Transforming Waste into Profit

Deishin Lee, a professor at Harvard Business School, is conducting a research paper on the way manufacturing companies can turn their waste into by-products.  By-product synergy (BPS) is basically taking waste from one part of the production process and using that waste in order to generate a new product.  The idea of BPS in not a new, as it is most often used in the agriculture industry.   Furthermore, she explains that in order for a manufacturing company to implement such an idea, it is important for the managers to “stop thinking of yourself as a company that creates a certain product and instead think about how you can use them to produce as much value possible.”

Since Lee is researching about recycling, she talked with Gordon Forward, CEO of Chaparral Steel.  His company use wastes from producing steel to make cement.  After an interview with Forward, she concluded that the main challenge as mentioned above is thinking outside the box, to produce an innovative product that companies/consumers will be able to purchase.

As a result of her research, Lee was able to come up with three scenarios for BPS.

1)      In a case where the by-product is a low value, a company may choose to maximize profits by using only a partial amount of the waste to produce a new product.

2)      In the second case, if the value of the new product/by-product increases, then the company might choose to actually increase the production of the primary product in order to create more “waste.”

3)      Lastly, Lee proposes a scenario in which the by-product ends up being more profitable then the primary product.  She suggests it would be wise for a company to find virgin material to make more of the secondary product.

Although using the wastes of a particular product can be beneficial to the company, it may not end up being so good for the environment.  Lee points out that sometimes using by-product to make new products can lead to more pollution.  Do you think companies should push manager into thinking “outside the box,” in order to find ways to use the waste?



3 thoughts on “Transforming Waste into Profit

  1. I agree that companies should think outside the box and minimize waste. The article poses some interesting possibilities on how to maximize resource capacity, and it also raises some interesting questions; what is the effect of creating a product/by-product based on a preceding manufactured product has on a company, i.e., sales, forecasting, marketing, company’s mission, etc.? Is the additional capital expenditure needed to produce the product/by-product cost beneficial? Is it better off to just sell the company’s waste to another firm that can better create the product/by-product?

  2. Thinking outside the box is great for innovation. Depending on the industry I find it to be almost necessary. I really like when companies reuse waste from production, it makes sense. In the case of increasing pollution to do so, that’s something that should be taken seriously when deciding that harm that can be caused. It is an interesting subject and I believe BPS should continue.

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