Coordinated action

Inthe following we analyze the combination of coordination mechanisms in the RENAS system, and the ability of these mechanisms to coordinate the system as a whole and achieve coordinated action.

The RENAS system changed over the two contract periods in our study. The coordination of the physical flow changed from being based on standardization to being based on planning.

The governance of the commercial interest changed from being mainly based on hierarchical 176

Case2:The RENAS system mechanisms to being mainly based on a combination of hierarchical mechanisms, incentives and norms. The table below summarizes the coordination mechanisms in the RENAS system for both periods.

Table 7.6:An overview of the coordination mechanisms in the RENAS system Coordination ofphysical Dow

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Coordination of commercial interests

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The coordinated action in the system improved from the first to the second period. After changing the system, RENAS reported an increase in collected volume by 50 % and a decrease in cost of 50 %. RENAS had been able to fulfill the demands of the authorities within the first five years of operations, as the collection rate passed the 80 % level. The system had in other words achieved the system goal. The explanation of the effect can be found in the coordination of the system.

It was demonstrated in the RENAS system that standardization was not a suitable coordination mechanism for the physical flow. The products were not returned to the collection sites as expected, because of the rest value of the general electric products at end-of-life. The end-consumers demonstrated that they wanted to recap the rest value of the products. The fact that the main group of end-consumers in the RENAS system was from the business-to-business market strengthened this behavior. This characteristic meant that larger volumes could not be returned from fixed locations, but from different sites (i.e. companies) and the system had to adapt to these sites. The collection pattern was variable both in volume and location on each collection task. The interdependencies between the activities were different from what the RENAS system had assumed. Itwas not a question of utilizing some common resource (like a collection site) but one of fmding a solution of how to handle each delivery (adapting collection facilities, transport and separate deliveries to a reprocessing unit).

RENAS was, however, a cost center and a non-profit based company, and their mandate was to get the highest possible collection rate at the lowest possible costs. As a consequence, it

Case2:The RENAS system was important for the company to have a close control of the costs. Inthis manner, the interaction effect between standardization and centralization and formalization provided the company with control. However, they developed a system that achieved control rather than the collection rates they desired and the system, therefore, did not achieve coordinated action.

Inthe second period, the actors were allowed to adapt to the inherent logic of the physical flow. The operations were based onplanning, as the volume was generated from a changing pattern of locations. Consequently, it was difficult for RENAS to formalize standard operations of conduct for the operators because the operations changed for each collection task. On account of this, it was necessary to adapt the system with an outcome-based contract, which strengthened the incentives in the system.

The system experienced some degree of overlapping activities, as the reprocessing units were also given status as collectors. In some cases, the reprocessing units may by-pass the collectors. Insuch cases, the reprocessing units outbidd the collectors because the cost of direct delivery is lower (i.e. one handling step is skipped). The reason for permitting this overlap lay with the end-consumers. The fact that they did not distinguish between the different operator roles and that they were the ones who initiated the bidding between the actors pointed to the need to let the reprocessing units double as collectors. Additionally, the initiative for returning products lay with the end-consumers. Therefore, it was considered better for the system as a whole that the volume was returned to one of the actors, rather than it being traded outside the system. The waste management company took, in this respect, the perspective of the whole system and allowed this internal competition. The common interest was prioritized, which was to the advantage of some individual actors. However, this was to some extent counteracted, as the actors were allowed to, and expected to, take the initiative to find volumes.

The operations in the system were facilitated by the development of norms. The fact that the actors were able to negotiate directly with each other provided them with the possibility to build norms based on comparing. expectations and experiences. As an example, there was a certain understanding between collectors and reprocessing units on the type of activities in which they engaged. The seminars initiated by RENAS also facilitated such development.

We argue that there was an interaction effect between the coordination mechanisms that contribute to coordinated action in the RENAS system. The planning was facilitated by a 178

Case2:The RENAS system balance in the governance mechanisms that were implemented to coordinate the commercial interests between the actors in the RENAS system. That is, it was expected that planning would be difficult under the high level of control that RENAS exercised in the first period.

The ability for the actors to negotiate directly with each other made it possible to plan the physical flows to a greater extent. Thus, the interaction effect contributed to the RENAS system achieving the system goal and coordinated action in the second period.

7.6 Case summary

In this chapter we have presented and analyzed the RENAS system, a reverse distribution system that has been established to collect and reprocess EE-products at end-of-life within the categories of general electric. We have presented the case in accordance with two contract periods, showing how the physical flows and commercial interests of the system have been coordinated.

The physical flow in the RENAS system was coordinated mainly through standardization in the first period, with the utilization of collection sites, transport operators and reprocessing units assigned to defined geographical areas. The commercial interests were coordinated through a high level of control, where the governance mechanisms of centralization and formalization were utilized. In many respects, the choice of governance mechanisms resembled a hierarchy.

The RENAS system changed its coordination in the second period. The physical flows were coordinated with planning, and the activity structure was to some extent duplicated and organized through collectors and reprocessing units. The commercial interests were coordinated with the governance mechanisms of hierarchical mechanisms but balanced with incentives and norms.

Incomparison to the first period, the RENAS system experienced an increase of 50 % in collection rates and a decrease of 50%in costs during the second period. During the second period, the RENAS system was able to collect more than 80% of the EE-waste from general electric products. It is our reasoning, therefore, that the interaction effect between the coordination mechanisms of physical flow and commercial interests made it possible to reach the system goal for the RENAS system.