THE REVALUE CHAIN
There has been a number of different 'frameworks' that have been developed, by different groups around the world, that show potential alternatives to the existing business-as-usual industrial paradigm. This map is an attempt to show some of them, in relation to the existing ‘Linear Value Chain.' It was initially developed to clearly communicate what remanufacturing is, and how it fits' within the other eco-system of alternative and complimentary strategies; and so there is some bias towards remanufacturing in the main text below, and in the 'Design for Revalue' processes.
As the map is based on the Linear Value Chain, it maybe advisable to watch a short introduction to what that is first, before going into further detail on this page.
This work was initially developed in 2015, as part of a first regional remanufacturing initiative, that was provoked in the Basque Country, by Acede (an industrial cluster), H-Enea Living-Lab and the Provincial Government of Gipuzkoa, entitled ‘Reman Gipuzkoa.’ The map and the presentation was developed by Agence designContext, and was facilitated by Régis Dando of remanufacturing.fr; with the stakeholder development being managed and dynamised by H-Enea Living Lab. The first meeting was entitled ‘Reman 101,’ which had the dual objective of creating an initial dialogue between key ‘soft infrastructure’ actors (political, economical, environmental, industrial clusters, innovation, media, university…), those industries and social groups already involved in revalue activities in the region (Emmaus, Zero Waste Gipuzkoa, Motorlan, ReBattery…), mixed with an intensive overview of the revalue chain - to build a shared level of understanding between all involved.
Since this initial work, projects have been developed, and more are currently in development, and the understanding of the potential of remanufacturing has spread across the Basque region.
There are many different types, and scale of company involved in ‘revalue’ activities, which can be found all across the revalue chain map (sometimes in multiple positions). Below is a short list of some of the actors already active around the world, which can help in understanding the map, and the typology. For more examples (particularly in reverse-engineering) see the European Remanufacturing Network, and the Centre for Remanufacturing & Reuse. Most of the examples are involved in Reverse Engineering and Remanufacturing as this map was initially developed to explain these activities.
Capital Goods Industries: (Industrial Equipment): Retec Machines (FR).
Service Industries: Deutsche Post DHL, Vespertec, Recover-e(NL), UPS with iQor Aftermarket Solutions, Round Trip Logistics.
Component Industries: Valeo (FR), SKF (SW), JEGS (US).
Turnkey Suppliers: (sub-contracted revalue suppliers): Flextronics, Fossil Monswiller Site, (Tiama) (DE).
Subsidiaries: Renault subsidiary in Choisy-le-Roi (FR), Ricoh UK (UK).
Lead Production Firms: Caterpillar Inc., Xerox Inc., Rolls Royce, John Deere, Neopost (FR), Interface Flor.
Retailers and Resellers: Fnac (FR), Stormfront (UK), mResell(UK), Apple Store, Cash Converters, Cash Express.
After-Sales-Services: Candy (UK), Alltrucks (DE).
D.I.Y Services: iFixit, London Bike Kitchen (UK), Repair Café.
Core Brokers: European Recycling Platform, Eco-systèmes(FR), Ecolec (SP), Autoenterprises (UK), Swico Recycling (CH).
Maintenance: Lufthansa Technik (DE), AFI KLM E&M.
Refurbishment: Emmaus, Envie (FR), Tiama.
Recondition: EnvironCom (UK), Motorlan (SP).
Remanufacture: Armor (FR), Robotif GmbH (D), Lizarte (SP), SRC, Weichai Reman Company, Flight Systems European Group, BU Drive (DE).
Recycling: Veolia (FR), Clamens (FR), Misapor (CH), Earth Stone International, Preserve.
Manufacturing & AFFF Infrastructure: Catapult: High Value Manufacturing (UK).
Principles/Standards/Guidelines: British Standard Institute(UK).
Development Policy: The All-Party Parliamentary Sustainable Resource Group UK.
Parks & Zones: Kalunborg Symbiosis, John Deere Reman - Strafford Industrial Park.
Financial Institutions: Green Bank (UK).
R&D Labs: GSCOP (FR), R.I.T Centre for Remanufacturing(US), Advanced Remanufacturing and Technology Centre (SG), Fraunhofer.
Higher Education: University of Strathclyde (Scotland), WASEDA University (JP), Nanyang Technological University(Singapore), Fraunhofer IPA & University of Bayreuth (DE). TUBerlin (DE).
Knowledge Networks: Ellen MacArthur Foundation (UK), ERN, Duxes Reman Industry Focus, The Knowledge Transfer Network(KTN) and _connect (UK), High Speed Sustainable Manufacturing Institute, University of Cambridge Institute (UK), WRAP (UK), APRA.
Action Groups: Zero-Waste Scotland, The All-Party Parliamentary Sustainable Resource Group UK, Innovate UK: Technology Strategy Board, Scottish Institute for Remanufacture, and H-Enea Living Lab (SP).
The Revalue Chain, through product-life-extension and the reuse of “waste” materials, can help reduce the dependence on virgin raw materials.
Beyond the clear environmental benefit, it can also be highlight as a benefit to nation states (particularly those developed countries with low natural resources), who are highly dependent on other countries (often developing countries) for virgin raw materials:
“Resource, or material, security concerns the access to raw materials to ensure economic sufficiency. Industrial minerals are vital to a modern economy - they underpin industry, construction and agriculture. Ensuring access to materials, or seeking substitutes for materials with supply risks, are significant features of our competitors’ response to supply risk.” (EEF, July 2014)
Added to this, many virgin raw materials are also concentrated in a small number of countries; for example:
“Across 19 resources (crops, timber, fish and meat, metals, fossil fuels and fertilizers) the three largest producers on average account for 56% of global production. The eight dominant players are China, the United States, Australia, the European Union, Brazil, Russia, India and Indonesia. Others with significant production capacities for one or two major resources include Argentina (soybeans), Saudi Arabia (oil), Iran (oil and gas), Canada (potash and nickel) and Chile (copper). For resources with smaller production volumes, such as palm oil or many speciality metals, concentration among producer countries is even higher.” (Chatham House, 2012)
Virgin raw materials are often linked. A shock in the access to one resource can travel rapidly through to other parts of the system. This is, in part, due to the fact that some resources are also the input resources for another: for example, water and oil are linked to the production and extraction of many other resources, and if there is an issue with access to these, then this will send a flux through the entire system (EEF, July, 2014).
The cost of buying and transforming virgin raw materials for manufacturers’ is high, according to EEF, July 2014:
“Materials and resources are the lifeblood of the sector and account for around 40% of manufacturers’ costs.”
And the cost of virgin raw materials, across many sectors, is on the rise:
“With rapidly growing demand and long response times to bring new mines on line, a gap has developed between demand and supply which has pushed prices up dramatically. But while there is upward pressure on prices, costs of production are also on the rise due to the following factors:
- as high grade deposits close to markets are mined out, more remote mines become economically viable with associated higher costs of the full range of support services including energy, transport, water supply, and labour.
- ore grades are decreasing as richer deposits are mined out…
- shallow deposits are depleted and are replaced by deeper lying deposits with higher extraction costs.
- deposits with simple mineralogy are being superseded by those with complex ores that are more difficult to process.
- society’s expectation that mining operations meet more exacting environmental, social and cultural standards of performance.
- increasing demands for new capital, stemming from the need for new processes, equipment and technology, as well as better trained staff necessary to operate modern mines.” (ICMM, Oct 2012)
However, one of the benefits of developing revalue activities is its’ potential in reducing industries’ need for virgin raw materials, and the pollution made during its extraction and transformation:
“Research by Lund (1984) indicates that 85% of the weight of a remanufactured product may come from used components, that such products have comparable quality to equivalent new products, but require 50–80% less energy to produce and that remanufacturing can provide 20–80% production cost savings in comparison to conventional manufacturing. Remanufacturing can limit environmental impacts. For example, it can reduce the production of greenhouse gases such as CO2 and methane that The Kyoto Protocol (2005) has highlighted for reduction. This is because for most goods, raw materials production and the subsequent shaping and machining processes produce the highest CO2 emissions, but remanufacturing bypasses these processes.” (Ijomah, 2009)
And, again from the nation state perspective:
“With processes that require significantly less raw materials, energy and water, and which produce less carbon and waste, remanufacturing has a critical role to play in meeting UK and EU carbon and waste reduction targets, and safeguarding our shared resources.” (APSRG, Dec 2014)
And the cost of energy (from fossil fuels) is also rising:
“Remanufacturing not only preserves valuable raw materials, but also uses less energy, which can in turn also signify additional cost savings for businesses. Demand for energy is increasing. In turn, energy costs are rising. This is a critical issue for any UK manufacturer where energy use accounts for a significant proportion of its operational costs. However, the energy required to remanufacture a product can be up to 90% less than to manufacture from raw materials.” (APSRG, Dec 2014)
Land Area: Land Area can also be classed as a Raw Material when making life-cycle-assessments (LCAs), although in this map it is classed as a ‘Factor of Production’ as it is not strictly consumed within the production of the final product, and embedded in the final product. We do extract land (earth), minerals etc., during the production process, but this is then classed as raw materials, and not land area: a hectare of land remains a hectare of land (or sea) before or after it is used for production.
Land Area/Space is also not infinite - and “[t]aking a resource use perspective, land area is one of the most restrictive categories of resources since humanity only has one planet on which we have to arrange sustainable ways of meeting our demands on land…” (SERI, July 2009)
Humanity has been changing the use of the land area in some way, even when we were foragers. Since agriculture began, this has increasingly accelerated:
“More land was converted to cropland in the 30 years after 1950 than in the 150 years between 1700 and 1850. Cultivated systems (areas where at least 30% of the landscape is in croplands, shifting cultivation, confined livestock production, or freshwater aquaculture) now cover one quarter of Earth’s terrestrial surface.” (Millennium Ecosystem Assessment, 2005)
Industry and Infrastructure have also changed the use of land, particularly through covering it, called ‘Sealing’:
“Each year, fertile land is lost though the expansion of land used for the construction of buildings and infrastructure. From a sustainability perspective, halting the expansion of sealed land is an important objective which would also have positive effects on the preservation of biodiversity.” (SERI, July 2009)
Both these human activities (as well as the pollution from these activities) are some of the main drivers for the loss of biodiversity, genetic diversity, the number of species on the planet, and the degradation of ‘ecosystem services’ for example:
“Ecosystem services that have been degraded over the past 50 years include capture fisheries, water supply, waste treatment and detoxification, water purification, natural hazard protection, regulation of air quality, regulation of regional and local climate, regulation of erosion, spiritual fulfillment, and aesthetic enjoyment. The use of two ecosystem services—capture fisheries and fresh water—is now well beyond levels that can be sustained even at current demands, much less future ones.” (Millennium Ecosystem Assessment, 2005)
Ecosystem services are defined as non-market benefits of an ecosystem for example:
“…one of the most comprehensive studies to date, which examined the marketed and nonmarketed economic values associated with forests in eight Mediterranean countries, found that timber and fuelwood generally accounted for less than a third of total economic value of forests in each country… Values associated with non-wood forest products, recreation, hunting, watershed protection, carbon sequestration, and passive use (values independent of direct uses) accounted for between 25% and 96% of the total economic value of the forests.” (Millennium Ecosystem Assessment, 2005)
A question now is, how much more land can be converted into industry, infrastructure and agriculture - whilst further polluting the land directly and around, before the continued degradation of ecosystem services sparks a form of collapse?
Entrepreneurs: Entrepreneurs are those willing to bear risk, innovate and develop strategies, manage and lead an activity (economic or non-economic) for example.
In the continued transition from Linear Value Chains towards Revalue Chains, Entrepreneurship is almost a prerequisite. It is a risk to change the status-quo, and there are a fair number of hurdles to get over, and lots of unproven territory ahead.
Revalue activities are systemic. The ‘Entrepreneurs’ working in Revalue will have to be able to work and collaborate across industries and sectors: the inward focus within the company, is a priority that will have to be shared with a outward focus to the local ecosystem.
Specialised Labour: Firms hire people either as a salary or wage worker, in exchange for their labour. Specialised labour is a slightly more defined description of ‘labour’, as today, many jobs require some form of basic training (which can also be referred to as ‘human capital’).
The Revalue Chain is seen as a sustainable way to create new jobs:
“Remanufacturing creates jobs – it even has the ability of capturing jobs that have been lost to cheap manufacturers in developing countries.” (Steinhilper, 2000)
“Compared to the traditional manufacturing process, the labour input of the circular economy is higher as (a) its economies of scale are limited in geographic and volume terms, and (b) remanufacturing comprises additional steps of dismantling, cleaning and quality control, which are absent in manufacturing.” (Stahel & EMF, 2013)
Also, it is hard to mechanise/automate:
“Remanufacturing presents difficulties to automation because the process is frequently concerned with batch productions of a range of components or products. This variety would mean that if machinery were to be used in disassembly etc, it would have to be frequently reset and reconfigured. This is likely to make automation prohibitively expensive for the majority of remanufacturers. Therefore remanufacturing often necessitates human intelligence and evaluation. The skilled work of the remanufacturer is reputed to lead to greater job satisfaction, particularly those involved in more creative remanufacturing (OHL, 2004), which would apply to Design for Remanufacture.” (Gray et al, 2007)
And Ijomah (2009) explains that:
“…remanufacturing benefits include employment creation especially for low skilled labour and provision of high quality goods at prices that those on low income can afford. The former is due to the fact that many of the tasks of remanufacturing such as sorting and cleaning are easy to learn. Research by Lund (1984) indicates that in the automotive sector up to 60% of a typical remanufacturing company may be skilled or unskilled.”
However, certain parts of the process (the other 40%…) can need skilled and highly trained personnel, i.e., for ‘Reworking, Replacing or Upgrading’ components in the ‘Remanufacturing’ reverse-engineering process; or in ‘RE-marketing’ and the application of new ‘Business Models,’ and this put’s pressure on the supply of adequately trained labour for some of these revalue activities:
“The remanufacturing sector has the potential for substantial job creation at a number of different skill levels. However, the availability of skilled staff has been cited as a big barrier for remanufacturing in a number of different sectors in the United States and this is likely to also be the case in the UK. Remanufacturing involves manual engineering as well as business and management knowledge to develop the business models needed to develop remanufacturing businesses.” (APSRG, Dec 2007)
Capital Good Industries & Capital Goods (Means of Production): Many revalue activities may need access to new forms of Capital Goods (new cleaning or additive manufacturing technologies for example). This maybe an expense that puts revalue out of reach of some smaller SMEs. See the section on ‘Soft Infrastructure’ and within that ’Manufacturing & AFFF Infrastructure,’ for an example strategy from the UK, that aims to bridge some of these issues.
Some OEM Capital Good Manufactures, and non-OEM remanufactures (i.e., Robotif GmbH) are already involved in revalue activities in this the capital goods sector, in that they maybe renting instead of selling the products to manufacturers, and/or have developed facilities to reverse-engineer end-of-cycle Capital Goods.
As the umbrella term ‘revalue’ is very large (and could potentially cover nearly every type of industry…), this following list of industrial sectors, categorised by Eurostat, therefore, only includes those that are, or can be, active in all four 'reindustry' activities (maintenance, refurbishment, recondition, and remanufacture); That is to say, that a significant amount of the products that are produced by these industries are/can be remanufactured, reconditioned, refurbished and maintained in some way.
Machinery & Equipment; Office Machinery & Computers; Electrical Machinery & Apparatus; Radio, Television, & Communication Equipment & Apparatus; Medical, Precision & Optical Instruments; Watches & Clocks; Motor Vehicles & Semi-trailers; Other Motor Vehicles, Trailers, & Semi-trailers; Other Transport Equipment; and Furniture & Other Manufactured Goods.
As should become clearer through reading some of the different elements detailed in these texts, and by looking at the map, the revalue chain requires a new way of thinking for many of the different departments within a manufacturing company. Thinking in loops, requires OEM engineers to change quite radically their approach to designing new products for example, and also for those OEMs shifting their Business Model to providing a service instead of selling a product, for example, can also be a huge mental change for marketing and sales departments:
“On the customer-facing side, sales and marketing will have to complement their chief focus on generating demand and fulfilling customer requirements with generating greater revenues from the use of products and services instead of the purchase of them. They also need to develop new ways to engage and incentivize customers to use and dispose of their products properly, especially if adopting service-based models where customers no longer have direct ownership of products and, as a result, less incentive to take proper care of them.” (Lacy, P., 2014)
The point about incentivises is discussed further in the sections on ‘Reverse Logistics’ and ‘Business Models.’
And finally, why should Manufacturers or Regions consider revalue actives an economically interesting endeavour? Below are some reasons, using the UK as an example:
“At the most basic level, it is almost always less expensive to remanufacture a given product than to start the manufacturing process from scratch. Savings are accrued throughout the production process, from not needing to source new raw materials, to using simpler and shorter supply chains.” (APSRG, Dec 2014)
“With rising transportation costs, rapidly evolving customer demand, greater quality assurance and better skilled labour, shortening of supply chains is becoming increasingly important.” (APSRG, Dec 2014)
“Keeping production, and particularly remanufacturing, local also has significant benefits for the UK economy as a whole. If the sourcing of input materials and subsequent processing is mostly domestic, imports would invariably go down. This would be a boon to the UK’s chronic and problematic trade deficit.” (APSRG, Dec 2014)
Revalue activities also have the potential of creating new jobs. This is discussed more in the section above, entitled ‘Specialised Labour’ with 'Factors of Production.'
Similar to the list of industrial sectors, mentioned in the previous section, the following descriptions of product criteria, class and type, includes only those that are, or can be, processed through all four 'reindustry' activities (maintenance, refurbishment, recondition, and remanufacture); This means that ‘remanufacturing’ criteria is used over-all for now, as this is potentially the most resource & organisational demanding of all four reverse-engineering activities. In time, more criteria will be added for all four activities.
Product Criteria: This list of criteria defines which products, in general (there can be variations depending on the design of particular products, within product categories), which are suitable for remanufacturing.
Depending on the academic source, there are different synthesis of the key criteria, and so a few are listed below:
- “Technology exists to restore product. Technology must be able to extract a component without damage…
- Product is made up of standard interchangeable parts.
- Cost of core is low relative to savings in product cost achieved through core reuse.
- Product technology is stable over more than one life cycle.
- Sufficient market demand to sustain enterprise.
- An evaluation of disposal options and environmental impact of legislation is also necessary to determine a product’s suitability for remanufacture…” (Gray et al, 2007)
This criteria is also synthesised by Steinhilper (2000) in a different way:
- “Technical Criteria (kind or variety of materials and parts, suitability for disassembly, cleaning, testing, reconditioning)
- Quantitative Criteria (amount of returning products, timely and regional availability…)
- Value Criteria (value added from material/production / assembly)
- Time Criteria (maximum product life time, single-use cycle time…)
- Innovation Criteria (technical progress regarding new products vs. remanufactured products…)
- Disposal Criteria (efforts and cost of alternative processes to recycle the products and possible hazardous components…)
- Criteria Regarding Interference with New Manufacturing (competition or cooperation with OEM`s [or even with internal departments for an OEM]…)
- Other Criteria (market behavior, liabilities, patents, intellectual property rights…)”
Product Class: The products that go through the remanufacturing process are mainly of two classes: ‘Durable Goods’ and ‘Capital Goods’. Durable Goods includes anything from a photo-copier to an automobile, and Capital Goods includes anything from manufacturing, mining, and agricultural equipment to vending machines. There are a few exceptions, such as ink-cartridges, which are non-durable goods, which can also be reverse-engineered (refilled with ink). Giuntini et al. (2003), highlight the two different basic historical journeys thus far:
“Capital goods remanufacturing is… the more mature of the two types, having existed in one form or another for much of the twentieth century. In the case of consumer durable goods, [remanufacturing] process costs can often exceed the price of a new product, which has limited their use in many industries. Large-scale remanufacturing of products outside the domain of capital goods is still in its infancy, and time will tell how this opportunity will yet be exploited.”
Product Type: Here is a short list of some of the main types of products that match the criteria and are currently remanufactured:
- Bakery Equipment
- Data Communication Equipment
- Gaming Machines
- High end electronics and electricals
- Industrial machinery e.g. machines and tooling
- Motor Vehicle Parts (notably engine parts and tyres)
- Laser Toner Cartridges
- Musical Instruments
- Office Furniture
- Vending Machines” (Gray et al, 2007)
This section looks at product life extension strategies that can and are made in the market (by retailers and customers) and by the market, after the product has already been sold by the original manufacturer to the original distributor or to the original customer.
