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BUSINESS BACKGROUND
Remanufacturing A step towards profitable and sustainable growth
In the current turbulent economic conditions improving productivity is key for survival. Going by the definitions on productivity it is the ratio of output and input. In other words it is doing more with less. Labor and Material have been the primary inputs to manufacturing process. Considering the global business in last two decades, labor productivity has been the main focus for increasing productivity using technology and various management techniques. Though recently various material productivity initiatives are also being taken to reduce the material input or to be able to utilize the material over and over again
Remanufacturing, being the ultimate form of recycling is becoming a way of life in US and European countries due to various legislation and corporate green initiatives. Remanufacturing not only conserves the raw material content but also much of the value added during the process required to manufacture new products.
Remanufacturing can be defined as the process of returning a products at the end of its life to same as "new" condition in a manufacturing environment. It operates as a one-for-one exchange, in which end-of-life products are returned for a remanufactured product reducing waste and minimizing the need for raw materials to produce a brand-new item.
The diagram below describes the difference between Recycle, Remanufacturing and Re-use (Repair).
Repair makes a broken product operational again. An analysis of the root cause of the problem is generally not performed in the repair process which means the product may not perform like a new product. Typically, a warranty on a repair will only apply to the specific repair and not the whole item.
Recycling returns a product to raw material form, which can be used as raw material for a future manufacturing process and often leads to change in the physical form. For example can be the chassis of a car is melted and then new steel sheets are produced.
In remanufacturing, products that are known to be worn, defective, or discarded are brought to a manufacturing environment, where they are disassembled. All components are cleaned and checked. Those that can be reused are brought up to specification. Those that cannot be reused are replaced. When the product is reassembled and tested, it is ready for a second life, performing as new along with warranty.
REMANUFACTURING AND PRODUCT LIFE CYCLE
The manufacturing process starts when the raw materials are transformed into parts which are assembled to form new products. The products are used by the consumer and are supported by preventive and breakdown servicing and repairs over a period of time. As the product nears the end of life (for example end of live period of a car can be 10 years or 1, 00,000 miles its engine, transmission, braking systems could be defined as cores ) the reusable systems and components are potential cores which are collected from the customers via dealers or third party core collection companies.
The Remanufacturing process starts from here where the cores are collected from the customers and brought to the remanufacturing facility where they are disassembled into parts and components. These parts and components are inspected, cleaned and tested for quality. The parts and components which pass the test are sent to get assembled as new products.
The parts and components which cannot be reused are sent for recycling. Various studies in field of remanufacturing shows that about 60% of the components of a end of life products can be re-used to form a remanufactured part.
Citing the earlier example 60% components of the engine of the car (which has been used for 10 years) can be used for a new remanufactured engine. The cost of such remanufactured engine or engine components is typically 40% to 60% less than a new engine. The remanufactured engines are tested for quality and are as good as new engines and also come along with a warranty.
STEPS INVOLVED IN REMANUFACTURING PROCESS
The following steps involved in the remanufacturing process:
1. Receiving of cores and initial inspection - Before cores are entered into the remanufacturing process, they must pass inspection to ensure the qualifications for the remanufacturing program have been met and that proper core credits are applied.
2. Complete disassembly - All components that flow through the OEM facilities lean design have a standard bill of materials for a given part as well as any technical documents required including service letter information to ensure all components remanufactured at OEM contain the latest updates for parts and/or salvage operations.
3. Part washing and inspection - During this phase of the process, all parts are subjected to inspection to determine if the part can be reused, salvaged or replaced. The necessary measuring devices to ensure tolerances are within the manufacturers reusability guidelines is essential in determining whether a part can be reused, salvaged or replaced with new. As well, OEM extensive quality assurance program draws on non-destructive testing using techniques such as liquid dye penetrant, wet particle testing, air and water pressure testing and magnetic particle inspection.
4. Assembly & Testing - All components are assembled by product specific technicians who are organized into specialized employee teams. This allows the technicians to focus on specific processes. OEM has developed a pool of talented experts who consistently product top quality components.
5. Painting and Shipping - Once a component is remanufactured and tested (where applicable), it is sent to paint & package for completion and eventual shipment
BUSINESS DRIVERS FOR REMANUFACTURING
The drivers for remanufacturing are following:
1. Sustainability - Remanufacturing a product saves about 85% of the energy that would otherwise have been used in producing that part. It also helps the manufacturers to increase material productivity by using it more number of times. It also helps in reducing global warming
2. Environmental Compliance Remanufacturing also helps manufacturers to adhere to various environment compliance such as RoHS, WEEE, and ELV Directives etc. and reducing pollution through lower landfills. As per the European ELV directives, for all end of life vehicles the re-use and recycling would be increased to minimum of 95% be an average weight per vehicle and year.
3. Profitability - Remanufacturing would provide the manufacturers with opportunity to produce quality products with lower prices up to 40% by leveraging the reusable components of end of life products (60 % components can used for remanufactured products). This increases the profitability for manufacturers practicing remanufacturing.
4. Improved Brand image - Manufacturers are able to provide high quality replacement and spare parts are available at a price 40 to 60 % less than a new part along with valid warranty is leading to high customer satisfaction and assurance.
5. Competitive edge Through remanufactured products manufacturers are able to provide spares parts at a lower price which are at par with new parts in terms of quality and also come along with valid warranty
CORE COLLECTION: POTENTIAL PROBLEM AREA IN REMANUFACTURING PROCESS
Through our research and study we identified core collection in remanufacturing process as a potential solution area. In the current set up it is the customer who initiates the core collection process. When the customer purchases any remanufactured product the dealers/OEMs or any authorized parties seek information from the customers about the core. The core thus identified is collected from the dealers/OEMs either by themselves or through third party vendors.
Some companies practice a core deposit fee system where the customers can enjoy the discount on remanufactured parts only when they return the cores or on the other hand they can provide incentives to their national managers to collect core by linking the success of core collection to annual bonuses. Also when the 3rd party vendors are involved, the complexity of core collection is increased.
The core collection process currently, is not proactive in nature. The OEMs and dealers have information such as sales history, warranty information and service history about the equipment or machines but they are not able to predict or forecast potential sources for collecting cores.
OUR SOLUTION APPROACH FOR PROACTIVE CORE COLLECTION PROCESS
Most of the discrete manufacturing organizations have various Enterprise IT systems such as CRM, Warranty management system, Service management systems etc. to support after sales and product support.
Our Solution aims to leverage existing information residing on such disparate systems by pulling relevant data such as Sales history, warranty data, service data via ETL (Extract, Transform and Load) mechanism, put them into a common database and then run rules based engine on the information to identify potential cores. Our Remanufacturing Core collection solution is a web based system where the users (Dealers and OEMs) can search potential cores by providing query to the system based on various parameters.
The query is powered by rules engine which selects the relevant equipments and machines into consideration. The user can filter the reports based on his needs and identify the customers with whom the potential cores are lying. Such information is then provided to the Field service teams or personnel who proactively engage with customers and collect cores from them.
BENEFITS OF REMANUFACTURING CORE COLLECTION SOLUTION
1. Providing the OEMs and dealers with proactive mechanism for identification and collection of cores
2. Helps in identifying potential customers to sell remanufactured parts
3. Improved brand image due to low equipment down time for customer
4. Better forecasting of cores using analytics and business rules capabilities
5. Providing the OEMs a mechanism to track and ensure proper disposal process
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