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Turning Trash into Cash: How Companies Can Save Money with Smart Recycling
February 27, 2012
As trash packs landfill sites and oceans, both consumers and governments are demanding that manufacturers change their approach to waste management. Governments have tightened mandatory waste management requirements. More and more consumers have pledged to end a “throw away” culture and embrace recycling and re-use. As a result, manufacturers have started managing their products more closely across their lifecycle and changed operational processes to reduce waste. Let’s take a look at where companies can rethink waste management in their operations, often with surprising business results.
Costly Regulations Spark Innovation
Every manufacturer knows that environmental compliance is a challenge. End-of-life regulations are increasing in number, scope, and complexity. Consequences for non-compliance can be very costly due to regulatory fees. Non-compliance can even cause business interruption by losing the operating license. For many years, the European Union has led the way in regulating manufacturers’ responsibility and product take-back. Now Japan, Korea, China, and the United States are getting more aggressive in issuing and enforcing regulations. Examples are new regulations governing the disposal of electronic devices or battery recycling. Similar to the EU, regulations in the United States vary from state to state. For many regulations Waste Electrical and Electronic Equipment (WEEE) this means manufactures need to collect vast amounts of data across the entire supply chain for regulatory reporting. Companies have to track the quantity of products sold by country, state or region. They must then calculate recycling fees based on sales amounts, market and return shares, weights of included components, material recycling costs, and other factors. Often companies lack the visibility into important details, such as the exact weight that must be considered to produce a correct fee. To be on the safe side, they knowingly overpay by basing the fee on the product’s gross weight. Not surprisingly, many manufacturers classify waste management as a growing operational expense. Eliminating data hunting and automating regulatory reporting processes with software-based approaches can result in up to 50 percent reduction in the amount of resources needed to support the effort, according to SAP data.
Accurate Reporting Supports New Approaches to Waste Management
Accurate reporting is the key to maintaining regulatory compliance at the lowest cost. It is also the foundation to new innovative approaches to waste management. Some manufacturers started using new approaches and technologies to manage compliance processes and exactly determine the recycling fees due. For example, electronics giant Panasonic Europe uses SAP software to classify recyclable materials by type, weight, usage, destination, brand and category to meet the requirements of the EU packaging regulations and Europe’s WEEE regulation. By improving recycling and reuse, the company saved as much as 15 percent per year in recycling costs while supporting its ultimate goal of designing, manufacturing and distributing innovative and safe products.
Start Waste Reduction with Smart Product Design
A more granular insight into product components helps companies lower their recycling costs. They also have better visibility into the entire product’s lifecycle to drive innovation. For example, they can spot areas of “wastefulness” that can be improved such as a non-recyclable material being used in a particular product. From an innovation perspective, this detailed knowledge can provide a baseline for reverse logistics - the processes of recapturing value at the end of life through remanufacturing or refurbishing. Armed with this information, companies can start developing products and business practices that emphasize recycling, reuse and waste management.
One key area where manufacturers can focus on is re-thinking the entire product lifecycle with an eye towards reducing waste and enabling re-use. Some manufacturers have started pursuing a product and packaging recycling strategy that encompasses the full supply chain — from sourcing raw materials to consumer sales.
This new approach starts with smart product design, based on business insights. New transactional software and business analytics allows companies to assess what type of materials and packaging can help build a product that produces minimal waste. Using sustainability software, companies can now minimize the use of resources that might impede a “cradle-to-cradle” approach. The ability to incorporate waste management tenants at the earliest stages of product and packaging development has inspired a new generation of innovative products and manufacturing processes. One example is Varian Medical Systems, a $2.6 billion company that creates medical devices, software for treating cancer and other medical conditions with radiosurgery, and X-ray imaging for both medical and industrial purposes. In 2010 Varian introduced a new mandate for corporate social responsibility, which included far-reaching sustainability goals. Varian made it a priority to re-engineer its products to help ensure that they were created with a dual focus on sustainability and compliance. Going beyond basic compliance requirements for regulations such as RoHS and REACH, the Palo Alto-based company is using software technology to understand the chemical composition of its products and use this information to re-engineer its products. Varian reduced the time to implement engineering changes from 18 to five days and avoids late-cycle changes because compliance checks are embedded into the design process.
Executing a successful recycling and product end-of-life strategy makes real business sense today. Information technology can play an important role in implementing more sustainable product recycling and reuse strategies. In the process companies cannot only save costs, they can create new business opportunities.