Remanufacturing of Products Remanufacturing of Products and Reverse - - PowerPoint PPT Presentation

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

• rigin for the purpose of recapturing or creating value.

Council of Logistics Management

Reverse logistics Reverse logistics

• Many

companies with limited resources

• utsource 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 Supplier Manufacturer Manufacturer Distributor Distributor Consumer Consumer Collector of returned Collector of returned products products Donate Donate to charity to charity Recycle Recycle Remanufacture Remanufacture Repackage Repackage Refurbish Refurbish Outlet/Internet Outlet/Internet 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

• n three components:

1.The infrastructure

• f

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

• f 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,
• ne 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.

• 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. Example: Tire Industry Example: Tire Industry

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
• f 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,
• rganization 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