Reuse by the Same Owner: This is in fact, potentially, the revalue loop that requires the lowest level of raw material consumption and energy, to extend the life of a product. When consumers, reuse a product within their own household/family for the same function - i.e., the original owner has a bike that has been outgrown by one child, that can be handed-down to a younger child.
Reuse by a Different Owner:
If the product is not wanted/needed by the original owner and their immediate household, then they have the option to resell it (or give it away):
Re-Sellers (intermediates): Here, the original owner can take the used good to a reseller, where they pay the original owner a price for the product, and resell it at a higher price. To create a sufficient profit between buying and (re)selling, re-sellers often make additional works, such as those detailed in the section below in 'Product Life Extension.
There are a mix of OEMs re-selling their own products (i.e., Apple Store), specialist re-sellers, re-selling a specific range of products (i.e., Stormfront, mResell), or those re-selling almost any product (i.e., Cash Converters, Cash Express). Emmaus is also an example of a company that ‘Recaptures’ and ‘Reverse-Engineers’ end-of-life products, and has outlets where they can ‘Resell’ the revalue products to customers directly.
Re-Seller Platforms: This includes those internet platforms that put in relation those who have something to sell, with those that are looking to buy (a two sided market). Examples of product re-seller platforms are Ebay, Price Minister, Vivastreet, Leboncoin - or even Freecycle, where the goods are given for free.
The Second-Hand-Market (in general):
The second-hand-market is a often a market based on asymmetric information. In many ways, revalue products (in the best cases) are the opposite: revalue manufacturers are often communicating (RE-marketing) as much information as possible about the quality of their revalue products - confidence in quality is a key part of relationship with the customer - who, unlike the second-hand-market, can often be repeat customers (so clearly revalue products need to perform…).
USITC (2012), highlights some more reasons why some consumers may not be attracted to revalue products (using the case for remanufacturing as an example) - these reasons can be the same for consumers buying from other consumers (C-to-C), or consumers buying from retail resellers (B-to-C) - therefore this section overlaps with ‘Wholesalers, Retailers, Resellers & Service Providers':
“(1) the cost of a remanufactured good could be too close to the cost of a new good to justify the effort; (2) the technology, particularly for consumer electronics, is constantly changing, and older technology is often considerably less desirable to consumers than new technology; (3) the “form factor” (size, shape, and configuration) of the older good is less desirable than that of the new good…”
The known (and in some cases justified) stigma with second-hand-goods, is also another reason why many resellers, add additional services (such as 1 year warranty), or make additional product life extensions (such as new batteries in second-hand-phones), in a way to reduce this potential scepticism of product quality and durability.
Service Providers: There are also many retailers, specialised or generalists who sell new products, and also rent new and/or refurbished goods. See R&M Rentals in the U.K. for example, or Lokeo in France.
These service providers can lease, or rent products. The subtle difference is mostly in the timing, for example; if someone leases a car, they may have it for 1 year for example (and nobody else has access to it), with a contract; however a person who rents a car, may only rent it for a day, and in this case the car is usually in use most of this time; whereas in a lease, the car may be idle most of the time, like an owned car.
And so with the addition of service providers, in the revalue chain 'Customers' evolves into three interconnected groups:
A) Consumers: In this case, consumers are still (currently) the most common form of customer, who gain access to the functionality of a good, simply by buying it. The ownership of the good is transferred from a seller to a customer (an individual or another company), and the customer can do what they want (within the law…) with the product.
C) Collaborative Consumption: This third group is an umbrella term developed by Rachel Botsman and her ‘Collaborative Consumption’ network; and it describes a relationship between consumers and users, whereby consumers (the owner of goods) rent access to these goods for limited periods of time to users. And so, it is possible for consumers to make repeat money (which becomes a form of income) from their own products, without selling them.
This is still an evolving field increased by the internet, and there are many different definitions, and types of activities (and theories) in this area; however this group is placed within ‘Customers’ in this map, as mentioned above, this group either owns the asset (so is first a customer) and then shares access to that asset for monetary, or non-monetary benefits (Sharing Economy), or this group acts as a connector between those who have an asset, and those that want access to that asset (Peer Economy).
There are three main types of relationships currently identified:
Business-to-Consumer (B2C): Aided by the internet, these companies actually own the assets, and facilitate through various services, the temporary access to these assets to their users. Zipcar, or Netflix for example use a membership system to allow access to different cars (Zipcar) or films (Netflix) normally on a 24h-7day-per-week basis. Zipcar, in particular needs economies of scale - i.e., it’s current model only works in cities, where there are enough users to support the large investment in cars, parking, and other elements required by the company to provide its’ service.
Peer-to-Peer (P2P): Aided by internet based companies who act as an enabler between a two sided market - person to person; that-is-to-say, the Peer-to-Peer Platforms connect those people that have excess capacity - a spare bedroom for example - with someone looking to rent a bedroom for example, and the platform takes an added fee-per-transaction. As a market operator, they focus on developing 'trust' and reducing risk between both sides (sometimes some forms of insurance coverage, and history of both user and 'rentier' experiences for example). Examples include companies such as Airbnb, Inc., BlaBlaCar.com, Uber, Inc. and Lyft, Inc. for example.
Some of these Peer-to-Peer Platforms create new markets through innovations in finding 'gaps in the law.’ For example, there are laws around the traditional taxi delivery method: when a potential ‘User’ raises their arm to attract a taxi (hail), this frames the following transaction within a particular set of rules and laws. When however, a technology makes it possible for a potential customer to attract a taxi via a mobile app (e-hail), the frame of rules and laws are arguably not the same: and here is the new 'legal' space to create a new two sided market.
Peer-to-Peer can create problems for the volume (economies-of-scale) business model of traditional manufacturers:
“The Sharing Platforms business model promotes a platform for collaboration among product users, either individuals or organizations. These facilitate the sharing of overcapacity or underutilization, increasing productivity and user value creation. This model, which helps maximize utilization, could benefit companies whose products and assets have a low utilization or ownership rate. However, today it’s most commonly found among companies specializing in increasing the utilization rate of products without doing any manufacturing themselves, putting considerable stress on traditional manufacturers.” (Lacy, P., 2014)
Business-to-Business: This is where businesses can monetise (rent) their idling/excess capacity to other businesses. For example, aided by the LiquidSpace platform, companies that have empty office space can rent that space on an hourly or monthly basis to companies needing some extra space on a temporary basis.
Here are a few of the possible scenarios for Repair within the Revalue Chain:
A) After-Sales-Service Repair: When the product is still under warranty, this can be a department within the OEM, or Original Retailer, or a Private Repair firm sub-contracted by the previous two entities. If the end-of-cycle product is outside of its’ product warranty, a Private Repair Firm can also work with the customer directly.
If the product has been designed for repair, and the business model has already been put in place, then it is possible that the After-Sales-Services is connected via the internet. Here, the After-Sales-Service is connected to the product, at the products location, either by hard (ethernet cable) or wireless connection. Fault diagnose and even repair (if its software) can be done at a distance, improving both the efficiency of a site visit (the engineer goes knowing better the problem before hand), and improving the over-the-phone diagnosis and repair (i.e., the service team can see in real-time, the results of the customers interventions, due to their instructions). Communication companies like Free in France integrate this into their products and ‘Business Model’ for example.
Large international logistics companies are increasingly becoming part of the After-Sales-Service repair networks - particularly when repair work is sub-contracted by an OEM, and particularly when products are under warranty, but not exclusively, as the example below highlights:
“Logistics service providers are increasingly looking at reverse logistics not only as an opportunity to fill backhaul loads but as an attractive stand-alone business. DHL, for instance, established beverage distribution platforms in the U.K. that include the distribution, refilling, repair and collection of vending machines.” (EMF, 2012) (Bold text added)
B) D.I.Y Services Repair: More recently, there is another group of actors in this space, which is a mix between ‘Customer D.I.Y Repair’ and ‘After-Sales-Services’, which includes new types of ‘D.I.Y Services’ (shown to the left side of the column in the map). This can be free, or for a fee (one-off, or subscription for example), which gives access to a dedicated fixing space (with furniture and tools), where the customer can fix the product either on their own, or get help by other members or specialist experts that may work in the space. An example of one of these is the London Bike Kitchen.
D) Customer D.I.Y Repair: Here, the product is maintained by the original customer (or someone they know, and usually for free). The level of technical experience required to do this, is strongly linked to the quality of, and accessibility to, the necessary information from the OEM or Original Retailer, or from information platforms dedicated to sharing maintenance information, such as iFixit (many professionals also use these types of platforms). This, then directly relates to what extent the product has been designed to be maintainable (See the section on ‘Design For Multiple Cycles’) - such as easy fault detection, or easy access to remove and replace the faulty parts for example. If products are out of warranty, then this or disposal are likely options for consumers, if they don’t want to pay, or can’t afford or warrant the expense for a repair professional, as a new product can often be cheaper…
Fab Labs: are also linked to the D.I.Y Services options available, particularly for those skilled customers, who want to make replacement parts or even upgrade them, themselves. Fab Labs are also part of the ‘Manufacturing & AFFF Infrastructure,’ as they provide the public and private companies access to technologies for making (not quite yet manufacturing) components and final goods.
This is when an original owner, or secondary owner, or an intermediate buyer and seller changes the original use of the product, and turns it into something else. An example of an original owner doing this, is a small home-scale farmer, re-using an old bath, and using it as a small duck bath or worm composting bin (permaculture example). An example of an intermediate buyer and seller, is an artist or artisan buying (or salvaging) waste materials to make furniture or sculptures, or old signs to make hand-bags. Pottias for example, in France, use los car seat belts to make high quality hand bags.
This section looks at the systems that can be and are put in place to make many of the product life extension strategies possible: you can not 're' something that you don't have...
For more detailed information take a look at these two short papers: the first is by Electronics Remanufacturing Company (ERC), which can be found here, and Erik Sundin et al., which can be found here.
Firstly, it can be useful to understand what a ‘Core’ is (particularly for 'reindustry' processes). For this, this study uses the following definitions:
“ ‘Core’ is the term commonly used to describe the component or product that will be retained through the remanufacturing process. ‘Hulk’ is a synonym for ‘core’, used notably by Xerox.” (Gray et al, 2007)
“…a core… a used part of any kind. Most of the time this part is not referred to as a core until it has been separated from its original-use application. …The same terminology is used for a part that has only been in an application for 1 hour and the exact same part that has been in an application for 5+ years.” (Schinzing, July 2010)
So, now that the ‘Core’ terminology is clearer, here is a breakdown of the different types of ‘Waste Management Groups’ :- those either managing the flow and /or the access to these cores:
A) Pre-treatment Waste Sites:
Municipality Waste Sites: These are publicly management sites, that collect and pre-sort different waste streams. This includes different sites that may specialise in different types of waste, and the different collection and distribution sites used to move waste around.
Salvage Yards: This includes private centres, that are effectively also brokerage services (see below), that buy and sell scrap - mostly metals; such as iron, steel, stainless steel, brass, copper, aluminium, zinc, nickel, and lead.
Retailer Collection Sites: If a customer wants to dispose of an end-of-cycle product, one option available to them, maybe within the French Ecotax scheme. Here, some WEEE retailers can be obliged to take-back the end-of-cycle product, during delivery of the new product at the customers home. The end-of-cycle product is then taken back to the retailers site, and stocked, ready for collection by the various companies further along the revalue chain.
Peddlers: “Peddlers are those individuals that go into the salvage yards and pull the parts off the [products]. Armed with shopping carts, wrenches, and wire snips they search for parts that they can sell directly to core brokers.” (Schinzing, July 2010) This can be both legal, and illegal (black market) work…
Professional Core Brokers: “Core brokers - or core suppliers - are professionals, who deal with salvage yards who disassemble cars as their key business… [and the] …leaders and the largest core suppliers even publish catalogs, out of which remanufacturers can order used units…” (Steinhilper, 2000)
“Core brokers’ main focus is to recover interesting units and parts and to have a core inventory on hand that enables them to supply the remanufacturing industry with the unit types, part numbers, and quantities they need. After having taken the complete engine unit out of the carbody, the core supplier takes apart further subassemblies and parts, such as gearbox, starter, generator, water pump, clutch, carburetor etc. to fill his stocks with sufficient numbers and types of units he expects to sell to a wide range of remanufacturers.” (Steinhilper, 2000)
“…a core broker may buy cores and disassemble them before selling the cores and constituent parts to a remanufacturer. Some firms may clean and inspect cores, but not actually remanufacture them. In addition, some firms may warehouse or distribute cores or remanufactured goods, some may trade (import and/or export) cores or remanufactured goods, while others may provide logistics and core management services to remanufacturers. As a result, the number and type of firms that comprise this remanufacturing “ecosystem” is substantially broader and more diverse than only those firms that produce remanufactured goods.” (UTISC, 2012)
“Core brokers serve as a consolidation center for cores. Brokers work with peddlers to purchase cores from crashed vehicles, OEM/OES surplus, and dismantlers and consolidate, sort, and in many cases link to customer part numbers. In the early years, cores were purchased by type and make, but as remanufacturers became more sophisticated and more discerning, they began “cherry picking” for certain part numbers. This approach put a lot of the risk on the core broker who was forced to guess on what part numbers their customers would want in the future. Since they were adding more value, cores purchased this way became more valuable, and therefore more expensive. Remanufacturers send the core brokers a bid list of the part numbers and quantities that they want and the core broker will submit a price quote for these cores. After some negotiation, cores are purchased and shipped to the remanufacturer.” (Schinzing, July 2010)
C) Dealers: This groups principle purchase and sell waste, however, they do not take physical possession of the waste. This can be a company that is buying and selling, or an internet platform that facilitates the buying and selling by others.
An example of an internet platform, with its’ routes in Industrial Ecology, positioning itself between those that have ‘waste’ that they would like to dispose of, and those that are looking for such ‘waste’ as a low cost input for their business. For example:
“Capturing value is accelerated when a systems approach is applied to analysing opportunities. An example of this is the U.K.’s National Industrial Symbiosis Programme (NISP). NISP works to provide a brokerage service for businesses wishing to turn waste into by-products. NISP also plays a role in addressing technology and processing barriers to maximise economic benefits.” (EMF, 2013)
To the writers knowledge, NISP has not (yet) helped develop local networks for product cores, the work has been developed more in secondary material markets (see ‘Recycling’ for more details).
D) Public-Private Regulators: This includes Public or Public-Private groups that manage and regulate the waste management system at a regional, national or transnational level (i.e., Europe for example). These groups, like ‘Eco-systèmes’ in France, can be those who are responsible for the distribution of the ‘Ecotax,’ to those companies working in Revalue activities. Other examples include Zero-Waste, which exists in various forms in many different countries and regions around the world - zero-waste Scotland, is a particularly dynamic example. On the map, this group is also an example of an Action Group, but is also mentioned here, as they are an integrated part of this Waste Management Group, and so, the key link should noted.
This includes the point of collect (which includes a first level of sorting and screening), and the logistics required to move the core/product to be stocked in an independent ‘Inventory’ or the site for ‘Reverse-Engineering.’
For revalue companies to enter into a reverse logistics and collection activity, their has to be an economic incentive for them, and often also for the customer. Prior to giving some more detail about the collection process, there is some more detail about these incentives.
Core Value: What is the value of the Core? In the case of an independent/non-OEM revalue manufacturer, the process can start with:
“Core brokers and remanufacturers engage in the bartering process, each with the goal of maximizing their profitability and minimizing their risk. Hard to find, in demand cores are sold at a premium, while common, low demand cores are much less expensive. The entire process is won or lost on the grounds of information.” (Schinzing, 2007)
As well as market demand, the value is also linked to many factors, such as model, quantity, quality, product-cycle, rate of technological change, and supply and demand for example. See the next section ‘Inventory’ for more information.
Core Acquisition: If the reverse engineering is being made by the OEM or a sub-contractor of the OEM, then they have the possibility to build-in some form of ‘Business Model’ to increase ‘Recapture’ of their own products. To find out more about these types of business models, and their numerous advantages, go to ‘Design for Revalue’ and ‘Business Models.’
There are however, a number of Business Model options for non-OEM revalue companies, when attempting to source cores, and they are described below:
Buy-back: “…the remanufacturer buys the core…. [There] is [a] lack of relationship since neither the supplier nor the buyer has any further obligations after the transaction is made. It is common that remanufacturers buy cores from core brokers or scrap yards but could possibly be end users as well. The supplier is, in this case, seldom the customer.” (Sundin et al., 2013)
Credit-based: “…the customer receives credits for returning a core, which can be used as a discount when buying a remanufactured product. The supplier is also a customer in this case.” (Sundin et al., 2013)
Deposit-based: “…this means that when the customer buys a remanufactured product, the customer is obligated to return a similar used product. This type of transaction is frequent within automotive remanufacturing and in particular concerning components that are cheap and often exchanged at services (e.g. brake calipers).” (Sundin et al., 2013)
Reman-contract: “…this type of transaction is somewhat similar to direct-order since the supplier, which also is the customer, gives an order for remanufacturing. Also, the ownership of the core and the remanufactured product remains at the customer.” (Sundin et al., 2013)
Direct-order: “in this situation, the supplier who also is the customer gives an order for the remanufacturing of a used product. The supplier/customer sends the core to the remanufacturer, which, after being remanufactured, is sent back to the supplier/customer.” (Sundin et al., 2013)
Collection & Transportation: Here, the product needs to be collected, either directly from the original consumer, or from one of the ‘Core Brokers.’ In all cases, the product has now left its’ working location, and is being transported to one of the ‘Reverse’ Engineering sites and/or ‘Inventory.’
If the core had been through the ‘Design for Recapture’ process during its’ development (see more about strategies for improving Recapture in the sub-group ‘Design for Revalue’), then this stage can be considerably improved.
“Collection systems must be user-friendly (addressing users’ key reasons for making or not making returns, such as guaranteeing complete deletion of a user’s phone data to allay privacy concerns), they must be located in areas accessible to customers and end-of-life specialists, and they must be capable of maintaining the quality of the materials reclaimed.” (EMF, 2012)
Also highlighted by EMF (2012), this part of the revalue process can be critical in the economics of the system:
“Without cost-efficient, better quality collection and treatment systems with effective segmentation of end-of-life products, the leakage of components and materials out of the system will continue, undermining the economics of circular design. Building up the capabilities and infrastructure to close these loops is therefore critical.” (EMF, 2012)
Reducing distances from the collection point and the place of remanufacture, can be fundamental:
“Observations from current practice suggest that raw materials can be recycled at global levels, or at least sold on increasingly liquid markets. In contrast, component harvesting for reuse and remanufacturing as well as product refurbishment are best executed at a local or regional level, as this cuts down logistics costs and allows players to tap local engineering skills.” (EMF, 2014)
“Transportation and labor costs strongly influence where remanufactured goods are produced. Over 36 percent of HDOR equipment remanufacturers and 32 percent of motor vehicle parts remanufacturers cited transportation costs as an “extremely” important competitive factor, reflecting in part the importance of regional production networks and producing closer to the intended market of sale. The costs of shipping inbound cores to be processed and outbound remanufactured goods for distribution contribute to the tendency of remanufacturing to be done close to the U.S. market, favoring Canada and Mexico.” (USITC, 2012)
A typical example of a collection system by an Original Equipment Manufacture is Caterpillar Inc. Caterpillar, which has a global vendor and distribution system, which it uses as a collection point and network for most of its cores (engines in particular).
And lastly, it should be kept in mind that:
“Apart from the automotive industry, few industries currently achieve a collection rate of 25%. When shifting from linear to circular approaches, the rule of thumb for optimisation is: ‘the tighter the reverse cycle, the less embedded energy and labour are lost and the more material is preserved.” (EMF 2012)
Pre-Sorting: This is where a simple or more technically refined set of protocols are put in place to judge the quality of the core at the time of collect. EMF, in the quote shown above in ‘Collection & Transportation’ also highlights the point about ‘quality’ during transportation, and Sundin (2013) goes into more detail:
“…there is a concern that cores not being handled and stored properly during transportation will be damaged on their way to the remanufacturer or core broker.”
If the original product had been through the ‘Design for Recapture’ process and the ‘Design for Fault Detection, Inspection & Sorting’ during its’ development (see more about this in the section ‘Design for Revalue’), then quality could be better maintained and measured during the collection phase. Highlighted by the EMF (2014):
“Sophisticated reverse network management capabilities are another part of the puzzle, best fuelled by investments in hardware (e.g. sorting and manufacturing capabilities) and software. The latter will need a high level of sophistication, such as materials databases, methods for monitoring the condition of used components, and inventory management tools to store BOM information. Companies working hand-in-hand with governments and industry associations will have the best chance of establishing standards to ensure product quality and supply chain transparency.” (EMF, 2014)
Here is an example of a pre-sorting process of washing machines made by EnvironCom in the UK:
“When machines first arrive on site they go through a grading process. Older machines, those with small drum sizes and badly damaged machines will be rejected at this stage and will be sent directly to crushing. The remaining 35 to 40% of machines go to the refurbishment line where a second grading takes place. Here, a more detailed visual and mechanical examination takes place, with special attention on the bearings, filters, rubber seals, paintwork, etc. …grading the machines into gold and silver categories…” (Tuppen & EMF, 2013)
The point about quality will be discussed further in the ‘Inventory’ section.
