Recycling gives manufacturers competitive advantage

Recycling brings environmental benefits while also helping manufacturers develop strategic sources of raw materials, such as rare and precious metals. The new research also highlighted the consequent competitive and economic advantages.

The financial impact of recycling in the 20-billion-dollar industrial metal cutting tool and inserts industry is significant, bringing benefits including lower prices for customers.

Because companies become their own supplier, they can sell and collect products as they recycle them, giving them their own source of raw materials, according to research from Indiana University.

“It insulates you from the volatility of the market, at least partially. You’re still buying some portion of your raw materials from the commodity market, which is volatile, but if that’s a smaller and smaller portion, then that’s a significant benefit,” commented co-author Gilvan C. Souza in a statement.

The researchers compared efforts by two companies from 2005 to 2015. Using a Nash Equilibrium game theoretical model, they found that recycling can be a strategic supply source, resulting in cost savings per unit, higher quantities and greater profits.

During the period, the value of tungsten – which is used in drills, lighting and automobiles – rose from 50 dollars per ton to 350 dollars per ton.

“From the demand market perspective, we confirm that recycling is good for customers and the society as market prices under recycling are lower than under the case of no-recycling, while welfare is higher, and more recycling the better,” they said.

The value of using third parties to recycle common commodities such as aluminum, steel and paper is well established. But manufacturers wanting to recover rare materials such as tungsten may invest in their own facilities to ensure quality, initially adding to production cost.

Photo credit: Nicolas Nova/ CC BY-NC 2.0

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