Several studies indicate the environmental benefits associated with restoration and the low costs associated with remanufactured parts, which are usually 30–40% cheaper for both the consumer and the manufacturer, while energy and material consumption are reduced by approximately 85%. compared to the new manufactured part
These obvious reasons alone are enough to present convincing arguments in favor of the companies going for reconstruction. But, as it turns out, environmental benefits, lower costs and, to some extent, legislation cannot be true drivers for companies involved in restoration activities.
Why not worth it?
The answer to this question is partially provided by a study (Xiong et al, 2013), which assesses the interaction between a key component supplier and a manufacturer who is also engaged in restoration. This OEM buys components from its supplier that will be used to rebuild products that could directly compete with that supplier. Therefore, for this manufacturer, this may be a mutually beneficial or even losing relationship with its key supplier.
if there is interdependence, this manufacturer will consciously develop products that are not suitable for re-production (Agarwal et al, 2012). In other circumstances, recording a reductant may affect the profitability of an OEM that does not repair itself, and this may lead the OEM to strategically design products that will not support recovery (Wu, 2013).
This implies that products sometimes may not be designed for remanufacturing by the OEM’s to consciously discourage its supplier or any independent remanufacturer from remanufacturing its brand part and sell it under another brand name. If this is the case, then profitability may not be the main driver for remanufacturing for some OEM’s. However, there will be large cost reduction for OEM’s as they will replace any parts in warranty with a remanufactured equivalent hence lowering overall warranty bills for the company, but that may not be the prime motive why firms go for remanufacturing. Why not environmental benefits?
A study by Seitz (2007) evaluated the manufacturer’s motives for recovery using an engine as an example. It was revealed that responsibility for environmental protection is not the main driving force for recovery companies. In fact, the driver for recovery does not come from an ethical / moral point of view, nor from the point of view of legislation or profitability.
Why not legislation?
The European Union Vehicle End of Life Directive (ELV) and the Electrical and Electronic Equipment Directive (WEEE) actually push manufacturers to recycling strategies and other products, and do not necessarily support recovery as such (Charter and Gray, 2007). A case study (Seitz and Wells, 2006) conducted with a European manufacturer of premium cars showed that profitability and legislation are not key factors in restoring the production of automotive components (may be true for other sectors)
BASIC SAFETY, PROVISION OF FUTURE SPARE PARTS AND BRAND PROTECTION – 3 BASIC REMANUFACURIZATION DRIVERS
Contrary to what some authors and organizations consider, the main drivers of recovery companies are not the temptation to save the environment and economic incentives or the fear of legislation. Most likely, nuclear safety, future supply of spare parts and brand protection (market share) are indicated as the main reasons for manufacturers to recover (Seitz, 2007; Seitz & Wells, 2006; Atasu et al, 2008).
There is no doubt that restoration creates environmental and economic incentives, but these are not the only reasons.
Others (Lund, 1984b; Seitz, 2007) also suggested that motivation for OEM / OES be a protective measure to prevent its competitors from repairing their parts that may be of lower quality, which could be detrimental reputation.
From the perspective of a high-level circular economy, environmental and economic incentives supporting recovery decisions become the main drivers, but the main reasons OEM and VM are involved in recovery are related to market considerations (Charter and Gray, 2007), such as was discussed.
First, OES / VMs want to control the core market and not allow an independent after-sales service retailer to take advantage of the design knowledge they have spent on materials and energy. Secondly, virtual machines must service their cars for at least 10-15 years, and after some time, reconditioned parts are the only way to supply spare parts. Finally, as mentioned earlier, OES / VM wants to protect its brand image, which means maintaining control over the provision of the highest quality product.
It has also been discovered that OEMs / VMs that do not rebuild are opening up to competition from their own branded cores in the secondary market. Due to the lack of control over the quality of these products, there is a risk that cheap, low-quality OEM products will appear on the market. Thus, competition in the secondary market can be a driving force in making repair decisions.