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remanufacturing_of_shortlife_cycle_products__1_.pdf
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OPERATIONS AND SUPPLY CHAIN MANAGEMENT
Vol. 7, No. 1, 2014, pp. 13-22
ISSN 1979-3561 | EISSN 1979-3871
Remanufacturing of Short Life-cycle Products
Shu San Gan
Department of Mechanical Engineering, Petra Christian University, Surabaya 60236, Indonesia
E-mail: gshusan@peter.petra.ac.id
I Nyoman Pujawan
Department of Industrial Engineering, Sepuluh Nopember Institute of Technology, Surabaya 60111,
Indonesia
E-mail: pujawan@ie.its.ac.id (Corresponding Author)
Suparno
Department of Industrial Engineering, Sepuluh Nopember Institute of Technology, Surabaya 60111,
Indonesia
E-mail: suparno@ie.its.ac.id
ABSTRACT
Rapid development and innovation in science and technology
have resulted in shorter product life-cycle, especially in
technology-based commodities like mobile phones and
computers. Mounting wastes from such products have received
increasing attentions from government, society, as well as
industries for sustainability concerns. Numerous studies on
remanufacturing have been found on durable goods, but only a
few focusing on short life-cycle products. Even though several
studies implied that successful remanufacturing requires
products to have long useful life and stable technology, there
are other findings that support remanufacturing of short lifecycle products. It is our intention to investigate
remanufacturing of short life-cycle product. A literature
review is conducted to study the pros and cons, life-cycle
implication, and remanufacturing aspects of short life-cycle
products. Then we propose a framework that can be used to
decide and plan the remanufacturing system. Furthermore, we
conduct a survey to obtain descriptive analysis about the
market potential for remanufactured short life-cycle products.
The factors investigated are existence of demand, customer’s
willingness to pay (WTP), and existence of green segment. The
survey results show that low-end customers are the potential
market segment for short life-cycle remanufactured product,
because they have the highest preference toward
remanufacturing and 95% of them chose remanufactured
product when the price is less than 40% of new product. It is
also shown that green segment exists since 42%, 65%, and
47% of customers from high-end, low-end, and student subgroup respectively consider buying remanufactured products
over new ones driven by their concern for the environment.
Keywords: remanufacturing, short life cycle product, framework,
survey, market potential
1. INTRODUCTION
In an increasingly competitive global market,
innovation has become one of the keys for successful
enterprises. Rapid innovation and development in science
and technology coupled with rapid changes in consumer
behavior due to internet technology has shortened product
life cycles (Lebreton & Tuma, 2006; Wu et al., 2006;
Xianhao & Qizhi, 2007; Briano et al., 2010a). As a result,
technology-based product becomes obsolete quickly
(Beamon, 2008) and reaches its end-of-use (EOU), when
consumer switches to product with newer technology even
though the old product is still functioning. Technologybased product at its EOU usually still has a relatively high
value, so it has the recovery or reuse potential. In addition to
the economic benefit, the motivation for performing
recovery process is reducing the waste disposed to the
landfill by extending the life of product at its EOU, delaying
product disposal or diverting its function. Thierry et al.
(1995) identified several alternatives for recovery process,
i.e. repairing, refurbishing, remanufacturing, cannibalization, recycling, and direct reuse. Remanufacturing is an
option that gives the upgrade effect on the highest scale,
which is expected to be a feasible option for recovering
short life-cycle product at its EOU.
Most of remanufacturing literature considers durable or
semi-durable products, such as heavy equipments,
photocopiers, and automotive engines. However, life cycle
of technology-based product is getting shorter and shorter,
which poses a threat to sustainability in terms of excessive
use of natural resources and energy, as well as faster landfil
waste buildup. On the other hand, the huge availability of
used products that still have value for use indicate potentials
for remanufacturing. Therefore, we believe that remanufacturing of short life-cycle product could be a good
approach for addressing this sustainability issue and for
tapping the remaining values of the short-life cycle products
at their EOU. However, we still need better understanding
whether remanufacturing of short-life cycle products is
economically feasible from the market point of view
requires. In this study, we investigate the potential to
remanufacture short life-cycle product. The study is divided
into two major parts. The first is development of a decision
model for remanufacturing shrt life cycle products, which is
preseted in section 3. The second part is a survey of market
potential for remanufactured mobile phone which is
presented in section 4.
