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SSRN Id3363072
SSRN Id3363072
ARTICLEINFO ABSTRACT
Article history: Sustainable development is the need of the hour as population booms on a planet with a finite resource pool.
Received 22 January 19 Employing the process of remanufacturing is essential in achieving this. Busting the myths surrounding the
Received in revised form 05 February field of remanufacturing by studying the components and characteristics of this process and the obstacles
19 faced by it in the market will ensure the absorption of this methodology in the mainstream, commercial
sector. A key aspect of remanufacturing is the close association between remanufacturing opportunities and
Accepted 23 February 19
product cannibalization. This paper touches upon the challenges faced by this sector, like the End-of-Life
Product cost, the hindrances in the reverse logistic chain, the perception of remanufactured product quality,
Keywords:
to name a few. Acquiring a significant, profitable market share for remanufactured products is decided by
Remanufacturing Product
elements like Product Acquisition Management, Reverse Logistic Collections, Supply and Demand of
Life Cycle Product
remanufactured products. The analyses of two cases, one from the cartridge industry and the other from the
Cannibalization End-of-
PC Monitors industry expound on these elements and their influence on the decision to remanufacture
Life
Reverse Supply Chain
Management Product
Acquisition Management
1. Introduction
Every year, more than 375,000,000 empty toner and ink cartridges end up being tossed in the trash, and finally end up either in landfill or are incinerated.
This means that in a second, approximately 11 empty toner and ink cartridges are simply discarded away. This situation can be remedied by reusing these
cartridges or by recycling them into other useful components. Yet, roughly 70% and 50% of used ink cartridges and used toner cartridges respectively are
not recycled at all. Due to progress in education and greater awareness about the merits of the philosophy of ‘Reduce, Reuse, Recycle’, and due to
improvements in the laws, today there is evidence of continuous changes in this regard. This evidence is most prominent in Small and Medium Enterprises
(SMEs). The above mentioned cartridges are made of engineering grade polymers which have extremely low rates of decomposition, in the range of 450 to
1000 years. In order to combat this issue and to eliminate, or at least minimize, this blatant wastage, the U.S. Environmental Protection Agency has
recommended a Reduce-Reuse-Recycle system where incineration is the absolute last resort. Yet, approximately 67.5% of their municipal waste has gone
straight to landfills or incinerators in 2006 (U.S. EPA 2007). This strongly puts forth the need and necessity to have a market for remanufacturing.
Remanufacturing is, in essence, a process that brings used products back to near-new product standard. According to Hauser and Lund (2008), 9000 firms
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in the U.S. are remanufacturers. These industries remanufacture components from the automotive industry, equipment from the medical field, furniture,
computers, television sets, tyres, photocopying machines, etc. and Original Equipment Manufacturers (OEMs) and/or independent manufacturers (Ferguson,
2009) put these products in the market. Significant merits to the technique of remanufacturing in the industries has prompted a number of researchers to
come forth with creative and ingenious ideas for the same (Vasudevan, et al, 2011; Bashkite,et al., 2014).
Study of Product Life Cycle (PLC) of an existing product is critical for a profitable launch of a remanufactured product. Such a product’s demand can be
gauged, predicted and influenced by studying & analyzing closely the life cycle of its competition (Vasudevan and Terkar, 2011; Guide and Li, 2010 ). The
rate of disposal of the competing existing products is another important factor influencing the demand of their remanufactured counterparts (Agrawal et al,
2016). These studies and analyses require the employment of specialized skill sets by the organization. The introduction of remanufactured products results
in a phenomenon called product cannibalization, which shall be analyzed further (Atasu et al., 2009; Terkar et al., 2013).
20000000
Units at End of
15000000 Life
10000000
The sale of PC CRT monitors was in the growing phase between 1990 and 2000, and this is an indicator of a greater remanufacturing opportunity for
companies during this time period. The PC CRT monitors exhibited a very small maturity phase. After the PC Flat Monitors were launched in 1988, they
started cannibalizing CRT PC monitors, and this rate of cannibalization only increased in the period 2000-2011. The decline phase of PC CRT monitors is
seen to be quite healthy. Around 2009, the sale of Flat PC Monitors fully replaced the sale of PC CRT monitors, and the demand of remanufactured PC CRT
monitors was replaced by that of remanufactured Flat PC monitors. The quantity of End-of-Life (EOL) product is indicatives of the opportunity for
remanufactured product in the market. From the above illustration, it is evident that the demand of a remanufactured product depends upon the product
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cannibalization of its existing counterpart. Hence, it can be inference that the product life cycle of remanufactured product depends upon the product life
The actual remanufacturing process almost always ends up being less expensive than manufacturing a new unit of the product from scratch, because a
number of parts and components are reused, and this eliminates the need for procuring them from a vendor. The remanufacturing of used products is
important in extending the product life cycle in the decline phase, as seen below in Fig.2. This extension of the product life cycle has several significant
financial benefits in addition to the increase in profits earned (Östlin et al., 2009).
