Remanufacturing Is Key to Supply Chain Growth
A supply chain includes all the processes to produce and distribute a product to buyers. It involves creating and allocating raw materials and transforming those raw materials into products that can be sold to retailers or directly to consumers. Eventually, buyers discard the product they bought after it is no longer needed. This type of forward logistics forms a straight line — beginning with raw materials and ending by discarding the final product.
More and more, companies are looking into reverse logistics. Reverse logistics seeks to close the supply chain loop and bring used materials back into the manufacturing process. Three ways companies can do this include:
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- Recycle: Many cities and companies implement recycling programs to collect materials like glass, plastic and aluminum. Companies then take these discarded items and break them down to the material components to manufacture similar products.
- Remanufacture: To remanufacture something means to take an item that's been discarded or reached the end of its functioning life and collect the necessary parts and materials to bring it back into working condition. The purpose of remanufacturing is to create a good or better product than the original by reusing as many parts from the actual product as possible.
The Problem of Forward Logistics
The traditional supply chain, or forward logistics, has been under growing pressure to reevaluate its practices. The problem exists in the waste and enormous energy required to build products that buyers eventually discard. The problem of forward logistics is that the waste produced by this model is not sustainable.
In particular, large multinational corporations (MNCs) have faced public scrutiny for neglecting their pledges to utilize more sustainable and ethical materials and practices throughout their supply chain. From the raw materials to the assembly to the distribution of products, companies have to answer for their supply network's environmental, social and economic impact.
MNCs don't have total control over their entire supply chain network. In a 2020 case study, Harvard Business Review selected three MNCs thought to be exemplary in sustainability. Their findings revealed failures in many, if not most, of the suppliers these MNCs relied on. Since these exemplary MNCs had trouble controlling their supply chain, how might other, "regular" firms fare?
In addition to implementing strategies to enforce more fair labor and environmental practices, companies can implement remanufacturing to close the supply chain loop. A closed-loop supply chain aims to transform forward logistics by reintroducing materials and products to the supply chain.
Companies can reintroduce raw materials by recycling their own products or using remanufacturing methods to create good-as-new items for resale. A closed-loop supply chain using recycled or remanufactured goods presents a solution to forward logistics by preventing the constant introduction of new materials and the waste of old materials.
How Does Remanufacturing Grow the Supply Chain?
Remanufacturing grows the supply chain by introducing new processes and opportunities. Companies that engage in remanufacturing need to develop wholly new ways of approaching and developing products. They need to:
- Coordinate the collection of old products and parts.
- Establish methods of evaluating the viability of those products.
- Engineer ways to create like-new products out of old and used parts.
Remanufacturing, like any new business method, requires an investment. But the payoffs can be impressive. Companies that use remanufacturing enhance their product and organization value chain, reduce production costs and increase new market development.
Benefits of Remanufacturing for Supply Chains
Remanufacturing is a relatively new concept, and it presents an incredible opportunity for supply chain growth. Beginning as a business-to-consumer (B2C) practice, remanufacturing has opened doors in the business-to-business (B2B) sector as well. There is a growing demand for remanufactured goods, so it's an area with a great deal of emerging potential, in addition to its cost-saving and sustainability benefits:
1. Emerging Potential
The Association for Supply Chain Management (ASCM) conducted a survey that revealed remanufacturing as a key element in sustainability, research and development. As such, it supports the high-priority goals of many companies, including customer service. Companies can integrate remanufacturing into their warranty policies, replacing customer's defective or broken equipment with remanufactured products.
Reverse logistics also adds complexity to organizations because it requires new forecasting, planning and inventory management skills. New roles in remanufacturing management, engineering and production present possibilities for the growth of jobs and industries as a whole.
2. Cost Savings
Within the traditional supply chain, companies spend an enormous amount of money on harvesting raw materials and transforming them into the form they need to create a product. Remanufacturing doesn't eliminate the need for raw materials, but it does introduce viable materials back into the supply chain at little to no cost. Many companies institute recycling programs in which customers can return their old products to the company, which can use or sell those parts for remanufacturing purposes.
With lower production costs from remanufacturing, companies may be able to allocate more funds to further their other goals. For example, Cummins began a remanufacturing program with their engines that allowed them to reclaim 50 million pounds of engine parts. The resulting revenue they were able to gain from remanufactured engines added an additional profit of $1 billion to their sales.
The most obvious and impactful benefit of remanufacturing for supply chains is its environmental impact. Remanufacturing doesn't require wholly new raw materials, so it repurposes viable parts from discarded and old parts into products with the same performance and value as new ones. Using the remanufacturing process effectively reduces energy output and the creation of waste, so it increases a supply chain's overall sustainability.
Improving sustainability also has great benefits in customer satisfaction. Consumers today are looking for companies that demonstrate a firm commitment to responsible environmental practices. Implementing remanufacturing in the supply chain can increase companies' customer loyalty and improve environmental ratings.
Remanufacture With the Best
Advanced Technical Solutions is an ISO 9001-registered company that offers custom remanufacturing product solutions. We have the highest-qualified electric engineers, repair technicians and parts changers to fulfill our customer's needs quickly and to the highest standard. We specialize in remanufacturing in the automotive industry, including the emerging market of electric vehicle drivetrain and charging station remanufacturing.
ATS is at the cutting edge of our industry with the knowledge, experience and commitment to deliver the best solutions for our customers. Contact an ATS representative to learn more about our remanufacturing services.