Gan et al. : Remanufacturing of Short Life-cycle Products
Operations and Supply Chain Management 7(1) pp. 13-22 © 2014
14
2. REMANUFACTURING OF
SHORT LIFE-CYCLE PRODUCT
2.1 Pros and Cons on short life-cycle product
remanufacturing
Remanufacturing is a process of transforming nonfunctional, removed or exchanged products into “like-new”
condition (Lund & Hauser, 2009; Gray & Charter, 2008).
Remanufacturing also results in reduction of energy and the
use of natural materials, as well as reduction in the cost of
production (Gray & Charter, 2008). Additionally,
Kaebernick et al. (2006) proposed that remanufacturing can
improve the eco-efficiency and reduce environmental impact
through the use of technology. Remanufacturing process
involves collection of used products, inspection,
disassembly, cleaning, reconditioning (includes repairs and
upgrades), reassembly, and testing. One of the main
problems in remanufacturing is retrieving sufficient amount
of used products at the right quality. The amount and timing
of product returns depends on the type of product. Factors
such as products’ useful life, the pace of technological
innovation and the rate of components’ failure also
influence the rate of return from EOU products (Ostlin et al.,
2009).
There are several findings that claim durability as one
of the critical factors for successful remanufacturing.
Lebreton & Tuma (2006) claimed that by promoting aspects
such as prestige, modernity or security, remanufactured
items of those products tend to be discredited. Also,
technology based commodities (such as mobile phone,
computer) face short innovation cycles, which consequently
make the previous generation psychologically and
functionally obsolete. Gray & Charter (2008) suggest that
successful remanufacture requires that product technology is
stable over more than one life cycle and unlikely to be
successful when the evolution rate is high. The term
evolution used here refers to technological change,
legislation, and upgrade potential. In the mean time, Ostlin
et al. (2009) and Ferguson & Souza (2010) find that the rate
of technological innovation and long useful life are the
major influencing characteristics to the balance between
product returns and demand for remanufactured products.
However, several studies find that life cycle of
technology based products such as computers, mobile
phones, and networking equipment is getting shorter due to
rapid innovation in technology as well as rapid changes in
customer preference (Lebreton & Tuma, 2006; Wu et al.,
2006; Xianhao & Qizhi, 2007; Beamon, 2008; Guide et al.,
2003; Helo, 2004, Briano et al., 2010b; Hsueh, 2011). When
product life cycle is getting shorter, there would be more
products discarded even though they are still in good
conditions and well-functioning. This ultimately creates a
problem on waste disposals. Green supply chain initiatives
has been adopted as a respond to this problem, such as green
purchasing, eco-design and reverse logistics (Eltayeb, 2009),
and remanufacturing is one of several processes in
conjuction with the reverse logistics. Even though some
studies mentioned earlier implied that successful
remanufacturing requires products to have long useful life
and stable technology, there are several findings that support
remanufacturing of short life cycle products. Steinhilper
(1998) found the increasing volume of electronic products
disposals that are not just look like new but also 80% of
them are still working. This condition offers an ideal base
for remanufacturing including modernization by upgrading
or upcycling. He also suggested, if the whole electronic
product can not be remanufactured, then remanufacturing of
the components is also an important solution approach,
which is also supported by Xing et al. (2007). Guide et al.
(2003) show that remanufacturing of short life-cycle product
is not only feasible, but can be profitable given well
managed product acquisition. Remanufacturing of mobile
phones has been studied by several authors in different
countries and the findings shows that it has great potential in
recapture value, recover assets, reduce energy and provide
economic benefits (Franke et al., 2006; Tong, 2006; Chan &
Chan, 2008; Neto & Bloemhof-Ruwaard, 2009; Rathore et
al., 2011; Wang et al., 2011).
Remanufacturing also significantly reduces the amount
of energy used in the product life cycle, even though the
effectiveness of remanufacturing is very sensitive to the life
span of the second life of the product. The period of the life
cycle in which the product is returned to recovery, the
quality of the product, the easiness to remanufacture and the
consequent recovery costs can affect
whether
remanufacturing is more eco-efficient than manufacturing
(Neto & Bloemhof-Ruwaard, 2009; Neto et al., 2010; Neto
& Bloemhof-Ruwaard, 2012). Within the context of
electronic and electrical equipments, Nnorom & Osibanjo
(2008, 2010) recommend careful use of products, repair,
refurbishing and remanufacturing, as attempts to extend
product life cycle. Again, the importance of remanufacturing
of electronic products is stressed since remanufacturing can
extend a product’s life, improve the re-usability of
components, reroute waste and energy, and at the same time
create economic value. This finding is a corroboration of
similar claim by Kerr & Ryan (2001), Kaebernick et al.
