The European Remanufacturing Network (ERN), sponsored under Horizon 2020, estimates the current size of the European remanufacturing industry to be just under 30 billion euros, employing around 190,000 people. The recently published market study however shows that the industry could triple by 2030. This is an enormous business potential for European, including Finnish, companies.
What is remanufacturing?
In short, Remanufacturing is an industrial process of returning a product to at least its original performance with a warranty that is equivalent or better than that of the newly manufactured product. Remanufacturing is a process that involves dismantling a product, restoring and replacing components, and testing the individual parts and the whole product to its original design specifications. The performance after remanufacture is expected to be at least the same as the original performance specification (‘like new’) or better, and the remanufactured product generally comes with a warranty.
Remanufacturing occurs across a wide range of industrial sectors, but is particularly attractive to industries that produce capital-intensive, durable products with relatively long product life cycles. These include: aerospace, automotive, electrical and electronic equipment, furniture, heavy duty and off road equipment, machinery, marine, medical devices and rail. However, the factors mentioned above, are not enough to enable remanufacturing to take place. The economic viability of remanufacture can depend on a number of factors including: how dispersed the product is, how easy it is to locate and retrieve, the ease with which it can be disassembled, diagnosed and remediated, the rate of technology and product performance change, knowledge and skills related to manufacturing, and legislative issues.
A Win-Win-Win situation
Remanufacturing is referred to as a “win-win-win” situation. The customers need to pay less for the remanufactured products or components. Normally the price is in roughly 60 % compared to a new product. Remanufacturers earn more, the profit margins are higher than for newly manufactured products. Remanufacturing contributes to all three dimensions of sustainability: environment, economy and society. It saves material and energy resources, prevents waste, creates skilled jobs and produces substantial savings compared to new goods with new components.
A circular economy is one that is restorative and regenerative by design, and which aims to keep products, components and materials at their highest utility and value at all times
Unlike the traditional take-make-consume-dispose linear economy of the past, the circular economy aims to keep products, components and materials at their highest utility and value at all times. In its most basic form, the circular economy encourages the reuse of materials to the furthest extent possible. Remanufacturing fits directly into the circular economy through intrinsic systems being focused on the return and reuse of valuable materials, and making them last for as long as possible.
It is clear that the situation is not fully as rosy as described above. Naturally there are problems and challenges involved with remanufacturing processes. These are related among others to collection of cores, business models, public acceptance, legislation and IPR issues.
Remanufacturing worldwide, in Europe and Finland
Worldwide the industrial sectors having the highest remanufacturing intensity are aerospace, automotive, heavy duty and off-road equipment. Other industrial sectors in which remanufacturing is actively used, are: machine tools and industrial robots, machinery and medical equipment, copying machines and electronic products and office furniture. In Europe four countries dominate, accounting for more than half of remanufacturing value – Germany, the UK & Ireland, France and Italy. Germany has a strong position in the aerospace, automotive and HDOR (heavy duty and off-road) sectors. In Finland the remanufacturing activity is still in its infancy. Only a few companies market remanufactured products, in e.g. the HDOR equipment, machinery and furniture sectors.
Business models for remanufacturing
One potential option to boost the business activity is to introduce new business models for remanufacturing. Product-Service Systems or Functional Sales have become more popular business models in consumer and business-to-business environments. A very strong focus is placed on how to fulfil customer needs and create customer value through product-service combinations. The traditional boundary between manufacturing and services is becoming increasingly blurred. The service-providing company decides how to fulfil the function that the customer is buying. The product is not sold and instead the user gets access to product through a service agreement. Then the service provider has an interest to have durable products and long product life-cycles. In these cases remanufacturing is a viable option to provide long and even multiple product life-cycles.
Government and industry need to work together to develop its full potent
There is good potential for growth through remanufacturing in the Finnish industry. However actions are needed to raise the awareness of the technology and business models. All stakeholders, research institutes, universities, funding agencies and large as well as SME industries need to work together to develop its full potent. The European Remanufacturing Network is a small step in the direction. The authors call for further actions.
VTT is a partner in the ERN-Project and co-author of the market study.