Remanufacturing Key to Supply Chain Growth

Most supply chains move in one direction: New products move from manufacturing to a customer.

Increasingly, those products are coming back into the supply chain, either as returns for repair under warranty work or to be remanufactured for reuse.

In fact, new research from the nonprofit organization APICS Foundation, finds that remanufacturing serves a broad array of strategic interests for companies, provides considerable career advancement potential for individuals and has become instrumental in furthering sustainability initiatives.

“Remanufacturing was once considered a niche process,” says Jonathan Thatcher, director of research, APICS Foundation. “Today it is becoming a mainstream practice.”

The findings are part of the APICS Foundation’s recent report Examining Remanufacturing in Supply Chain and Operations Management. A copy of the report is available for downloading online. Thatcher will also host a webinar on the findings on June 5, at 1:00 p.m. CT. You can access the full report and register for the webinar here.

Remanufacturing, defined as the process of restoring used or worn products to like-new condition, is an area of growing opportunity for supply chain and operations management professionals. Previously segmented to specific areas of the B2C supply chain, like customer service, remanufacturing has established a place in both B2C and B2B supply chain models and is expanding significantly as additional markets accept and trust the “as good as new” concept. While many businesses may look at remanufacturing as part of their warranty processes, Thatcher says there are a number of entrepreneurial opportunities around remanufacturing in areas such as electronic devices, printer cartridges and other products.

“Remanufacturing provides obvious benefit for the forward progress of sustainable supply chain initiatives,” adds Sharon Rice, executive director, APICS Foundation. “Supply chain professionals are eager for more information about this quickly evolving area because, as our survey has shown, more than 50 percent of survey respondents felt it was important for supply chain and operations management professionals to have at least some familiarity with remanufacturing as they expect a growing demand for remanufactured goods.”

To gather information for this report, the APICS Foundation surveyed supply chain and operations management practitioners in 2013 in response to a growing interest in remanufacturing and requests for more research.

Three key findings arose through the surveys that further identify the current perception of remanufacturing and distinguish how professionals anticipate its future industry benefit:

• Remanufacturing drives sustainability – Sixty-eight percent of respondents felt that sustainability was the primary advantage associated with remanufacturing, and 41 percent already consider it a formal component of their organization’s sustainability policies.
• Remanufacturing provides vast organizational benefits – While 59 percent of respondents noted the additional complexity remanufacturing brought to reverse supply chains, the process was commended for the additional benefit it brings to an organization: increases customer satisfaction (66 percent), enhances product and organizational value chain (47 percent), and reduces production costs in relation to new manufacturing (46 percent).
• Remanufacturing adds career versatility – Remanufacturing requires new skills in forecasting, planning, and inventory management. With these skills, a supply chain and operations management professional can better identify potential for opportunity and innovation in forward and reverse supply chains.

APICS also found that a number of supporting trends are converging to support remanufacturing, from the opportunity to build brand awareness in emerging markets that need lower-than-new price points to developing a functioning reverse supply chain path as a risk management strategy.

Just as remanufacturing and reverse logistics is becoming a mainstream supply chain function, in the future, it may also become a required competency for supply chain professionals. “This is no longer in the category of emerging competency,” says Rice. “As APICS looks to keep up to date, we believe that in the future, we’ll see remanufacturing in our certifications as a base line competency.”

Reverse Logistics
By Dave Turbide, CFPIM, CIRM, CSCP, CMfgE

Building up capability in reverse logistics may start with packaging, move on to product design, and then move to more specialized supply chain functions. Recovery of value, whether from scrap or deliberate product design, is a core feature of remanufacturing. As organizations increase reverse logistics maturity, remanufacturing may be a good way to leverage that capability.

A company’s introduction to reverse logistics typically is based on the return of reusable shipping containers or pallets, product returns handling, or recycling or reprocessing of production scrap and offal materials. These indeed are the best places to start for company leaders not currently involved in such practices.

Reusable packaging is not always practical, but packaging and shipping materials should be a key part of reverse logistics. Smaller packages are less costly to produce and ship; meaning, customers appreciate them, too. For example, a lot of household cleaners now come in concentrated refill form, and industrial products often can be shipped inside recyclable or reusable containers.

Most commonly, product returns are handled through package shipping services and include return for repairs or, perhaps, for credit. The green approach—and something that is required in many industries—is to encourage consumers to return end of-life products for recycling. In order to take advantage of the numerous benefits of capturing the value of scrap and offal materials, you may want to offer incentives or returns at no cost to the customer.

For instance, some printer cartridge manufacturers include postage-paid envelopes at purchase, and some stores give a credit for returned cartridges.

This gets old products off the market and—if there is additional life possible through refurbishment—revenue in your hands. Another great place to look for savings is in design. When new products are designed or existing products updated, every effort should be made to make use of parts rather than specify a new part to be acquired, stored, and managed. Modular design is a big cost saver, as is late customization.

Beyond those practices, designers and engineers should keep an item’s eventual end of life and disposal in mind to maximize reuse and recycling potential. One step beyond that is to design for logistics (making products easy and economical to pack, handle, and ship); design for reverse logistics (employing reusable or salvageable packaging, materials, and components); and design for sustainability (specifying renewable materials).

There are suppliers that specialize in the reverse logistics arena. In fact, there even is a Reverse Logistics Association—a collection of third-party service providers focusing on such services as repair, customer service, parts management, end-of-life manufacturing, returns processing, order fulfillment, and more.

Related: Why Reverse Logistics Needs to Become a Core Competency Inside Your Supply Chain