Remanufacturing of Products Remanufacturing of Products and Reverse Logistics and Reverse Logistics Xochitl Aquiahuatl March 2007
Outline Outline • Closed-loop Supply Chain • Reverse Logistics • Recovery Options • Product Remanufacturing – Example: Tire Industry • Conclusions • References
Closed-loop Supply Chain Closed-loop Supply Chain • A complete closed-loop supply chain system includes both forward and reverse logistics. • Forward logistics is the process of getting products from the point of origin to the point of consumption. • Reverse logistics can be defined as the reverse process of logistics.
Reverse logistics Reverse logistics • For Retailers – a way to get product that has been returned by a consumer back to the vendor. • For Manufacturers – the process of receiving defective products or reusable containers/parts/components back from the user. • The process of planning, implementing, and controlling the efficent, cost effective flow of raw material, in- process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing or creating value. Council of Logistics Management
Reverse logistics Reverse logistics • Many companies with limited resources outsource their reverse logistics operation needs to third-party providers. • FedEx, ASTRA, GENCO • They also collect customer information and track the status of returned items.
Reverse logistics Reverse logistics • Customers may decide to return products for this reasons: – Product did not work properly – Customer changed his mind about wanting product – Customer could not understand how to operate the product • Retail stores also have reasons for returning products: – Stock balancing returns – Marketing returns – End of life or season
Recovery options Recovery options • Recovery is the process of retrieving, reconditioning, and regaining products, components and materials. • The objective of recovery process is to recover as much of the economic value as reasonably possible, thereby reducing the final quantities of waste.
Recovery options Recovery options Supplier Manufacturer Distributor Consumer Supplier Manufacturer Distributor Consumer Collector of returned Collector of returned Recycle Recycle Remanufacture Remanufacture Repackage Repackage Refurbish Refurbish products products Outlet/Internet Outlet/Internet Donate Donate to charity to charity Landfill Landfill Forward Backward
Product Remanufacturing Product Remanufacturing • An industrial process in which worn-out products are restored to like-new condition. Through a series of industrial processes, a discarded product is completely disassembled. Usable parts are cleaned, refurbished and put into inventory. Then the new product is reassembled from the old.
Product Remanufacturing Product Remanufacturing • The economic feasibility of remanufacturing depends on three components: 1.The infrastructure of the reverse-logistics network 2.The market for remanufactured products or components 3.The design of the product
Product Remanufacturing Product Remanufacturing 1. Creating a reverse logistics system capable of generating and handling a sufficient return flow. 3. Recovery of high-value parts and materials is not very useful, if there is no market for recovered and/or remanufactured items. The manufacturer has to identify and reach a class of customers willing to purchase and operate machines using not-so-recent technology. 5. Design plays an important role by making products easier to disassemble. Reducing the time spent on disassembly improves the operation’s viability.
Example: Tire Industry Example: Tire Industry • When to stop retreading and replace the complete tire. • Retreading the tires used on trucks, buses, construction equipment and many other commercial vehicles is a widespread practice. • As the core deteriorates, the expected life of the retread also decreases, suggesting that it may not be economical to retread the tire indefinitely.
Example: Tire Industry Example: Tire Industry • Retreading is the only tire reclaim process that attempts to take full advantage of the value remaining in the used product. • 60 percent of the added value in the tires is in the casing, which hardly deteriorates during its first life. • For each remanufactured tire, one casing is reused.
Example: Tire Industry Example: Tire Industry • There are several stages in the retreading process where some material is lost: – The tire usage – Pre-inspection process: some of the incoming casings have been worn beyond repair. – Final inspection: eliminating the tires not succesfully retreaded, for instance, because of vulcanization problems.
Example: Tire Industry Example: Tire Industry • Using retreaded tires is a natural choice for profit improvement through cost reduction. • Used tires can have many destinations: agriculture, direct material use, civil engineering applications.
Product Remanufacturing Product Remanufacturing • The existence of an efficent reverse logistics system is necessary if remanufacturing is intended. • The development of the transportation and storage network that feeds the remanufacturing operations • The handling and packaging required to satisfy a variety of product models • The selection of disassembly facility locations
Product Remanufacturing Product Remanufacturing • In 1972, Caterpillar Inc. started remanufacturing diesel engines at the request of a large client. • A second remanufacturing facility was opened by Caterpillar in 1989 in Mexico, specialized on the remanufacturing of fuel nozzles. • Caterpillar offers its dealers a variety of innovative product take-back incentives, ensuring that the large majority of its parts are returned by the dealers to Caterpillar: – a buy-back guarantee for unused (unsold) parts inventory – a deposit scheme on remanufactured parts and engines as an incentive for dealers to return used parts to Caterpillar – a voluntary take-back of surplus used products at a price above the scrap value
The impact of remanufacturing on sustainability The impact of remanufacturing on sustainability • Resource productivity: Remanufacturing has a decisive impact on increasing resource productivity through the extension of the useful life of equipment, engines and parts, by making it cheaper to operate old machines • Toxicology: reduces the impact of toxic substances on the environment
The impact of remanufacturing on sustainability The impact of remanufacturing on sustainability • Waste prevention: waste from the remanufacturing facility is recycled through specialized companies • Social ecology: Labor employed in remanufacturing works with the culture of waste prevention and value conservation, qualities that are mostly missing from the modern manufacturing society, but necessary to build a sustainable society
Conclusions Conclusions • A complete supply chain requires planning, organization and control over all logistics activities (forward and reverse) • The remanufacture as a recovery option for returned products was presented • Remanufacturing creates important benefits: – Saving in labor, materials and energy costs – New market development opportunities – A positive, socially concerned image
References References • Canan Savaskan R., Van Wassenhove Luk N., REVERSE CHANNEL DESIGN: THE CASE OF COMPETING RETAILERS. Management Science Informs, Vol. 52, No. 1, 1-14, 2006. • Krumwiede Dennis W., Sheu Chwen, A MODEL FOR REVERSE LOGISTIC ENTRY BY THIRD-PARTY PROVIDERS, Omega the International Journal of Management Science, No. 30, 325-333, 2002 • Krikke Harold, Le Blanc Ieke, Van de Velde Steef, PRODUCT MODULARITY AND THE DESIGN OF CLOSED-LOOP SUPPLY CHAINS. California Management Review, Vol. 46, No. 2, 23-39, 2004. • Tibben-Lembke Ronald S., Rogers Dale S. RETAIL REVERSE LOGISTICS PRACTICE, Business Aspects of Closed-Loop Supply Chains, International Management Series: Vol. 2, 43-70, 2001 • Ferrer Geraldo, Clay Whybark D. THE ECONOMICS OF REMANUFACTURING, Business Aspects of Closed-Loop Supply Chains, International Management Series: Vol. 2, 317-353, 2001. • R. Guide V. Daniel Jr., MANAGIN PRODUCT RETURNS FOR REMANUFACTURING. Business Aspects of Closed-Loop Supply Chains, International Management Series: Vol. 2, 355-379, 2001 • http://www.product-life.org/cat.htm#ECONOMICS
Thank you !! Thank you !! Xóchitl Aquiáhuatl March 2007
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