Remanufacturing — A Fine Old-Fashioned Idea.
It seems we’re living in a technological revolution in areas like artificial intelligence (AI), big data, fifth-generation telecommunications networking (5G), nanotechnology and biotechnology, robotics, the Internet of Things (IoT) and quantum computing. However, when you look at verticals like aerospace, automotive, medical equipment and consumer products — they all still rely on a fine old-fashioned idea… remanufacturing. Better known today as “reman.”
The U.S. produces more than $43 billion dollars of remanufactured goods per year, supporting 180,000 full-time jobs. According to a recent PRNewswire release, the global Automotive Parts Remanufacturing market is projected to grow by $30 billion at a Compounded Annual Rate of Growth (CAGR) of 6.8 percent. That’s rock-solid reliability.
Remanufacturing is a comprehensive and rigorous industrial process by which previously sold, worn or non-functional products/components are returned to a “like-new” or “better-than-new” condition and warranted in performance level and quality. Reuse. Recycle. Reman. It’s alive and well in 2021. And here’s why.
Remanufactured products are typically 60-80% of the cost of a new product due to the savings derived from the recovery of the materials and energy content of the product. Lower prices deliver better value. In addition, remanufacturing often allows customers to receive products in a timelier manner. Remanufacturing is often done in local factories rather than overseas, because of low volume and smaller production runs. Reman also allows customers access to limited supply or discontinued products.
A well-oiled green machine.
The remanufacturing industry helps the environment in a number of different ways. For starters, remanufactured goods use up to 95% less energy and fewer raw materials. Industrial parts are kept out of the resmelting process, resulting in saving millions of barrels of oil or comparable forms of energy. Also by not resmelting parts, this benefits the environment by reducing air pollution. Plus, remanufacturing enables products to have numerous lives — instead of one — saving tons of natural resources like iron, aluminum and copper. Lastly, landfills are spared the dumping of these raw materials because of the monetary value the industry places on cores. The “core charge” ensures parts are returned to be remanufactured and not scrapped.
Quality you can rely upon.
To prevent smaller shops from discrediting the industry, reputable reman companies can certify — MERA’s Manufactured Again — that their remanufacturing processes meet quality standards more generally associated with new manufacturing (like ISO 9001). This certification also allows buyers to confidently identify — and purchase — remanufactured products. The ability for companies to remanufacture products is a critical differentiator from a financial, sustainability and customer service perspective.
The automotive industry is the king of remanufacturing techniques. Just look at Cummins, which produces truck engines that can be remanufactured up to three times. Talk about long-term profitability! Up to 85 percent of an engine can be remanufactured, enabling the motor behemoth to reap profits over and over while simultaneously delivering a quality product.
However, some fear that “reman” products will destroy or cannibalize new part sales. Quite the opposite. A recent industry study concluded that reman will not negatively affect sales of new products, but could in fact boost volume due to improved design knowledge and innovation gained from remanufacturing. The whole process is about identifying part flaws and re-engineering them to improve performance.
The original product, not an imitation.
A lot of times when you purchase aftermarket products made overseas, they just don’t fit right. It seems there’s limited engineering, no realistic tolerances and issues with form, fit or function. You end up cutting or grinding like crazy to get the part in place. But when you buy Original Equipment Manufacturer (OEM) or reman parts — they don’t just fit — they match.
Furthermore, the OEMs know how to control overhead. When it comes to remanufacturing they review warranty cost, failure rates, cost to remanufacture, plus cost of new and average selling price of remanufactured products. Using this data, an OEM can quickly determine the profitability of remanufacturing and develop the right strategy to move forward. And for most OEMs, the numbers don’t lie. It translates into a strong bottom line. Now that’s keeping it real!
Not available in all markets.
With OEM products, quality is guaranteed because they come directly from the original manufacturer, but they can also be expensive due to limited availability. This also means the product can be hard to find. Most original parts are sold exclusively at official service centers as opposed to aftermarket distributors. And if you’re lucky enough to locate the OEM product, shipment may take a few days. However, time is not on your side when it comes to emergency repairs.
China’s remanufacturing is on the rise.
According to Frost & Sullivan’s analysis of Global Remanufacturing of Automotive Parts, they predicted China would become a hotspot for remanufacturing of auto parts by 2022. At the time of the study, China had 6% share of the global automotive parts remanufacturing with companies like Cummins, CAT and Bosch supplying parts from factories located in their country.
Frost & Sullivan’s next analysis — Global Automotive Aftermarket Outlook 2019 — reveals China is moving in the right direction. They’re inching closer to becoming the world’s biggest automotive market; vehicle parc was estimated at 233.3 million, accounting for 18% of the global vehicle parc of 1.32 billion. Second only to the U.S. market with 273 million vehicles. The Chinese are poised to become a remanufacturing powerhouse. Hopefully, they can get those OEM specifications right!
Remanufacturing holds a special place in our hearts.
At Spuhler Associates remanufacturing runs deep through our people. Managing partner, Ron Spuhler, spent over two decades at Cardone Industries selling their “we build it better” mantra. Today you can find him building better partnerships by supplying the industry with top talent. His organization has also established solid partnerships with MERA and the Remanufacturing Industries Council.