Remanufacturing: A Strategic Analysis
Remanufacturing, the process of restoring used parts to give them a second life, has been propelled into the spotlight in recent years by attempts to mitigate supply chain shortages, reach new customers through affordability, and search for high-margin alternatives for parts.
Both independent remanufacturing companies and remanufacturing arms within OEMs have proved essential for efficiently restoring parts and creating a way to lower expenses while making operations more efficient. These players provide value across multiple industries, from the well-established space in the automotive sector to more emergent opportunities across sectors such as medical devices and electronics. All of these sectors can benefit from reduced dependence on raw materials, extended product life cycles, and more.
What is remanufacturing?
Remanufacturing is the process of restoring core to give it an entirely new life.
The core, the starting point for the remanufacturing process, is typically a high-value part that requires technical expertise to be restored to its original function. Within the automotive and industrials industry, parts that can be remanufactured include engines, transmissions, hydraulic components (such as bucket lifters), and drivetrain components (such as clutches and axels), as well as turbochargers and superchargers. Historically, the automotive and industrial equipment industries have had the most use cases for remanufacturing, but a growing number of use cases are emerging in industries such as medical devices, furniture, electronics, and aircraft components.
The remanufacturing process typically involves seven primary steps:
- Disassembly
- Cleaning
- Inspection and sorting
- Reconditioning
- Replacement
- Reassembly
- Testing
What are the benefits of remanufacturing?
Remanufacturing offers several benefits for OEMs and remanufacturing organizations, including the following:
- Cost-effectiveness: Remanufacturing can reduce costs by 40 to 60 percent, directly boosting margins versus newly manufactured parts.
- Faster availability: Remanufacturing makes parts available more quickly by using less raw material than new product manufacturing.
- Reaching new customers through affordability: By extending product life cycles, product prices can be 45 to 65 percent lower, giving remanufacturers the opportunity to grow organically and reach a new set of customers.
What are the challenges of remanufacturing?
Remanufacturers face a unique set of challenges, including the following:
- Complex product pricing
- Variable core availability and difficulty in core forecasting
- Warranty management
Recommendations for Remanufacturing Companies
Based on the challenges faced by remanufacturing companies, the following recommendations are provided:
- Implement advanced analytics techniques to streamline pricing and SKU management.
- Invest in predictive modeling for core availability forecasting.
- Utilize natural language processing for warranty data analysis and insights.
Market Trends in Remanufacturing
Recent market trends in remanufacturing include:
- Increased adoption of remanufacturing in emerging industries such as medical devices and electronics.
- Focus on sustainability and circular economy principles driving remanufacturing initiatives.
- Growth of third-party remanufacturing companies offering specialized services across industries.
FAQs
Q: What are the key benefits of remanufacturing?
A: The key benefits of remanufacturing include cost-effectiveness, faster availability of parts, and reaching new customers through affordability.
Q: How can remanufacturing companies overcome challenges in core availability forecasting?
A: Remanufacturing companies can invest in predictive modeling and data analytics to improve core availability forecasting.
Conclusion
Remanufacturing undoubtedly makes logistics, pricing, and operations more complex. But companies that pursue it reap the benefits of lower costs and prices, new customers, and supply chain resilience. In “Powering the remanufacturing renaissance with artificial intelligence,” the next article in our remanufacturing series, we will explore how advanced analytics techniques can ease the challenges of remanufacturing and help players win share in the marketplace.
