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Original Articles

Addressing decision making for remanufacturing operations and design-for-remanufacture

Pages 91-102 | Received 29 Nov 2008, Accepted 05 Apr 2009, Published online: 28 Jul 2009

Abstract

Remanufacturing is a process of returning a used product to at least original equipment manufacturer original performance specification from the customers' perspective and giving the resultant product a warranty that is at least equal to that of a newly manufactured equivalent. This paper explains the need to combine ecological concerns and economic growth and the significance of remanufacturing in this. Using the experience of an international aero-engine manufacturer it discusses the impact of the need for sustainable manufacturing on organisational business models. It explains some key decision-making issues that hinder remanufacturing and suggests effective solutions. It presents a peer-validated, high-level design guideline to assist decision-making in design in order to support remanufacturing. The design guide was developed in the UK through the analysis of selections of products during case studies and workshops involving remanufacturing and conventional manufacturing practitioners as well as academics. It is one of the initial stages in the development of a robust design for remanufacture guideline.

1. Introduction: the importance of remanufacturing in sustainable development

Remanufacturing is a process of returning a used product to at least original equipment manufacturer (OEM) performance specification from the customers' perspective and giving the resultant product a warranty that is at least equal to that of a newly manufactured equivalent (Ijomah Citation2002). Because remanufacturing recovers a substantial fraction of the materials and value added to a product in its first manufacture, and because it can do this at low additional cost, the resulting products can be offered to the user at substantial savings. Remanufacturing is particularly applicable to complex electro-mechanical and mechanical products with cores that, when recovered, will have value added to them that is high relative both to their market value and to their original cost (Lund Citation1984). Cores are used products and components. Remanufacturing falls within ‘reduction’ and ‘reuse’, the top two preferred waste management options identified in the EU's Fifth Environmental Action Programme. Research by Lund (Citation1984) indicates that 85% of the weight of a remanufactured product may come from used components, that such products have comparable quality to equivalent new products, but require 50–80% less energy to produce and that remanufacturing can provide 20–80% production cost savings in comparison to conventional manufacturing. Remanufacturing can limit environmental impacts. For example, it can reduce the production of greenhouse gases such as CO2 and methane that The Kyoto Protocol (Citation2005) has highlighted for reduction. This is because for most goods, raw materials production and the subsequent shaping and machining processes produce the highest CO2 emissions, but remanufacturing bypasses these processes. Also, European producers must manage their waste inside the EU because CitationThe Basel Convention prohibits the export of waste outside the EU. Thus, the major remanufacturing drivers are environmental concerns, legislation – particularly landfill tax (CitationHM Treasury), and end-of-life directives and economics. Moreover, remanufacturing can help address social ills such as exclusion by reducing the major causes of poverty and lack of skills. The reason here is that remanufacturing benefits include employment creation especially for low skilled labour and provision of high quality goods at prices that those on low income can afford. The former is due to the fact that many of the tasks of remanufacturing such as sorting and cleaning are easy to learn. Research by Lund (Citation1984) indicates that in the automotive sector up to 60% of a typical remanufacturing company may be skilled or unskilled. The latter results from the ability of remanufacturing to drive down production costs, thus, enabling producers to reduce the selling price of their products. Because remanufacturing can have positive impacts on all three pillars of sustainability-economic, environmental and societal, it is being regarded as a key strategy for sustainable manufacturing and in turn for addressing the needs of sustainable development. Furthermore, remanufacturing is playing a crucial role in the paradigm shift from product sale to service industries that is occurring. The key remanufacturing problems relate to the paucity of knowledge in the area and its relative novelty in research terms and include:

i.

The ambiguity in its definition leading to its confusion with repair and reconditioning (Melissen and Ron Citation1999).

ii.

The paucity of readily available remanufacturing tools and techniques. Remanufacturers perceive the scarcity of effective remanufacturing tools and techniques as a key threat to their industry (Guide Citation1999).

iii.

The poor remanufacturability of many current products because design has typically focussed on functionality and cost at the expense of environmental issues (Ferrer Citation2001).

