Product Stewardship for Manufacturers

Servicizing

Servicizing refers to selling a service or function rather than a product, and can include operating leases and trade-ins. Actual ownership of the product remains with the supplier, and customers pay for use and maintenance. Some servicizing examples include carpet leasing, office equipment leasing, outsourcing of onsite chemical management, and office furniture supply, maintenance and moving services.

There are significant benefits for the environment, sellers and customers, if a servicizing program is designed and implemented well. The customer benefits include:

Servicizing inherently provides incentives to maximize and recapture the end-of-life value of products and equipment. This diagram illustrates how DfE can affect (and is affected by) servicizing and takeback programs.

Checklist of suggestions for servicizing programs.

Who's Doing It?

Dell Financial Services (scroll down)

Xerox Asset Recovery Management (see page 24)

Carpet manufacturers

IBM Inc. Product-End-of-Life-Management Services (see page 61)

HP End of Lease Return Program and Guide (http://www.hp.com/hpfinancialservices/end_of_lease_guide.html)

Coro, Inc., office furniture and moving services (see Appendix of Tellus report)

Chemical Management Services

Interface LLC, BetzDearborn, Radian International, and PPG Chemfil

Ashland Specialty Supply Company (see page 55)

Castrol Industrial (see Appendix of Tellus report)

Additional Resources

Inform, Inc. Leasing: A Step Toward Producer Responsibility

Tellus Institute Servicizing: The Quiet Transition to EPR

Chemical Strategies Partnership
"Servicizing the Chemical Supply Chain" The Journal of Industrial Ecology, vol 3, issue 2 & 3, 1999

Tips for Starting a Servicizing Program

checkbox Assess whether your business (or a portion of your business) has good potential for a servicizing program

Reason: Some products or business areas are not suitable for servicizing
Examples:

  • Typical candidates for servicizing are products that have limited lifespan and/or can be supplied as a service rather than a directly sold product. Some examples include: electronics, photocopiers (or "document services"), chemicals and cleaning supplies, office furnishings, equipment, stocked inventories
  • An economic analysis considering all costs, revenues, and environmental or cost savings can determine whether the business wants to implement. The analyses can identify if the program will be cost-effective, if some costs will need to be internalized, or if product or service prices will need to raise
  • Evaluate policy - although all Extended Producer Responsibility (EPR) policy in the U.S. is voluntary at this time, some tax policies may offer rates, credits, deductions, depreciation, or other benefits that favor product ownership and responsibility, such as sustainable practices, resource conservation, and agency procurement policies
  • Conduct a preliminary market analysis to test the idea with current customers; a simple market analysis can help ensure your servicizing plan will suit customers

checkbox Start incrementally

Reason: Test the waters before investing too heavily
Example: Often, servicizing evolves from existing lines of business and historical relationships with customers. Xerox's leasing program was initially developed as a marketing tool, but is now a full-blown DfE program which maximizes recovery and reuse of materials and components from their copiers; including powdered toner.

checkbox Develop draft servicizing options and policies for customers; consider indpendent legal review of the policies

Reason: Policies and contracts are definitely required for servicizing
Example: Include contract provisions, pricing, and the customer's advantages of leasing or service contracts over buying

checkbox Optimize product design and manufacturing activities to facilitate recovery

Reason: You will now be responsible for the ultimate disposition of this product and its components
Examples: Specific design opportunities for servicizing include:

  • minimize dissimilar and incompatible materials, coatings, inks, etc.
  • minimize number of components
  • use interchangeable parts
  • use recyclable materials
  • mark parts and components so materials are easily identified
  • make hazardous parts components easily detachable

Frigidaire consolidated several types of plastic into a single polycarbonate. Furniture manufacturers design for disassembly so that usable parts can be extracted and reused in new or refurbished furniture.

checkbox Develop a material and product distribution tracking system

Reason:Account properly for returns
Examples:

  • Mark components with material identification
  • Mark products with unique serial numbers
  • Usea comprehensive database to document distribution of products and components

checkbox Ensure viable end uses or markets for the equipment or dismantled components, keeping in mind that some markets for used or recycled materials are volatile

Reason: Maximize the value of the materials
Examples for end uses and markets:

  • Remarket and sell the product as is - through retail, auction, or consignment
  • Refurbish for resale
  • Reuse parts in refurbishing
  • Extract and sell useable and recyclable parts and materials

checkbox Design and test a process for receiving, handling and recovering products and equipment at the end of the lease or product life

Reason: The facility, or a vendor, must have a well-planned system to handle incoming returns, covering how it will operate and defined roles and responsibilities
Examples may include (but are not limited to):

  • Physical space for receiving, storing, and disassembly
  • Personnel trained in tracking, safety, disassembly methods, sorting and material recovery
  • Personnel trained in remanufacturing and testing
  • Equipment for extraction of critical substances, shredding, magnetic separation, other automatic sorting
  • Reinventory stocking and tracking (of useable parts)

checkbox Partner with suppliers (or customers if you are a supplier) on supply contracts or outsourcing for chemical inventory management, cleaning and cleaning supplies, furniture management, etc.

Reason: Toxics reduction, waste reduction, and cost savings can be significant when these types of supplies are managed by the company that knows them best
Example: Nortel Networks teamed with its main chemical supplier to share savings based on chemical services provided rather than on the volume of chemicals purchased. A shared savings agreement provides incentive for both firms to reduce chemical use.

checkbox Develop final policies and provisions and sign on customers!

 

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