Troubled Times? Remanufacture
Typically in the automobile industry, there is more wear and tear given the fact that mechanical parts are involved. So whenever we have a faulty engine, what do we do? We either send it back to the manufacturer (if it is within warranty) or go to a service mechanic. And when it is beyond repair, we scrap it (normally we buy it from a dealer who then takes custody of the old engine).
As companies struggle to cut costs in a dwindling economy, many of the automobile manufacturers have resorted to what we call as ‘Remanufacturing’.
Typically these companies receive the engine from the customer in lieu of a new engine (if it is within warranty). And when there is shortage of ‘Cores’ as it is normally known , it is bought from the open market. Once the Core is received, it is disassembled and an assessment is made of what all can be salvaged. There are certain parts which are beyond repair and are scraped. For the salvageable parts, they go through a typical cleaning process and further processing is done to deem them fit for further assembly.
In context of this, we have something called a ‘Replacement factor’. For example, suppose 30% of the total bearing bushes can be used and rest has to be procured new, the Replacement Factor in this case will be 0.7. Typically, the Bill of Material is designed in a way to accommodate this replacement factor which is typically changed once a month. This ensures that the Planning recommendations are in sync with the shop floor operations.
Typically, there are plants dedicated for these kind of operations and they normally operate as Cost Centres. The Bill of Material is designed in such a way that the salvaged part will have a zero cost while any new part will have a cost associated with it. There are common routings which are apportioned and hence there is no labor component as such per job. Also, some of the core is sent for outside processing which typically goes out as a Purchase Order.
Companies resorting to this business model have been able to save a lot of money and it has been equally good for the environment.
Comments
Exactly. This is a good way of reducing environmental wastes and will also help companies in these difficult economic times.
But this entails good processes in these companies to receive the products after use from the end customers.
Posted by: K N Harilal | January 2, 2009 8:59 AM