The central premise behind the remanufacturing process is this: Generally speaking, the cost of building a new widget is 70% materials and 30% labor. Why not try to wring more productivity out of the materials component, as well as the labor side?
A small but growing number of manufacturers is reclaiming used products, taking them apart, inspecting them, and putting them back together to get many more life cycles of use from them.
Remanufacturing is most robust in the capital-goods sector. Makes sense, since things like railcars and big diesel engines are expensive to build new and use a lot of natural resources, like energy and metal, in the process. Plus, customers care more about what these goods do than how they look. Here are some remanufactured products, large and small:
DIESEL ENGINES: Caterpillar (CAT) got into this business in the '70s as a favor to client Ford Motor (F). Now, remanufacturing is one of the $36 billion industrial giant's fastest-growing divisions. Caterpillar's main reman facility in Corinth, Miss., churns out hundreds of remanufactured diesel engines a month.
It takes a couple of workers about half a day to break down a large engine. Each part, no matter how small, will be inspected for possible reuse. When an engine or part in the field breaks down, a customer will buy a remanufactured replacement—at a discount if he supplies a remanufacturable part in return.
COMPRESSION "SKID": These massive machines, made by Hanover Compressor, help coax natural gas out of tight deposits in the ground. Each one of these tangles of engines, pipes, and fans embodies many tons of materials and hours of value-added labor, and they're produced in a low enough volume to keep the cost of each relatively high.
When it comes to remanufacturing a skid, Houston-based Hanover will reinvest up to 50% of the cost of building a new one.
CARPET TILES: Atlanta-based Interface makes modular carpet tiles and is one of the most evangelical recyclers in the corporate world. Its carpet tiles, sold mostly to businesses but also for home use, are made essentially of a vinyl backing made from reused materials, and a fiber face.
Interface gets its material from corporate clients, who replace worn tiles one at a time rather than en masse as with traditional carpets. Interface will also take whatever a new customer has in the office, even competitors' products. Any material Interface doesn't use in its own process it will recycle or convert to raw energy to power its factories, says Vice-President Stuart Jones.
SINGLE-USE CAMERA: Apart from film itself, most of the parts in the disposable cameras that Kodak (EK) made famous are reusable many times, according to Nabil Nasr, a professor at the Rochester Institute of Technology.
The remanufacturing loop works like this. The customer drops the camera off at a photo developer, say a drug store. The drug store develops that roll of film but sends the camera "core" back to the camera manufacturer to be reused. That way, the loop is closed and the reman plant is fed.
XEROX COPIERS: Xerox (XRX) head of operations Wim Appelo says the company has saved "billions" over the years by remanufacturing both copy machines and toner cartridges. Xerox supports its reman efforts with its leasing sales arrangements. Instead of selling the product outright, Xerox will maintain the machine so the customer doesn't have to and will replace it as needed.
Reclaimed copiers are inspected and go right back onto the new-build assembly line. The only reason Xerox wouldn't remanufacture a product, says Appelo, is if the technology was simply too old to be useful anymore.
CELL PHONES: Chances are you'll only see a remanufactured cell phone if you lose your old one and need a "loaner." Motorola (MOT), for example, uses remanufactured handsets as warranty replacements.
Because so much of the cell-phone business is about making the smallest, most technologically intensive unit possible, companies don't invest the effort in reclaiming their used models. Even though the "husks" are plastic and could last indefinitely, they would likely be too bulky to reuse in the latest, greatest, tiniest phone. By Brian Hindo