By Rajesh Krishnan, Director, Manufacturing and Hi-Tech SBU, Wipro
The world has come to realise that the process of linear manufacturing, which takes products from factory floors to users and then, inevitably, to landfills is unsustainable.
In response, attempts are being made to extend the lifecycle of products or recycle them in an environmentally responsible manner. A practical question for manufacturers today is: how can maximum business value be extracted from restoration and recycling? The answer to that question lies in a cutting-edge variant of recycling called remanufacturing, popularly known as reman.
The importance of reman can be gauged from the fact that the Advanced Manufacturing Partnership (AMP) Group, a cross-sector, national effort to secure US leadership in the emerging technologies, has identified it as a new innovative process that can assist the US manufacturing sector create a competitive advantage.
Reman focuses on exploiting a circular economy; one in which, as the Ellen MacArthur Foundation says, today’s goods become tomorrow resources. The Ellen MacArthur Foundation works with global leaders to create an economy that is regenerative by design.
Reman processes aim to disassemble worn, discarded, end-of-life products and bring them back to a “like-new” state. Reman products are cheaper with comparable performance and warranty and do not compromise quality. The process presents an opportunity to develop profitable new models that are relevant to our times where overuse of resources is hurting businesses and the economy.
According to Nabil Nasr, the founder of the Centre for Remanufacturing and Resource Recovery at the Rochester Institute of Technology, the reman industry currently has over 500,000 employees and generates over $100 billion of annual sales.
Research by the Ellen MacArthur Foundation shows that immediate implementation opportunities point to a $600 billion per annum saving by 2025 through the adoption of a restorative approach.
In addition, as manufacturers reorganise their processes and reengineer their design principles to embrace reman within the framework of a circular economy, a new wave of innovation will further transform manufacturing.
Industries as diverse as construction equipment, transportation, mining, aerospace, computers, mobile devices, printers, medical devices and white goods, can leverage reman. They can unlock business value to go beyond primary manufacturing.
In the US, the Motor & Equipment Manufacturers Association (MEMA), a 109-year-old trade group, has been leading the way.
Auto manufacturers in the US made an early start with reman, starting to take apart old vehicles and recovering parts for reuse over the past 70 years. Other industries are watching and, more importantly, beginning to emulate the success of the automotive industry.
Today, an estimated 14,000 manufacturing firms, both small and large are already leveraging reman, drawing on the powerful opportunities presented by a more rational circular economy. Many of these manufacturers have begun identifying high value core components for reman as an important first step.
Manufacturers who are introducing reman into their business models are, naturally, also finding it easier to meet the requirements of new legislation adopted by Extended Producer Responsibilities (EPR) directives for environmental reasons.
OEMs are understandably wary of reman as they are focused on new product sales. Many believe that reman products, which are cheaper and perhaps even enhanced, will cannibalise their existing business.
However, current successes in manufacturing show that reman can improve the efficiency of material use and lower energy utilisation while secure businesses from spiraling resource costs and supply disruptions.
Other challenges include identifying, procuring and shipping worn and discarded products from a variety of users and partners across locations to plants where they are needed; managing reverse logistics; accurately forecasting demand to match the flow of returns; and ensuring products are re-designed to enable reman.
The foundation for reman
Manufacturers must build a strategic plan that integrates reman with existing manufacturing processes. These strategies must address the challenges of marketing, logistics, regulatory issues and product re-engineering to suit the needs of reman.
However, the first crucial step is to analyse the market and select products with promising reman ROI. Many manufacturers begin by identifying core components, which may include IP of high value.
The next step is to create a financial model to capture the cost benefits, setting up reman processes (inspection, disassembly, cleaning, reassembly, testing) and a reverse logistics network.
It is becoming important to consider the cost of not remanufacturing. If a business does not reman its own product, someone else, sooner or later, will.
Third party reman businesses can result in brand erosion and lowered customer loyalty. In addition, as new legislation and regulations are adopted, and as consumers discard the unsustainable use-and-throw economy of the last century, the business benefits of reman will far outweigh the risks.
Reman is not a `should we?’ question for manufacturers. It is an inevitable business model that manufacturers must urgently explore.