It should be noted that the pre-sorting operation should ideally be made at the customer’s location. It isn’t worthwhile to make the whole recovery process for a product which has no demand. It can reduce costs significantly. Moreover, the reverse logistic and engineering process can be different if the product is broken or if it doesn’t fit anymore the customer needs.
Pre-sorting can be made by the customer, however, certain problems can arise:
“A challenge identified by company E concerns the identification and sorting of cores at its suppliers, which, in this case, are OEM retailers. The deliveries often contain unwanted parts and mechatronic devices (e.g. turbochargers and dashboards). This is believed to be caused by a lack of routines at the retailer where the personnel, even though having specified which parts were to be sent for remanufacturing, do not put the right parts in the right core bins.” (Sundin, 2013)
Pre-Dismantling/Disassembly: In the case of the product arriving at the end-of-cycle, as mentioned in ‘Peddlers’ within the group ‘Core Brokers’, there can often be a pre-dismantling of a product made on site, as the entire product might not be worth transporting to the reverse-engineering site or Inventory. And, in the case of a product which is still in use, the core that is removed, could be a motor, which in the ‘Maintenance’ phase, could then be sent to a revalue company, and replaced by a new one, or a motor that has already passed through the revalue process.
This section enters into more depth in one of the key elements of Revalue, and that is the management of stocks and flows of cores within the system. In this map, the word ‘Inventory’ is used to describe the actual physical place that cores are stored in, to distinguish it from ‘stock’, which can be used to describe the same thing, but also means the amount of cores flowing through the system. Therefore, stock is only used in this map in relation to flow.
Cores can often pass through multiple Inventories, potentially at the various ‘Core-Brokers’, ‘Reverse-Engineering’ companies, and the companies who finally fit the revalue core into a product for example. The Inventory can also be based in a specialised company, dedicated to managing the flow of cores through the system. A specialised Inventory, is also a form of ‘Professional Core Broker,’ like Autoenterprises in the UK, mentioned in the section on ‘Core Brokers.’
‘Cannibalise’ or Cannibalisation, is the process of stocking cores that are evaluated to have an economic value in the future. The cores that can be cannibalised are those that don’t need any reverse engineering work done to them, those that need some form of reverse engineering work done to them in the future, or are those cores that have already passed through the reverse-engineering process.
Cores can be both products (like motor engines), or sub-assemblies, or components (like micro-chips). Sony Europe, with the Playstation, is a classic example of a company that stocked cannibalised cores for a very successful ‘After-Sales-Service’; highlighted here by Parker (2013):
“Over the last 3 years, SCEE has reused over 6.8 million components from both the PlayStation® and the PlayStation2®. These range from screws to expensive processing units and motherboards. These parts would otherwise have been shipped from the Far East, incurring not only purchase cost, but also Shipping and handling costs; instead they were reused predominantly at the centre where they were reclaimed.”
The reverse-engineering company also managing the Inventory, presumed rightly that the sub-assembles, once removed from faulty Playstation units and then stored, would have a value later on, after analysis, to be used again within other Playstation units which had faults corresponding to the same parts. The Playstation example, is an interesting example of an ‘Advanced After-Sales-Service model’, and one in which could be mimicked by many After-Sale-Service departments within OEM manufacturing companies. This particular point will be discussed further, in the main text on this webpage.
These reusable parts, obtained at the various different stages of the reverse engineering process, can represent a large percentage of the components that enter back into the revalue products. This is one of the main economic interests of revalue engineering - as if it were not the case, and a majority of the parts had to be replaced with new ones, then reverse engineering would be completely uneconomical.
Below are a list of four main variables the Inventory has to contend with:
1) Quantity of Cores (and Space): Quantity links directly with point 3 below ‘Controlling Timing of Cores,’ however it is not the same. For example, a company may be able to predictably receive 10,000 cores per year (Quantity), but they may all arrive at different times throughout the year; and so even though the total amount (on paper) seems economically viable, a variability in flow timing can create periods of insufficient labour, or too much for example - making the activity non-economical.
Sundin et al., (2013) also highlights the issue with small batch volumes:
“Another challenge is that a remanufacturing firm typically has a large number of sources which means that a remanufacturing firm has to bring together a large number of small volume flows which increases the complexity.”
Sometimes Core Brokers may supply a minimum quantity (to make it economic for them), and so a reverse engineering company/department may have to take more cores than it wants, or has clear demand for. On the other hand, the reverse engineering company/department may lack sufficient cores, particularly for fast-moving products.
As with point 3 below, the variables of quantity can be managed to some extent (if possible - but not so easy for non-OEM revalue companies for example) by implementing some of the Business Models based around services (see ‘Business Models’ for more information).
And Sundin et al., (2013) also highlights the fact (linked also to Quality) that:
“Two returned products (cores) that are identical might yield a very different set of remanufacturable parts which makes inventory planning and control and purchasing more difficult.”
Quantity and Timing also links directly to the space in the stock, and the related costs associated to the loss of space for every core stored, and the cost of maintaining the space. Space management for cores may be more complex than an inventory for new products in a OEM, as cores can vary more in size and shape (cores may come from a range of different manufactures, and include various models), and are invariably not packed, so stacking and optimising storage is not always very easy.
2) Quality of Cores: This depends a lot on the type of product. An example of good control of quality by Sundin et al., (2013):
“[This revalue company] claims to have total control of the quality of the returned brake calipers. There are two reasons for that. Firstly, brake calipers have a simple design and are made out of a robust material but also contain few parts, which make units worn beyond their remanufacturability infrequent. Secondly, because of their design, it is easy to visually determine whether a unit is remanufacturable or not [easy sorting…].”
The continued review of quality and value over time, is also a key activity in the Inventory. It is imperative, due to space and maximisation of the stored assets, that the inventory is constantly monitored (visually, and with a database), and that the parts are used or sent to recycling at the right time. Quality of parts can possibly degrade over time, however, it is more likely that the parts move closer to obsolesce (depending on their ‘rate of technological change’) the longer they are stocked (this may be the opposite in the niche market for collector cars for example, where pieces may actually increase in value over time).
To improve quality “[some revalue companies also use] …check sheets that private customers and car dealerships/repair shops must fill out in advance to avoid receiving non-remanufacturable cores and cores too costly to remanufacture. This improves quality control, but does not eliminate the need for quality inspections at arrival.” (Sundin, 2012)
The handling of cores is also a key concern for maintaining the quality of cores. For example, a core can be in good quality prior to reverse logistics, and then be mis-handled, and damaged (Also see the ‘Reverse Logistics’ section). An example from Sundin (2013):
“Company E estimates that 60% to 70% of the initially sound diesel particulate filters (DPFs) from one of its core suppliers are being damaged when dismounted from the cars or when transported to company E's remanufacturing facility. The damages are assumed to be caused by the mechanics at the OEM dealers as well as by the companies responsible for the transportation of the cores - they do not recognize the value of the cores and thereby handle them in an incautious way.” (Sundin, 2013)
This can create a huge loss in potential products/cores/components for revalue processes; and instead creating a greater flow to recycling (and potentially landfill).
3) Controlling Timing of Cores: There is often a real lack of control on the timing of returned cores (as mentioned in point 1). Products will of course break or be discarded prior to their end-of-cycle phase, however there is also the ‘product cycle’ to consider. As described by USITC (2012):
“The supply of cores to be remanufactured is limited at the beginning of the life cycle of a new product (such as the introduction of a new model), generally increases as the product type or model matures, and finally declines as the product type or model begins to be withdrawn from the market. During this cycle, warranty coverage tends to increase the flow of cores as buyers opt to replace rather than repair worn-out goods. For instance… when a component of a new engine is first introduced in a motor vehicle, few to no cores are available to remanufacture that part. As the part ages, however, consumers replace the component and return an increasing number of cores, thereby creating a supply of cores viable for remanufacturing. Core availability begins to decline again as the vehicles in which the part is used are removed from service.”
Demand is also a timing issue, underlined by Schinzing (2007):
“Knowing how high the demand will be at what time in the life cycle is a critical piece of information.”
So, a revalue company and/or inventory, should be aware of these supply and demand stages within the product life cycle.
Another way to improve the management of core timing is to create a service (i.e., renting or fee-for-service) style ‘Business Model’ (see the section on ‘Business Models’ for more details). With a fixed term contract, and direct access to the cores, revalue companies can clearly reduce, or even eliminate this variable.
4) Supply and Demand Balance: Here, linked to quantity, quality, and timing, the Inventory has a lack of control of balancing supply; but they also can have difficulties predicting demand. Having a view of demand can depends a lot on who is doing the reverse-engineering work, the type of product, and who the customer is. For example, if it’s a sub-contracted remanufacturer, they may have a 12 month vision of demand, and a clear view of what types of cores and some understanding of the level of work involved. Independent Remanufactures that work directly with factories (i.e., robotic assembly capital goods) or garages (i.e., drive-chains or water pumps) for example, may also have a good view of their customers previous yearly demand - by keeping yearly statistics of demand. Sundin et al., (2012) describes another, more speculative, scenario:
“…company F buys certain cores without having a concrete demand but believes it will rise in the future. The motive is twofold; cores that are bought prior to the actual demand are cheap, hence displaying large profit margins if later sold. In addition, buying pre-demand cores prevents or diminishes competition within core acquisition. However, the speculating comes with a price tag. Apart from the obvious cost associated with storing cores until demand arises, there is an imminent risk that the anticipated demand never occurs, thus making the acquired cores less worth.”
Most revalue companies do not focus too heavily on perfecting the balance between supply and demand, simply because it can make inventory management and control functions too complicated. Those revalue companies that do not try and balance at all, have a high scrap rate - sending a a lot of non-economic cores to ‘Recycling.’
This section looks at the systems and processes the manufacturing industry can put in place to extend the life of products - and recapture value (make a profit), in the process.
The term 'maintenance,' is work made by industry, at the scales of industry, which includes repairing, (but different to repairing in the market, discussed in the section 'REMARKET'), and other work - inspection and servicing. Maintenance can be done by a variety of individuals and companies, which can be made during the working-life phase of the product, either at the products location, or in another specialised maintenance facility; or afterwards, at the end of the products’ end-of-cycle phase (post customer waste).
Within ‘maintenance’ the three activities become the different levels of intervention made by a maintenance engineer. For example, a car owner can take their car to a garage for a maintenance check. Here the mechanic will first Inspect the car, to see if there is anything that needs doing, and if so, Service it (replace the oil), and/or Repair a fault.
A) Inspect: This is usually a process that is made after a defined period of time (i.e., continuous checking by computer systems, or daily or monthly checks by a maintenance engineer for example). Here, the inspection work often involves a ‘procedure’ to check the performance of the product, to see if all is working correctly, and to see if any further intervention is required.
B) Service: A simple example of this is an domestic car oil change, made after a defined number of kilometres of use. In a service, nothing is usually broken, it is more the case of refilling liquids (like the car oil example), or changing parts that have a tendency to wear (like car tyres, engine drive belts and so forth). These parts that wear, are known as non-durable goods or consumables (see more about non-durables in the section on ‘Design for Multiple Cycles’).
C) Repair (Specialised and Industrial): The following definitions of Repair are used in this study:
“Repairing is simply the correction of specified faults in a product. When repaired products have warranties, they are less than those of newly manufactured equivalents. Also, the warranty may not cover the whole product but only the component that has been replaced.” (Ijomah et al, 2007)
“Repair makes a broken product operational again. An analysis of the root cause of the problem is generally not performed in the repair process which means the product may not perform like a new product. Typically, a warranty on a repair will only apply to the specific repair and not the whole item.” (Gray et al, 2007)
Who does the maintenance work, and where and when it is done, depends on the ‘Business Model’, ‘Re-Marketing’, and ‘Design for Core Collection’ put in place by the Original Equipment Manufacturer or the Original Retailer, or the preference of the Original Customer. To find out more about ‘Repair’ go to ‘After-Sales-Services.’
The following definitions of Refurbishment are used within this map (in revalue literature, there can be cross-overs with definitions for Renovation or Reconditioning, or this term is not even used…):
“The largely aesthetic improvement of a product which may involve making it look like new, with limited functionality improvements.” (APSRG, 2014)
“A process of returning a product to good working condition by replacing or repairing major components that are faulty or close to failure, and making ‘cosmetic’ changes to update the appearance of a product, such as cleaning, changing fabric, painting or refinishing. Any subsequent warranty is generally less than issued for a new or a remanufactured product, but the warranty is likely to cover the whole product (unlike repair). Accordingly, the performance may be less than as-new.” (EMF, 2012).
Refurbishment, therefore, invariably involves some form of cleaning, and is often (but not exclusively) done at the products end-of-cycle phase (when it has been disposed of by the Original Customer). The refurbishment operator, is very often also a re-seller, and so often wants the product to look it’s best, to gain the best possible price with the minimum of technical intervention (labour). Refurbishment, can include cleaning, and no actual in-depth inspection, servicing or repairing, which is what also distinguishes it from ‘Maintenance’ or ‘Recondition’:
“…most “used” consumer products are actually goods that have been returned to a retailer because the buyer changed his or her mind, and not because the good in question is at the end of its useful life. As a result, the good may only require a cosmetic refurbishing before it can be resold.” (USITC, 2012)
A significant group of actors that are involved in the refurbishment of end-of-cycle products are Social Organisations, which also often manage their own reverse logistics directly from customers homes, ‘Retailer Sites’ or other ‘Core Broker Sites’ - also see the section on ‘Reverse Logistics’ for more details. Examples include as Envie in France, Emmaüs International), and more traditional organisations like Environcom in the UK.
The definitions of ‘Recondition/Renovation’ used within this map are:
“The potential adjustment to components bringing an item back to working order, although not necessarily to an ‘as new’ state.” (APSRG, 2014)
“The process of returning a used product to a satisfactory working condition that may be inferior to the original specification. Generally, the resultant product has a warranty that is less than that of a newly manufactured equivalent. The warranty applies to all major wearing parts.” (Ijomah et al, 2007)
Here, is a short overall description by Parker (2007) of the advanced ‘Recondition/Renovation’ model put in place by Sony Europe:
“A full bench test is… carried out on all consoles and any minor repairs are made. Cosmetic parts are cleaned or replaced as necessary. 85% of consoles will leave this process in full working order ready for shipment.” (Parker, 2007) (process form Sony Europe) This is in effect a more ‘advanced after-sale-service’ model.
As can be seen in the map, the different stages within Renovation/Reconditioning have been expanded into more detail, highlighting five key steps (which can vary in order, depending on the industry/product:
Test: ‘Failure Detection’ is the first test, detailed below; however, there are all types of tests made throughout the process.
If the ‘Design for Fault Detection, Inspection & Sorting’ has been included into the products’ development stages (See the ‘Design for Revalue’ Sub-Group for more information), then the product may have integrated features that make this part more efficient. For example, those who own a relatively modern car, are probably aware of the ‘computer’ that the mechanic attaches to the engine to diagnose faults.
Failure Detection: This can be made onsite, during collection, and/or at the Inventory, and/or at the site where the refurbishment will take place. Again, as highlighted above, features can be integrated into the product so this part can done easier on location, or at a distance via the internet for OEM, Original Retailers, or After-Sales-Services for example.
Specialised equipment and processes are usually used for this process (see ‘Inspect & Sort’ in ‘Remanufacture for more details). This is an example from EnvironCom, a WEEE revalue firm based in UK (taking about fault detection of a domestic washing machine):
“…a full fault diagnosis will… take place. The three most likely causes of faults are the drum bearings, the pump and the circuit board. Problems also arise due to faulty main motor brushes and bearings, wiring, heating elements and leaks. A machine with too many faults will be scrapped.” (Tuppen & EMF, 2013)
Sub-assembly dismantle: This stage includes the disassembly of the sub-assembly that has failed. Also, at this stage, there will be some form of assessment, to plan the actions required to Recondition the core. If this is a sub-contract remanufacturer, then this will also include a phase to generate a ‘Quote’ for the customer.
Repair or Replace Part: This stage includes repairing or replacing the components. Here, the revalue engineer may not have access to the new spare parts (they may be out of issue for example), and so in some cases they may make new parts (which may even be better than the original, so this can be a form of upgrading), or have a stock of ‘cannibalised’ parts in the ‘inventory,’ which they use to replace the failures part.
Sub-assembly Reassemble: This stage is putting the sub-assembly back together again.
Clean: Revalued components are then cleaned prior to being stored (‘Inventory/Cannibalised’ - for later use or sale), or prior to re-integration (reassembly) into a final product. Often a final test is also made:
“[After the repair, machines are] then sent for a wet test involving two separate wash and spin cycles.” (Tuppen & EMF, 2013) (Taking about washing machines at EnvironCom)
What happens next depends on which type of company is making the Recondition/Renovation work, and whether the product is a subassembly core (i.e., an engine), or a complete product (i.e., a washing machine).
Remanufacture requires the highest level of skills and industrial infrastructure (which often relates to investment requirements in capital goods, and therefore requires large economies of scale), with the highest quality of revalue core or product as the output of the process.
In this map, this definition by remanufacturing.fr (2015) is used:
“An industrial process that recaptures the intrinsic value of components (formed/machined materials, energy and knowledge) from end-of-life products; these components are then used to make new products with equal or higher performance, quality and warranty.”
Studies of different types of remanufacturing companies have shown that each company organises its’ processes in various ways, as argued by Gallo et al (2012) and Sundin (2004):
“Although the sequence disassembly -restore-assembly appears to be a fixed point, activities such as inspection, cleaning or testing have not an unique position into the process. The sequence, therefore, must be chosen considering the recovery process, the characteristics of the product, and the technology available for treatment.” (Gallo et al, 2012)
“For example, the cores could either be disassembled followed by inspection (e.g. error detection) or the inspection could be the first step, without first being disassembled. In research, the remanufacturing process often is described with the inspection step taking place after the cleaning and disassembling steps. This, however, is not efficient if the product has fatal errors, which make it less meaningful to remanufacture. In addition, the product is easier to inspect when cleaned, and some products might be impossible to inspect if not cleaned.” (Sundin, 2004)
Taking this into consideration, the following list of key stages, can differ:
Test: Different types of testing procedures can be made at each stage of the process. See below in ‘Inspect & Sort.’
Dismantle (Disassemble/Strip): This dismantling of the core, has in many cases followed at least one dismantling phae, if and when the core was removed from a complete product. Dismantling the core down to its key components is one of the unique processes within Remanufacturing, compared to other revalue processes.
And so according to Ijomah (2004) the “Disassembly of large [parts] may occur in stages: first by subassembly and then into smaller components.”
If the product has not been through the ‘Design for Disassembly & Reassembly’ (see this section for more information) during its’ development, it is likely, as Steinhilper (2000) highlights, that:
“Disassembly is also more difficult than assembly because dirt, rust and oil can cause the job of the workers to be slowed down.”
Some of the reasons for this are also explained further by Steinhilper (2000):
“…there is no easy reverse operation for assembly operations like gluing, riveting, pressing, welding. The disassembly task also includes an identification and immediate scrapping of parts, which are apparently not reconditionable like broken housings, burnt windings etc. It also includes the separation of all components which are fundamentally not reusable like gaskets, rivets etc.” (Steinhilper, 2000)
And so, disassembly can only go to the point where continued disassemble would irreversibly damage or damage beyond economic sense, the core elements. As Steinhilper (2000) also highlights:
“Epoxy seals of electric windings, spot welds, joinings obtained by pressing, forming, forging etc. cannot be disassembled.”
Inspect & Sort: If the product has been through the ‘Design for Fault Detection, Inspection & Sorting’ process during its’ development, then this phase could be far more efficient; for example, without any identification information - like codes (RFID, or bar-codes, or numbers for example) it can be difficult or even impossible to identify what the part is, it’s age, material composition, and the OEM; and it is often impossible to gauge the quality of internal components solely through visual information alone, as this is not reliant on the age, make or model. To find out more about methods to make this part of the process more efficient, go to ‘Design for Fault Detection, Inspection & Sorting’, within the ‘Design for Revalue Section.’
