By Paulina Golinska1 ,and Arkadiusz Kawa2
The automotive industry is the highly consolidated sector, with the global overcapacity of about 30%. The market is rather saturated and demand is driven by product replacement. The profit margin on new cars is relatively low, particularly in the low price/high volume segments of the market. The global downturn in sales in years 2008-2009 has forced automobile makers to review their structures and processes.
Moreover, since 2002 EU has introduced End of Life Vehicle Directive that requires manufacturers to reach the goal of new vehicles reusability and/or recyclability of at least 85%, and reusability and/or recoverability of at least 95% by weight, if measured against the international standard ISO 22620 (EAIR, 2009).
The RRR Directive 2005/64/EC on type approval of vehicles for reusability, recyclability, and recoverability came into force in December 2005 and requires cars and light vans (M1/N1), newly introduced to the market after December 2008 to be 85% reusable and/or recyclable and 95% reusable/recoverable by mass (SMMT, 2007). Focus on recyclability has driven the new model planning process. Newly applied advanced recycling methods (post-shredder treatment) allow nowadays the recycling and recovery of literally all materials. Moreover, there is a shift in design approach so-called product modularity. It allows improving disassembly operations. To speed up the dismantling operations all components are labeled in accordance with international ISO standards, enabling materials to be sorted according to their type. In order to reach the challenging goal of 95% recovery target by 2015, some efficient material separation technologies for end-of-life vehicles are promoted that allow the utilization for shredder residue and boosting the usage of recycled materials for some specific car components.
The EU is the still the largest automotive production region (27%) in the world, despite the incremental growth of car production in China in 2010. At the end of 2008 in Europe, there was altogether over 226 million of passenger’s car in use, including 73 million older than 10 years. The average age of the car in “old” UE 16 countries was 8.2 years, including the rest of European countries it is increased to over 11 years (ACEA, 2010). The problem of the old car is growing but this aftermarket trends also create opportunities, including a growing market for remanufactured products. Several characteristics of cars make this a difficult market in which to implement product recovery: a long and unpredictable working life, an ability to cross international boundaries, reselling between different owners, and, therefore, difficulties in tracking the product during its active life (Seitz & Peattie, 2004). Remanufacturing for major car components, such as engines, is less problematic.
The automobile industry has the longest tradition in remanufacturing among all industries. The automotive products’ remanufacturing accounts for two-thirds of all remanufacturing activities globally (Kim et al., 2008). Remanufacturing is a common practice in the automotive industry because 10% of all cars and trucks require an engine replacement during their life. Starters and alternators are, besides car engines the most typical products to be remanufactured due to the fact that most car requires two of each throughout their lives. These components are mass produced and remanufactured by thousands of companies. About 300 starter motor and alternator remanufacturers are active worldwide. 50% of the companies are US producers; the other 30 % of the companies are located in Europe. Their production volumes together are about 50 million pieces, which constitutes more than 80% of the overall remanufactured products (Kim et al., 2008).
In Europe, OEMs have just discovered the aftermarket profit potential of remanufactured products. There are three major market sectors: OEMs, including vehicle manufacturers and their first tier suppliers; remanufacturers subcontracted to the OEMs; and independent remanufacturers (Seitz & Peattie, 2004). In this article, the emphasis is placed on OEMs, including vehicle manufacturers and their first tier suppliers.
Remanufacturing vs. Manufacturing
Remanufacturing differs a lot from traditional manufacturing. Many authors have pointed as a key complication the need to deliver products from many locations to one processor in a “many to one transportation” or “many to one distribution points” system (Tibben-Lembke & Rogers, 2002). Constructing the reverse channels is perceived as a major obstacle to closed loop supply chain management in terms of the physical locations, facilities, and transportation links that need to be established and managed (Fleischmann et al., 2001). In this article, authors highlight the problems that appear within OEM’s facility.
In table 1 authors have presented the comparison of the traditional manufacturing process and remanufacturing process in the automotive industry.
|Materials and work –in-progress inventory level||just-in-time, just-in-sequence, low safety buffers||high –buffering against uncertainty|
|Inventory replenishment||standardized procedures||ad hoc|
|Process lead time||predictable||variable/ not following simple stochastic patterns|
|Delivery lead time||predictable||Variable|
The main problems in materials management for remanufacturing purpose can be defined as: The remanufacturing process lead times differs significantly and depends on reprocessing activities needed in order to disassembly and recover the used parts. In general disassembly operations are highly variable with respect to time required. Moreover the reprocessing may include different operations for the same type of returns depending on their conditions. Some operations/tasks are known with certainty but an appearance of others might be probabilistic. It makes setting accurate lead times for remanufacturing very difficult.
· the uncertain timing and quantity of returns
· the uncertainty in materials recovered from return items
· the reverse logistics network configuration
· the problems of stochastic routings for materials for remanufacturing operations and highly variable processing times
NOTE: Most of the above-mentioned characteristics result from lack of appropriate information on material flows and its forecasting.
About the Authors:
1Poznan University of Technology, Strzelecka 11, 60-965 Poznan, (POLAND)
2Poznan University of Economics, al. Niepodleglosci 10, 61-875 Poznan, (POLAND)
Cite this Article:
Golinska, P.; & Kawa, A. (2011). Remanufacturing in automotive industry: Challenges and limitations. Journal of Industrial Engineering and Management, 4(3), 453-466. http://dx.doi.org/ 10.3926/ jiem.2011.v4n3.453-466
EAIR, (2009). European Automobile Industry Report 2009, www.acea.be – Accessed 20th December 2010.
SMMT, (2007). 9th Sustainability Report-The UK automotive data 2007, http://www.smmt.co.uk – Accessed 20th December 2010.
ACEA, (2010). Report “Used vehicles 2003-2008”, www.acea.be – Accessed 20th December 2010.
Seitz, M., Peattie, K. (2004). Meeting the Closed-Loop Challenge: The Case of Remanufacturing. California Management Review, 46(2), 74-89.
Kim, H.J., Severengiz, S., Skleros, S., & Seliger, G. (2008). Economic and environmental assessment of remanufacturing in the automotive industry, 15th CIRP International Conference on Life Cycle Engineering.
Tibben-Lembke, R.S., & Rogers, D.S. (2002). Differences between forward and reverse logistics in a retail environment. Supply Chain Management: An International Journal, 7(5), 271-282.
Fleischmann, F., Beullens, P., Bloemhof-Ruwaard, J.M., & van Wassenhove, L.N. (2001). The Impact of Product Recovery on Logistics Network Design. Production and Operations Management, 10(2), 156-173. http://dx.doi.org/10.1111/j.1937-5956.2001.tb00076.x
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