Following the introduction of the remanufacturing methodology, the reluctance of Original Equipment Manufacturers to utilize this method led to small and
medium enterprises entering the domain of remanufacturing, and this, in turn, led to large scale cannibalization of existing products. This has prompted a
Remanufacturing is a rigorous, comprehensive process in the industry, by which a component that has been in use, has worn out, or is no longer functional
is brought back to a ‘new-like’ or ‘better-than-new’ condition, and is, most importantly, warranted in its quality and performance specifications. Ideally, the
sale of these remanufactured products will displace the sale of new product, thus causing cannibalization of the existing products.
One of the greatest obstacles in the wide acceptance of remanufactured products in the market is the fear of using parts that have already been in use for a
given time period, as it becomes difficult for the manufacturer to accurately gauge the safe operational life left with the part. This fear arises because of the
criticality of the remanufactured parts, the failure of which can even cause fatalities. Educating manufacturers about the concept of product cannibalization
can help curb this fear (Guide, 2000 ; Hermansson and Sundin, 2005).
Many marketing managers are of the opinion that remanufacturing the product will cause cannibalization of the new product, which will reduce their market
share, and that only new products will earn more profits in the market. This makes it crucial to conduct a comprehensive study of product cannibalisation.
Awareness about the remanufactured product is essential for sustainable development. Only if a remanufactured component can perfectly substitute its
conventional counterpart, will product cannibalization cease to pose a threat (Terkar et al., 2013; Matsumoto and Y. Umeda, 2011 ).
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One example for the actual implementation of remanufacturing is the Viking 400 aircraft, being remanufactured from the de Havilland Canada DHC-6 Twin
Otter twin turboprop aircraft, by Turboprop Remanufacturing. This has not only increased the company’s profits, but has also improved on a number of
parameters of the craft. For example, the process of remanufacturing has resulted in an increase in the maximum take-off weight of the plane, an improved
The maximum cost incurred in the process of remanufacturing is that incurred in the return of the used product, or End of Life product, to the remanufacturer.
The consumers are given incentives, like discounts on future orders, to return these used product(s) to the remanufacturer, in order to attempt to eliminate
this element of cost (Debo et al., 2005; Terkar et al., 2013). There are several comprehensive tests that are carried out on EOL products, in order to ascertain
their worthiness to be remanufactured and put into service. Thus, the possibility of remanufacturing has to be considered during the design phase of the
product. If these EOL components are deemed unfit for remanufacturing by these tests, they can be recycled, and, in the worst case, used for landfill.
B. Quality Opinion
The ultimate deciding factor for the success of a remanufactured product is the demand for it in the market, i.e. the willingness of the consumer to pay for it
and purchase it. If presented with a choice, a consumer, in general, will prefer a new product and not a remanufactured product with comparable quality,
characteristics and functionality. This is even more pronounced when high end products are involved in the process.
The primary raw material in remanufacturing is used products. Thus, the supply of the used products, i.e. the rate at which consumers return used components,
dictates the production rate of the remanufactured products, and, essentially, the supply of remanufactured products. The return rate of the used products, in
turn, depends on the product’s life cycle. The greater the availability of used components and the greater the time required to return the used components,
the greater the profitability. The demand for remanufactured products can be derived by specialised teams employed by the organisation, after a close survey
and analysis of the market, especially of its changing trends (Rajeev et al., 2017, Terkar et al., 2013). The availability and return rate of used products,
however, cannot be predicted as accurately, as it varies significantly from one consumer to another, because two consumers using the identical product may
keep it in service for different periods of time, depending on his/her ideology, and the area of application of the product, among other factors.
D. Competition
OEMs do not directly control the remanufacturing of products, unlike the conventional manufacturing process. They employ the services of third p arty
manufacturers to do so under their banner, as the alternative to this is other OEMs and SMEs grabbing a greater market share. Quality control comes into
play here, as the reputation of the OEM depends on the quality of their products, conventional or remanufactured. To directly compete with low-end product
E. Change of Technology
The swiftness with which technology develops heavily influences the demand, supply, and processes employed in the production of all goods, and
specifically remanufactured goods. The need for the product and its price are crucial factors which influence the consumer in his/her decision to purchase
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the remanufactured product. As the prices of products decrease with rapid advancements in technology, their product life cycles also shrink considerably.
