Although its predicted huge potential, many companies are struggling with the implementation of refurbishment business resulting in underutilization of its potential. The main cause is the lack of knowledge of this type of business and misconceptions about it. DLL, a global vendor finance company and enabler of this business, dove into the organizational implications of starting refurbishment business and tried to deepen the understanding of its concept.

All insights have been published in a new whitepaper, "Refurbishment: the road to success."

The Value of Refurbishment Business

Refurbishment is all about bringing a used product up to a certain, pre-determined quality level by replacing worn and critical parts and making it (almost) look like new. Refurbishment is an indispensable step in keeping used assets in a closed loop, however, it may not be confused with “remanufacturing,” said Egbert de Jong, Vice President Product Development at DLL. “Remanufacturing includes restoring or transforming a used product to at least, a like-new condition, with performance levels often exceeding those of a new product. Remanufacturing is overall costlier than refurbishment.”

A clear distinction between these two is crucial, as it can negatively affect consumer perceptions, since products and parts can be seen as waste, rather than valuable inputs in the refurbishing or remanufacturing process.

By keeping products, components or materials in a closed-loop supply chain as long as possible, refurbishment can benefit the environment through fewer need of raw materials and reduced energy usage and emissions. Next to environmental benefits, there is also huge economic potential. Second-hand business can deliver a strategic advantage, increased market share, higher profit margins and an enhanced customer perception as an environmentally responsible manufacturer.

The Organizational Implications of Successful Refurbishment

Despite the business potential of refurbishment, its success is depending on critical organizational elements. De Jong added: “People, processes, in-depth market knowledge, pricing and management focus are fundamental for accomplishing good quality refurbishment business. Once the foundation has been set, leasing can be an enabler of the refurbishment process by creating a steady and predictable flow of returned assets. It also enables manufacturers to keep grip on their assets and optimize the asset value through multiple life cycles.”

To download the whitepaper, click here.