This paper explains the need to combine ecological concerns and economic growth and the significance of secondary market processes, in particular, remanufacturing in sustainable manufacturing. It uses the experience of an organisation in the aerospace industry to illustrate the impact of the need for sustainable manufacturing on choice of organisational business model and the importance of remanufacturing in this. It describes some major decision making issues in the operation of remanufacturing and in the design of products for remanufacture. It describes some key research already undertaken in design for remanufacture (DFRem), and it presents a top level design guideline to assist decision making in design in order to promote remanufacturing. The design guide was developed via a case study and workshop analysis of selections of products as one of the initial stages in the design of a robust DFRem methodology. The workshop involved academics as well as design and manufacturing personnel from both conventional manufacturing, and remanufacturing industry sectors to ensure that all perspectives were considered. It was tested and validated by peer review and has been found useful in instructing Masters level (MSc) students on the DFRem approach.

2. Secondary market processes and the need to combine ecological concerns and economic growth

As early as 1935, geologists observed that since the beginning of the twentieth century, the ‘world has exploited more of its mineral resources than in all preceding history’ (Vandermerwe and Oliff Citation1991). It is estimated that 4 billion tons of primary metals were used for production between 1900 and 1950, but that 5.8 billion tons of metals were used between 1980 and 1990 alone. Because the world's waste has grown exponentially each year from the 1950s onwards, disposal methods such as landfills are becoming increasingly expensive as they are being exhausted. Research by Biffa (Citation2002) indicates that the UK has only 6.5 years of space remaining in existing landfills; and that by DEFRA (Citation2003) determined that house price decreases near landfill sites makes such sites undesirable in the urban areas where they are most needed. This is a considerable problem for highly populated countries such as the UK because of the demand for new houses and government initiatives to increase housing stocks. Moreover, the rate of waste generation is accelerating much faster in industrialising countries than in fully industrialised nations, fuelling concern because a significant proportion of the world is presently ‘under-developed’ and aiming for total industrialisation.

The relationship between pace of industrialisation and increase in creation of waste was demonstrated by comparing the rate of increase in waste generation with the pace of industrialisation in some European countries between 1980 and 1985. The survey showed that Denmark, one of the most industrialised European countries, increased its waste generation rate by 6%; Portugal, slightly less industrialised by 13% while Spain and Ireland had figures of 32 and 72%, respectively (Vandermerwe and Oliff Citation1991). Ireland was the least industrialised of the four countries and had the fastest pace of industrialisation because of its efforts to reach the technical advances of the more developed nations. The adverse environmental impacts of conventional manufacturing have prompted the rise of organisations such as the Club of Rome and the Business Council for Sustainable Development, which aim to link economic and ecological concerns. In the 1970s the Club of Rome warned that the exponential increase in population, exploitation of resources and destruction of the environment would curtail economic growth (Yamamoto Citation1999). A decade later, the Business Council for Sustainable Development declared that ‘economic growth and environmental protection are inextricably linked’ (Hormozi Citation1996). The sustainable development ethic argues that the earth's resources are finite and that waste should be discouraged, so that the present generation can satisfy its needs without jeopardising the ability of future generations to meet their own requirements. The two general aspects to sustainability are living within the critical limits of the ecosystem and balancing social, economic and ecological goals (Yamamoto Citation1999). Industries addressing sustainable development include agriculture, architecture and manufacturing (Hormozi Citation1996). Because of the significant adverse impact of conventional manufacturing on the planet, for example, manufacturing generates more than 60% of annual non-hazardous waste arising (Nasr and Varel Citation1996), sustainable development would be impossible without sustainable manufacturing. Within manufacturing, the needs of sustainable development are being addressed by promoting the use of secondary market processes.