“The inspection and sorting phases are closely related: the second activity can be seen as the completion of the first one. The result is the sorting of cores into three subgroups:
- "as is" reusable cores without need of revision;
- Recoverable cores, for which a refurbish activity is necessity;
- Not recoverable cores.” (Gallo et al, 2012)
This part of the process can often require a lot of manual labour, where the worker is sorting between a large numbers of similar, but not identical parts, like screws for example, to classify parts into (at least) these three main categories.
How these these three criteria are defined, is specific to the remanufacture. And the equipment that they use to affordably test these criteria, is also often specific to remanufactures, and is an area of development in itself. Test equipment, is often visual, such as microscopes, high resolution cameras, electronic image processing, and magnifying glasses for example. (Steinhilper, 2000)
Industrial Clean: This particular stage is also unique to remanufacturing, and in nearly all cases, needs specific capital goods (equipment) to complete the process. Many machines have been specifically developed by equipment suppliers, as those used in traditional manufacturing are not appropriate.
The four parameters for the cleaning process, identified by Steinhilper (2000) are:
- “Chemical Effects (e.g. Detergents)
- Temperature Influence (e.g. Heat)
- Mechanical Action (e.g. Brushing Water Jet)
- Time (e.g. Duration of Process).”
Cleaning, in remanufacture, is most often used to removing rust, old paint, and grease for example. The methods used, include those such as: CO2 spray (“…where they are blasted using the principle of dry ice and compressed air.” (Gray et al, 2007)), Ultrasonic baths, sand blasting, steel brushing, washing in cleaning petrol, baking ovens, steam or hot water jet cleaning, and chemical detergent spraying or purifying baths. Multiple treatments can be applied to the same core, in a sequence or even at the same time.
Rework, Replace, or Upgrade: Now that the parts are ready to be brought back to quality ‘like new.’ This part of the process, usually requires higher skilled labour than those previous. However, most of the time, the work requires standard cutting machinery, such as milling, lathes, drilling, turning and grinding; and can also use non-geometrical processes like hardening, spray painting, powder coating, or galvanising for example. (Steinhilper, 2000)
In some cases, however, some remanufactures have invested in metal spray machines (additive manufacturing), which “apply a thin layer of metal to restore worn surfaces and allow the part to be reused where it would otherwise have been scrapped.” (Parker, 2007)
Upgrading is not often done, but it can be of economic interest, in particular circumstances. This process can be integrated into, or done after the previous process, where parts (which might still be in good condition) are replaced with parts of superior performance - those closer to the ‘state-of-the-art’ technology. This means that remanufactured parts, cores or products, can be technically as up-to-date as the latest new product coming off the production line.
Levels of automation are nearly always lower (therefore higher amounts of labour), than in OEM plants making original parts, mainly due to the smaller batch sizes in remanufacturing plants, and lower predictability of the work required (therefor increasing bespoke).
Reassemble: This is the process of putting the parts back together again, to reassemble the core or the entire product. This, like the last two processes, needs skilled and trained workers. This is often done, in small batches, on assembly lines, and using the same or similar tools to the assembly equipment used in the assembly of the original product/core. (Steinhilper, 2000)
Final Test: As mentioned in ‘Test’ at the beginning of this subgroup, different types of testing procedures can be made at each stage of the process. However, this is the final test, which can be the same as, or very close to, the tests made on the product during its original manufacture; which usually involved a functional inspection or test run.
A key difference with testing remanufactured parts/cores/products and original parts is highlighted by Ijomah, 2004:
“The testing, measurement and quality control methods used are similar to those of the original manufacturing. The only difference is that remanufacturing requires 100% inspection because in remanufacture all parts are presumed faulty until proven otherwise.”
This ‘100% inspection’ for each remanufactured part/core/product, is in many cases higher than the inspection rate (which can be random sampling) that is put in place for original manufactured parts. And so, many observers argue that for this reason in particular, remanufactured parts/cores/products can be of a higher reliability than original products.
Reassembled cores may be sold by the remanufacture to the OEM (if they are not the same entity) for its’ integration back into the traditional production assembly line, or put in stock ‘Cannibalisation/Inventory’ - again, maybe their own, or a company specialising in this, or sold either directly to consumers, or to companies who will eventually fit these parts into products already in the market (i.e. a car mechanic, replacing an end-of-cycle motor in a car, with a remanufactured motor).
Maintenance is potentially the smallest loop within reverse engineering, in that it should require the least amount of resources, to extend the life of the product. However, irrelevant of which reverse engineering process is being used, there comes a point that product-life-extension, does not automatically equal reduced resource use over time for the provision of a particular function.
For example, unless some form of upgrade is made, or is possible, then many products are stuck with their ‘designed-in’ levels (Intrinsic Quality & Performance) of required consumable resources (i.e., energy, water, oils and detergents), that are required and used during their working cycles. And so, this resource consumption during use, can both increase over time due to general wear and tear, and increase in comparison to the latest state-of-the-art technologies. And so, when looking at the total resource consumption (LCA):- during manufacture, use, and revalue, there comes a point that it will require less overall resources to provide the function over the long term by replacing the product, than extending its’ life any further. Tuppen synthesises this point:
“Using data from suitable lifecycle assessments (LCAs) it’s possible to calculate the ‘optimum’ obsolescence point. That is the point in time at which it becomes better to replace a machine than maintain it.” (Tuppen & EMF, 2013)
Calculating this point is not easy, but when a product does reach it, then it makes more sense for the obsolete product or core to be dismantled, and after extracting the maximum number of sub-components that can be salvaged (cannibalised) as spare-parts, the rest that is obsolete and un-usable, then passes on to be recycled.
This section looks at the systems and processes available to extend the life - and this case the value that can recaptured from waste or secondary materials.
“Recovering materials for their original purpose or for other purposes, excluding energy recovery.” (EMF, 2014)
This is all about using the recovered material for the same purpose. For example, collecting used glass bottles, and reusing the glass (after it is processed), and making more glass bottles. This can include using bottles in their entirety and cleaning them for reuse, or using the glass and breaking it down, and processing it for reuse as one of the material feedstocks for the manufacture of new glass bottles.
However, there are many problems with this form of recycling, as Pauli (2010) highlights:
“…nature has some very simple and clear principles and leaves are never recycled into leaves."
And he continues:
“The producers of glass bottles know that making glass bottles from glass bottles is a complicated endeavour since you have to carefully separate white, green and brown glass and window shields from cars (another major source of glass) and you must first have polycarbonate plastics removed before the glass can be reused.”
(He goes on to suggest an alternative explained in the next section ‘Upcycling’).
However, a functional recycling strategy has been implemented by the automotive company Renault, which is explained by EMF (2014):
“As well as actively managing a flow of quality materials dismantled from end-of-life vehicles and enhancing actual recycling processes, Renault also adjusts the design specifications of certain parts to allow closed loop or ‘functional’ recycling. This makes it possible to turn end-of-life vehicles into high-grade materials appropriate for new cars and avoid downcycling.”
As is discussed in more detail in the sub-group ‘Design for Revalue,’ and within that ‘Design for Multiple Cycles;’ the strategies around improving the potential quality of the secondary feedstock, such as ‘simplifying/purifying’ the materials, eliminating/managing ‘toxicity,’ designing in efficient processing and separation of ‘technical’ and ‘biological’ materials, and improving the ability to ‘identify’ the quality and type of materials more efficiently, are all strategies that can improve the efficiency of functional recycling as a strategy (as is the case with all three recycling strategies); though as Pauli highlights, functional recycling may not be the best option…
“Converting materials into new materials of lesser quality and reduced functionality.” (EMF, 2014)
Or as Pauli (1998) put it: “…getting rid of waste at a price cheaper than the straightforward disposal…”
An example of this is the use of secondary material feedstock as a cheap ‘filler’ for other products. This is where the actual functional attributes of the material are not used to the full - or at all - and where the lowest price, and how much can be used within the final material without reducing its’ acceptable performance, can be the overriding incentives.
Today, downcycling, and functional cycling are probably the most common forms of recycling processes used. However, the third option, ‘upcycling,’ seems the smarter solution in most cases (if not all cases).
“Converting materials into new materials of higher quality and increased functionality, also by improving on a downcycling process.” (EMF, 2014)
Upcycling can best be describes through the concept of ‘Cascading’:
Cascading: Here, is a short extract from Pauli (2010), within a description of the concept of the ‘five kingdoms’ (one of the taxonomies of life made by scientists):
“Whatever is waste for one species, is a nutrient or energy for another species… belonging to another kingdom. Each time matter cascades, different chemical reactions, different exploitations of pressure, size, temperature and mechanics permit different results, unparalleled in efficiency at that time and place, using whatever resources are at hand.” (Pauli, 2010)
This frames the overarching concept, and there are numerous examples of this theory in practice, thanks in many ways to the work and promotion of Pauli and the ZERI foundation and its global network (to find out more, read any one of the books by Gunter Pauli, or see the cases described at www.theblueeconomy.org).
And so to an example in industry, leading on from glass bottles discussed in ‘functional recycling’ above:
“…based on a technique already invented in the 1930s… we shred all glass containers, put this glass dust into an oven and heat it up with the methane gas generated by the organic waste in the local landfill, finally injecting CO2 that we can obtain from the methane gas which is 30 percent carbon dioxide, we produce glass foam using only a minute amount of the catalyst.” (Pauli, 2010)
From this example (see Case study 103 from the blue economy link above), a range of different companies have been created and are developing a portfolio of products, including ‘Earth Stone International,’ a company that currently develops ‘Growstone,’ a growing medium that can be used in hydroponics, and ‘Quicksand’ a sanding block; and ‘Misapor (CH),’ a company producing foamed glass as an insulation for construction, that has both multiple functionalities (i.e., it is also structural, and can be used without an extra aesthetic coating) and also has multiple insulation uses.
The Misapor foam glass example, with its’ multiple functionalities underline it as an ‘upcycling’ - increased functionality - process. The example also shows how a mix of different ‘waste’ streams, in this case, CO2 and Methane (two important green house gases), and glass, can be combined to create a high value product.
At it’s base, cascading can also be described as arbitrage:
“…the arbitrage value creation potential is rooted in the lower marginal costs of reusing the cascading material as a substitute for virgin material inflows and their embedded costs (labour, energy, material) as well as externalities against the marginal costs of bringing the material back into a repurposed use.” (EMF, 2012)
However, cascading is more than seeing an arbitrage opportunity, it is also about innovation, and turning that opportunity into a functioning business - and potentially multiple businesses - as cascading can involve a material having extended value within multiple cycles:- the example of cotton (a ‘biological' material) from EMF (2012):
“…cotton clothing is reused first as second-hand apparel, then crosses to the furniture industry as fibre-fill in upholstery, and the fibre-fill is later reused in stone wool insulation for construction - in each case substituting for an inflow of virgin materials into the economy - before the cotton fibres are safely returned to the biosphere.”
Regional Cascading: The concept of dealing with ‘waste’, is now more about identifying the inherent value in secondary materials:
“South Korea refers to discarded waste now as “urban mines” and has estimated total metal and rare metals in urban mines, from industrial and domestic sources, to have a value of 50 trillion won (£29 billion).” (EEF, July 2014)
And connecting these secondary materials (outputs) with potential inputs. At the level of a region, the cascading of secondary materials, may be to some extent, facilitated by intermediates (including some Core Brokers), helping to connect supply and demand. For example:
“In the UK, the work of the Waste and Resources Action Programme (WRAP) has been instrumental in establishing secondary markets for recycles in the UK.” (EEF, July 2014)
Also see more information about NISP (the U.K.’s National Industrial Symbiosis Programme) in the section on ‘Brokerage Facilitators,’ under ‘Core Brokers’ within the sub-group ‘Recapture’, which is an example of a group helping to establishing regional cascading markets.
Industrial Cascading (Industrial Ecology or Eco-Industrial Park): This is the development of cascading secondary materials at the level of an industrial park. And so, companies with a ‘symbiotic’ supply and demand, position themselves locally together, to take advantage of the reduction in reverse logistic costs (and potentially ‘free’ cost of the input) - which can be a huge hurdle in revalue systems - and more broadly to take advantage of other location benefits and innovations that may arise from being located close together (such as knowledge and trust for example). It can be a risky strategy - after all, this can be a large scale bricks and mortar operation; what if one company up the ‘waste’ chain goes out of business, or changes the output material due to changes in technology? And, having a symbiotic resource chain, does not also mean that the companies are all located in the optimum geographic location for their market. However, the most famous example in the world, the Industrial Ecology site in Denmark ‘Kalunborg Symbiosis,’ which first began over 50 years ago, shows it can be possible, in a particular context, at a large scale.
Portfolio Cascading (Ecological Cluster): This is different from industrial ecology above, as it is typically at a smaller scale, with production close to consumption, initial investments are usually relatively low, and although often involves ecological clusters of more than one business, some ‘portfolio cascading’ can be primarily focused within one business (although always linked to external activities…).
Outputs to Inputs: One example is a brewery and a mushroom farm:
“If, for example, mushroom farming could be established next to the beer brewery… then we would have a most efficient production facility generating one ton of mushrooms for each four tons of spent grain.” (Pauli, 1998)
This example has more recently been evolved and developed all around the world, with the association of urban coffee shops (spent coffee grains) and urban mushroom farmers. Once these businesses are both up and running, there will be other secondary outputs, which can then lead to more activities, which can also be connected to other existing local businesses, or created businesses, and so on through a process of autopioeses…
This form of cascading, as highlighted by Pauli (1998): “…requires a multidisciplinary approach. It can only succeed with co-operation across business sectors. For example, fibres from the plantation are re-used in the pulp industry: lignin as a binding agent and hemicellulose in the food industry.”
This is a system focused on the economies of scope, and so, the symbiotic diversity in the portfolio, can be the resilience of the entire business or group of businesses.
Cascading can also help primary producers diversify their portfolio, and also move up the value chain towards the final consumer. This can be seen clearer with another example, the coffee plantation:
“When coffee is grown, only 0.2 percent of the coffee plant ends up being consumed as an actual coffee; and farmers do not make very much money on that 0.2%. Each cup contains only 3 grams of the biomass that was farmed and is worth less than a tenth of a cent to the farmer. What happens to the rest of that coffee plant? The rest of the coffee plant is unused biomass - actually 99.8 percent of the plant.” (Pauli, 2010)
By using the cascading methodology, the coffee farmer can use the waste coffee plant hardwood and/or coffee husks, as a substrate for growing mushrooms, and the remaining spent substrate from the mushrooms can then be used as pig or chicken feed (thanks to the mushrooms, the spent mushroom substrate is now full of amino acids, much lower in caffeine, and the lignin which is difficult to digest has been broken down…).
And so we should “… start doing more with what the earth produces. Less than 5% of agro-forestry output is effectively used, with, on average, some 95% discarded. If we adopted an economic system that used the 95% - even 100% - we would be able to satisfy as much as 20 times more material needs without expecting the earth to produce more.” (Pauli, 1998)
Biorefinery: To get to a point where all the value is extracted from biological nutrients - the entire chemical breakdown of a material is required - and then the knowledge of how to efficiently/environmentally extract those chemicals, at the right economic quality, and quantity. This type of work is typically made in a ‘Bio-refinery.’ A Bio-refinery can be positioned on the map, within the ‘Transformation Industry’, and as a ‘Recycling’ company. See the Processum Biorefinery in Sweden as an example bio-refinery. Like Industrial Ecology companies, a biorefinery can take secondary material from the ‘Post Consumer Waste’ stream (the brown arrow coming down from the top on the map), or from the ‘Pre- Consumer Waste’ stream (shown as the orange arrow on the map, coming in from the left).
The Biorefinery, has key roots in the field of ‘Green Chemistry’ - to find out more, got to the Royal Society of Chemistry.
This focuses specifically on energy or biomass recovery from waste (or sometimes a secondary output), not those crops - such as sugar, palm-oil, and corn, that are specifically grown for biofuel production.
Anaerobic Digestion: Energy can be extracted from biological materials in various processes, with incineration and anaerobic digestion (AD) being the most typical. The energy that can be recovered from AD can be in the form of heat, cold (with the use of a heat exchanger), and a gas that can be burnt to create electricity, or further processed (through transesterification) to create a liquid fuel - biodiesel, or separated into pure carbon and hydrogen (Pauli, 2015). A further output is the semi-digested slurry, which can be used as a form of fertiliser.
Anaerobic Digesters, can be built in varying scale, from those, typically in India, that are used at the household scale, to large industrial scale digesters with a capacity in excess of 10,000m3 in China.
The output quality and quantity, is directly linked to the inputs used. A vast amount of organic materials can be used in AD, however the type and amount of different elements within the feedstock (i.e., hydrogen, carbon, oxygen and trace elements) has a huge impact on the output yields of gas, and the quality of the semi-digested slurry. Many AD plants are not running at full capacity, as the mix of inputs are not correct (The Organic Stream, Dec 2015).
One of the key advantages of AD is that, in the theory of cascading, it uses waste as an input to bring multiple benefits. However, particularly in Italy, many AD plants have been built by investment groups, and with an eye on yield, have in many cases, opted for the use of corn as the main feedstock (to increase stability in sourcing the feedstock). In this case, this primary product, corn, has been grown for the use within the digester, and therefore, is not part of the cascading waste cycle, and places AD squarely in the same controversial issues with biofuels - plants grown for fuel (i.e., sugar, corn, palm-oil), and their use of energy to grow and competition for food (and therefore price) and land…
AD is very popular in Germany, with over 10,000 AD sites currently in operation nation-wide, and is a great example of de-centralised local energy production (i.e., local management, investments and profits, and local inputs and outputs). However, most of those sites (according to Pauli, 2015), are mainly existing through subsides, and as mentioned above, if using non-waste feedstock, are far from carbon neutral.
Syngas: Although ‘carbon capture,’ and capture of other green house gases (GHG), from the polluting smoke stacks of industry, has seemed a dream technical ‘patch,’ it seems that a company in New Zealand (LanzaTech), has found a way to convert syngas (CO2, CO, and H) into ethanol. By using specific microorganisms to ferment the syngas, in a proof of concept project, 100,000 gallons of ethanol has already been captured from the chimneys of a steel mill in China (Pauli, 2015).
Aerobic Digestion (Composting): Constantly rebuilding healthy soil, is one of the foundations of sustainable agriculture, and sustainability of the natural environment in general. One way to build new soil, to support this thin layer that covers the Earth’s landmass, which has taken ten of thousands of years to develop, can be through adding compost and humus.
Much of the different actors in sustainable agriculture look beyond the synthesised NPK (nitrogen, phosphorus and potassium), and look more to the compost as a medium comprising of the right soil-biology, with the right mix of materials for feeding that biology when it is added to the soil.
Compost can be produced through various processes, 'cold,' 'hot' or vermi-compost (with worms) are typical examples.
These processes are possible at the level of an individual farm or ecological cluster of farms; and if done well, can both increase (Upcycle) and improve (in quality and in time) the availability of nutrients to the soil - via microorganisms in the soil - for plants; reduce the amount of (or at least, the speed in which) elements are ‘leached’ into the atmosphere, particularly those which are also GHGs, and those leached into the soil (and therefore groundwater) and sea; and reduce the need for external and synthetic fertiliser (see ‘Agroecology’ for more examples).
This section looks at those strategies that can be made at the 'start-of-the-pipe' (opposed to the 'end-of-pipe') - during the design of the actual product or service. Work done here has the potential to vastly increase the effectiveness and efficiency of the waste or used product in REMARKET and REINDUSTRY, by looking at the causes, and not only the effects. Design for revalue, therefore, can increase margins, qualities and quantities. And it also increases the potential for new services and features, for both the manufacturers and the customers or retailers.
This strategy has strong links with the ‘Business Model,’ and one of the following product design strategies ‘Design for Fault Detection, Inspection & Sorting.’
The collection phase has many uncertainties for the company recapturing cores. Companies need to manage the flow of cores, such as where the cores are, who has them, when will they arrive, at what price, in what quantity, and at what quality for example… These are all examples of the variables companies have to manage with, when trying to economically recapture cores. See ‘Inventory’ within the sub-group ‘Recapture’ for more details.
“Remanufacture cannot occur without core, because without core there would be nothing to remanufacture! Core is generally collected through a specifically designed business model however the remanufacturing process relies so fundamentally on the collection of core that any steps that may help the collection of core should be utilised.” (Gray et al, 2007)
Information: A company can improve ‘Recapture’ of it’s products and components at the end-of-cycle/use phase, by sharing certain information to different actors involved in the ‘Recapture’ process. Some examples:
- The model type, manufacture location, age of core, and age of the model for example (these last two helping with inventory planning).
