A circular economy or closed-loop system is an industrial system which is regenerative or restorative by design (EMF and McKinsey, 2014) and replaces the concept of end-of-life disposal with various resource recovery methods such as reuse, reconditioning, remanufacturing and recycling.
A typical closed-loop system aims to minimize disposal by maximizing the use of the embodied energy embedded into the products. Higher gains in terms of material and energy usage can be expected if the loop is shorter (Stahel, 1994). Reuse and reconditioning have the shortest loop but they may not always be practical and effective. Recycling has the longest loop and not only uses the maximum amount of energy to recycle but also causes the loss of the embodied energy of the products.
One of the long established ways of participating in the circular economy is remanufacturing (commonly known as reman) which goes back to the point in the loop where, it not only salvages the material used but also captures the embodied energy required to make the product in the first place. It extends the life of a product by giving it a 2nd lease of life, which for premium vehicle manufacturers (VM’s) like JLR, prolongs the life of their both heritage and new vehicles market.
Remanufacturing can specifically be defined as an industrial process performed on an old worn out unit or on an end of life part (commonly known as ‘core’) which undergoes a series of steps (see fig 1.3) such as disassembly, cleaning, inspection, replacement/reconditioning, reassembly, and testing after which the core is returned to a ‘like-new’ or in some cases, better than new condition with a warranty to match(based on Steinhilper, 1998; APSRG, 2014b; Ijomah, 2002; CRR, 2009; BS8887-2, 2007).
Other benefits include opportunity for improving the product design with new offerings, reduced production costs of 40% to 65% than new products (no tooling and development costs), typical 30% to 40% savings for the customer to buy (Giuntini & Gaudett, 2003), 60-80% less environmental impact (Steinhilper, 1998), and reduction in waste diverted to landfills and waste streams.
The traditional candidates for remanufacturing have been engines and transmissions from the capital goods, automotive and defense industries (Giuntini & Gaudett, 2003). But many companies have now spread beyond these standard ‘big lump’ items into various other components and built new streams of revenue generation by capturing the lost value in the products once they reach their end of life. In the UK, remanufacturing is about £5 billion industry and growing (CRR, 2013; Lavery et al, 2013) and vehicle manufacturers like JLR stand to take advantage of this growing trend.
However, several barriers exist in the uptake of remanufacturing such as, complexity in reverse logistic channels (Blumberg, 2006; APICS, 2014), inaccurate core valuation, and different pricing and accounting methods to those of new products (Sundin et al, 2013). The quality, quantity and timing of the core collection can be variable and unpredictable for a profitable remanufacturing operation (Gallo et al, 2012). Also, trade barriers exist in terms of either excessive tax levied by countries or outright rejection of imports of remanufactured products since they come under the category of ‘used’ parts.
The biggest hindrance in remanufacturing for any manufacturer is the products inability to be remanufactured effectively. In other words, products are not designed to be remanufacturable (Ijomah, 2007; Sundin, 2004; Charter & Gray, 2008). While the cost argument is strong, in future, the sustainability argument of material, resource and energy savings will alone be strong enough to warrant the design of products suitable for remanufacturing.