Remanufacturing: A Solution That Makes Both Economic and Environmental Sense
Remanufacturing is a term that has been getting used more and more in the industrial sector, and it has seeped into the business jargon so quickly that not everyone knows exactly what it is.
The simple definition: Converting the traditional process of manufacturing, in which parts are used and eventually disposed of, into one that reuses worn out or obsolete components to create a refurbished or “good-as-new” product. The advancement of technology over the years has allowed for remanufacturing to salvage and reuse old parts without compromising the quality of the remanufactured product.
How big is remanufacturing getting? Check out a few facts from a report released in September by Global Industry Analysts (GIA), a leading publisher of market research.
According to GIA:
- The global market for remanufactured auto parts is projected to reach $122.8 billion by 2018.
- Remanufactured products offer cost savings in the range of 45 to 60 percent compared to a newly manufactured product.
- Automotive remanufacturing provides better economies of scale than original manufacturing because it uses damaged or retired components and thereby reduces the volume of raw material and energy consumption.
- In the U.S. alone, rebuilt and remanufactured diesel engines are projected to grow into a $21 billion market segment.
- Remanufactured automotive components prove to be 35 to 45 percent cheaper than new parts. A remanufactured engine, for instance, costs approximately 40 percent less than its new counterpart with warranties comparable with brand new products.
The Economic Factor
For some businesses, “reman” makes too much sense not to do it.
“Through the reman process, we can add value to the material we’ve already made,” said Mark Stratton general manager of Cat Reman, the Caterpillar construction company’s remanufacturing unit. “We can start from a piece of core, much of the form and function that’s still in good shape for that piece of core is still usable, and add to that core what we need to make the product be strong again.”
Stratton and others said that the labor costs of remanufacturing do tend to escalate, but the cost savings of not having to create a whole new part easily offset that.
“Reman is much more cost-effective for us if we start with a valid core, because we retain a significant portion of the value-add, meaning the amount of cost that you had to put into the material to get it to a finished state,” Stratton said. “If you think of a new part made with virgin material, someone had to dig that iron ore out of the ground, it had to be refined. In reman, all of that is retained, and you don’t have to go through all that again.”
For U.S. consumers, the past few years of economic recession, combined with the larger-than-ever availability of remanufactured parts, has made reman a very attractive option when a major appliance or vehicle breaks down.
“Let’s say you have a car with 150,000 miles on it,” said Paul Haugile, the president of AERA Engine Builders Association (AERA). “A lot of people are saying, ‘do I go out and spend $30,000 on a new car, or do I just spend $3,000 on a new engine and get myself a remanufactured engine that will run for another 5-10 years.”
The surge in remanufacturing is also attributed to design modularization, which allows for remanufacturing through interchangeable parts, and to the availability of such new technologies as devices that enable thermal spray and laser cladding.
The Environmental Factor
Rajesh Krishnan, the director of manufacturing and hi-tech at Wipro Technologies, said he thinks environmental benefits are an equally-important factor in remanufacturing’s rise.
Remanufacturing reduces greenhouse gas emissions, contributes energy savings, and perhaps most importantly, recycle materials that would otherwise end up in landfills, he said.
“We need to conserve our material resources, and consume one-third of what we consume today,” said Dr. Nabil Nasr, the director of the Golisano Institute for Sustainability and the founder of the Center for Remanufacturing and Resource Recovery at the Rochester Institute of Technology. “Reman can bring down the level of consumption, but maybe as importantly, it facilitates that closed-loop system.
“When you have a hazardous substance, you’re reman’ing it and putting it back into the product, and you’re not releasing it into the air.”
Caterpillar’s Stratton agrees that environmental benefits are a major reason his company takes reman so seriously.
“It’s hands-down our best sustainability effort, because it makes sense for the customer, the business and the environment,” he said. “The ability to re-use materials, and put it back into the consumer markets, and not having to harvest raw materials, is a major help in cutting down time and cost, but also saving energy.”
What Does the Future Hold?
As for the future of remanufacturing, all signs point to its continued growth, as more and more industries see the economic and environmental benefits.
“When I talk to people in the Reman Council that I’m in, suddenly we’ve got electronics developers seeing how it can help them, and rebuilding IT systems using remanufactured parts,” Stratton said. “We’ve got major companies in the medical equipment business who are getting into reman; considering what you spend on an MRI machine, to dispose of that after a few years is a shame, so they’re doing a lot of reman now.”
Haugile pointed to furniture manufacturing and makers of industrial equipment for restaurants as other markets that are taking reman seriously and incorporating it into their business plans.
Another industry emersed in remanufacturing is the Gen Set industry, the makers of diesel-power generators used in oil fields or other major construction projects, said Haugile.
“They’re finding that it’s easier for them buy two or three engines, put one in the field, and then when one of them conks out, you’ve got another one ready to go,” he said.
“The companies that did remanufacturing in the past weren’t making it clear and advertising what they were doing; we’re now talking about it as an exciting opportunity,” said Dr. Nasr. “So you’ve got a multitude of factors at work: There’s more discussed about it because more businesses are doing it, and more business are doing it because it’s being discussed more.
Either way, it’s a win-win.”