In this instance, secondary market processes are defined as the various production processes that use components from used products and include repair and reconditioning as well as remanufacturing. The importance of such processes is that they help limit landfill by prolonging the life of products and components, so they take longer before needing disposal. Also, by integrating used components into the manufacturing cycle they reduce the amount of virgin components and therefore of virgin materials and energy used in production. Such processes should be relatively localised to avoid the great impact on carbon footprint due to transportation, if parts of the process were undertaken in different locations or worse, used products were exported for processing to countries with less expensive labour rates and then exported back to the country of origin for sale. Additionally, in some instances, such as domestic appliances, remanufacturing would not be profitable. This is because the cost of processing items such as fridges and cookers for recycling continues to decrease and according to the Association of Manufacturers of Domestic Appliance (AMDEA) would be less than £5 by 2009, whilst the value obtained at the treatment plant continues to increase. This according to AMDEA was because the value of steel doubled between 2002 and 2006. Interviews of major domestic appliance manufactures such as Lec Refrigeration and Merloni indicate that remanufacturing of domestic appliances is cost prohibitive – at least within the EU. The main reason here is the cost of manual labour involved in remanufacturing as well as additional costs such as that for testing to safety standards. Such tests are expensive to run and their costs in new manufacture can be limited by running in batches, however, with remanufacturing the test must be undertaken individually. However, although secondary market processing, particularly remanufacturing of domestic appliances, may not be justifiable on environmental or profitability grounds, it may be justifiable in terms of its societal benefits, for example, addressing poverty, unemployment and lack of skills. The great decision to be made in considering secondary market processing of certain product types such as domestic appliances is whether their environmental and profitability disadvantages can be offset by their immense societal benefits plus the environmental benefits of reworking products from other sectors. Additionally, it could be that the positive societal impacts outweigh the environmental disadvantages. The societal benefits of secondary market processes include, employment creation, creation of a living for local community and for people selling second hand goods, provision of goods for poor people who would otherwise not be able to afford them and provision of training for low skilled and unskilled labour. The societal benefits of secondary market processes can be illustrated through the work of EMMAUS, a catholic charity for the homeless. The organisation takes donated products requiring rework. It also engages homeless people to rework the products under supervision. The key benefits of this arrangement include:

The homeless benefit by having a roof over their heads, paid employment, confidence and new skills to help them start again.

EMMAUS benefits by using the profit to support its various charitable causes.

Employment is created for the technician supervising the formerly homeless.

Poor people benefit because they can afford to purchase the goods.

Employment is created.

Table defines and differentiates repair, reconditioning and remanufacturing. Figure shows the three processes on a hierarchy based on the work content that they typically require, the performance that should be obtained from them and the value of the warranty that they normally carry.

Table 1 Definitions of secondary market processes (Ijomah Citation2002).

Figure 1 A hierarchy of product recovery processes (Ijomah Citation2002).

Figure 1 A hierarchy of product recovery processes (Ijomah Citation2002).

Remanufacturing is the highest of these processes because it is the only one capable of bringing a used product to a standard equal to that of the new alternative in terms of quality, performance and warranty. The key advantage of remanufacturing over reconditioning and repair is that it permits an organisation to combine the key order winners of low price and product quality, especially as remanufacturing also includes increasing the performance and quality of the used product beyond that of its original standards when new. This ability of remanufacturing to deliver high quality is especially important to ‘A’ class manufacturers and ‘customers’ who price the reputation of their service and brand name above low product cost. The following section describes how a major international OEM is addressing the key pressures of modern industry by using remanufacturing to support and assist its move from the product sale to the service business model.

3. Impact of the need for sustainable manufacturing on organisational business models

Traditionally, safety, performance and cost were the key consideration in manufacturing decisions. However, changing global and business circumstances are forcing organisations to reanalyse their strategic decisions so additional factors such as raw material costs and environmental legislation are also considered in design and manufacture decisions. This is leading to a paradigm shift from a product sale to service business model. This can be exemplified from the experience of an organisation specialising in the design and manufacture of aero engines. The company's business model has changed over recent years because of advances in technology, changes in customer expectation and increased competition. These changes are shown in Table .

Table 2 Past and present aerospace industry business models.

Table indicates that in the past, the bulk of the company's profit was obtained through sales of new jet engines and large quantities of spares. This was largely because the machines had lower performance as a result of the inadequacies of the available technology, so a large stock of spares was needed to support them because they were more prone to breakdowns. At the same time competition was also much lower allowing the company to obtain larger profit margins through the sale of new engines and spares. Under such circumstances overhaul was primarily a requirement for maintenance to ensure correct functioning of the engine during its expected life span. The technological advances of the 1970s and 1980s improved engine performance and led to increased customer expectations. Engine failure rates decreased leading to a decrease in overhaul frequency as well as the quantity of spares sold. At the same time competition, increased. As some of the new competitors were from manufacturers based in countries with lower labour costs, the company profit margins from sale of new products were reduced in order to attract customers. Environmental concerns about the effect of modern manufacturing also began to mount. At this point, the idea of simultaneously promoting a green image and augmenting profits by using the overhaul process to extend engine life and reclaim the materials and components from retired engines began to become attractive.