(2006) and Lee et al. (2010). Instead of considering the
whole product, Kwak & Kim (2013) recognize there is a
significant challenge to product recovery for technological
obsolescence of end-of-life product, and use the concept of
part upgrades in remanufacturing. In Europe and the United
States, the decisions to remanufacture electronic products
are encouraged by government regulations such as WEEE
(2003) and RoHs (2003), and as a form of responsibility for
environmental conservation (Chung & Wee, 2011).
Considering the mounting wastes from electronic products
nowadays, the potential of remanufacturing practices in
reducing waste sent to the landfill, as well as in reducing
production costs becomes clear. We believe that
remanufacturing short life cycle product is rewarding
economically as well as environmentally.
2.2 Life-cycle implication
Several studies have been done to investigate the life
cycle impact on the reverse flow of the supply chain.
Tibben-Lembke (2002) studies how reverse logistics is
affected by changes in sales throughout the product life
cycle. Product life cycle is divided into three levels, namely
the product-class, products-format, and product-model. A
new type of product belongs to the first category; a new
form of existing product-class goes to second category,
Gan et al. : Remanufacturing of Short Life-cycle Products
Operations and Supply Chain Management 7(1) pp 13-22 © 2014
while a new model of existing product-form is placed in the
last category. Georgiadis et al. (2006) studied how the
product life cycle and optimal patterns of product-returns
relate to the expansion decisions for collection and
remanufacturing
capacity,
and
influence
the
remanufacturing decisions. The relationship between
residence time and length of product life cycle is also
considered. As for the problem of balancing the supply and
demand for remanufactured products, Ostlin et al. (2009)
analyze the implications of the life cycle to the
remanufacturing system, using three scenarios namely
product remanufacturing, components remanufacturing and
parts cannibalization. The period a product in the hands of
consumers also influences the residual value of the product,
which in turn affects the strategy of the reverse supply chain
(Gobbi, 2011).
2.3 Remanufacturing factors
There are numerous studies in investigating the factors
that influence decision to remanufacture as well as the
factors for successful remanufacturing. We categorized the
factors into four aspects, namely product characteristics,
demand-related factors, process-related factors, and supplyrelated factors.
Product characteristics of short life cycle products,
consists of (1) innovation rate, as an extension to
technology factor that was reported by Lund & Hauser
(2009), Ferguson & Souza (2010), Souza (2009), and
Lebreton (2007); (2) residence time as pointed out in
Debo et al. (2005); (3) product residual value, according
to a study by Gobbi (2008); and (4) qualitative obsolesce,
as an extension to product characteristics, that was
presented by Subramanian et al. (2013) and de Brito &
Dekker (2004).
Demand-related factors, consists of (1) market size or
existence of the demand, as reported in Ferguson &
Souza (2010), Souza (2009) and Vasudevan et al. (2012);
(2) market channel, selling remanufactured products using
the same channel as the new product, or differentiated,
proposed by several authors i.e. Lund & Hauser (2009),
Ferguson & Souza (2010), Souza (2009), Lebreton
(2007), Debo et al. (2005), Thierry et al. (1995), Guide et
al. (2003), and Geyer & Jackson (2004); (3) pricing of
new and remanufactured products, with demand as a
function of, that was shown by Ovchinnikov (2011),
Qiaolun et al. (2011), Qiaolun et al. (2008), Ferguson &
Toktay (2006), Ferguson & Souza (2010), Souza (2009),
and Guide et al. (2003); and (4) existence of green
segment, proposed by Subramanian et al. (2013) and
Atasu et al. (2008b).
Supply-related factors can be described by: (1) acquisition
price, and (2) source of return, whether it is limited and
poses as a constraint, or unlimited These factors were
studied by Lund & Hauser (2009), Ferguson & Souza
(2010), Souza (2009), Subramanian et al. (2013),
Vasudevan et al. (2012), and Ayres et al. (1997).
The process-related factors consist of (1) remanufacturing
technology availability, proposed by Lund & Hauser
(2009), Ferguson & Souza (2010), and Ayres et al.