- The different material type, structure and grade - this has overlaps with ‘Design for Fault Detection, Inspection & Sorting,’ however, this can determine at the collection phase, where the core is sent and/or which form of logistics is used for example.
- The method(s) of collection to all stakeholders. Including if the product needs to be handled in a specific way, or pre-dissembled so that certain components can be packaged differently (i.e, electronic boards and displays in separate packages, and alternators in shipping containers), and/or sent to different destinations (via specific or non-specific logistics services), for example. High quality, Pre-disassembly in this phase, can improve significantly the profitability within the revalue chain.
- The reverse-engineering process. This can also instruct on pre-disassembly procedure(s) mentioned above.
Information can be marked (printed or engraved/embossed for example), on the outside or inside of the product or packaging, with the use of symbols (standard codes, Braille, infographics…), graphic representations of data (barcodes, QR codes…), or RFID tags for example. The style, type, and positioning of the information, will depend on the intended viewer. The collection method can also be communicated in some way, by the actual form and weight of the product itself.
“An example from perkins engines is to have codes marked on the engines showing place and year of manufacture, and engine type..” (Gray et al, 2007)
Systems Techniques: This information, can also be stored within a digital database (similar to the ‘Material Passport’ - See the sub-group ‘Recycling’ for more information), which can also be accessed via barcodes, QR codes, or RFID tags for example, on the product.
Panasonic for example, has developed with RTL (Round Trip Logistics), an online database that can be used by some of the different actors involved in the ‘Recapture’ process, particularly retailers and after-sales-services. In the case of a retailer (who often has to manage a vast range of different brands), when a customer brings a Panasonic product back for refund, or repair, with a particular warranty, the online database provides the retailer with Panasonic’s policies and rules, and the instructions for the following return procedure(s).
As highlighted in the quote below by Gray et al., collection strategies can also be integrated with the ‘Business Model’ already in place (go to ‘Business Section’ and ‘Reverse Logistics’ sections to find out more).
“The availability of core is a major challenge to remanufacturing. The management of core needs to be built into the business system. This requires not only building core collection methods into the business model but also providing incentives to ensure that those collections are carried out effectively.” (Gray et al, 2007)
By using integrated sensors (see ‘Fault Detection, Inspection & Sorting’ for more details), which can be combined with wireless or ethernet cable connections between the product in use and the OEM (or service sub-contractor), the collection of the product can be directly linked to the monitoring of the products/components performance. For example, Rolls Royce (‘Power-by-the-hour’ service) embeds sensors into its’ products, which can anticipate the maintenance of aircraft engines and reduce dramatically on the ground repairing processing time; by knowing when and where to collect the product, and if there is a fault which type, or if the product/component has reached a specific number of cycles, whether it needs to be replaced or reverse-engineered for example.
‘Recapture’ data, can be treated with the rest of the resource data, which may be already being collected, stored, managed, and interpreted by the OEM, sub-contractor, or Independent reverse-engineering company, through the company’s ERP (Enterprise Resource Planning) system. ERP systems, can show in real-time the main business activities, including product planning, manufacturing or service delivery, marketing and sales, inventory management (which is a key element of recapture), and shipping and payments for example.
Packaging: The product packaging can be designed to guarantee the best conditions to quickly collect and select products, while preserving its’ technical and aesthetic properties, and as mention above, packaging can also be a way to transmit recapture information.
“Designing packaging for more effective sorting. Simple steps can be taken immediately in design, such as not using black-coloured materials as they cannot be detected by near-infrared equipment, or by avoiding large labels on packaging as the label can be mis-detected as the actual packaging material.” (EMF, 2013)
EMF (2013) also suggests some strategies for designing packaging for reuse:
“Designing packaging intentionally for durability and re-use (e.g., thicker walls and anti-scuffing technologies as opposed to the ‘light-weighting’ trend of single use).”
“Updating current production, transport and retail infrastructure to process reusable containers at scale (e.g., back-haul collection of used containers, washing, refilling).”
“Convincing marketers / business owners that they can convey their brand image and justify price points through [the same] reusable packaging.”
The packaging, in some cases, maybe stored by the user. In this case, the package is usually specifically designed for the product, so it can be optimum for protecting the product, but it will take up storage space. Or the packaging maybe sent/taken to the user when the product is being recaptured. In this second scenario, the company managing the recapture also has the issue with space, and so perhaps more likely is the use of modular, or adaptable packaging, which may compromise protection of the product.
This is ultimately about designing products and components to be quickly disassembled at low costs, while preserving their initial properties - making them ready for the relevant reverse engineering process(es); and designing the products and components to be easily and effectively put back together again, at low cost, and preserving their initial properties, after the reverse engineering process(es).
“What Makes Disassembly Most Difficult?: Corrosion/Rust, Dirt/Oil/Debris/etc, Permanent Fastenings, Reduce Core Damage, Complexity, Tight Tolerances, Size, Req. Special Tooling, Worn Fastener Heads.” (Gray et al, 2007) (In order of importance)
Materials: Chiodo (2005) proposes that dismantling times can be reduced (or even eliminated) by making the product or sub-components of the same or similar materials, and with compatible fixings or attachments. And therefore eliminating:
“…incompatible materials, non-dismountable surface attachments and factors reducing [particularly] recycling performance… making it both costly and resource-intensive.” (Chiodo, 2005)
Simplification: Standardisation of mountings, reducing the number of components, easy to split materials, uses of common tools… are amongst many other design strategies.
“…reducing the use of adhesives and increasing modularity of components, using higher-quality materials to increase the robustness of plastic casings, and some technical tweaks to the circuit boards within smartphones that would reduce the likelihood of defects. …Specifically, industry sources cite the need to increase the space between printed circuit board tracks as an important design change.” (EMF, 2012)
Active Disassembly: Chiodo (2005) explains that this:
“…involves the disassembly of components using an all-encompassing stimulus, rather than a fastener-specific tool or machine. When designing for active disassembly, we tend to consider the use of smart materials which undergo self-disassembly when exposed to specific temperatures.”
Materials used for ‘active disassembly’ include Shape Memory Polymers (SMPs) or Shape Memory Alloys (SMAs) for example; and are often used as rivets, bolts or screws, which change shape at specific temperatures (approximately between 65ºC and 120ºC), releasing two or more parts from the assembly.
Fasteners: Active Disassembly, already highlights how good fastener design can improve disassembly, however they should be minimised in number and variety within an assembly (without compromising the structural properties). There should also be a preference of snap-fits over fastners, taking into consideration the general wear (work-hardening, fracture…). If metallic fasteners are used, ferrous types can help magnetic separation; and finally, the access to the fastener is also important:
“Holes which are complete (i.e. follow through the entire section of the component) allow for the fastener (e.g. snap-fastener) to be tapped out as opposed to being pulled out.” (Chiodo, 2005)
Also only use minimal riveting:
“Although rivets are not as bad as welding but they are still time consuming to remove.” (Ijomah et al, 2007)
General Principles: This is a list of further general principles developed by Chiodo (2005):
- “Minimise the number of components used in an assembly, either by integrating parts or through system re-design.
- Separate working components into modular sub-assemblies.
- Construct sub-assemblies in planes which do not affect the function of the components.
- Avoid using laminates which require separation prior to re-use.
- Avoid painting parts as only a small percentage of paint can contaminate and prevent an entire batch of plastic from being recycled.”
Designing for disassembly and reassembly is not the same thing. We all know how easy it can be to dismantling things… but the skills required to put things back together again, like in the assembly of a new product, needs to be much higher, and workers also need to have some minimum knowledge of the product(s) and components, and how they work.
“The lack of skills is the biggest to hindrance for reassembly in the Electrical Rebuilders section of the automotive industry (Hammond et. al, 1998). This could suggest employees need greater training, but also makes the case for simpler product designs leading to more intuitive reassembly procedures.” (Gray et al, 2007)
“What Make Reassembly Most Difficult?: Skill of Employee, Product Diversity, Complexity of Design, Replacement Defects, Variations in Cores, Permanent Fastening, Lighter Duty Materials, Threaded holes, Tolerances, Special Tooling.” (Gray et al, 2007) (In order of importance).
Beyond the skill of the workers, Gray et al., (2007) above, also mentions that the ‘fastners’ technology - screws and threaded holes for example, need to be robust enough for re-assembly: often plastic screw holes, with metal screws can be defective after they have been dis-assembled only once, whereby the metal screw has destroyed the threaded hole, for example. And also, special tooling maybe required to assemble certain components (which may not be available), and some components may need to be tightened to specific tolerances (which may not be indicated).
Design for Inspection, Fault Detection and Sorting Products/Cores/Materials, are all key strategies in improving the speed of analysis, and the quality of intervention option selected (including the option for no-intervention, or one of the reverse engineering processes) by the potentially numerous actors along the Recapture and Reverse Engineering Process.
“The inspection of a product [is] to establish its current status and history [which] is necessary in order to apply appropriate methods for remediation.” (Gray et al, 2007)
These three different actions, have been grouped together, as they are very much inter-related: Sorting, needs some information, which can come from some form of Inspection or Fault Detection for example.
There are potentially many Inspection, Fault Detection and Sorting actions made along the Recapture and Reverse Engineering process. These actions can include the analysis and selection of particular end-of-cycle products, during the ‘Reverse Logistics’ phase, which can often be a relatively quick selection of those products that are seen as economically interesting; this ‘pre-sorting’ then leads to progressive analysis and selections, during the products potential disassembly of its’ sub-assemblies and its’ sub-components.
Below, are some of the Design strategies that can be implemented for this part of Design for Revalue:
Materials: Make it easier to identify what the product is made of, and the grade and structure of the material, as this also changes how it can be machined or recycled for example. Ijomah (2009) also suggests to:
“Minimise the number of different materials used for parts thus facilitating component sorting. Limit the number of material type per part to reduce sorting complexity. Identify parts requiring similar cleaning or processing modes.” (Ijomah, 2009)
And try to:
“Use materials that will survive the inspection process.” (Ijomah, 2009)
And EMF (2012) underlines:
“Understanding all the materials and components with every product and better labelling of these will be will be crucial for our success in the Circular Economy game’. This information needs to feed into well-developed company-internal databases and tracking systems, so that one can easily look up the origin, age, and range of potential applications…” (EMF, 2012)
A Product Passport or Environmental Product Declarations (EPDs), can also be made available for the Recapture and Reverse Engineering actors, which is a document that describes the materials used inside the product, and can also provide an understanding of the economic value of the different materials, and potential ways to reuse them and manage them. The Product Passport can be made available as an online platform, with varying levels of openness.
APSRG (Dec 2014) highlights how this kind of information can help the actors involved in Recapture and Reverse Engineering (although they focus on the non-OEM remanufacturers, it can still be relevant for all the processes and actors):
“Remanufacturers collect and buy products at their end-of-life stage without knowing the quality of this product and this makes many companies financially vulnerable as some products will be too worn out to remanufacture.” (APSRG, Dec 2014)
Product Structure: The physical structure of the product and its’ components can also be designed in a way, that makes Inspect, Fault Detect and Sort more efficient and effective.
Ijomah (2009) suggests to:
“Arrange components so that separation joints are easily accessible and easily identifiable. Minimise the number of joints reduce/eliminate redundant parts simplify and standardise component fits. Reduce/eliminate redundant parts thus limiting sorting time and expense.”
“Use standardised components to limit sorting complexity. Identify parts by end-of-life destination. …Reduce number of parts. Reduce unit weight. Provide handles for heavy, bulky, hard to handle parts. Limit redundant parts.” (Ijomah, 2009)
Ease of access to both the information and the components (which is linked to ‘Design for Disassembly’) is also an important design criteria, in part noted by Tuppen & EMF (2013) that washing machines would be designed, firstly with wash cycle counters (to help in Inspection, Fault Detection and Sorting), and secondly with easy access to the cycle counters. Ijomah (2009) recommendations go further:
“Minimise the disassembly level required to effectively test components. Reduce test complexity. Clearly identify component load limits, tolerances and adjustments. Standardise tests.” (Ijomah, 2009)
Linked to access, is the clear marking of where inspection points are, and it is also useful to mark clearly on the product (and/or within the Product Passport mentioned above) the make, model, and year of manufacture. (Ijomah, 2009)
Technology: Different technologies can also be embedded in the product, to facilitate Inspect, Fault Detection, and Sorting; which can be linked to the Product Passport database mentioned above. Such as those outlined by Gray et al., (2007):
- “Embedded data recording, or RFID which may be updated during product servicing etc.
- Sacrificial parts. The application of sacrificial aspects to a component, which would wear during use and thereby give an indication of the components’ treatment over time.
- Traditional data recording of the products’ multiple life history. Xerox for example keep accessible data of all their products previous lives.”
EMF also discusses how technology can be used to facilitate tracking of products and materials through the value chain:
“…information technology is now so advanced that it can be used to trace materials through the supply chain, identify products and materials through the supply chain, identify products and material fractions, and track product status during use. Furthermore, social media platforms exist that can be used to mobilise millions of customers around new products and services instantaneously.” (EMF, 2012)
“The ‘Internet of everything’. …This interconnectedness will enable tracking efficiency that was previously inconceivable.” (EMF, 2014)
Technology, can also be used to help identify the condition and a fault:
“…the inclusion of fault-tracking software - that is, software systems that identify which parts of a broken phone need to be replaced - would greatly facilitate the process of sorting used phones, which would improve the business case for circularity.” (EMF, 2012)
“Radio-frequency identification (RFID). …The use of RFID has great capacity to boost materials reuse. Using RFID technology in sorting apparel and textiles at the end of their lives, for example, will enable the cascade of each type of textile to more suitable and higher-value applications than is the case today. Wider adoption of RFID could be facilitated by falling technology prices.” (EMF, 2014)
Designing the product and components to be easily cleaned is also one of the key design criteria that can be worked on within ‘Design for Revalue.’ Products and parts are often cleaned for aesthetic (i.e., ready for re-use, or re-sell) or functional reasons (i.e., a buildup of fine particles, in an area that can cause or increase wearing or create a malfunction), throughout the different Reverse Engineering processes; and industrial cleaning is used in Remanufacturing to remove paints, rust and other elements so that other stages of the process are made possible - such as Dismantling, Inspect & Sort and Reassembly for example.
Below are some of the different ways in which the product can be designed for more efficient and effective cleaning and industrial cleaning.
Materials: Ijomah et al, 2007 & 2009, highlight some strategies for the design of the material surface, and some material selection criteria:
- “Corrosion resistance. However, this will depend on the materials as some coating materials may peel leaving debris that may damage components.
- Non-adhesive surfaces. However, it may be difficult to maintain the integrity of such surfaces.” (Ijomah et al, 2007)
“Use product materials that will survive the cleaning process. Use durable materials for identification methods, e.g. avoid use of stickers as these may detach during cleaning.” (Ijomah, 2009)
“Avoid materials that are difficult to clean, e.g. material with pitted surfaces. Minimise number of different materials used in the product thus limiting use of variety of cleaning agents.” (Ijomah, 2009)
“Use components that all require or at least can be divided into groups that require similar cleaning agents and procedures. E.g. limit the number of material types per part. Identify components requiring similar cleaning procedures and agents.” (Ijomah, 2009)
Product Structures: Here are some design strategies for designing the product structure:
“Ensure easy access to all areas to be cleaned. Ensure good resistance to dirt accumulation, e.g. avoid sharp edges and thresholds that may attract dirt Ensure ease of handling, e.g. reduce product unit weight where ever possible without limiting functionality or required durability.” (Ijomah, 2009)
“Provide handles if product is heavy or bulky. Ensure marking on product can withstand cleaning.” (Ijomah, 2009)
Avoid “Shapes such as grooves, because these may make cleaning difficult, for example, because tight corners may be difficult to reach.” (Ijomah et al, 2007)
Assembly & Personnel: And here are some assembly and personnel techniques that can be considered:
“Use assembly methods that allow disassembly at least to the point that internal components can be accessed for cleaning.” (Ijomah, 2009)
“Use assembly technique that will withstand the cleaning process but that will not allow disassembly without damage to components that have potential to be reused.” (Ijomah, 2009)
According to Sundin in his study (2007) at Electrolux Motala plant, the step that needs most improvement is cleaning:
“Cleaning is the remanufacturing step that needs to be improved the most according to the data collected. To increase efficiency in this step, the following actions can be taken:
- Install steam cleaning.
- Train personnel so that they become more task-flexible, i.e. personnel from other work areas can ease the cleaning step by doing some kind of pre-wash when needed.
- Design products that do not collect dirt in the first place.” (Sundin, 2007)
“Less product complexity and more manageable life cycles. Providing stable, sometimes reusable product kernels or skeletons, and treating other parts of the product as add-ons (such as software, casings, or extension devices), enables companies to master the challenge of ever-shorter product life cycles and to provide highly customised solutions whilst keeping product portfolio complexity low.” (EMF, 2012)
This is all about designing for multi-loops. This asks the design engineer, to design for more than one life cycle, instead of just one. This is perhaps one of the most important and probably the most complex strategy within the products ‘Design for Revalue’; though it is also probably the area that can create the greatest rates of revalue recapture at the end-of-cycle. As Sundin (2004) mentions when discussing Remanufacture:
“One must remember that the essential goal in remanufacture is part reuse. If a part cannot be reused as is or after refurbishment, the ease of cleaning or reassembly will not be a factor… This means that much effort can be made in product design without getting the expected benefits. …the reliability of the part is very important since it has to go through at least one life cycle, including all remanufacturing steps, and still work satisfactorily.” (Sundin, 2004)
Products are very often made up of very different types of components, with potentially different life-cycles, and where some parts can be highly worn and other parts can be virtually unused. Understanding, during the design phase, which parts, at the 2nd or 9th cycle (for example), will likely need replacing (and therefore recycling), can be reverse-engineered (and to what level), and or can be upgraded; and then designing the product and its components with this mind, is the main goal of multi-cycle design. As Gray et al 2007, reiterates:
“…some components may be designated, by design, for single or multiple reuse, for single or multiple remanufacturing, for recycling, or for disposal.” (Gray et al, 2007)
Design for Recycling
Inevitably, not all the products, components, and sub-components will be able to cycle through the complete reverse-engineering process, and be integrated back into working products (especially not indefinitely). Some parts will be either too damaged (particularly non-durable goods), or technically obsolete for example, and so these elements will have to be prepared for ‘Recycling’.
Braungart, EMF et al. (2013) highlight that it is important to distinguish between ‘renewable’ and ‘recoverable’ when talking about recycling. And so, when evaluating if a material is ‘renewable’, the level of ‘recoverability’ of that material at the end-of-cycle, should also be evaluated. This ‘recoverability’, and therefore its recyclability can be improved through some of the following strategies:
Simplify (Standardised Pure Cycles): As explained by EMF (2014): “In pursuit of profitable value creation, companies have broadened the spectrum of materials used in today’s (consumer) products in myriad creative and complex ways. In the world of plastics, the number of new polymers has continued to increase in the past decades, mostly driven by new combinations of existing monomers.” (EMF, 2014)
At the end-of-cycle phase, this means that there maybe an incredible mix of different materials within one product, that are also difficult to separate:
“Studies into vehicle recyclability at the Georgia Institute of Technology, USA suggest that the limiting factor in the economic recycling of complex assemblies found in vehicles (e.g. instrument panels, headlight clusters) is the separation into pure material streams – either manually or mechanically.” (Chiodo, 2005)
And also a huge number of different materials also flowing through the relatively few segmentations within the end-of-cycle (post-consumption) streams, which can reduce quality and value.
Additives are also mixed into polymers to improve the functionality, and/or to reduce the price. There are potentially thousands of different additives in use, and the problem comes when they render plastics technically and/or economically unviable for recovery. And it not just the issue of what type of additive is in the polymer, it is also how that type of additive has been mixed into the polymer in the first place:
“Additives that are mixed with the polymers mechanically rather than being chemically bonded are easier to separate. Examples are inorganic pigments such as titanium dioxide (a whitening pigment) and iron oxides (red, black, brown and yellow pigments).” (EMF, 2014)
EMF (2014) suggests that one solution may:
“…be to tackle materials complexity and create pure materials stocks at scale that generate sufficient economic benefits for participants.”
And so, maybe this economies-of-scale solution, may help, what is arguably a variety of economies-of-scale problems.
EMF (2014), also goes onto suggest that a good place to start could be with:
“… Golden Oldies (paper and card board), High Potentials (polypropylene), Rough Diamonds (carbon dioxide) and Future Blockbusters (biobased and 3D-printing)…”
Chiodo (2005) outlines some pragmatic ‘simplifying' guidelines when designing for recycling with metals:
“Unplated metals are more recyclable than plated ones.
