A Remanufacturing Overview – Part 1. Definitions and Process
Question: What’s the difference between alchemy and equipment remanufacturing?
Answer: Remanufacturing works.
Why?
Alchemists used magic to turn lead into gold. In reality, they tried to hoodwink their audience, but the lead was still the lead. In contrast, remanufacturers use sound engineering and manufacturing processes to turn old machines into machines equivalent to new ones. They offer remanufactured machines with the same performance specs, warranty, and expected lifetimes as new machines but at a lower cost. Plus, the process reduces waste and manufacturing energy consumption and raw materials.
What Are the Differences Between Reconditioning, Refurbishing, and Remanufacturing?
People incorrectly use recondition, refurbish, and remanufacture interchangeably. Let’s set the record straight:
Recondition
Reconditioning involves returning an item to the reconditioning center, which undergoes an external physical inspection and an internal visual examination. The insides are cleaned of any unexpected material buildup and then reassembled. The outside may be touched up to make it look nice. Finally, there will be a short test to ensure basic functionality. For example, an AM/FM/Shortwave radio may be tuned to an FM station, and if the sound is reasonably clear, the product is packaged for resale or shipment with a short warranty and at a substantial discount from the list price.
Refurbish
During the refurbishment, an item is returned to the refurbishment center along with its service and use records. Certified technicians disassemble the item, visually inspect it, test appropriate assemblies, and replace any parts with visible wear or a history of causing failures. After reassembly, the item is completely tested, visually checked, and touched up as necessary to look almost as good as new and offered for sale at a moderate discount from the list price with either a shortened or whole warranty period. Refurbishment may be the most appropriate remanufacturing level for electronic products, bringing older items into saleable and serviceable condition.
Remanufacture
In remanufacturing, an item is returned to the remanufacturing center, where it is inspected thoroughly and disassembled until all the parts are at the level usually issued from inventory to manufacturing. Then, the real work starts.
Each part is checked to ensure that it complies with current engineering drawings. This means a machined part is completely cleaned (including stripping the paint), dimensionally inspected, tested for damage, and finally made to look like a new part. If possible, an electrical or electronic part is given a complete visual inspection and check, then brought up to the current shipping level. Suppose it cannot be brought to the current revision level. In that case, it will be brought to the highest possible revision level and eventually restocked in service inventory because a new product usually cannot include a “used” component.
The “equivalent-to-new” (ETN) parts are then assembled into the final product in the same way a new product is manufactured. The product is visually inspected, tested, calibrated, and anything else, just like a new product. The significant differences are:
- Many parts are ETN – not new.
- The product is sold with a new equipment warranty and can be covered by any company’s service contract.
- Installations, if any, are performed by the same technicians as new products.
- The product may be sold by either the primary salesforce or, if the remanufacturing business is large enough, by a dedicated sales force that does not compete with the new product group.
This flow chart is from the 2012 U.S. International Trade Commission publication Remanufactured Goods: An Overview of the U.S. and Global Industries, Markets, and Trade. (I wish I could have located a more recent report, but although “old,” this one is complete, and we can imagine what has happened in the years since the data was collected.)
A Remanufacturing Overview – Part 2. Business Aspects
Why Companies Sell Remanufactured Products
There are several reasons why a business would remanufacture its products. These reasons have been analyzed in detail and make sense to the decision-makers.
- They sell into geographic regions and market segments where the cost of their new products prohibits selling new products.
- Some start-up companies buy remanufactured capital equipment to conserve cash, and the seller hopes they will purchase new equipment when they commercialize their innovations. This is a better option than offering significant discounts (this is common in industries like semiconductor manufacturing).
- They must do something with products they took back in trade-in deals.
- Today, businesses want to have a strong environmental focus.
- Remanufactured products generate a positive margin and repetitive service revenue.
Why Companies Buy Remanufactured Products
A diverse range of companies purchase remanufactured products for a few reasons:
- They favor buying a specific brand but cannot afford the cost of new products.
- They are environmentally conscious.
- They already have one or more older products and want to add capacity, but they do not have to learn how to use a newer model. They may also already have a good stock of spare parts and trained in-house technicians available.
- Sometimes, remanufactured items have a shorter lead time than new products.
Examples of Companies that Have a Large Remanufacturing Business
GE Healthcare
Medical device companies are active in this market. Some market players operating in the remanufactured medical imaging devices market include GE Healthcare, Philips Healthcare, Toshiba Medical Systems, Shimadzu Corp., Carestream Health Inc., Hologic Inc., Hitachi Medical Corp., and Siemens Healthcare.
GE Healthcare has a substantial business line for refurbished systems under its GoldSeal™ brand. (Remember that electronic items generally do not require the typical remanufacturing process.) According to the brand’s website, “Hospitals and imaging centers must provide safe, reliable, advanced, and cost-effective imaging and ultrasound solutions for their communities—even when budgets are tight. When facing competing capital priorities, they can still access technology that offers peace of mind afforded by a comprehensive warranty and a GE Healthcare field service team they know and trust.”
