Auto Recycling Nederland (ARN) is the Netherlands’ innovative solution to the problem of minimising waste from End-of-Life Vehicles (ELVs) in line with European Union targets. To fulfil its brief, ARN must safeguard its share of the country’s total number of ELVs. That requires visibility of the future marketplace, something that has proved hard to obtain because of the large number of imponderables. PA Consulting Group (PA) helped solve the problem by developing a sophisticated yet easy-to-use mathematical model that allows ARN to explore different scenarios. The team then worked with ARN to create a strategy for building market share, supported by a portfolio of suitable policy instruments. PA contributed a unique combination of expertise and knowledge, including strategy development and modelling, the economics of the scrap industry, automotive cost reduction and waste legislation.

1. Exploring the future to meet
environmental targets
Auto Recycling Nederland
Auto Recycling Nederland (ARN) is the Netherlands’ innovative solution
to the problem of minimising waste from End-of-Life Vehicles (ELVs) in
line with European Union targets. To fulfil its brief, ARN must safeguard
its share of the country’s total number of ELVs. That requires visibility
of the future marketplace, something that has proved hard to obtain
because of the large number of imponderables.
“ARN predicts PA Consulting Group (PA) helped solve the problem by developing a
the availability of sophisticated yet easy-to-use mathematical model that allows ARN to explore
End-of-Live vehicles different scenarios. The team then worked with ARN to create a strategy for
every year. The used building market share, supported by a portfolio of suitable policy instruments.
models worked well PA contributed a unique combination of expertise and knowledge, including
in times of moderate strategy development and modelling, the economics of the scrap industry,
change. However, automotive cost reduction and waste legislation. ARN can now be confident
in current more of meeting its statutory obligations and environmental objectives.
turbulent times the
predictive value was ARN was established by the Dutch automobile industry in 1995 with the aim of reducing the
insufficient. Based waste generated by ELVs. It is to ARN that Dutch automotive importers and manufacturers
on prior projects delegate their responsibility for complying with European Union (EU) environmental regulations.
ARN asked PA Motorists pay a small fee to cover the cost of having their car removed by ARN, which
Consulting Group to operates its own network of dismantling companies, collectors, processors and shredders.
develop predictive
models which it did ARN’s objectives are:
very well.” • to maximise its market share of ELVs
Dave Bebelaar,
General Director ARN • to recycle 85% (rising to 95% by 2015) of the materials in those vehicles,
measured by weight, and
• to do this at the lowest possible cost.

2. Figure 1: Supply of ELVs including ELV age extension until 19 years in 2015
Historical data Prediction
400,000
Conclusion: the general trend is increase in supply of ELVs. With the increase of age of ELVs
is included, the supply is 49 thousand lower than without increase of age included. 350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
A need to see into the future Building a ‘car park’ model
For some time, the number of cars processed by ARN To address the problem of prediction, PA developed
has been in decline. There are three main reasons. a mathematical model of the stocks and flows of
Firstly, the total number of ELVs has reduced because ELVs. ARN brought in it immense quantitative insight
of exports to Eastern Europe and increasing lifespan into the automotive market in terms of historical ELV
of cars. Secondly, ARN has lost some market share to development, new sales, parallel imports and export.
other (mainly illicit) methods of disposal. Thirdly, ARN The dynamic model can be understood in terms of
has introduced a Post-Shredder Technology concept that a car park representing the country’s stock of cars,
will allow useful materials to be recovered from shredder and a stream of vehicles coming out of the car park
waste; this step will improve recycling yield but makes representing the flow of ELVs.
participation in the ARN scheme slightly less attractive to
dismantlers because their fee is reduced, with the result While this particular application of stock-and-flow
that some dismantlers have left the scheme. modelling is innovative, the approach is well-proven.
In building ARN’s model, PA drew on experience
To protect its market share, and for other strategic and in areas like supply chain and factory optimisation,
planning purposes, ARN needs to be able to forecast as well as strategy development.
the future volume of ELVs (figure 1). However, owing
to the large number of factors influencing that volume, The model can easily accommodate the numerous
the picture used to be uncertain. Influences include factors influencing future ELV volumes. Working closely
increasingly stringent emission standards and the with ARN, PA identified around 30 such factors,
possible introduction of a road pricing system like and assigned each a weighting to represent the
London’s congestion charge, both of which could reduce strength and immediacy of its likely impact (figure 2).
the number of cars on the road.
ARN can now carry out ‘what-if’ modelling to evaluate
ARN therefore asked PA – with whom it had already ELV availability under various scenarios – for example,
been working on strategic issues for a number of years under the assumption that exports are increasing
– to provide a quantified prediction of ELV supply, dramatically while new sales drop.
and also to help it develop a strategy for increasing
its market share.
2

3. Figure 2: An ‘Event horizon’ frames factors that contribute to changing ELV supply, ELV value and amount of scrap yards
1990 1995 2000 2005 2010 2015
0 1 2 3 5 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5
fall ‘iron wall’ • 4e extension EU • 5e ext. EU • 6e ext. EU • 7e ext?
# export #
º Euro norm 1 º Euro norm 2 º Euro norm 3 º Euro norm 4 º Euro norm 5?
• TAX refund export # export #
Social/ • road pricing?
political º less tax exemption
# ELV and export # # ELV #
# export #
º regulatory compliance
# scrap yards $ º scrap incentive (?)
# ELV #
º increase value parts trading € purchase ELV #
Economic º increase raw material prices € purchase ELV #
º budget cars # reg. #
Technological º avg. vehicle weight up € purchase ELV #
Key: continues effect leap effect º moderate influence • major influence
Designing a new strategy Benefits of the project
The model immediately gave ARN a much clearer view ARN is now equipped with the ability to understand
of the future, including the good news that, although its future market, and also has a strategy and policy
the flow of ELVs had been declining, it was likely to instruments to manage that market. That means
recover again in future, avoiding the need for a total the company is well positioned to fulfil its business
restructuring of the sector. objectives and at the same time comply with the
EU’s environmental targets.
Armed with this new information, PA helped ARN
to create a strategy for protecting and increasing its PA had contributed not only expertise in modelling
market share. Together, ARN and PA held workshops and strategy development but also knowledge about
to brainstorm the policy instruments available for tasks the economics of the scrap industry, automotive cost
like making ARN’s proposition more attractive to current reduction and waste legislation.
and potential new dismantlers, and restructuring the
non-compliant part of the dismantling sector. All these Because PA and ARN staff worked so closely together
instruments were evaluated in the light of their ability during the assignment, it was easy for ARN to start
to contribute to the overall objective of building ARN´s using PA’s model and approach in-house. The
market share. By identifying the feasibility, impact and companies continue to collaborate on other projects.
risk associated with each of the policies, ARN was able
to build up a portfolio of preferred approaches.
Making recycling work
The ARN approach to implementing environmental
policy is effective and professional, but internationally
it is virtually unique. Only Sweden has a comparable
system for automotive recycling, and no country has
yet applied it to other types of goods, though it is just
as suitable for, say, washing machines as cars.
ARN is truly leading the way in turning environmental
targets into practical policies.
3

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