- Low alloy metals are more recyclable than high alloy ones.
- Most cast irons are easily recycled.
- Aluminium alloys, steel, and magnesium alloys are readily separated and recycled from automotive shredder output.
- Contamination of iron or steel with copper, tin, zinc, lead, or aluminium reduces recyclability.
- Contamination of aluminium with iron, steel, chromium, zinc, lead, copper or magnesium reduces recyclability.
- Contamination of zinc with iron, steel, lead, tin, or cadmium reduces recyclability.”
When looking at the material, from a complete product point of view, other strategies can be used. For example, using plastics with enough difference in their specific gravity (i.e., greater than 0.03) can help during the floatation separation process of different components; or using magnetic with non-magnetic materials, so magnetics can help separate quickly one element or material from another.
In summary, the benefits of simplifying/purifying the material used in products are that:
“…uncontaminated material streams increase collection and redistribution efficiency while maintaining quality, particularly of technical materials, which, in turn, extends product longevity and this increase material productivity.” (EMF 2012)
And to lead to the next point, ‘Pure’ does not necessarily mean ‘Non Toxic.’
No Toxic Materials: At the level of the product manufacturer, this is often about companies developing their own ‘black list’:
“Alongside their mission to increase recyclable content across their portfolio, Electrolux and Philips have drawn up lists of restricted materials not to be used in their products.” (EMF, 2014)
At the level of ‘Heavy & Light Transformation Industries,’ who create the materials for industry, this is more about:
“...[d]esigning out contaminants (e.g., colorants, plasticisers, stabilisers).” (EMF, 2013)
…and other types of additives (go to ‘Purify’ above for more details)
Technical & Biological: It is important to understand the differences between ‘consumable’ and ‘durable’ products and components. Consumables can be water, oils, chemicals, textiles and biomass for example; and Durables can be computers, engines, metals and most plastics for example. Illustrated by the Cradle-to-Cradle team, they suggest that the majority of consumables should be made of ‘biological’ materials (which is not the case today); and the majority of durables should be made of ‘technical’ materials (which is mostly the case today).
The goal then is for the biological materials (also called ‘nutrients’) to be:
“…designed to re-enter the biosphere safely and build natural capital, and technical nutrients [to be] …designed to circulate at high quality without entering the biosphere.” (EMF 2012)
The biological nutrients can also be designed to ‘cascade’ through a variety of different applications, to extend and diversify value potential, prior to re-introducing it back into the biosphere. This biological cascading concept has its routes in the Blue Economy. Cascading of some of the technical materials is also possible, which is strongly linked to Industrial Ecology. These types of cascading strategies can actually be designed into the product during its’ initial development. See the sub-group ‘Recycling,’ Upcycling’ for more information.
The majority of the technical nutrients, beyond cascading and recycling, are cycling through the reverse engineering cycles; reducing the flow of materials to Energy Recovery or Landfill.
Material ID: This is a strategy to improve the identification of the material(s) at the end-of-cycle phase.
An identification showing what the material is in general, should be marked with the appropriate standard (i.e, ISO 1043), to make identification simpler. However, particularly with metals, the grade of the material should also be shown (low grade or high grade steel for example). If the grade is not shown, then high grades can be mixed in with lower grades, reducing he overall quality potential of the material that can be recovered, and therefore its economic value.
Product Passport: See the section on ‘Design for Disassembly & Reassembly’
Leakages: Reducing the ‘leakages’ of biological and technical materials.
“Bio-cycle materials experience a different type of leakage: the loss of opportunities to maximise the cascaded usage period of the materials and the inability to incorporate the nutrients back into the biosphere due to contaminations.” (EMF, 2014)
“For technical nutrients, ‘leakage’ refers to the loss of materials, energy, and labour as products, components, and materials are not or cannot be reused, refurbished/remanufactured, and recycled, respectively.” (EMF, 2014)
“Because of this different solutions are often used to solve leakage for the bio and technical cycles. Bio-cycles focus on defining leakage through cascades while technical cycles focus on closing or continuing loops.” (EMF, 2014)
Design for Upgrade
Design for Upgrade means designing in the possibility to upgrade parts and/or software or a end-of-cycle product during the reverse engineering process. Upgrade can mean replacing a part and/or software with more efficient and/or have more modern aesthetics than the original design for example, or in the best case replacing old parts with the state-of-the-art technology of the latest comparable products on the market.
“The increasing rates of technological/aesthetic change in the consumer markets, make design for upgrade particularly relevant to remanufacturing in this sector. Upgrading product function to meet customer requirements can prolong the functional life of products (Sundin, 2004).” (Gray et al, 2007)
This is particularly difficult for independent/non-OEM reverse-engineering companies, that may not have access to the required engineering data, and the latest technology to make an upgrade, although some innovative companies do make their own upgrades and even sell them to the OEM!
Reverse Production: This is the design of the physical industrial space, where the Reverse Engineering actually takes place.
The work space for Reverse Production can be designed and continuously improved, using many of the different process management methods already developed for the linear production system. Some of the more well known, such as Lean Manufacturing (particularly useful for relatively new production setups), and Six Sigma (perhaps more effective when applied to more mature production systems), are already used in Reverse Production design and management.
Lean Manufacturing: is a systematic method for the elimination of waste (“Muda”), within a manufacturing system (wikipedia). In essence, Lean Manufacturing focuses on what adds value, and reducing everything else that doesn’t. Waste in the case of “Muda”, is more than waste of Raw Materials; it also focuses on wasted time of labour (a worker waiting for example), or overproduction (ahead of demand), defects, and wasted transportation for example. In Lean it is deemed a waste, if an activity doesn’t add a tangible economic value to the final product.
Six Sigma: is a set of techniques and tools used to improve processes within the entire organisation. It focuses more on the quality of the output, by reducing defects and minimising variations in the production and business processes (wikipedia). The areas where six sigma are used, can include After-Sales-Service (both customer relations and the re-engineering area for example), and looking at pollution reduction, and increasing profits.
3R (Reduce, Reuse, Recycle - including Biodegrading): In this map, 3R is primarily focused on the production value chain, and revalue chain, and applying 3R in the use of all the different ‘Raw Materials’ inputs (Abiotic, Biotic, Water, Energy & Land Area), which are imbedded in the infrastructure used for production (i.e., capital goods), imbedded in the products themselves, and imbedded in the ‘waste’. 3R can be a constant, iterative process, much like, and linked to, Lean and Six Sigma for example (discussed above), which ‘reduces’ the inputs required, through increases in efficiency, reusing ‘waste’ raw materials in the production process directly (maybe not for the same function), which again reduces the need for external inputs, and finally by managing those ‘wastes’ that can not be used on site, to be ‘recycled’ onsite or by an external specialist.
“Improvement of Materials’ Efficiency. This technique asks whether environmental impact can be reduced by minimal use of materials, use of low impact materials, use of renewable materials, and/or use of recovered materials.” (Gray et al, 2007)
3R is an important part of the sustainable use of natural resources, but it is not the complete solution. As highlighted by EMF (2012) through a distinction between efficiency and effectiveness:
“Efficiency vs. effectiveness - a key distinction. Eco-efficiency begins with the assumption of a one-way, linear flow of materials through industrial systems: raw materials are extracted from the environment, transformed into products, and eventually disposed of. In this system, eco-efficient techniques seek only to minimise the volume, velocity, and toxicity of the material flow system, but are incapable of altering its linear progression.”
This first part focuses on the strategies which can be taken by a revalue OEM.
Some companies foresee, or may even experience some market competition between their own revalue products and their own new products (market cannibalisation). In most cases, this can be managed by Grading the revalue products, in terms of price and performance, and selling them cheaper (i.e., -30 to 40%, or -10 to -15% depending on the type of product) than the new product equivalent. Even with this reduction in sale price, it is estimated that due to the potential savings on material goods inputs and services, companies can make an average of 30% EBITDA (Earnings before interests, tax, depreciation & amortisation), compared to the 16% EBITDA average margin earned when selling new products (according to Lavery et al., 2013).
Lower prices can extend the market: Selling a revalue product at a lower price, can attract new customers to a product and/or brand, that normally can not afford it. Here, existing customers may also purchase the revalue product, or they may stay with the perceived level of quality that they are used to (the new product). In this last case, the market has expanded (product/brand exposure is increased to more customers), and cannibalisation of new product sales is reduced or even non-existent.
There are further strategies that an OEM can take to bolster ‘Grading’:
Market Cascading: One way to clearly differentiate between new and revalue products is not to sell them in the same market. For example the:
“…initial life [is] with more affluent, more developed countries then subsequent life following remanufacturing with less developed, less affluent countries.” (Ijomah et al, 2007)
The basic principal is that the lower cost revalue products are sold to developing countries, where it is suggested that the higher performance (and therefore higher cost) is not justified: i.e., a revalued high-speed train or carriage, may not have the infrastructure to be able to run at high-speed in a developing country, so the performance requirements are lower. In the case of ‘Remanufacturing,’ the revalue product may be equal or perhaps better in performance than a new product, so the issue of reduced performance may not always exist. However, this strategy can run the risk of continuing a cycle typical in the second hand car industry, where products cascade down through poorer and poorer countries, potentially competing with local manufacturing, and increasing the density of high consumption and high emission products (old cars with old technologies) in one place (increasing energy demand and pollution for example).
Sub-Brands: Grading can be done through price, and with the use of branding and communication. For example: Siemens has a sub-brand called ‘ecoline’ for revalue high-end medical scanning equipment (i.e., MR Magnetic Resonance machines); and Ricoh has a sub-brand called ‘Green-Line’ for its’ revalue photocopiers for example. The fact that the product has been reverse engineered by the OEM (or by its’ sub-contractor), gives a ‘stamp’ of quality transmitted to the consumer.
These last two strategies can be used by a OEM, and a non-OEM revalue company.
Quality Label: Some companies also use quality labels that are communicated to the customer (beyond that of the brand) as a form of ‘seal of trust.’ Siemens has ‘Proven Excellence’, GE has the ‘GoldSeal: Grow with quality,’ and Philips has ‘Philips Diamond Select: Refurbished medical imaging equipment.’ To date, there are no international, national, or even industry level quality labels for revalue products.
Warranty: One of the differentiates of quality, particularly used between refurbished and remanufactured products is the warranty, as Parker (2007) extends:
“How to persuade customers that a remanufactured product is as good as new?"
"The ‘as new’ warranty reassures customers that they will be buying a quality product with excellent after sales support should they need it. Strict quality procedures ensure that the customers experience is trouble free, building trust and confidence in remanufactured products.”
A warranty can be a strong signal to the customer (primarily as it has economic consequences for the company) that a company has confidence in the quality of their own product, and the reverse-engineering work that has been made on it. The level of the warranty depends on part on the company, and on part on the type of reverse-engineering process made; for example a warranty can be given for the entire product if it has been ‘Remanufactured,’ and for a subassembly that has been fixed/replaced in the case of ‘Reconditioned’ product for example. A warranty is less typical with ‘Refurbished’ goods, usually as the intervention work made is often minimal, and so are the resale margins.
Return-to-market Speed: As mentioned briefly before, different products can have different margins, which can depend on the obsolesce level of product. For example, a laptop has a relatively short life in the market (i.e., 5yrs), compared to a washing machine (i.e., 10yrs) or car (i.e., 13yrs) for example. And so, the potential resale market price falls far quicker over the same period of time for a computer than for the other products mentioned above. It is very important, therefore, if the revalue process is to be economically viable, to make the entire ‘Recapture’, ‘Reverse-Engineering,’ and ‘Remarketing and Re-selling’ processes as quickly, and efficiently as possible - in particular for those products, like the computer (or mobile phone). In the case of the computer the resale price is consequently around 10% and 15% cheaper than the equivalent new product on the market (who’s sale price is falling); whereas, a washing machine may resale between 30% and 40% cheaper than the new equivalent product (who’s sale price is more stable). (based on figures from Lavery et al., 2013)
OEM and non-OEM Competition: When revalue products are entering into the market from a non-OEM revalue company, market cannibalisation can be more difficult to manage for the OEM. In this case, the OEM doesn’t control the amount of revalue products on the market, the quality or the price. And so, potentially they can be competing with their ‘own’ products on the market, which can be potentially below the standard that they would like - which can damage their brand. This is mainly why, non-OEM revalue companies, which are an important part of the revalue ecosystem, and OEMs are not always ‘in phase’ with legislation and industrial policy for example. If these two groups are facilitated to make closer partnerships, then perhaps win-win strategies can be found, and profits, and the real and perceived quality of the product/brand can be maintained or even enhanced. However, today:
“…some independent printer cartridge remanufacturers claim that OEMs engage in various tactics to compete with third-party firms, including public relations campaigns to discredit the quality of third-party remanufactured printer cartridges and efforts to limit the supply of cores. These efforts reportedly include making cartridges more technologically complex and thus more difficult for third-party firms to remanufacture, and promoting discount programs directly with customers to exchange new cartridges at a discount for used ones.” (USITC, 2012)
Other strategies to increase selling price, and/or reduce costs of revalue processes are discussed further in the next section.
“One of the key challenges currently experienced with successfully moving to a circular economy revolves around business models. The majority of organisations and companies currently still operate on linear business structures, which transfer producer responsibility for products to retailers or consumers upon their sale. Developing business models in which manufacturers acknowledge their producer responsibility is vital for moving to a more circular economy.” (APSGR, Dec 2007)
Below are a list of some of the business models already used around the world, to improve the efficiency and economics of revalue activities, and to help ‘close the loop.’ They can be used with B-to-C (Business to Customer) markets, and from B-to-B (Business to Business) markets - like the ‘Capital Goods Industry’ for example. To understand more of the possibilities than those listed below, look at Product-Service-Systems and the Performance Economy.
Renting not Selling: Stahel & EMF (2013)
“Selling performance, results, utilisation, services instead of goods means that economic actors:
- retain the ownership of goods and embodied resources; and,
- internalise the cost of risk and of waste.
By comparison, the industrial economy maximises its profits by externalising the cost of risk and of waste. After the point of sale, it offers a warranty for a limited period of time and limited to manufacturing defects.”
This is a strategy that can benefit both the OEM/Original Retailer (and even some non-OEM revalue companies) and the consumer. If the OEM/Original Retailer rents a product to a consumer, then the ownership and therefore the responsibility and risk of disfunction stays with the OEM/Original Retailer. The benefits to compensate for taking on this increased responsibility and risk, is that the manufacturer/seller can better manage a closed loop between themselves and the customer, improving efficiency, costs, and reducing leakages of their products beyond their revalue chain (increasing ‘recapture’ rates). The extended responsibility by the OEM in particular, motivates the manufacturer to start thinking more in loops - and potentially improving the quality of their products and how they measure performance and use - therefore, integrating some of the ‘Design for Revalue’ design solutions. The OEM/Original Retailer now also has a longer service relationship with the customer, which they can be used to build a better relationship and understanding of their needs - as highlighted further by EMF (2012):
“Improved customer interaction and loyalty. Getting products returned to the manufacturer at the end of the usage cycle requires a new customer relationship: ‘consumers’ become ‘users’. With leasing or ‘performance’ contracts in place, more customers insights are generated for improved personalisation, customisation, and retention.” (EMF, 2012)
One of the barriers to this business model is that the OEM/Original Retailer has to cover the upfront cost of the product, and has to wait for the full price to be paid over an extended period, therefore they face a:
“…maturity mismatch between upfront production costs and future cash flow streams. Financing this gap from the company’s own funds could be a financing risk to a certain extent, yet typically these risks can be carried by financial intermediaries.” (EMF, 2012)
The advantage for the customer is that they have access to product at a far lower initial cost, and as it is a service contract then:
“Choice and convenience are increased as producers can tailor duration, type of use, and product components to the specific customer - replacing today’s standard purchase with a broader set of contractual options.” (EMF, 2012)
“Customers can then stay up to date with respect to energy consumption, emissions controls or safety systems.” (Parker, 2007)
Pay per use/ Fee-for-Service:
This is also a form of service contract, however it goes beyond renting a particular product, at a particular price, per period of time; instead here the OEM/Original Retailer charges for a defined level of performance - and so they are motivated to provide the level of performance, using the most efficient technologies (within the economic limits of the contract), which can also evolve over time, as it is them that is financially responsible for the use cost (i.e., the consumption of consumables, and the wear of durables):
“Rather than simply making a stand-alone sale, the ‘servitised’ OEM provides the customer with certain performance outputs. This model guarantees a result instead of a product: hours of flight instead of a jet engine, full print services instead of a printer, or whole flooring services instead of carpet tiles. It is similar to leasing a product, but goes a big step further as the client doesn’t simply pay for the use of an asset, but for the desired output.” (APSRG, Dec 2014)
The service which is actually provided to the customer depends on the product(s) and the company; however, it would generally include an installation, maintenance throughout the contract, and at the end-of-cycle, a moment where the elements are recaptured for reverse engineering (in the best cases). The maintenance may be made with remote monitoring as well as onsite visits, giving the ability to maintain and even improve performance during use.
“Capturing big data in this way represents a significant opportunity for businesses to understand their customers and grow their brand. Moreover, by including reclamation of end-of-life products as a central aspect of its service, the manufacturer has direct access to the component parts and materials which it can remanufacture.” (APSRG, Dec 2014)
An example of Rolls-Royce - ‘Power by the Hour’:
“The service concept has been pushed to the extreme for Rolls Royce, the aero turbine manufacturer. Not only do commercial customers demand a round-the-clock, round-the-globe support for their power units, the military do not even own theirs! Rolls-Royce retains ownership of all cores and spares, and charge for usage as agreed with the customer. It is in Rolls’ interest to maximise reuse capability subject to other client constraints. The client is offloaded from maintenance tasks and has a clear view of its future liabilities.” (Parker, 2007)
Core deposit/Incentivised Return and Reuse: An example is given by Parker (2007):
“How to make sure that core is returned to CAT rather than rebuilt by 3rd parties, who will not have access to the full technical data and test procedures? The core deposit is set above the market price for the used part so that the customer has an incentive to return the core to CAT. Only CAT remanufactured parts will carry a full warranty and give the customer guaranteed reliability and performance.”
Schemes can also include ‘buy-back’ systems whereby the OEM/Orginal Retailer (B-to-B, or B-to-C) pays cash or gives credit towards a new purchase.
“Remanufactured goods are often sold with an additional core deposit price incorporated into the price of the good. Once a core is returned to the remanufacturer (not necessarily the original manufacturer of the product), the deposit is credited back to the customer who returned the core. Such a system incentivizes core returns and ensures an adequate and reliable source of cores.” (USITC, 2012)
Service-Exchange System/Like-for-Like: This strategy, replaces a faulty product with a similar age/aesthetic/condition/model product from the after-sales-service ‘Inventory’; and in examples below, the replacement products have been through ‘Remanufacturing’ or ‘Reconditioning’ reverse-engineering processes.
An example from Sony Playstation Europe:
“Customer contacts SCE UK regarding a suspected faulty console. SCE, on diagnosing a fault, arrange collection by courier and consolidate these returns at a logistics hub. Package is checked on arrival and if console is intact and shows no sign of abuse, a remanufactured replacement is shipped to the customer.” (Parker, 2007)
The Sony Playstation system was built on economies of scale and a high level of cannibalisation of reclaimed parts, which brought down warranty repairs to the minimum.
CAT Inc., also focuses on packaging for this business model:
“When a customer purchases a remanufactured part from CAT it is delivered to them in a reusable container, for which they pay a deposit. When returning a worn part (core), customers are expected to use this container. The Shrewsbury site has reduced its wooden packaging waste by 70% using this system, reducing cost and making sure core arrives undamaged.” (Parker, 2007)
OEM, Sub-contracted, or Non-OEM (Third Party): This sub-section looks at some of the possibilities of who can actually be doing the ‘Reverse Engineering.’ This is specifically not shown in the map, as all three of these actors could be active on their own, or together, in one revalue chain, or one of them can be mixing strategies across various different product lines (i.e., an OEM is remanufacturing some of its’ products/cores, and sub-contracting the remanufacturing of others).