The earlier the launch of a remanufactured product, the longer it might survive in the market, before its technology becomes obsolete, and the greater its
An integral element of the remanufacturing process is the closed loop supply chain (CLSC) of End of Life products, the primary raw material needed for
the process. This is also the factor that poses the greatest threat to the smooth supply of remanufactured products if it goes awry. A profitable foray into the
remanufacturing market hinges on this CLSC (Tang et al., 2016; Yan et al., 2018).
Fig. 3. helps visualise the flow of reverse logistics, and how it fits into the process of remanufacturing. An EOL product is first disassembled into its
constituent components, following which, some are utilized for remanufacturing, while the others are recycled or used in landfills. The post-disassembly
components’ utilization depends largely on its constitution, its cost, and its future field of application.
For the purpose of remanufacturing, the EOL products’ return flow is critical, and hence uses collection models for the same. There are three most utilized
methods for this purpose, and in each of them, the remanufacturer, retailer, third party and consumers play critical roles in the reverse logistic collections.
Fig.4. shows that the consumer directly returning the used product to the manufacturer, i.e. the retailer is not involved in the reverse logistic collection
process. Many remanufacturing companies like Xerox, Canon and Hewlett Packard prefer to directly collect EOL products from their customers (Li et al.,
2016)
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Fig.5. illustrates the involvement of retailers in the collection of EOL product from consumer. In this scenario, the retailers supply the EOL product to the
manufacturer. A majority of the remanufacturers employ this model of reverse logistics as consumers prefer returning EOL products to the retailers. The
return of televisions, air conditioners, refrigerators and single use Kodak cameras are some examples of the employment of this model.
Fig.6. demonstrates the model wherein the third party collects the EOL products from the consumer on behalf of the remanufacturer. In this scenario, the
role of the retailer is eliminated from the reverse logistic process flow. Automotive components, and even complete cars, are collected by and supplied to
the remanufacturer by the third party organisation.
THIRD PARTY
Any EOL product that needs to be remanufactured has to pass through several stages and processes in order to reset its safe operational life to zero. These
stages are illustrated in Fig. 7. The remanufacturer needs to, first and foremost, segregate the products into a number of groups, for an organised and
structured work flow, which entails disassembly, cleaning, testing- a crucial step in the entire process, machining, finishing and inspection operations. After
final assembly and inspection, or testing, or both, the remanufactured product is ready to be packaged and shipped.
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The strategies employed in the complete process of remanufacturing, from research and design to marketing, hinges on the demand for the remanufactured
product in the market, and the availability of its EOL counterpart.
The four quadrants in Fig.8. indicate the appropriate action to be taken by the remanufacturer based on the condition of market demand for the remanufactured
product and the EOL product availability. The remanufacturer should take no action (towards initiating the complete remanufacturing process) if the demand
as well as availability are low. He/she should only observe and analyse the situation if the demand is high, but availability is low. This is because this is a
potentially profitable market and can attract third-party remanufacturers. Recycling EOL products will be the most suitable course of action if availability
is high, but the demand is not in proportion to it. This enables some revenue to be earned by material recycling.
Watch Remanufacture
Market demand
No Action Recycle
Product availability
F. Remanufacturing Decision
Table I. gives data on remanufacturing costs, supply rate of EOL products, consumer segment and the decision to remanufacture on this basis. However,
not remanufacturing can also be indicative of third party organisations conducting the operation under the OEM’s banner.
Influencing the decision to not manufacture are several factors, including, third party remanufacturing, as mentioned above, the return supply of EOL
products, the developments in technology and the need for retiring legacy systems.
From Table 1, it is evident that cost of remanufacturing, supply of EOL products & size of functionality-oriented customer segment are conclusive
Remanufacturing should be opted for if the remanufacturing costs are low, the functionality-oriented segment is large, and with an adequate return supply
rate of EOL products available (it should ideally be greater than the remanufacturing production rate). If the remanufacturing costs are low, then
remanufacturing will be profitable in the three cases as indicated in Table 1. All these cases fall under the quadrant ‘Remanufacture’ in Fig.8. However, a
limited supply of EOL products coupled with a large functionality-oriented segment, can be detrimental to remanufacturer. This is also indicated in the
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A printer cartridge can be overhauled by either refilling its ink, or by remanufacturing it. To determine the more viable option of the two, the consumer is
taken into consideration. He/she will consider the quality and the price of the cartridge being sold to him, not necessarily in that order, in order to take a
decision to purchase it. Table 2 and Table 3 provide a comparison between the refilling and remanufacturing of printer cartridges by World Pasadena, in
terms of the process, processing time and the operation time for both processes.
