Geraldo Ferrer

Eco-efficiency, asset recovery and remanufacturing

In this article we consider the underlying imperatives driving the trend toward eco-efficiency and, especially, asset recovery, at the firm level. We show how the enormous potential for adding value while reducing material inputs can be realized in almost every sector of the economy. Many of these gains can be obtained by internalizing the product. In many cases there is a large scope for double dividends, by which we mean increased profits for the firm combined with environmental improvement. We also discuss the role of government regulation as a driver of change. Finally, we review a number of specific cases from (mostly) European firms, with emphasis on the potential for internalizing the product by recovery, remanufacturing and materials recycling. We conclude with a discussion of the economics, the regulatory environment and the organizational and management aspects of the problem.

Competitive advantage through take-back of used products

Abstract Motivated by a recent antitrust ruling against Hill–Rom, one of the two dominant American suppliers of hospital beds, we develop a stylized model to investigate the consequences of used product take-back on firms, industry and customers. Our findings suggest that by taking back and reselling refurbished products, a manufacturer can increase both profit margins and sales––to the detriment of a non-interfering competitor. In our model, customers are always better off under product take-back, but it depends on the degree of competition, whether firms use the benefits of take-back primarily to increase their margins or to pass them on to the customers by lowering their prices. The first firm to offer take-back, in some cases, can deter its competitors from following this profitable strategy, especially if it has an existing advantage in terms of lower production cost or higher market share. Contrary to the claim of Hill–Roms competitor, we find a “legitimate business justification” for Hill–Roms reduction of new product prices.

The economics of tire remanufacturing

Abstract The world market for tires is described to identify the current material flow from raw materials to tires and the used tire disposal problem. Then, I describe the value-adding operations in the tire production process and in the tire retreading process. Once retreading is identified as the only recovery alternative that maximizes tire utilization, I explain why heat generation is the only recovery alternative, when retreading is not technically feasible. The economic values of heat generation in electric plants and in cement kilns are discussed. The paper culminates with the case of retreading, the tire remanufacturing process and the recommendation of a simple decision rule for selecting the number of times a tire should be retreaded to maximize its utilization.

Value of information in remanufacturing complex products

Remanufacturing facilities usually face a trade-off between limited information about remanufacturing yields and potentially long supplier lead times. To improve production performance, these firms may attempt to acquire more timely and accurate information about remanufacturing yields or alternatively, to reduce the lead times of purchased parts. We develop four decision-making models to evaluate the impact of yield information and supplier lead time on manufacturing costs. We identify the operating conditions under which these capabilities are valuable, along with their relative impact on facility performance. Each model is formulated as an infinite horizon, stochastic dynamic program (Markov decision process). Our results indicate that the yield information is generally quite valuable, while investments in supplier responsiveness provide trivial returns to products with few parts. However, as product complexity increases with large number of target parts, the value of short lead times increases.

The Impact of Remanufacturing in the Economy

Very few durable goods are recovered at the end of their useful lives. However, this situation could reverse with the development of a stronger remanufacturing industry in the economy. This paper evaluates the impact of remanufacturing in a hypothetical situation where remanufacturing holds a significant share of the economy, presently dominated by the original manufacturing industries. It would have direct impacts on the demand for several inputs. We adapt the inter-industry input-output framework with the development of a methodology to consider these changes. Subsequently, we apply the model to the 30-sector aggregation of the French input-output national data to illustrate the nethod and to evaluate the impact that remanufacturing may have on the economy. The analysis assumes that remanufacturing sectors substitute labor and transport services for the usual inputs such as raw materials and semi-finished goods. We find that remanufacturing may satisfy the same final demand from all sectors requiring fewer intermediate resources, with proportionally higher demand of labor.

Yield information and supplier responsiveness in remanufacturing operations

Abstract When making used product disassembly and procurement decisions, managers of remanufacturing facilities usually face limited information on remanufacturing yields or a potentially long supplier lead time. To help making the decision, managers may attempt to identify the reparable parts early in the recovery process, to develop a responsive supplier with reactive capacity, or to implement an information system that helps to identify the wear state of the used machines that are available for remanufacturing. This paper provides optimal lot-size policies for each of these scenarios, which are then used to compare the relative value of the alternatives under a broad range of parameters. We find that: (1) as the yield variance increases, the benefits of developing early detection capability of the process yield at the disassembly stage outweigh the advantage of having suppliers with short lead times; (2) as the shortage cost increases, it is preferable to have a responsive supplier that can deliver with short lead times; and (3) as the purchase, repair or holding cost increase, it is preferable to have the capability to detect process yield early.

The economics of personal computer remanufacturing

Abstract Personal computers (PCs) are among the durable goods of shortest life cycle. Given the increased population of PCs, and their quick turnover, their disposal represents a considerable environmental concern. However, many users do not require the latest technology for running their applications. This opens an opportunity for renovated or remanufactured machines. This paper addresses the complexity of PC manufacturing and the difficulties in developing adequate recovery processes. A recovery process is proposed and evaluated. It allows the coexistence of two markets: one for remanufactured PCs and another for all-new PCs.

On the widget remanufacturing operation

Abstract For many materials, recycling technology (material recovery) is broadly available. However, the design of most products does not favor the recovery of added value. Products designed for optimal marketing and ease of manufacturing are not necessarily good candidates for a recovery scheme. This article provides a framework for designing an efficient remanufacturing procedure for a generic durable good at the end of its useful life. Design measures such as recyclability, disassemblability, and reusability are defined and used as the basis of the product recovery routine. A numerical experiment illustrates the framework.

The undershoot of the reorder point: Tests of an approximation

We investigate a widely used approximation for the mean and variance of the undershoot. The approximation is based on the limit of the excess random variable of a renewal process as the order size approaches infinity. In the current business environment which emphasizes small batch sizes and frequent deliveries, many inventory systems order in batch sizes that are not large. We investigate the potential error that could be introduced by using the approximation for a variety of batch sizes and demand distributions.

The residual life of the renewal process : A simple algorithm

We develop a simple algorithm, which does not require convolutions, for computing the distribution of the residual life when the renewal process is discrete. We also analyze the algorithm for the particular case of lattice distributions, and we show how it can apply to an inventory problem.