The New 'R' On the Block

May 21, 1999

By Michael Jessen

Move over reduce, reuse, and recycle. There’s a new ‘R’ in your neighbourhood and its name is remanufacturing.

According to a Boston University professor, the remanufacturing industry is a “hidden giant” and has more environmental and economic benefits than recycling.

Remanufacturing is actually the ultimate recycling. It is defined as the process of disassembly of products during which time parts are cleaned, repaired, or replaced then reassembled to sound working condition.

The Remanufacturing Industries Council International (RICI) is an industry group which fosters cooperation among remanufacturing industries. RICI says hundreds of distinct products are now being remanufactured including motor vehicle parts, office furniture, compressors, electrical apparatus, vending machines, photo copiers, laser toner cartridges, computers and other data communication equipment, gaming machines, musical instruments, robots, aircraft parts, and bakery equipment. The list goes on.

Professor Robert Lund of the Manufacturing Engineering Department of Boston University compiled a report on remanufacturing and discovered some startling facts about the industry’s size.

Lund’s investigation showed 73,000 remanufacturing firms have total annual sales of $53 billion. And these firms provide direct employment to 480,000 people, twice the level of the American steel industry and equal to the entire consumer durables industry. Remanufacturing is a major force in the economy, says Lund. “Remanufacturing industry sales are greater than the value of shipments of the entire consumer durables industry (appliances, furniture, audio and video, farm and garden equipment).”

While recycling reduces the quantity of waste headed for landfill space and adds multiple lives for the earth’s raw materials, remanufacturing offers a better alternative says Lund.

“Remanufacturing differs from recycling, most importantly, because it makes a much greater economic contribution per unit of product than does recycling,” he says. “The essential difference arises in the recapture of value added.”

Lund explains that each product made has value added to the basic cost of raw materials in its manufacture. This value added takes the form of cost of labour, energy, and manufacturing operations.

“Recycling destroys that value added, reducing a product to its elemental value – its recoverable raw material constituents,” Lund continues. “Further, recycling requires added labour, energy, and processing capital to recover the raw materials.”

Studies performed at the Fraunhofer Institute in Stuttgart, Germany showed energy savings by remanufacturing world-wide in a year equals the electricity generated by 10,744,000 barrels of crude oil which corresponds to a fleet of 233 oil tankers. The institute also determined that raw materials saved by remanufacturing worldwide in a year would fill 155,000 railroad cars forming a train 1,100 miles long. Because products that are remanufactured are kept out of the waste stream longer, landfill space is preserved and air pollution is reduced from products that would have had to be resmelted or otherwise processed.

The March/April 1999 issue of the Harvard Business Review featured a cover wrap on remanufacturing produced by RICI and the Buy Recycled Business Alliance urging companies to consider purchasing remanufactured products. It concludes with the following: “There have never been better reasons to take advantage of the trend towards remanufacturing – improved products, lower costs, warranties and significant contributions to the conservation of natural resources. Remanufacturing is an important tool in the resource conservation and recycling tool kit. It’s not only good environmental strategy; it’s also good business strategy.”

John Elkington, author of the best-selling book about business strategy and leadership “Cannibals With Forks”, says that the world is moving toward eco-efficiency and companies will have to change their ambitions from production growth to sustainable consumption.

The World Business Council for Sustainable Development agrees and says, “companies which manage their resources more efficiently will gain a competitive advantage.”

Elkington uses the example of Xerox to illustrate the potential of remanufacturing. For Xerox, “this involves taking back older photocopiers and refurbishing them to the point where they can be resold or leased again. These machines are designed to be ‘as-good-as-new,’ and are covered by the company’s standard three-year guarantee.” Xerox saved over $12 million through worldwide recycling programs in 1995, a year in which the company’s Rank Xerox joint venture recovered 80,000 of the 120,000 photocopiers discarded in western Europe. Elkington says Rank Xerox saved about £50 million on purchases of virgin raw materials by reusing recovered equipment and 7,000 tonnes of material were diverted from the landfill.

Remanufacturing is obviously improving the environmental performance of products and many are now being designed specifically with remanufacturing in mind. Remanufacturing – a good example of win-win.

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