There has been an increasing burden of e-waste across the world. On average, the global e-waste generation has increased by two metric tons annually over the last decade, with global electronic waste volume projected to grow to 74.7 metric tons by 2030. Meanwhile, the increasing demand for consumer electronics coupled with corporate social responsibility (CSR) initiatives are driving the adoption of IT Asset disposition (ITAD) services.

As a part of their CSR activities, businesses worldwide contract with third-party remanufacturers in the ITAD industry. Third-party remanufacturers (3PRs) provide services including pickup and transportation, secure data destruction, recycling, and asset remanufacturing and remarketing with value recovery. 3PRs also share information through settlement reports, which include (for example) the condition of the equipment, final disposition, and resale prices. 3PRs efficiently dispose of their used IT equipment while ensuring data privacy, lower cost of disposal, and eliminating any environmental liability from improper disposal of their equipment

In a recently published paper, Aditya Vedantam and Ananth Iyer from SUNY Buffalo collaborated with a 3PR in the ITAD industry to understand the barriers to reusing used electronics. In this article, we summarize some key learnings from the study.

Our study shows that 3PRs in the ITAD industry often receive used IT equipment in mixed quality batches. Furthermore, 3PRs derive revenue mainly from the sale of remanufactured equipment, and so a 3PR may be exposed to considerable risk if the used equipment is of poor quality. While many business enterprises that dispose of used IT equipment contract with 3PRs on a revenue-sharing basis, others use a fixed upfront payment contract. Typically, the contract terms are agreed to before the equipment is tested for quality.

We find that business enterprises can better repurpose used IT equipment by characterizing the quality of used IT assets before disposal. Grading the equipment by quality before contracting and utilizing different contracts for each quality grade can lower the cost of ITAD. We also find that optimizing the disposition contracts based on historical data on the quality of used IT assets can increase the profit for both the business enterprise and the 3PR.

Our findings also suggest that business enterprises with significant IT infrastructure should consider the benefits of disposition contracts when making equipment replacement decisions. Typically, business enterprises that repurpose used IT equipment with a lower asset age keep a more significant share of resale revenue and see a greater quantity of equipment remanufactured because of better equipment condition. Therefore, a faster “refresh rate” can lead to higher value for used IT equipment and profitability of both the supplier and 3PR.

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Reference:

Vedantam, A. and Iyer, A., 2021. Revenue‐Sharing Contracts Under Quality Uncertainty in Remanufacturing. Production and Operations Management, 30(7): 2008-2026.

 

 

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Aditya Vedantam
Aditya Vedantam is an Assistant Professor in the Operations Management and Strategy department at the University at Buffalo. His research studies how business can lower the environmental impacts of their operations including remanufacturing and recycling practices in reverse supply chains, clean energy technology development, and circular economy-based business models. His published work has appeared in Production and Operations Management, Operations Research Letters and Energy Policy, among others. Vedantam's research has been funded by the U.S. Department of Energy's Critical Material Institute, the New York State Department of Environmental Conservation, and the Stephen Still Institute for Sustainable Transportation and Logistics. He serves on the editorial review board of the Production and Operations Management journal and the Decision Sciences journal and has chaired sessions at several professional conferences including POMS and INFORMS.