OEM revalue manufacturer: “In this case, it is the OEM… who remanufactures its own products arriving from service centres, trade-ins from retailers or end-of-lease contracts. …Furthermore, OEMs… have all the needed information concerning product design, availability of spare parts and service knowledge. The remanufacturing process could be integrated with the ordinary manufacturing process or be separated from it. Also, the parts from the remanufactured products could be used in manufacturing, or the products could be entirely remanufactured.” (Sundin, 2004)
“Furthermore, Lund (1983) studied a diesel engine OER [OEM remanufacturer] that stated the following reasons why it could effectively compete with smaller, local remanufacturers:
- The company had higher worker productivity because of its factory methods;
- it used facilities, specialized equipment, and energy more efficiently;
- the quantities it produced were large enough to justify machines requiring less skilled workers, and
- it salvaged more materials, thereby greatly reducing its requirement for new materials and the cost of new parts.” (Sundin, 2004)
“Furthermore, by using the supply chain network, the following advantages were also highlighted by Jacobsson (2000):
- Knowledge of the consumer provides the OEM with user patters, which, in turn, are valuable in evaluating the remaining values in the discarded product.
- Detailed information of the consumers and the market for the original product also provide the OEM with advantages in the marketing of the product. First of all, the OEM can estimate the size of the market and remanufacture products according to estimated demand. Secondly, this kind of information provides the OEM with an excellent situation to evaluate the requirements from the customers and which market segments may be interested in the remanufactured products.
- With regard to marketing, the OEM also has the advantage of using its reputation for producing high quality products in the process of convincing the customer of the reliability of the remanufactured products.
- By having the equipment, competence and infrastructure for manufacturing in place, the OEM already has a system that can be reversed. It also reduces the need for investments for the remanufacturing operations.
- The OEM generally produces higher quantities allowing for investments in more advanced production/remanufacturing equipment.
- The OEM is also generally better equipped to earn profit from remanufacturing, as recovered parts can be used in the manufacturing process, providing a higher return than if the parts were to be sold.” (Sundin, 2004)
OEMs can also have a few different ways in which they work within the revalue ecosystem: Full OEM (that does everything - recapture, reverse-engineering, reselling…); OEM with Retailer as redistribution and a ‘Reverse Logistics’ manager; or an OEM working with an independent ‘Reverse Logistics’ company.
Revalue Sub-Contractor: In this case, the OEM usually still owns the products, but outsources the work to a specialist revalue company. The advantage here is that the OEM does not have to invest time and money into revalue activities (and knowledge), and still controls the management of revalue products/cores/components in the revalue chain (RE-marketing), and the Sub-Contractor can specialise - and horizontally specialise, serving other companies, and increasing economies of scale and expertise - and:
“…the company can expect to obtain assistance from the OEM in terms of replacement parts, design and testing specifications, and even tooling.” (Sundin, 2004)
On the other hand, OEMs are careful to manage who they Sub-Contract, due to this potentially high level of IP transfer:
“SCEE [Sony Computer Entertainment Europe] are careful not to work with companies who are also engaged in operations with a direct competitor, this ensures issues of commercial sensitivity are safeguarded.” (Parker, 2007)
Sub-Contractors can also work in different ways: Full Sub-Contractor, which serves 100% the demands of the OEM; Sub-Contractor with independent distribution, whereby they manage the reselling; Sub-Contractor with independent reverse logistics; Sub-Contractor which both manage reselling and reverse logistics.
Revalue Non-OEM (Third Party/Independent): Non-OEM revalue companies often depend on the ‘Core Brokers’ for the sourcing of products/cores:
“…some independent remanufacturers may rely on purchases on the open market to fill needed core supplies. For instance, independent motor vehicle parts remanufacturers may work with third parties such as brokers, salvage operators, and salvage auctions to procure an adequate supply of cores.” (USITC, 2012)
This opens up the potential problems with:
“The quantity, quality, and type of core supplied to the salvage yards and brokers may be inconsistent, which increases the uncertainty of core supply for independent remanufacturers. However, independent remanufacturers also tend to use a core-deposit system to encourage the return of cores and to keep supply flowing.” (USITC, 2012)
And the need of spare parts:
“These independent remanufacturers also often need to buy spare parts for their products that are to be remanufactured. …this type of operation is an integrated one, in that it purchases cores, remanufactures them and markets them under its own name or for the private labels of others. Generally, exchange of experience between these remanufacturers concerning reprocessing to the OEM is minimal…” (Sundin, 2004)
“[And]…actions have been taken against [an independent remanufacturing] company… where OEMs refuse to sell spare parts needed to perform remanufacturing of their products.” (Sundin, 2013)
And the need of design specifications:
“The prevalent battle in remanufacturing continues to be that often third party remanufacturers cannot take OEM cores and remanufacture them due to the lack of design specifications available to them. OEMs are understandably reluctant to share confidential data to competitors. Any regulatory change forcing OEMs to share data runs the risk of manufacturers offshoring their production to avoid the legislation.” (APSRG, Dec 2014)
“[And, an independent remanufacturing company] …experiences that OEMs delay technical information (e.g. test parameters) about the products on purpose, which, due to the effort, put into reverse engineering results in higher remanufacturing costs…” (Sundin, 2013)
The United States, has moved some way in reducing this problem, through the implementation of the ‘Freedom of Information Act,’ that allows general access to product information, held by governments and corporate bodies, to individuals. (APSRG, March 2014)
And finally, non-OEM revalue companies can suffer from cheap imports of new parts:
“A further challenge for company F is the competition from low-labour cost countries. When there are brand-new spare parts available at a cost close to, or even cheaper, than a remanufactured part, the demand for remanufactured parts decreases.” (Sundin, 2013)
And costs of cores, related to scrap prices:
“The second challenge affecting company F is the recently increasing scrap prices, which follow the prices of raw materials, which, in this case, are metals. When scrap prices are high, scrap yards would rather sell the dismantled cars as scrap than sell the individual mechatronic devices to core brokers or remanufacturers.” (Sundin, 2013)
This final section within ‘Design for Revalue’ is an introduction to further strategies, that can also be applied to the product, which go beyond Recapture or Reverse Engineering efficiency.
“It means designing a modern industrial structure - a car, factory, or office building - as a whole system, identifying a multitude of relationships between various components, or subsystems, and then optimising the entire system for multiple benefits rather than optimising individual components for single benefits. Integrative design is systems thinking in action.” (Capra, Fritjof et al., 2014)
This type of design requires the collaboration of a multi-disciplinary team, such as architects, designers, and engineers; which can bring about huge advances in energy and material efficiency.
The systemic approach, and the benefits are discussed further by Capra, Fritjof et al., (2014):
“A further characteristic of RMI’s systemic approach is that it integrates the redesign of the four most energy-intensive sectors of the US economy - transportation, buildings, industry, and electricity… For example, the energy problems of automobiles and the electricity grid are easier to solve together than separately; energy savings in motors that run industrial pumps and fans can also be applied to commercial buildings, and so on.”
And extended by Lovins himself:
“Synergies likewise arise from integrating innovations in technology, policy, design, and strategy, not just the first one or two.” (Lovins & EMF, 2013)
This integrative design, at the level of a States’ hard infrastructure, has also been developed by Jeremy Rifkin, with his “The Third Industrial Revolution” strategy - this will be developed further in the ‘Hard Infrastructure’ section within ‘Infrastructure and Institutions.’
Ecodesign & Biomimicry: This overlaps with ‘Integrative Design’ mentioned above, as, at its best, it is also systemic in approach, based on ‘loops/cycles’ and non-linear systems.
The Ecodesign work includes the ‘cradle-to-cradle’ work developed notably by Walter Stahel (Product-Life Institute), and McDonough and Braungart (MBDC),’ which is said to be a design approach inspired by nature.
“All of them apply basic ecological knowledge to the fundamental redesign of our physical structures, cities, technologies, industries, and social institutions, so as to bridge the current gap between human design and the ecologically sustainable systems of nature.” (Capra, Fritjof et al., 2014)
Another strategy, within ecodesign in the broad sense (in this map), which has links with cradle-to-cradle design, is the work developed by the Zero Emissions Research and Initiatives (ZERI) organisation, lead by Gunter Pauli. This strategy is focused on recycling waste streams using natural cycles, whereby the output of one activity becomes the input for another. The (potentially new) activity which profits from this potentially low cost input, creates diversity in activities that can create new incomes and jobs. To understand more about how some of the ZERI strategies have been applied, go to the ‘Recycling’ section, and within that, ’Upcycling,’ or here to the ZERI or Blue Economy websites.
Again linked to cradle-to-cradle, and ZERI, is biomimicry. Here, the focus is on learning from nature, which then inspires design of structures, materials and processes. It is a design method, first coined by Janine Benyus in 1997 (cofounder of Biomimicry 3.8), which is also developing in other places like the Biomimicry Institute for example. Benyus’s basic argument is that living organisms and ecological systems have been solving many of the design problems we have, through billions of years of evolution, in efficient and ecologically sustainable ways. In many case this systems design method, brings together scientists from physics, biology and chemistry for example, and puts them together with engineers and designers. Go to the web-links referenced above, to see real world examples of this in action.
“Biomimicry relies on three key principles: Nature as model: study nature’s models and emulate these forms, processes, systems, and strategies to solve human problems. Nature as measure: use an ecological standard to judge the sustainability of our innovations. Nature as mentor: view and value nature not based on what we can extract from the natural world, but what we can learn from it.” (EMF & D&T, 2012)
Video Coming Soon
Many of these activities are systemic - that is to say, they involve multiple stake-holders, across industrial sectors and public sectors, and require diverse (and new) skills sets - and so the system 'below' (the infrastructure) needs to support these new collaborations, and relationships, to also increase their existence and potential. As with 'RE-DESIGN,' this can focus on causes, and effects, barriers and opportunities, and start-of-pipes, and end-of-pipes... Public departments, education, research, investors and ecologists play a key role in this section.
Hard Infrastructure: Here are some of the strategies for ‘Hard Infrastructure,’ described below by Jeremy Rifkin (2011):
“Infrastructure, at the deepest level, is not a static set of building blocks that serves as a kind of fixed foundation for economic activity as we’ve come to regard it in popular economic lore. Rather, infrastructure is an organic relationship between communications technologies and energy sources that, together, create a living economy. Communication technology is the nervous system that overseas, coordinates, and manages the economic organism, and energy is the blood that circulates through the body politic, providing the nourishment to convert nature’s endowment into goods and services to keep the economy alive and growing. Infrastructure is akin to a living system that brings increasing numbers of people together in more complex economic and social relationships.”
Jeremy Rifkin has developed a systemic strategy that focuses on going beyond fossil fuels by bringing together some of the main hard infrastructure elements ‘Transport,’ ‘Communications,’ ‘Monitoring Systems,’ and ‘Energy,’ together with Construction (building stock), into an integrated solution.
This strategy is known as the ‘Third Industrial Revolution’ (TIR), which is outlined by Rifkin as containing five pillars:
“The five pillars of the Third Industrial Revolution are  shifting to renewable energy;  transforming the building stock of every continent into micro-power plants to collect renewable energies on site;  deploying hydrogen and other storage technologies in every building and throughout the infrastructure to store intermittent energies;  using Internet technology to transform the power grid of every continent into an energy-sharing intergrid that acts just like the Internet (when millions of buildings are generating a small amount of energy locally, on site, the can sell surplus back to the grid and share electricity with their continental neighbours); and  transitioning the transport fleet to electric plug-in and fuel cell vehicles that can buy and sell electricity on a smart, continental, interactive power grid.” (Rifkin, 2011)
Another systemic strategy in hard infrastructure, which both compliments TIR and extends into other areas (particularly energy efficiency) is ‘Reinventing Fire,’ which has been developed by The Rocky Mountain Institute (RMI) and its’ cofounder Amory B. Lovins (also see the section on ‘Integrated Design & Biomimicry).
Like TIR, the ultimate goal is to make the shift from fossil fuels to renewables, using a systemic approach:
“…to create a clear and practical vision of a fossil-fuel free future for the United States, backed up by quantitative analysis, and to map a pathway to achieve that future.” (Lovins, 2009)
The strategy integrates four of the most energy-intensive sectors in the US economy: Hard Infrastructure: ‘Transportation,’ ‘Energy,’ (electricity in particular), with ‘Industry,’ and ‘Buildings’ (Construction).
For ‘Transportation,’ the three main innovations are based around making vehicles ultra lightweight; hyper aerodynamic; and powered by hybrid-electric drive. For the ‘Energy’ used for ‘Transportation,’ ‘Industry’ and ‘Buildings,’ the three main innovations are radical energy efficiency (retrofitting commercial buildings, or capturing and reusing waste heat for example); switching to renewable sources of electricity such as Wind and Solar power, hydrogen fuel cells and advanced biofuels for example; and the integration (like Rifkin) of the ‘Communications,’ ‘Monitoring,’ and ‘Energy’ (the Electricity Grid in particular) known as the “smart grid” (similar to Rifkin’s ‘Intergrid’), which:
“…is an electric system that uses a multitude of smart chips and instant communication to interlink and coordinate countless small generators whose lower costs, lead times, and financial risks make the system far superior to a centralised grid.” (Capra, Fritjof et al., 2014)
Green Architecture: This is used as an umbrella term in this map for all the ecodesign strategies used in construction and retrofitting (the addition of new technologies or features to older systems) of buildings.
Green architecture can use ‘bio-mimicry’ (see ‘Integrated Design & Biomimicry’ for more information), or principles from nature as inspiration, in designing the structural form, to take the greatest advantage of the Sun and the Wind, for maximising solar heating, and cooling, ventilation, and natural light. The termite mound is often used as one of natures ‘teachers’:
“Termites in Zimbabwe build gigantic mounds inside of which they farm a fungus that is their primary food source. The fungus must be kept at exactly 87 degrees F [30 degrees celsius], while the temperatures outside range from 35 degrees F [1 degree celsius] at night to 104 degrees F [40 degrees celsius] during the day. The termites achieve this remarkable feat by constantly opening and closing a series of heating and cooling vents throughout the mound over the course of the day. With a system of carefully adjusted convection currents, air is sucked in at the lower part of the mound, down into enclosures with muddy walls, and up through a channel to the peak of the termite mound. The industrious termites constantly dig new vents and plug up old ones in order to regulate the temperature.” (Retrieved the 13/12/2015 from inhabitat.com)
Systemic architect Anders Nyquist from EcoCycleDesign, has designed and built, houses and schools based on the ‘termite technology.’
Green architecture also involves highly efficient forms of insulation for all construction surfaces including windows, that in some cases can make space heating systems redundant. Buildings, can also be designed to capture and distribute water from the rain into the house for certain uses, or outside the house for irrigation systems for the garden for example.
Finally, like the strategies mentioned above in ‘Hard Infrastructure’ by Rifkin and Lovins, a building can become not only an energy saver, but also an energy producer, with the use of different forms of solar panels and solar water heaters, or even biogas for example.
Agroecology: Modern agriculture often promotes the use of agrochemicals and monoculture design, which weakens ecosystem resilience, reduces biodiversity, and undermines Earth’s ability to provide ecosystem services. Modern methods can also have a negative impact on public health, the quality of food and its nutrition. Socially, it impacts traditional rural livelihoods and cultures; and psychologically can separate farmers from the land as an ecosystem. Economically, it also creates a debt cycle for farmers, and is often focused on exportation, and framing food as a commodity (no qualitative differentiation across a market).
Agroecology on the other hand, aims to build on the traditions/cultures and skills of the past and studies many developing countries (where they have low means, and therefore low external inputs), and mixes this with modern scientific understanding of ecology, ethnology and sociology for example. The result is a focus on developing agricultural systems specific to the location (as all locations are unique), and balancing outputs with the continuous building of soil fertility, natural pest control, low external inputs (except knowledge), potentially more jobs, and helping to put nature back in line with the path of evolution. As Gleissman (1998) underlines:
“From a management perspective, the agroecological objective is to provide a balanced environment, sustained yields, biologically mediated soil fertility and natural pest regulation through the design of diversified agroecosystems and the use of low-input technologies.”
One of the key principles of agroecology is diversification of farming activities through biodiversity, and mimicking nature:
“Agroecologists are now recognizing that intercropping, agroforestry and other diversification methods mimic natural ecological processes, and that the sustainability of complex agroecosystems lies in the ecological models they follow. By designing farming systems that mimic nature, optimal use can be made of sunlight, soil nutrients and rainfall.” (Pretty, 1994)
Below is a list of agroecology strategies brought together by Miguel A. Altieri., et al (2005) (one of the lead thinkers and leaders in the field):
“Various strategies to restore agricultural diversity in time and space include crop rotations, cover crops, intercropping, crop/livestock mixtures, and so on, which exhibit the following ecological features:
1. Crop Rotations. Temporal diversity incorporated into cropping systems, providing crop nutrients and breaking the life cycles of several insect pests, diseases, and weed life cycles (Sumner, 1982).
2. Polycultures. Complex cropping systems in which two or more crop species are planted within sufficient spatial proximity to result in competition or complementation, thus enhancing yields (Francis, 1986; Vandermeer, 1989).
3. Agroforestry Systems. An agricultural system where trees are grown together with annual crops and/or animals, resulting in enhanced complementary relations between components increasing multiple use of the agroecosystem (Nair, 1982).
4. Cover Crops. The use of pure or mixed stands of legumes or other annual plant species under fruit trees for the purpose of improving soil fertility, enhancing biological control of pests, and modifying the orchard microclimate (Finch and Sharp, 1976).
5. Animal Integration in agroecosystems aids in achieving high biomass output and optimal recycling (Pearson and Ison, 1987).”
As a final note, some of the work of the Blue Economy, has been the development of business models that attempt to make some of these strategies both economically viable and job positive (creating new jobs). See their case studies on the website link given above for more information.
Urban Agriculture: Within this map, ‘Urban Agriculture’ is used as an umbrella term for three main activities: Edible Landscaping, Community Gardening, and Urban Farming.
Urban Agriculture is a growing global movement (particularly during the last 10-15 years), which is also recently being integrated into agroecology (see Altieri’s work in urban agriculture here for example), and permaculture (Toby Hemenway for example). As society is becoming more urban, it seems that these strategies (i.e., agroecology and permaculture) are also moving logically to where people are…
Urban agriculture is defined as:
“The practice of cultivating, processing and distributing food in, or around, a village, town or city.” (Bailkey, 2000).
And to be clear what is meant by ‘Urban’:
“The term “urban” is used here to define the regulatory boundaries of a municipality and is not intended to imply a particular degree of building density. It is likely that some farmers who are currently producing food within town boundaries may not self-identify as “urban farmers”.” (EcoDesign Resource Society, 2013)
And below are definitions of the three forms of Urban Agriculture:
Edible Landscaping: “Landscaping, typically in the public realm, that is designed with edible fruit, berries and nuts for public consumption. These landscapes are generally maintained by the city or volunteer residents or organizations.” (Creasy, 2009).
Community Garden: “The practice of gardening or growing food either as a group or as an individual or family in a shared garden space. Community gardens are often located on public lands or undeveloped private land and are the result of a group of people coming together to make land available for gardening.” (American Community Gardening Association).
Urban farming: “Growing, cultivating and distributing food within a city or town boundary to generate revenue. Revenue generating urban agriculture has also been termed market gardening, commercial urban agriculture and entrepreneurial urban agriculture.” (EcoDesign Resource Society, 2013)
And why is Urban Agriculture an important part of the sustainable agricultural mix? The EcoDesign Resource Society (2013) provides an overview:
“As towns and cities chart a path for the next generation, re-linking the food system to local energy, investment, and resources will propel communities towards greater growth, prosperity, and health. Urban farming is one strategy for developing strong local and regional food systems. The technical innovations, jobs, entrepreneurial opportunities, educational programs, and urban greenspaces that are created by urban farming help to stimulate community health and wealth. The partnerships that are developed through the planning for and coordinating of urban farming create new avenues for resource sharing and increase the potential for a broader range of local businesses, projects and initiatives.”
And finally a last word from George Orwell from his book the ‘Road to Wigan Pier’ (1937):
“I think it could be plausibly argued that changes of diet are more important than changes of dynasty or even of religion....Yet it is curious how seldom the all-importance of food is recognized. You see statues everywhere to politicians, poets, bishops, but none to cooks or bacon-curers or market gardeners.”
This section focuses on those institutions that make up the public and private ‘Soft’ infrastructure of a nation state. ‘Soft’ is distinguished from ‘Hard’ (explained in the next section), not by physical structures - Soft Infrastructures often have them (i.e., hospitals, schools and government buildings), but the focus is on the economic, health and cultural and social level of the state; whereas ‘hard’ infrastructure is more about the means (bridges, airports, fibre-optics, satellites, trucks…) in which elements (people, goods, information, energy, water, waste…) flow around the economy.
