The Value of Information Systems for Product Recovery Management

This article sheds light on the role of information systems in product recovery management. We first develop analytical models and then provide a numerical example to determine under what conditions investments in Information-intensive Product Recovery Systems (IPRS) are economically justifiable for manufacturers and when policy-makers need to consider facilitating their implementation. The results of the analytical models indicate that the recovery network (collection) structure and product characteristics determine if precision improvements or increased sorting speed associated with IS investments will lead to higher profit gains. Manufacturers should carefully assess conflicting impacts of current manufacturing and recycling technology trends on the value of IPRS. Implementing IPRS might end up reducing manufacturers' profits under a highly time efficient decentralised collection structure. We show that negotiations with competitors about IPRS implementation may lead to a win–win situation and allow consumers to enjoy the lowest product price if the binding force of the agreement is strong. Otherwise, some manufacturers follow free-rider strategies. This article has immediate application to manufacturers' IS strategy and to government policy-makers considering investing in and/or structuring product recovery closed-loop supply chain processes within their jurisdictions. It also opens a potential stream of research concerning the role of IPRS to automate, informate and transform closed-loop supply chains for eco-efficiency.