A sense of urgency and opportunity
- April 11, 2018
The US is a world leader in remanufacturing – but with a bit of input from government, interest groups and industry itself, it could grow faster, according to a report by Tessa Vlaanderen of Circular Futures.
“Whenever remanufacturing is technically feasible, it should be the first product recovery strategy to be considered as it maximises value generation for consumer and business”
The US is currently the world’s largest producer, consumer, and exporter of remanufactured goods – a surprise, perhaps, since the circular economy appears to get more coverage in other territories, Europe and China in particular. But building on the existing US leadership in remanufacturing would be an “attractive and effective way of growing the US circular economy”, suggests a new report. The US remanufacturing industry is expected to grow as a result of existing international market developments anyway, the report notes: “However, in a scenario of leadership and collaboration across US stakeholder groups, this predicted growth can be significantly larger. This scenario is not far-fetched: the benefits associated with remanufacturing address a broad range of growing concerns that can engage an increasing number of stakeholders in taking action to support the industry. Remanufacturing is worthy of attention and focus in the effort to mainstream a circular economy in the US.”
“Next steps should include awareness-raising initiatives, business development, and research, as well as the creation of collaborative roadmaps, frameworks or action plans”
Accelerating growth of the US Remanufacturing Industry: A Stakeholder Guide looks at practical steps which can be taken to make this a reality. It is written by Tessa Vlaanderen, the founder and principal consultant of Circular Futures, a New York-based consulting group and thinktank. She is a veteran in the circular economy field. As well as holding two degrees - a Master’s in sustainable process and energy technology and a Bachelor’s in mechanical engineering – from Delft University of Technology, Vlaanderen co-founded the Circular Economy Network and has worked with various corporates.
Quality and consistency
Only remanufacturing assures high quality and consistency, the report points out. “As a consequence, whenever remanufacturing is technically feasible, it should be the first product recovery strategy to be considered as it maximises value generation for consumer and business, and therefore of overall resource productivity,” Vlaanderen adds.
The report examines the activities of six key stakeholder groups. As well as independent remanufacturers (IR), original equipment manufacturers (OEM) and governments, it looks at:
- End customers, whose demand has been a “driving force” for reman – and by “shifting revenue from product sales to services, companies can meet that demand while positively impacting income”.
- Academic organisations, which “can catalyse collaboration in pre-competitive, public-private research and development, increasing insight into opportunities and progressing technologies”.
- Business interest groups, which increase industry alignment and visibility, and “articulate industry growth needs and opportunities, contributing to the effectiveness of government actions”.
While the role of the private sector is vital in developing reman, Vlaanderen argues: “The importance of government influence on the growth opportunities of the remanufacturing sector should not be underestimated. Past actions contributed to the strong position of the US remanufacturing industry today and ranged from stimulating government procurement as well as trade and market regulation (nationally and internationally) alongside stimulation of sustainable manufacturing innovation covering remanufacturing.” Governments can adapt market conditions to enhance OEM-IR collaboration and competition, to stimulate demand or to increase the availability and access to used products – although inter-agency co-ordination is crucial, she states.
But a great deal of effort is required to keep this up. While the US International Trade Commission report of 2013 was “very helpful in increasing industry visibility and developing international trade initiatives…the size and impact of the industry have not been assessed since”. There is room, Vlaanderen says, for the development of new product and customer segments, in B2B and B2C markets. Also, the importance of OEMs’ intellectual property interests has to be balanced with “consumer/independent remanufacturer/repair shop interests”: “’Right to Repair’ laws would enable remanufacturing as much as repair.”
Academia can also help – she cites the Rochester Institute of Technology’s efforts to promote reman – by developing multi-disciplinary education and research programmes, developing reman expertise and tailoring research to what stakeholders actually need.
Independents and OEMs
Independent remanufacturers have an essential role to play in growing reman, not least because – having lower margins than OEMs - they can capture opportunities. Also, Vlaanderen writes, “they are not hampered by a perceived threat to new product sales and therefore will often be the first, or in some cases the only ones, to remanufacture a specific product line”. Some OEMs, such as Caterpillar, see reman as an important part of their business model, but many OEMs choose not to remanufacture their products – and if they are involved in product recovery, it tends to be either recycling or refurbishing (of warranty products, for instance). Those OEMs who do remanufacture only ‘on the side’ “tend to miss out on the scale advantage which undermines business returns and further decreases its attractiveness”. But she sees OEMs as a key driver of reman growth for three reasons. They:
- can scale up quickly and aggregate volumes that drive economies of scale
- can play a leading role in unlocking foreign markets
- have a “unique capacity to contribute to remanufacturing progress regarding (smart) supply chain integration, production technology R&D and most importantly in designing for remanufacturing building on increasing volumes of customer data”.
Urgency and opportunity
In short, Vlaanderen sees the reman industry as being “increasingly well organised, raising awareness of governments at various levels on impacts of rules and regulations”. But she acknowledges: “Their effectiveness requires a broad and aligned membership base: quite a challenge considering the diversity in sectors, company sizes and interests they represent.” Nevertheless, Vlaanderen sees “a sense of urgency and opportunity for circular growth”. Describing her work as a “first step”, she thinks that follow-up studies could usefully examine the role of forward and reverse logistics firms. “More importantly, next steps should include awareness-raising initiatives, business development, and research, as well as the creation of collaborative roadmaps, frameworks or action plans. Those will truly impact the progress of remanufacturing within society, businesses, sectors, regions and the US as a whole,” she concludes.