Caterpillar
Caterpillar (CAT) has a program with its dealers being certified to rebuild assemblies and machines and then resell them. The brand says its machines “are built to be rebuilt” and highlights a few reasons why one might opt to remanufacture or rebuild their products:
“Maximize machine productivity
Improve reliability
Have a like-new machine coverage
Lower cost than a new machine
Greater return on your equipment investment
Like-new appearance
Receive a new machine serial number.”
Caterpillar also notes that those who choose to remanufacture their products can “get a second machine life at 50-60% of the price of a new CAT machine.”
Applied Materials
Semiconductor manufacturing equipment manufacturer Applied Materials has a substantial remanufacturing business. According to a report by a financial adviser who follows the company, the company’s revenue comes from three specific business segments, including “the global services business, which provides integrated solutions to optimize equipment, performance, and productivity. This includes spares, upgrades, services, certain remanufactured earlier generation equipment, and factory automation software.”
The Applied Materials website notes that the brand is looking for used equipment and that “demand remains strong for production-proven, workhorse 200mm technologies.” The company is also interested in buying used systems for refurbishment according to customer specs.
Colborne Foodbotics
Colborne Foodbotics makes automated systems for food processing and packaging. The company’s website notes that its “Remanufactured Equipment Program is designed to take nonoperational or older operating Colborne machines and completely disassemble and rebuild them to a like-new standard.” The company can remanufacture any of its equipment, offering a new machine warranty and discounts while “enhancing [customers’] production efficiency” in the process.
Cisco
Cisco is the leading manufacturer of routers, switches, phones, security products, and software. The brand runs a program called Cisco Refresh, which offers remanufactured products at “extremely competitive, pre-discounted net-prices.”
“At Cisco, we believe more than ever that what’s good for the world is good for business,” their site explains. “The Cisco Refresh (Certified Remanufactured) program demonstrates our commitment to minimizing our environmental impact and helps you do the same. With Cisco Refresh, you get the quality products you expect from us with a fully sustainable low carbon footprint.”
ABB
ABB has a global robot remanufacturing and repair center. Their website illustrates that remanufacturing is essential to their global sustainability efforts.
“As sustainability continues to grow in importance globally, ABB is committed to help create more environmentally friendly manufacturing facilities across the world,” it explains. “Remanufacturing enables existing robot users to sell inactive or legacy robots to ABB with an attractive buyback service, rather than scrapping or leaving them unused. Over the last 25 years, thousands of robots have been refurbished and upgraded by ABB’s remanufactured robot teams to give them a second life. As well as previously owned robots, peripheral equipment such as controllers and manipulators are refurbished to ‘like-new’ conditions at one of ABB’s Global Remanufacture & Workshop Repair Centers.”
ABB continues, explaining, “Before being labeled as an ABB-certified remanufactured robot, every second-hand unit undergoes rigorous checks, including a detailed inspection and a minimum 16-hour functioning test. Each remanufactured robot comes with a two-year warranty, and buyers of refurbished equipment enjoy the same level of support from local service teams, including installation and training, as they would with purchasing a new ABB robot.”
“We not only fix faulty parts, we completely remanufacture our robots using original ABB design plans, specifications, and dimensional data. This guarantees that the robots offer the same levels of quality, performance, durability, and safety as a new ABB robot,” says Jan Borsky, sales manager of ABB’s Global Remanufacture & Workshop Repair Centers.
Forging Equipment Brands
When forging companies need to expand their operations, they must balance their financial limitations with potentially long lead times.
A 2019 article from Today’s Motor Vehicles notes, “Forging machines are massive pieces of equipment that weigh 25 to 300 tons and rise 10 ft to 25 ft above the production floor. Designed and built to last decades, it’s not uncommon to find equipment from 50 or more years ago still in use; both a blessing and a curse when purchasing new equipment. Size and complexity mean items such as the massive cast steel frame can take 6 to 8 months for delivery, not including the 4 to 6 months to install internal parts and componentry.”
The author says, “Another option is purchasing used forging equipment and having it rebuilt or remanufactured, speeding delivery by as much as 6 months and reducing the budget impact. But, a shrinking supply of used equipment is increasingly taking this option off the table.”
A Remanufacturing Overview – Part 3. Business Opportunities
You can see that manufacturers of various product sizes, from telephones to forging equipment, are in remanufacturing. And I have yet to mention retread tires or remanufactured consumer goods! If you are not currently remanufacturing your products, you should do some homework and consider whether this can create additional customer value.
Following is a chart with the results of a 2023 project sizing the remanufacturing market:
This growth rate should provide additional motivation.
[Note: To read more about Customer Value Creation, read Creating Lasting Shareholder Value By Creating Customer Value.]
About Middlesex Consulting
Middlesex Consulting is an experienced team of professionals with the primary goal of helping capital equipment companies create more value for their clients and stakeholders. Middlesex Consulting continues to provide superior solutions to meet the needs of its clients by focusing on our strengths in Services, Manufacturing, Customer Experience, and Engineering. If you want to learn more about how we can help your organization create more value for your customers, please get in touch with us or check out some of our articles and white papers here.
Be social and share!