Strategic Management of Product Recovery

Manufacturers of an expanding range of durable products are facing regulatory and market pressures to manage the products they manufactured upon their end of life (EOL). In part, this attention is motivated by a growing number of countries—especially 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 EOL product recovery to reduce production costs, promote an image of environmental responsibility, meet changing customer expectations, protect aftermarkets, and preempt pending legislation or regulations. This article leverages transaction cost economics, capabilities, and resource dependence theories to describe when manufacturers should directly engage in product recovery efforts versus 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, various 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.