5.1. Uncertainty in the timing and the quantity of returns
Characteristic (1), the problem of uncertainty in timing and quantity of returns is a reflection of the uncertain nature of the life of a product. A number of factors including the life-cycle stage of a product and the rate of technological change will influence the rate of returns.
The product returns process is highly uncertain with respect to timing, when cores are available for re-manufacturing; and quantity, how many cores are available. The problem of core acquisition requires that core availability be forecast for planning purposes, for both quantities available and the timing of availability. This forecast should be compared with the demand forecast to determine whether sufficient cores are available to meet demand (which we discuss in Section 5.2). Firms report activities that assist in the control of the timing or the quantity of returns, but not both. Over half (61.5%) of the firms report that they have no control over the timing or quantity of returns. Firms reporting some degree of control mainly used some form of core deposit system. Core deposit systems are intended to generate a core when a remanufactured product is sold. Most companies report requiring a trade-in, or charging a premium if no core is returned (80%). A small percentage of firms (5%) use leasing of the item to reduce timing uncertainties. However, these activities only reduce the quantity uncertainty of returns. Return policies do little to reduce the timing aspect of returns since a sale generates a return-a stochastic event itself. Leased equipment may have the lease renewed or the equipment purchased. Because of these uncertainties in returns quantities and returns timing, re-manufacturing firms report core inventories account for one-third of the inventory carried (Nasr et al., 1998). Presumably, higher levels of cores are held to buffer against variation in the supply of cores and the variability in demands.
5.2. Balancing returns with demands
Characteristic (2), the problem of balancing returns with demands, is also a function of a product’s expected life and the rate of technical innovation. The goal, in order to maximize profits, is for a firm to be able to balance the returns of items from consumers with demand for re-manufactured items. This need to balance return and demand rates complicates inventory management and control functions, and requires additional coordination between functional areas to effectively manage.
Re-manufacturing firms seek to balance return and demand rates to avoid excessive amounts of inventory from building up (where returns exceed demands), or low levels of customer service (where demand exceeds returns). Almost half of the firms (46.1%) report that they attempt to balance returns with final demand. The remaining firms do not attempt to balance returns with demands, preferring instead to dispose of excess inventories on a periodic basis. About half the firms base core acquisition on a mix of actual and forecasted demands, but one-third of firms report using only actual demand rates. Firms using only demand-based rates to acquire cores generally use MTO or ATO strategies, and commonly use work-in-process inventory to buffer against lead-time and demand uncertainty. The MTS firms relying solely on actual demand rates reported no difficulties obtaining sufficient cores. However, one-quarter of the firms report that no excess of cores exists, and their major product acquisition management problem is identifying reliable sources of sufficient quantities of cores. The remaining firms report several methods of dealing with excess materials, including using excess parts as spares (5%), placing the excess cores into a holding warehouse (22.7%), trading excess cores with other re-manufacturing firms (10%), and selling the excess parts and cores to scrap dealers (41%).
The core acquisition problem requires coordination amongst the various functional areas to provide the proper balance of cores and purchased replacement parts, and to ensure a balance of return and demand rates. Core acquisition activities at a typical firm include identifying the potential sources for cores, and establishing preferences based on various criteria (e.g., quality, cost, etc.). We defer this discussion to Section 5.5.
Secondary effects of this characteristic include materials management, and resource planning. Materials management activities are influenced by core acquisition activities since replacement lot sizing is dependent on the expected volumes and condition of cores. In the event replacement parts are not available, excess cores may be cannibalized for needed replacement parts. Inventory control and management techniques should be developed specifically for cores since many remanufacturing firms report that excess cores require costly storage space, and that disposal costs may be high. Finally, production decisions with respect to staffing and scheduling are dependent on core acquisitions and timing. When new parts production co-exists with remanufacturing using shared resources, this information becomes even more crucial since resource contention becomes more pronounced.
5.3. Disassembly
Characteristic (3), returned items must be dis-assembled before the product may be restored to full use. The effects of dis-assembly operations impact a large number of areas, including production control, scheduling, shop floor control, and materials and resource planning. The disassembly and subsequent release of parts to the remanufacturing operations requires a high degree of coordination with reassembly to avoid high inventory levels or poor customer service.
Disassembly is the first step in processing for remanufacturing and acts as a gateway for parts to the remanufacturing processes. Products are disassembled to the part level, assessed as to their re-manufacturability, and acceptable parts are then routed to the necessary operations. Parts not meeting minimum re-manufacturing standards may be used for spares, or sold for scrap value. Purchasing requires information from disassembly to ensure that sufficient new parts are procured. Nasr et al. (1998) report that disassembly is not simply the reverse of assembly, and that a good design for assembly is not necessarily a good design for disassembly. Two-thirds of re-manufacturing firms must practice reverse engineering to generate dis-assembly sequences, and this set of activities is time consuming (average time 22.7 days per product) and expensive (average cost $37k per product). Our survey findings indicate that three-quarters of products remanufactured are not designed for disassembly, and this has a significant impact on operations. Products not designed for dis-assembly have less predictable material recovery rates (MRRs), higher dis-assembly times, and generate more waste. Parts may be damaged during disassembly, especially on products not designed for disassembly, and this often increases material replacement rates.
In general, disassembly operations are highly variable with respect to the time required. Our respondents reported that disassembly times ranged from minutes to weeks, with very large variances in required times to disassemble like-units. The average times reported to disassemble a typical product ranges from a low of 5.54 h to a high of 300 h. All products exhibit a wide range of average times for the dis-assembly of identical products. The variances associated with disassembly times may be very high, with coefficients of variance (CVs) as high as 5.0. This uncertainty makes estimating flow times difficult and setting accurate lead times almost impossible. The majority of remanufacturers stated that they were under constant pressure to reduce lead times in order to remain competitive with OEMs.
One of the decisions facing a planner is how to release parts from the disassembly area to the remanufacturing shops. Firms report using pull, push, and push/pull release mechanisms. Our experience has shown that careful coordination is required between dis-assembly and reassembly to provide short, responsive lead times. Disassembly activities are also labor intensive with no automated techniques reported. This is a function of the current paradigm of design for disposal, and as design engineers become more aware of the problems associated with dis-assembly, presumably the outcome of dis-assembly operations will become more predictable.