These changes in the business environment led to the company's strategic decision to begin to adopt the service business model. Although the company both sells and leases its products, it now makes the bulk of its profit by selling the customer the service of its engine at a fixed rate per hour over an agreed number of years. Thus the income is fixed throughout the lifetime of the engine, but the company profit varies depending on the resource required to maintain the engine. Here, the customer benefits from security and certainty, and the company bears any risk due to engine breakdown. This is in contrast to the earlier model where income is upfront at point of product or spares sale and risk is borne by the customer. The success of this new business model depends on the company's ability to merge its concerns with those of its customers'. For example, in the case of reliability, customers require high reliability engines in order to avoid disruptions to their work whilst the company requires the same to remain competitive by reducing maintenance costs, retaining customers' goodwill and improving the standing of the brand name so that new customers can be obtained. In the case of product price, customers want low-priced products to reduce their capital expenditure whilst the company needs the same to increase the attractiveness of its products and services and thereby its profitability. The company's success in using the business model and the relative ease with which it is navigating this paradigm shift is due to the company's characteristics and that of its product. The company is forward-looking and is internationally recognised as a leader in its market. This provided the organisation with the capability to compete for customers on the basis of the quality of its brand name rather than on cost. With the service model the organisation does not lose ownership of its product and can afford to invest much more on design and manufacture to ensure its product quality, rather than competing on price. Additionally, the characteristics of engines such as material, design life, pace of technology, impact of fashion and initial purchase price all provide incentives to remanufacture. For example, the engines are long life products as they are built for a 25–30 year life span, although there are instances where this expected engine life span has been greatly exceeded. Aero engines are mature products, giving ample supply of used products to remanufacture and to cannibalise for remanufacturing. They are not fashion-affected products, and are not placed in a prominent position thus age and model are far less important than functionality. Also, the remanufactured engines would be sold to those with technical understanding. Research shows that remanufacturing thrives under such circumstances. Remanufacturing reduces the costs to the organisation of adopting the service business model, for example maintenance costs are reduced through the use of remanufactured components and remanufactured whole engines can be used in place of more expensive all new engines. In fact, the company's engines are being designed with increasing potential for remanufacture. As remanufacture can be labour intensive and the company is also trying to reduce cost by increasing effectiveness and efficiency. For example, automation has been introduced although this has been possible for a relatively small part of the process. Customers' constraints are a key cause of complexity in decision making in their service operation. For example, some customers specify that only their own components may be put into their engines whilst other customers insist that components from engines that work in harsh and hot desert environment may not be used to rebuild their engines. This second constraint is because components from such engines accumulate more sand wear as a result of the harsher conditions. These customer constraints increase work scheduling complexity.

The above strategic decision to remanufacture in order to maintain business sustainability in the aero engine market is in contrast to the situation in the automotive sector. Currently, OEMs in the automotive sector are operating under huge debts because of increased competition that is mainly product price based. At the same time there has been an increase in the number of producers from newly industrialised countries. As a result there are a large number of producers seeking a share in a finite market. The response of Western producers has largely been to produce more and cheaper vehicles, and this is leading to a glut of new cheaper cars in the market. This strategy is very much like turning the taps on higher when the house is being flooded by tap water. A much better strategy would be to produce less new cars and use remanufacturing to satisfy customer needs. This would however require a change in manufacturing decisions in this sector. For example, the sector designs for recycling rather than remanufacture, in an effort to reduce product cost and therefore their costs via the use of less durable material. Designing for remanufacture would require changes in the design and manufacturing methods. This would initially raise product price and thus would initially be costly but would lead to long-term profitability especially given the increase in waste disposal costs and the end-of-life vehicle legislation. To optimise the application of remanufacturing in sustainable manufacturing its efficiency and effectiveness must be maximised and this will require enhancements in expertise in the process of remanufacturing as well as in the design of products for remanufacture. The following sections explain some key remanufacturing decision-making issues.