From Table 2, it is observed that the refilling process can be completed within 10 to 12 minutes. This low operation time, material requirement and labour
From Table 3, it is observed that the remanufacturing of the cartridge takes around 30 operational hours. We can infer that cost and operational hours
associated with remanufacturing is high, as compared to refilling. The labour and material costs incurred in the process of remanufacturing are also
The process that requires the maximum operation time in remanufacturing the cartridge is the cartridge drying process, as it takes around 81.5% of the total
operational time. The process that requires the next highest time for completion is the cleaning and rejuvenation of the cartridge; it needs 240 minutes for
completion. It entails an intensive cartridge cleaning process with multiple cycles of vacuum boiling, spinning and atomizing. The cartridges also take 60
The other processes involved in remanufacturing take negligible time in comparison to the above mentioned processes, and take a collective 1.52% of the
5 Cleaning and rejuvenating of cartridge by multiple cycles of vacuum boiling, spinning and 240 14
atomizing
6 Complete drying of cartridge 1440 81.5
7 Injection of ink into the cartridge (ideally, this ink should be identical to original ink) 03
0.2
8 Resting and acclimatization of cartridge after refill process 60 3
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10 Packaging 02 0.10
Total time required for remanufacture of the ink printer cartridge 1766 100
Consumers now have three options when they wish to purchase a printer cartridge; they can purchase a brand new cartridge, or can go for a refilled cartridge,
or can opt for a remanufactured cartridge. With these options, consumers will opt for that cartridge that suits their preferences; they will consider the
reputation of the process used to manufacture it, that of the company or the OEM, the life of the cartridge, its economy or value for money and will weigh
the pros and cons for each option to make their decision to purchase.
On comparison of the price of each type of cartridge, consumers will find that the remanufactured cartridge costs lesser than its two competitors;
remanufactured products generally cost 30% less than their brand new counterparts, and the same applies to printer cartridges as well. Add to this the fact
that its quality and warranty are at par with the brand new cartridge, unlike refilled cartridges, and one gets the reason why remanufactured cartridges and
Several manufacturing companies are earning significant profits through the sale of their remanufactured cartridges, as documented in Ink Guides Company.
Cartridge brands and their savings on employment of remanufacturing, over OEMs are represented in Fig. 9.
HP and EPSON have recorded savings of around 65% of the manufacturing cost, due to the utilization of remanufacturing. These huge cost savings enable
companies to competitively price their remanufactured products, thus increasing their customer base and bettering their image and reputation in the market.
Competitive prices also prevent stagnation of the market and stagnation of advancements, and this ultimately helps spur innovation.
remanufactured
new cartridge
Fig.9. Cost saving due to remanufactured cartridges over OEM’s new cartridges
The Ink Guide records more than 10,000 ink and toner cartridges from 10 reputed online ink stores. The sale volume of remanufactured cartridges as
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(%)
cartridge (%)
The findings from the analysis of the three options available in the market for printer cartridges point to the correlation between cost saving due to
remanufactured cartridges and maximum sale volume of remanufactured cartridges, as seen in Fig.9. and Fig.10. The coefficient of correlation between cost
saving for the cartridges remanufactured and maximum sale volume of remanufactured cartridge is R= 0.5771 and this indicates a correlation neither too
strong nor too weak. As R2= 0.3331, the cost saving due to remanufactured cartridges is 33.31% for maximum sale volume of remanufactured
cartridges.
1.8 Conclusion
The demand for remanufactured products is on the rise, as it enables the introduction of more cost effective products with the same, if not better, quality and
characteristics as compared to conventionally manufactured products in the market. The greater the value for money, ie greater functionality for lesser cost,
the greater the preference of the product over its competitors, and the greater the demand. The supply of these products depends largely upon the pace of
product cannibalization of the existing product. The product remanufacturing matrix explains what course of action should be taken depending on the
demand and availability of resources for successful remanufacturing. This is illustrated in the case study of PC Monitors, which also details the importance
and criticality of product cannibalization for remanufacturing products. Cost saving due to remanufacturing has positively impacted the sale of
remanufactured cartridges, and the coefficient of correlation with a value 33.31% quantifies the impact of cost saving due to remanufacturing cartridges on
To sum it up, remanufacturing faces challenges like expectation of quality, limitations in supply, competition and change of pace of technology. To analyse
this, and to help overcome some of these hurdles, key topics like Product Acquisition Management, Reverse Logistic, Reverse Logistic Collection Models
and Basic of Remanufacturing Product Development have been discussed for profitable launch of and subsequent market share retention by remanufactured
products.
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