Remanufacturing is a relatively young business, but it can be as confusing as a Floridian presidential election. It is just now becoming popular among industrialists, consumers and environmentalists.  Like recycling, remanufacturing will soon become a household word and PRC Industries is leading the way.  This is the first in a series of articles that will take a look at the broad scope of the remanufacturing industry. In follow up issues, we will study the impact of remanufacturing on the consumer and the manufacturer.

Refurbishing, Recycling, Remanufacturing - What IS the difference and why is it important? 

Often consumers use the three terms interchangeably, yet there are significant differences in the process and product.

Recycling is a process that involves disassembling the original product and reusing components in other ways, often discarding many of the parts.  While the materials from the parts are reused, none of the original value is preserved since the parts are usually ground down to their simplest form. This reprocessing of the raw materials uses large amounts of energy or in a worse case scenario, creates much waste and burdens our landfills.

In refurbishing, only the defective component is removed or repaired.  The product is essentially a used product and may be of inferior quality.  Traditional refurbishing companies typically perform only the least amount of service required to allow a product's return to market. No attention to integral components, their performance, or the wear characteristics is being assessed. Most people are deterred from purchasing refurbished items due to the notion of getting an inferior product

Remanufacturing is the process of disassembly and recovery. According to Wikipedia, “Remanufacturing differs from other recovery processes in its completeness: a remanufactured machine should match the same customer expectation as new machines.”  In remanufacturing, the entire product is taken apart.  All parts are cleaned and inspected and defective parts are repaired or replaced.  The product is reassembled and tested.  As unlikely as it may seem, remanufactured products are BETTER than their original cousins. Ray Jonaitis, Sr. VP of Operations at PRC Industries states that with one major floor care manufacturer, the product rejection rate is less than 1% of sales. He states, “We have processed hundreds of thousands of vacuums and the rejection rate is 0.5% as compared to 5% for the original manufacturer.” He goes on to explain, “The reason for this is very simple, part conformity is insured through multiple inspections and, in most cases, exceed the original factory standards.”

Remanufacturing - The Ultimate Recycling

In the 1970’s recycling was at a crossroads.  Slowly industry and consumers began to recognize the economic and environmental advantages of reusing components that had previously been discarded.  Today, remanufacturing takes that concept a step further.  Remanufacturing makes great strides in its efforts to conserve our natural resources, save energy, and decrease pollution.  Environmental groups are supporting the concept of remanufacturing as it does more to save the environment than traditional recycling.  Not only are the raw materials reused, as in recycling, but the value added to the raw material in the manufacturing process is also conserved. By extending product life, 85% of the energy that goes into the first manufacture of a product is saved.  There is less waste and less impact on landfills and disposal plants.  According to Arthur Krantz of PRC Industries, “PRC Industries’ ideology is reflected in our desire to keep returned products out of the nation's overflowing waste stream. To do this, we recycle hundreds of thousands of products each year. Remanufacturing is the ultimate method of recycling."

Governments from a local to global level are recognizing the value of remanufacturing.  President Bush addressed the issue of remanufacturing in a press release

We will launch the Reduce, Reuse, and Recycle ("3R") Initiative at a Ministerial Conference in spring 2005 hosted by the Government of Japan. In cooperation with relevant international organizations such as the OECD, we will seek through this initiative to:

• Reduce waste, Reuse and Recycle resources and products to the extent economically feasible;
• Reduce barriers to the international flow of goods and materials for recycling and remanufacturing, recycled and remanufactured products, and cleaner, more efficient technologies, consistent with existing environmental and trade obligations and frameworks….

The Consumer Advantage

While the general public has been well educated about the value of recycling, many consumers are still hesitant about buying remanufactured products.  Yet, the remanufactured product has undergone thorough testing and inspection and will meet or exceed the original factory standards. Sometimes an original weakness or defect in a product design is discerned and corrected in the remanufacturing process.  Care is given to the external appearance as well as the mechanics of a product, so the product is essentially “new.”  In addition, remanufactured products sell for less than the original product making it even more appealing to the consumer.  Further articles in this series will continue to discuss how remanufacturing benefits the consumer as well as the manufacturer.

The Manufacturer’s WIN-WIN-WIN

Even the best manufacturer is plagued by defects and returns.  The Destroy In Field strategy employed by many manufacturers for retailers is a real, hidden danger. While many wholesalers and retailers honor DIF, the real amount of slippage is skewed due to dishonorable or careless merchandisers claiming a defect and still selling the merchandise. While this is no surprise to many, the fact is that ‘brand’ perception can in fact be harmed due to this unscrupulous tactic.  Manufacturers have to deal with small margins and steep competition, so every dollar counts. Manufacturers can change the return losses into remanufactured profits.  Since so many products are manufactured overseas, local remanufacturing saves the OEM warehousing and shipping costs and turns waste into profit.  Ron Giuntini, Executive Director of TRI, “a global non-profit organization providing support for the marketing efforts of the aftermarket remanufactured products community” says, "Remanufacturing is the stealth business model.  Profit margins on the sale of remanufactured goods can be as high as 40%."  Remanufacturers preserve the integrity and reputation of the original product by eliminating defect and providing information about product weakness and durability to the OEM.   Companies like PRC Industries provide a multitude of services.  In addition to the actual remanufacturing, PRC has locations nationwide set up to expedite receiving returns, reverse logistics, warehousing, transportation, recycling and even the sale of returned products. 

Remanufacturing is a growing business.  Studies have shown that remanufacturing firms exhibit substantial growth and profit, even during economic recession.  According to Robert Lund and William Hauser in their study, Remanufacturing: An American Resource, in 2003, 70,000 remanufacturing companies employed 480,000 people and generated annual sales of 53 billion dollars. As the remanufacturing business gains the attention of industry and the public, it is sure to flourish.  The diversity of products and people benefiting from this business is vast.  Remanufacturers employ large numbers of skilled and unskilled workers.  Higher visibility will draw the support necessary from consumers, manufacturers and legislators who can do much to stimulate the industry.

We are on the threshold of a new era of industry and while recycling has been the buzz word for the Boomer generation, remanufacturing will be the buzz word for Gen X, Gen Y, Gen Z, and beyond.