4. The key remanufacturing decision making issues

Remanufacturing is complicated by a range of decision making issues that affect the effectiveness of operational practices as well as the potential of products for remanufacture. In the case of operational decision making issues the major ones relate to uncertainty, predicting the quantity and quality of incoming cores, core assessment criteria, pricing and quality control. The causes of these problems and their adverse effects on the effectiveness of remanufacturing practice are discussed in Ijomah et al. (Citation2005). These factors make the scheduling activity particularly complex in remanufacturing. However, the tools of conventional manufacturing are not ideally suited to easing these difficulties because remanufacturing planning, controlling, and managing operations are significantly different from traditional manufacturing production control (Guide Citation1999). Table describes some principal operations control issues highlighted by the author's case-study work in industry along with some effective coping strategies. The case study involved focus group discussions in workshops involving product disassembly and assessment, and was conducted in a wide range of remanufacturing and manufacturing organisations including aerospace, automotive and brown goods industries. Because of time constraints the study was restricted to mechanical and electromechanical products. The findings were later validated by new companies using telephone interviews and practical assessment.

Table 3 Some principal operations control issues highlighted by the case-study work.

In the case of product design, there is an urgent need to develop strategies and tools, particularly design tools, databases or knowledge-based systems, to assist designers to take effective decisions that would facilitate the integration of environmental considerations in product design (Nissen Citation1995). The significance of DFRem is that design is the stage that has the strongest influence on environmental impacts (Graedel and Allenby Citation1995) and also sets the product's capabilities. DFRem requires products to be designed for ease of disassembly, with no damage to the product affecting functional performance for parts hidden from the customer, and no damage affecting performance (or provides good mechanisms to rectify damage). Various DFRem guidelines have been proposed, for example (Amezquita et al. Citation1995, Shu and Flowers Citation1995, Citation1999, Bras and Hammond Citation1996, Sherwood and Shu Citation2000, Williams et al. Citation2000, Sundin Citation2001, Mangun and Thurston Citation2002, Gehin et al. Citation2005, Sundin and Bras Citation2005). Examples of other relevant work include (Ishii and Lee Citation1996, Ishii Citation1998, Rose and Ishii Citation1999). The most useful of such work are those that are not general guidelines and that also simultaneously consider product features and remanufacturing process activities. This is probably because the most effective way to boost remanufacturing is an integrated product and process design approach (Amezquita et al. Citation1996). The research indicates that there is opportunity to build on previous work by introducing new parameters to enable the development of enhanced DFRem guidelines, for example based on life-cycle thinking. In fact, the World Summit for sustainable development identified product life cycle based tools, policies and assessment tools as key sustainable production requirements (United Nations General Assembly Citation2002). There appears to be a lack of DFRem guidelines based on life cycle thinking, that simultaneously consider products' dissimilar life-cycle profiles and the impact of proposed remanufacturability enhancement product features on initial manufacture. Table shows part of a high level remanufacturing design guide developed by the author as a precursor to the robust DFRem guide proposed in Ijomah et al. (Citation2007). The design guide was developed in a similar manner to the solutions presented in Table . It was also validated by peer review and has been found useful in teaching MSc students about the requirements of DFRem.

Table 4 High level DFRem guidelines.

5. Summary

This paper has described the reasons why economic progress must be tied with environmental concerns. It has argued that sustainable development would be impossible without a shift in manufacturing ethics, because of the significant adverse environmental impacts of conventional manufacturing. It has presented the case for remanufacturing as a key strategy for sustainable production and waste management in order to forward the aims of sustainable development. It used the experiences of an international aero-engine manufacturer to illustrate the impact of the need for sustainable manufacturing on organisational business models and the support that remanufacturing can offer in that regard. It discussed some of the key decision-making issues that hinder remanufacturing operations. It discussed the cause of ineffectiveness in decision-making during design to ensure product remanufacturability. Research work in the area of DFRem was briefly described and a high-level DFRem guideline was presented. The guideline was developed through the analysis of selections of products during case studies and workshops involving remanufacturing and conventional manufacturing practitioners as well as academics. It was validated by peer review and has been found useful in teaching the needs of the DFRem approach. Future work will involve using the guideline as a foundation for the development of a robust DFRem methodology.

Acknowledgements

The author wishes to thank the industrial collaborators: Rolls-Royce Plc, Caterpillar Remanufactured Products, Ivor Searle Ltd, Price Brothers Auto Engineering and BAE systems for their support.

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