(1997); (2) remanufacturing cost, as presented by Lund &
Hauser (2009), Ferguson & Souza (2010), Souza (2009),
Debo et al. (2005), Gobbi (2008), and Ayres et al. (1997);
15
(3) reverse flow structure readiness, that was reported in
several studies i.e. Lund & Hauser (2009), Lebreton
(2007), Vasudevan et al. (2012), Ayres et al. (1997),
Guide & Wassenhove (2001), Zanoni et al. (2006), and
Lashkari & Zhang (2008).
3. FRAMEWORK OF SHORT-LIFE
CYCLE PRODUCT
REMANUFACTURING
From the literature review and our comprehension to
the overall remanufacturing issues, we are able to develop a
framework for remanufacturing of short life-cycle products.
The framework is built started from identifying forward and
reverse flow of the supply chain, and consider the possible
alternatives when dealing with short life-cycle products. In
terms of product life-cycle level, we only consider productmodel, since new model is lauched in a very short period
after launching the current model of the technology-based
commodity. But for product form and product class, the
length of life-cycle is quite long.
3.1 Short life-cycle remanufacturing flow
New product model introductions are usually very
effective for early adopters and high end customers, where
added features are not too significant to change the product
form but mostly for improving convenience or fashionable
design, as well as for increasing the level of emotional
attachment between product and user (Tibben-Lembke,
2002). Since product-class and product-form have been
introduced earlier, remanufacturing of product-model could
be implemented with less complication. Acquisition of used
product, or collection scheme, can be very challenging
because there is high uncertainty in the quantity and quality
of the returns, as well as reverse supply chain network
problems. However, collection scheme for product-model is
often similar to the one for existing product-class or
product-form; therefore the readiness is usually higher in
terms of network availability which could reduce
uncertainty in returns quantity. Also, some firms consider
that effective return management can impact on competitive
advantage (Hsiao, 2010; Vidovic et al., 2011). Quality
problems usually are not too significant since customers
have learned from the previous levels about the quality of
remanufactured product compared to new product. Since
maturity phase is typically very short, the design of supply
chain flow is important.
There are many reasons behind product returns as
explored by de Brito & Dekker (2004), and categorized into
manufacturing returns, distribution returns and customer
returns. Faulty, left-over and by-product within
manufacturing returns are internal ones which usually have
been accounted in the manufacturing processes. Most of the
distribution returns are suitable for remanufacturing because
they retain highest added value; as they are typically
business-to-business (B2B) commercial returns such as
unsold or damaged deliveries, or they could be the results of
stock adjustments and product recalls. Short life-cycle
products within this distribution time frame would still have
high innovation value, and would be good inputs for repair
and remanufacturing. As for customer returns, there are only
Gan et al. : Remanufacturing of Short Life-cycle Products
Operations and Supply Chain Management 7(1) pp. 13-22 © 2014
16
several types of returns that would be suitable for
remanufacturing; those are business-to-consumer (B2C)
commercial returns, warranty and service returns. End-ofuse customer returns are not all remanufacturable, since
sorting and inspection are required beforehand. However,
some of the returns may not be good for remanufacturing,
such as end-of-life customer returns. We propose a short
life-cycle product remanufacturing flow as depicted in
Figure 1.
Product returns may occur for several reasons over the
product life-cycle, as pointed out by Flapper et al. (2005),
Guide & Wassenhove (2009), and Cuc & M Vidovic (2011).
Dominant pairings between type of returns and recovery
options are provided by Guide & Wassenhove (2009).
Remanufacturing is not limited to product remanufacturing
but also include component remanufacturing, as suggested
by Ostlin et al. (2009), Xing et al. (2007), and Steinhilper
(1998). We extend Guide & Wassenhove’s pairings to
differentiate product and component remanufacturing and to
include the type of market for recovered product. Since B2B
and B2C commercial returns are obtained within a short
period of time, they are in prime conditions for short lifecycle product remanufacturing; and given the expedited
process, the recovered products can be sold in the original
product’s primary market. End-of-use (EOU) customer
returns are usually collected later than B2B and B2C
commercial returns, which in turn undergo partial
obsolescence risk. Even though this type of returns are still
suitable for remanufacturing, but the recovered product
might not be able to get the same perceived quality from
customers, which consequently should be sold in product’s
secondary market. However, if the manufactur …
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