Remanufacturing Demystified: Redesigning Business for a More Profitable Future
Remanufacturing is becoming increasingly popular among World Class Companies (WCCs) as they adapt to an extended business model to realise the business benefits of its adoption.
At a Motors and Equipment Remanufacturers Association (MERA) conference in October 2013, Cummins, a global leader in engines and related technologies,presented a series of facts related to its global business of power generation.
With 46,000 employees spread over 190 countries and sales of $17.3 billion, Cummins disclosed that its remanufacturing initiative had 3,000 employees in nine global facilities, contributing $1 billion to sales. The numbers demonstrate the tremendous business investment Cummins is placing on remanufacturing.
Cummins is not alone. Automotive giant Renault has also expressed its growing faith in remanufacturing, as has construction vehicle and machinery supplier, Caterpillar to name a few.
Besides environmental benefits, WCCs are increasingly driven by the business benefits of its adoption. Adopting remanufacturing has shown to:
· Maximise value of materials in end-of-life products and improve profitability
· Reduce energy bills related to components that have already been manufactured and need only reconditioning to specifications
· Reduce the use of expensive virgin materials, thereby offering more competitive pricing to customers
· Reduce business risk by minimising exposure to volatile costs of raw materials
· Create new business models that are aligned with emerging consumer trends
· Reduce warranty costs and improve aftermarket product offerings
Remanufacturing in many ways is similar to classic manufacturing. But some of the “building blocks” are unique to remanufacturing.
Implementing a “reman” strategy
The foundational element for ‘reman’ is building a strategic plan and integrating it with the larger enterprise strategy for new products.
One of the first exercises is to conduct a market analysis to select suitable products for remanufacturing and identify the core components of high value.
Once completed, a broad financial model that captures the cost benefit analysis including the reman processing cost of the components needs to be identified for remanufacturing. This should include reverse logistics costs and the core exchange/broker costs, as well as confronting operational challenges.
Getting over the first hurdle
Conventional OEMs are ill-equipped to manage the many business and operational challenges of reman, simply because their traditional strategy has focussed on procurement, supply chain, manufacturing and sales. End-of-life disposal is usually left to third parties.
Also, for a successful adoption, OEMs must get over the fear of ‘cannibalising’ their own products, and develop strong competencies in the reverse supply chain of core components.
On the operational side, companies face the initial hurdle of accurately estimating the availability and quantities of cores that can be retrieved and the lack of product designed for remanufacturing.
Core availability issues are best addressed by building the incentive programmes through channel partners; while tackling the lack of product designed for remanufacturing through the use of traditional PUGH matrix, a criteria based decision making tool.
A reverse logistics programme is essential to any reman strategy, but unfortunately this is an area where many OEMs have difficulty.
For remanufacturing, two supply chain streams are required; one for new parts and other for used. Control of a reverse logistics network can be done in three different ways: directly by the OEM; through handpicked dealers/distributors; or by third party logistics, if the forward and reverse logistics can be delinked.
Even with a successful reverse logistics network in place, remanufacturers struggle to accurately forecast demand and match the data with the flow of actual returns.
Furthermore, the return yields are unpredictable due to the variability in the quality of the cores. Finally, it is imperative for manufacturers to match warranties similar to new products for market acceptance.
Many companies overcome some of these challenges through analytics for asset recovery programmes to gain early insight in order to match supply and demand.
Also, a successful reman strategy relies upon IT and analytics support in order to build information and operation systems essential to the creation of a successful and effective ecosystem.
The opportunity now and in the future
Remanufacturing is becoming more and more important to today’s manufacturers as it allows them to take advantage of a large pool of untapped revenue and growth.
For many traditional OEMs there are a number of challenges that need to be addressed before a reman programme can be undertaken.
By addressing the two main challenges of implementing a reverse logistics network, as well as designing the products for multiple product life cycles, OEMs will have a leap start in the reman journey.
Remanufacturing has never been more important as demand for raw materials increase with decreasing availability.
Companies that successfully implement a remanufacturing strategy will be the ones who sustain growth and success in the circular economy era to come.
Lion Electric to Construct US EV Manufacturing Facility
Who is Lion Electric?
Founded in 2008, is an innovative manufacturer of all-electric, zero-emissions, medium and heavy-duty urban vehicles. Lion Electric designs, manufactures, and assembles all components for its vehicles that have unique features specifically adapted to the users and their needs. “We believe that transitioning to all-electric vehicles will lead to major improvements in our society, environment and overall quality of life,” believes Lion Electric.
Lion Electric’s new Illinois Manufacturing Facility
Just two months after announcing plans to construct a battery manufacturing plant and innovation centre in Quebec, Lion Electric is expanding its locations further, selecting Joliet, Illinois for its new manufacturing facility in the US.
The new facility is said to “represent the largest dedicated production site for zero-emission medium and heavy-duty vehicles in the US,” as well as being the company’s biggest footprint in the market. The new facility will give Lion Electric the capacity to meet increasing demand for ‘Made in America’ zero-emission vehicles and bring production closer to customers.
It is expected that the first vehicles off the production line will be in the second half of 2022.
“Lion’s historic investment to bring its largest production facility to Illinois represents not only a win for our communities, but a strong step forward in our work to expand clean energy alternatives and the jobs they bring to our communities,” said Gov. J.B. Pritzker.
“The new Joliet facility will put Illinois at the forefront of a national movement to transition to zero-emission vehicle use, advancing our own goals of putting one million of these cars on the road by 2030. In Illinois, we know that a clean energy economy is about more than just vehicles – it’s about healthier communities and jobs for those who live there. We are excited to welcome Lion to the Land of Lincoln and look forward to their future success here.”
Lion Electric’s Agreement with the Government of Illinois
Over the next three years, Lion Electric will invest a minimum of US$70mn into Illinois. The new facility - totalling 900,000 square feet - is expected to create a minimum of 745 clean energy direct jobs in the next three years, and have an annual production capacity of up to 20,000 all electric buses and trucks.
Scaling electric bus production and decarbonising freight and transportation
As the US moves to electrifying its school buses, the additional production capacity at the facility will help Lion Electric to scale its electric bus production, as well as produce an increased volume of heavy-duty zero-emission trucks to help governments and operators in the US further the decarbonisation of freight and transportation fleets.
“Lion is the leader in electric school buses and has always been dedicated to the U.S. market, and our commitment to be close to our customers is one of the core values we have as a company. This significant expansion into the U.S. market will not only allow us to drastically increase our overall manufacturing capacity of electric trucks and buses but to also better serve our customers, while adding critical clean manufacturing jobs that will form the backbone of the green economy,” said Marc Bedard, CEO and Founder of Lion.
“I also want to acknowledge the crucial role that P33 and Intersect Illinois, civic groups committed to developing developing a long-term roadmap for the local tech industry, played in connecting Lion with the Chicago area’s business and civic community to help further commercial traction, as well as engagement with key workforce and supplier partners.”