In its second whitepaper, “Complement new equipment sales with pre-owned assets”, DLL refutes manufacturers’ anxiety for cannibalization and highlights its strategic benefits. DLL concludes that remanufactured pre-owned equipment product lines may even enhance financial performance.
DLL notes that many manufacturers mainly focus on selling new assets. The current paradigm is that offering remanufactured or refurbished assets and services negatively impacts new asset sales. This phenomenon is more known as cannibalization. It refers to customers obtaining second life assets while they have had the required budgets to acquire new. DLL investigated whether cannibalization is an issue for manufacturers and gives insights on the strategic benefits of second life business.
DLL researched best practices of various partners that are engaged in second life business. None of these manufacturers reported any explicit negative impact on their new asset sales. Additionally, DLL researched external communications of over 218 manufacturers across the construction, transportation, industrial, food and agriculture industries. An increasing number of manufacturers see the business benefits of being actively engaged in second life assets. However, less than 1% of them have a remanufacturing program, DLL said.
“The linear economy is not sustainable. There is an environmental and commercial need to embrace new, circular business models,” said Rob van den Heuvel, senior vice president Global Asset Management at DLL. “We’re looking for innovations to reduce the pressure on the planet’s finite resources and simultaneously stimulate entrepreneurship and business success. Second life business appears to benefit finance, competitiveness and the customer, so a win-win solution.”
The circular economy is a regenerative model inspired by nature. It offers businesses a way to deliver value and profitability in a sustainable way. Products are designed to be recycled, reused or remanufactured at the end of the first life cycle, reducing pressure on the planet’s finite resources. It also calls for greater use of renewable energy, reducing carbon emissions and countering the threat of global warming. It encourages the development of healthy materials in products, promoting a non-toxic closed loop system. The circular economy relies on usage rather than ownership of assets. It enables manufacturers to maintain more control on their assets throughout the technical cycle and offers the potential for product services to become an increasingly important profit center for manufacturers. New service-based financial solutions such as leasing and pay per use are allowing manufacturers to do so.
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