Does your company have what it takes to succeed at product reconstruction?
Findings
- Product reconstruction—recycling, refurbishing or remanufacturing—allows for higher profit margins (typically, 20%) than the creation of new equipment (3 to 8%).
- The appropriateness of product reconstruction for a company depends on the nature of its customers—six kinds in particular make for the best fit—and its specific core competencies.
- Federal and state governments are encouraging the product-reconstruction trend through legislation and public/private programs.
Product reconstruction also allows for... To read the complete article, login or sign-up using the form below.
Register or login to read this article.
Register for free and read this article now.
Already have online access? Login below.
Do you subscribe the MIT Sloan Management Review in print? Enter the email address and password you used when ordering. Don't remember? Lookup your subscription account information
- Register for free access to recent articles and the current issue of MIT Sloan Management Review.
- Subscribe and read articles from the past three years online.
- Premium subscription give you access to the entire archive of articles.