In the section ‘Hard Infrastructure’ the focus is on some of the broad strategies in systemic sustainability (particularly in transitioning to renewable energy). However, in this section, the ideas discussed are focused on those that have direct relevance to the ‘Revalue Chain.’ So, for example ‘Health’ is not discussed here (but if you want to know more about some interesting strategies in health see the work of John Thackara here, or Lester Brown and the Earth Policy Institute here); and neither is ‘Social Welfare’ (though of course, they are both important elements). There are also a number of ‘soft-infrastructure’ elements that are not shown on the map, such as ‘Media,’ ‘National Security, Emergency Services and Military,’ ‘Judiciary System,’ and any of the groups that are part of ‘Civil Society’ like ‘Activist Groups’ or ‘Volunteer Groups’ for example.
Tier 1 (The 1st column from the left in the map)
State or Region: A state or region can have a revalue strategy (and many do), however, this will be looked at in the ‘Development Policy,’ which is within ‘Tier 3 & Flows.’
Governance, Economic, Social, and Cultural and Civil Society institutions: In this map, ‘Soft Infrastructure’ has been broken down into these four main groups.
Tier 2 (The 2nd column from the left in the map)
Legislation System: Legislation is regarded as one of the three main functions of government (‘Executive’ being the second - which is also shown in the map, and ‘Judiciary’ being the third - which is not). “Legislation (or statutory law) is law which has been promulgated (or “enacted”) by a legislation or other Governing Body or the process of making it. Legislation can have many purposes: to regulate, to authorise, to proscribe, to provide (funds), to sanction, to grant, to declare or to restrict.” (wikipedia, retrieved 12/01/2016)
Below are some examples of different types of UK, and European legislations that have an effect on different revalue activities:
Product Take-Back Laws: “Remanufacturers in Sweden… have a steady flow of discarded products since manufacturers have legislative driving forces in the form of responsibilities for taking care of their manufactured products (e.g. Swedish manufacturers have to follow the product take-back laws and thus remanufacturers/recyclers are supplied with end-of-use products).” (Sundin, 2004)
Landfill Directive: “With increasing Landfill taxes, the advantage for producers to rely on landfill is decreasing with time. Landfill is neither an environmentally or commercially sustainable option and so producers are exploring alternative end-of-life scenarios. Remanufacture is one of many alternatives to landfill and is increasingly being seen as an effective means of generating revenue.” (Gray et al, 2007)
Waste Electrical and Electronic Equipment (WEEE) Directive: “The WEEE Directive aims to reduce landfill and support more sustainable development by providing the impetus to boost recycling. The UK finally passed WEEE in early 2007 and it will require all products placed on the market after 1 April 2007 to be marked with a crossed out wheelie bin symbol (Clements, 2007).” (Gray et al, 2007)
“Under the terms of WEEE, buildings such as retail shops which may be used to store products e.g. a washing machine returned for remanufacture, have to be registered to store ‘hazardous waste’ (Gould, 2006).” (Gray et al, 2007)
Waste: “Classifying products as ‘waste’ at their end-of-life stage can hinder the rapid re-entry of those materials into the circular economy because organisations are required to have waste handling certificates. This is the case even if a part or product that arrives as waste could easily be remanufactured. This is an impediment to remanufacturing, since items that could be remanufactured or re-used almost immediately have to be processed and handled as waste.” (APSRG, Dec 2007)
RoHS: “The RoHS Directive can also be a barrier to remanufacturing. It has recently been added to the Conformité Européene (CE) Directive and means that if part of a product is replaced, the whole product will have to be reassessed in order to be awarded a CE mark. In this respect, the RoHS represents a legal black hole when looked through the prism of reuse and remanufacturing.” (APSRG, 2014)
Freedom of Information Act (FoIA): “The FoIA seeks to give individuals the right of access to information held by governments and corporate bodies. In the USA FoIA allows remanufacturers access to OEMs’ design specifications allowing 3rd party remanufacturers to remanufacture to original specifications.” (Gray et al, 2007)
Sale of Good Act (SoGA): “The SoGA also presents a barrier to remanufacturing as the burden is placed on the retailer instead of the manufacturer if a product is faulty. This does not incentivise an OEM to make long-lasting products that are easily remanufactured.” (APSRG, Dec 2014)
Trade Description Act (TDA): “The TDA prevents manufacturers, service industry providers and retailers from misleading consumers as to what they are purchasing. Remanufactured products are often considered by consumers to be less reliable than new products. Following the recommendations surrounding a legal definition of remanufacturing and certified mark for remanufactured products could increase consumer acceptance.” (APSRG, Dec 2014)
The EU Waste Shipment Regulation: “The EU Waste Shipment Regulation bans all exports of hazardous waste to non-OECD countries and all exports of waste for disposal outside the EU. Although this is a very important and extremely necessary piece of regulation, industry members interviewed during our inquiry stressed the need for both remanufactured items and items due to be remanufactured to not get caught up in this regulation.” (APSRG, Dec 2014)
The Energy using Products (EuP) Directive: “Remanufactured components may not be as energy efficient as new components of more recent design. The EuP Directive is continually revised to reduce standby and in-use energy consumptions. There is the possibility through this Directive that it could become impossible to sell remanufactured products if they use more energy than new, low-energy models. Although lowering stand-by and in-use energy consumption is beneficial in isolation, it may not be the best measure to drive holistic improvement. A more holistic approach focusing on the entire supply chain of products should be used to assess energy-saving potential. This Directive is particularly relevant for large electrical appliances such as white goods, which have a high potential to be successfully remanufactured.” (APSRG, Dec 2014)
Recycling Targets: “Although the EU is recognising the potential of the remanufacturing industry by funding numerous research and development projects in this area, legislation is still largely focussed around recycling rates with the most recent EU recycling targets set at 50% by 2020 and 70% by 2030. Some companies, for example Lexmark, have begun to set internal management targets that aim to reduce recycling rates, enabling them to achieve higher rates of remanufacture. European policy makers have perhaps not recognised that to move on to the next stage of a resource efficient economy the familiar policy framework favouring recycling may need to be reversed. By continuing to promote materials recycling, the policy framework may hinder the development of product remanufacture in Europe.” (APSRG, Dec 2014)
Government Procurement: “In the U.S., the policy of moving towards procurement of performance-based services (rather than products) has created a market of significant scale. In its convenor or ‘matchmaking’ role, a government can initiate concerted efforts among different companies in the value loops that are large enough to overcome diseconomies of scale.” (EMF, 2013)
Executive System: Is the government party that exercises authority in and holds responsibility for the governance of the state or region.
Tax System: Tax is a financial charge (or other form of levy) imposed upon a taxpayer by the state to fund various public expenditures (i.e., pay for the construction and maintenance of public infrastructures and institutions).
Taxes can also be used to transfer wealth (particularly through ‘Social Welfare’), and Taxes can also act like ‘Legislations,’ which can be used as economic motivators to regulate, increase, or to restrict certain forms of economic activity. Here Stahel & EMF (2013) outline how tax systems could be shifted to promote revalue activities (and other activities that can also help reduce the impact of linear economic activities):
Tax Shift: “…adapting the tax system to the principles of sustainability by not taxing renewable resources, including work.” (Stahel & EMF, 2013)
“…Not taxing work - human - labour as a zero-carbon renewable resource. …Not charging VAT on such value preservation activities as reuse, repair and remanufacturing, with the possible exception of technologic upgrading activities. Major re-marketing activities, such as flea-markets and eBay, are already de facto exempt from VAT. …Do not tax what you want to foster, punish unwanted effects instead. …Not taxing renewable resources, including work, and taxing non-renewable ones instead… The resulting loss of state revenue could be compensated by taxing the consumption of non-renewable resources in the form of materials and energies, and of undesired wastes and emissions.” (Stahel & EMF, 2013)
VAT: “In the USA, companies can benefit from accelerated depreciation of 50% of the adjusted basis of assets purchased for the reuse and recycling of waste materials. In addition, a business that purchases waste materials or used cars and reuses them in further manufacturing processing is entitled to recover a deemed input VAT. Various tax incentives are also available in China. For example, revenue derived from the manufacture of products that has employed “synergistic use of resources” may be reduced to 90% of actual in calculating the taxable income of enterprise. In 2011 China, reduced or eliminated VAT on goods produced from recycled materials in order to promote the circular economy. VAT refunds range between 50-100%.” (EEF, July 2014).
And some suggestions from the RREUSE network:
“Should the EU VAT Directive (2006/112/EC) be opened up, RREUSE suggests using differentiated VAT rates in accordance with the waste hierarchy to make repair more economically feasible.
- Zero VAT on repair, maintenance, upgrade services and sales of second hand/refurbished products.
- Allow retailers to recoup VAT through donation of unsold new products to approved/accredited reuse centres from the social economy.
- Zero rated VAT for preparation for reuse activities and services carried out by social enterprises.” (RREUSE, Sept 2015)
Here, are some Tax innovations, which go beyond revalue activity promotion:
CO2 Tax: “A $50 tax per metric ton of CO2 emitted in developed countries would raise an estimated $450 billion annually, while a more modest $25 carbon tax would still yield $250 billion per year, according to a 2011 report by the World Bank, the International Monetary Fund, and the Organisation for Economic Co-operation and Development (OECD), among others.” (Klein, 2014)
Free Trade for Organic Produce: “It would be an innovative step if the European, North American and Japanese governments were to agree to free trade in organic produce. It would mean that any produce that is guaranteed to have been cultivated without the use of chemicals could enjoy free, unlimited access to the market. The proposal is simple; the implementation pragmatic. This strategy would depend on a clear and agreed definition of what is meant by ‘organic’. …The advantages are clear. Consumers will pay a premium for organically produced goods - it is generally accepted that food that is certified as being organic fetches price premiums of between 50% and 200%. Supply will follow demand, leading to more sustainable agriculture. …It would be the beginning of a long process towards empowering smaller farmers.” (Pauli, 1998)
Financial System: Is the overall system that includes financial regulation, the printing and management of the national currency, national accounts and the management of the national budget, and more recently local currencies, and digital currencies are also entering into this area.
Manufacturing & AFFF Infrastructure: This includes the soft infrastructure around manufacturing such as ‘Parks and Zones’ for Manufacturing which is discussed later, and it overlaps with ‘Hard Infrastructure’ and ‘Legislation' specific for Industry. This also includes soft infrastructure for AFFF (Agriculture, Forestry, Fisheries and to some extent Foraging), which can include agricultural price support, insurance, quota management and related enforcement systems, and regional storage facilities for example.
This group also includes programs put in place which provide access to the latest manufacturing technology and expertise for Manufactures. An example of this is the Catapult: High Value Manufacturing program in the UK, which is similar in some ways to the Fraunhofer (a group of nearly 70 applied scientific research centres around Germany).
The program has grouped together 7 ‘world-class’ manufacturing centres, with the goal to provide access to for companies to test the latest manufacturing technologies, supporting them in prototyping and testing pre-industrial runs prior to investment in the technology in their company, and providing access to knowledge/expertise to both help the companies develop their solution, and if required, train workers in the final application.
This type of innovation could help SMEs in particular, where capital investment can be a huge barrier to entering certain revalue activities, particularly those manufactures wanting to move towards remanufacturing where new specialised capital good technologies will be required.
This example has overlaps with ‘R&D Labs,’ but is placed here, as the labs and manufacturing facilities themselves do not (yet) have specialised knowledge and skills in revalue activities (as the R&D labs do), it is more an innovation in how these facilities are grouped together and made available to industry. This group is also linked to ‘Fab-Labs.’
Education System: This is the overall education system from primary, secondary, further education (FE) and higher education (HE). The Ellen MacArthur Foundation (EMF) is an example of a group that is working at many of these different education stages to help educate people in the concepts and potential of the circular economy. See here for more information.
Tier 3 (The 3rd column from the left in the map)
Principles/Standards/Guidelines: Below are some of the main standards that are already used in industry that can be used as a beginning platform for revalue activities.
ISO 14001: “Environmental management systems are often regulated and/or standardised. There are two dominating EMS standards/regulations on the market today. The first is the standard ISO 14001, which is an ISO-standard for which companies all over the world can be certified. The standard is derived partly from the Rio-1992 summit, and was put in force in the mid-1990s (Ammenberg, 2004). In this case, external auditors from accredited firms perform audits to make sure the certified companies fulfil the standard. Hence, the external auditors have an important impact of the manufacturing companies that have ISO14001 standardised EMSs. In December 2003, more than 61,000 companies were ISO14001 certified (ISO World15, 2004).” (Sundin, 2004)
EMAS: “The other dominant EMS standard is the Eco-Management and Audit Scheme (EMAS), which is an European Union regulation and thus applies to European companies. The EMAS regulation was launched in 1993 and put in force 1995. In 2001, it was further revised. By fall 2004, 4,029 sites in 3,021 organisations were EMAS registered. Most of them are companies from the industrial sector, but since mid-2001, when EMAS was opened to all other economic activities, more and more companies from the service sector and local authorities have joined the scheme (EU–EMAS16, 2004).” (Sundin, 2004)
Development Policy: These are the policies that governments make that activity aim to promote a particular activity/set of activities over another. Governments can do a lot in helping change the ecosystem in which industry is present, to encourage and favour revalue activities over the traditional linear economy (extract, make, use, waste).
“As exemplified by Japan, Germany and China, the driving force for any system’s change has to be framed as a coherent future vision that will act to align society in a desired direction. Germany’s Raw Material Strategy, China’s White Paper on Mineral Resources and Japan’s Strategy for Rare Metals are providing clarity of direction for policy makers, industry and civil society, driven by assessments of material vulnerabilities.” (EEF, July 2014)
“Developing markets for secondary resources is another area with a rich range of policy responses in the countries examined. Established methods of driving secondary resource use includes waste exchange projects, often referred to as industrial ecology. While the once-public funded UK National Industrial Symbiosis Programme was considered ground-breaking, in fact there are similar models in operation elsewhere for example the USA and in Germany. In Germany, for over 35 years, the Chamber of Industry and Commerce Recycling Exchange has been fostering contact between the suppliers of residual materials and companies that can put those materials to good use.” (EEF, July 2014)
Below are some examples from different countries (based around remanufacturing):
Japan: “Japan has a relatively well-developed remanufacturing industry for photocopiers and single-use cameras. Having grown steadily over the past 10-20 years, the sector has been called a ‘Hidden Giant’, with significant market potential. Interestingly, however, the remanufacture of automotive parts is not nearly as common as in other countries. In addition, whilst design for remanufacture is advanced, certain legislation that can increase the export of end-of-life products can undermine the implementation of more widespread remanufacturing.” (ASPRG, Dec 2014)
China: “China has focussed heavily on supporting remanufacturing through regulation. Having first established a laboratory dedicated to developing remanufacturing technologies in 2001, over the next ten years several laws were passed in China to deal with environmental issues and expand the application of remanufacturing. Cross-departmental pilot programmes for the motor vehicle parts sector and industrial machine and electrical equipment sector were established. Twelve ministries also successfully collaborated on guidance notes to promote the development of China’s remanufacturing industry, which further established broad goals, noted the major challenges, and presented a strategic road map for implementation.” (APSRG, Dec 2014)
Singapore: In 2011, the [Singapore] government launched the Advanced Remanufacturing and Technology Center, an R&D center that works with local universities and remanufacturers to develop remanufacturing technologies for the aerospace, motor vehicle parts, marine, and HDOR equipment sectors. The center has partnered with a handful of SMEs and larger multinational companies, including Boeing (U.S. ownership), Rolls-Royce (UK ownership), and Siemens (German ownership), among others.” (UTISC, 2012)
Scotland: “Within the UK, Scotland is currently leading the drive towards remanufacturing. The CSR was recently commissioned by Zero Waste Scotland to investigate the size of the remanufacturing industry in Scotland and to identify key barriers, enablers and opportunities for the industry. In addition, the Scottish government announced in November 2014 £1.3 million of funding for a new Scottish Institute of Remanufacture “to realise the value of materials like gold and electrical components harvested from recycled televisions, mobile phones and computers.” Vallely, L. (2014) New Institute of Remanufacture to drive Scotland’s Circular Economy. EdieWaste. (APSRG, Dec 2014)
And here are some broader development strategies focusing on the transition to renewable energy:
Feed-in Tariffs: “The tariff [in Italy] is paid for by the citizenry in the form of a 5 percent increase in electricity rates. To date, the vast majority of applications for installing solar electricity have been for large PV plants, with far fewer applications going to distributed power generation projects. That ratio could be reversed, however, if the government were to underwrite loans to small- and medium-sized enterprises (SMEs) and homeowners to help pay for the solar installations.” (Rifkin, 2011)
Phasing out Fossil Fuel Subsidies: “Phasing out fossil fuel subsidies globally would conservatively save governments a total $775 billion in a single year, according to a 2012 estimate by Oil Change International and the Natural Resources Defence Council.” (Klein, 2014)
Parks & Zones: This includes two, sometimes linked, industrial development strategies. The first are industrial parks (IE) (also known as industrial estates or trading estates), which are zones that have been planned for the development of industry. The second are special economic zones (SEZ), which also includes (FTZ), EPZ (Export Processing Zones), FZ/FEZ or BLP for example.
Parks & Zones are often created to encourage the entrance of foreign firms into an region, however, this is not the objective here. Parks & Zones can potentially be used as a way to, or at least prototype the, implementation of some of the innovative tax, legislation and development policies discussed above in a smaller ‘controlled’ zone, and at the same time allowing those companies inside to ‘circumnavigate’ some of the issues with existing tax, legislation and development strategies. Zoning, similar to subsidies, should probably be seen as a transition to zero i.e., at a certain point the zone is disbanded, as the outer zone catches up. An example from China is described by EEF (July 2014):
“In China, its Circular Economy Promotion Law signals a commitment to embed this thinking into its industrial structure. The Law requires the development of plans on the distribution of different sectors of the economy and their regions in order to “reasonably readjust the industrial structure [into industrial parks or zones] and compel enterprises to cooperate in such areas as the comprehensive utilisation of resource so as to realise the efficient utilisation and recycling of resources.”. Enterprises in the parks or zones will be encouraged to exchange wastes, cascade use of energy, land, water and sharing infrastructure and other facilities. Efforts to drive material efficiency through incentives to reuse “waste” materials using the tax regime are also notable.”
And another example from China described by USITC (2012):
“In the motor vehicle parts sector, China allows the importation of certain used motor vehicle parts (cores), including engines and transmissions, into export processing zones (EPZs) for remanufacturing and subsequent export. However, China prohibits the importation of cores directly into China’s customs territory to be remanufactured domestically. As a result, motor vehicle parts (and HDOR equipment) remanufacturers that sell directly into the Chinese market are dependent on domestic core supplies.”
Financial Institutions: This includes different types of institutions that deal with Deposits (Banks, Building societies, Trusts...), Contracts (Insurance and pensions), and Investments (Investment banks, Underwriters…). These types of Institutions can be encouraged by government to invest in revalue projects, and if possible, develop credit schemes that are inline with revalue activities.
Revalue Investment: The UK Green Investment Bank is a funding institution created in 2012 by the UK government, with the objective to attract private funds for financing the private sector in environmental preservation activities (therefore, including revalue activities). However, the Bank has come under much criticism since it’s creation, and so in principle the initial concept seemed to have great potential, but the reality is still far from a clear benchmark.
The following example strategies in Finance, are more general, and go beyond revalue activities:
Disinvestment: “The latest campaign of 350.org, named “Fossil Free,” is a movement to divest stocks, bonds, or investment funds fossil-fuel companies in order to overcome their resistance to responsible climate policies. This project is modelled after the campaign to divest from the Apartheid regime in South Africa. …The activists of 350.org argue that, just as the investments in South Africa under Apartheid were unethical, so are the investments in fossil-fuel companies today, because they seriously endanger the well-being of humanity.” (Capra, Fritjof et al., 2014) This is currently mainly targeted at corporations and/or universities for example.
Green Mortgages: “Green mortgages could also help facilitate building conversions. Banks and other lending companies could provide lower interest rates for businesses and homeowners that install solar panels. Assuming an average of eight to nine years for payback on the energy savings from the installation, businesses and homeowners that install solar panels. Assuming an average of eight to nine years for payback on the energy savings from the installation, businesses and homeowners holding a twenty-year mortgage would be generating all of their own electricity off grid for the last eleven to twelve years of their loan. The monthly savings on the electricity bills could be leveraged against the monthly mortgage payment and be the basis for a reduced interest rate.” (Rifkin, 2011)
Green Investment: “…a 2012 study from the Canadian Centre for Policy Alternatives compared the public value from a $5 billion pipeline - the rough cost of Enbridge’s Northern Gateway - and the value that could be derived from investing the same amount in green economic alternatives. It found that if $5 billion is spent on a pipeline, it produces mostly short-term construction jobs, big private sector profits, and heavy public costs for future environmental damage. But if $5 billion is spent on public transit, building retrofits, and renewable energy, economies can gain, at the very least, three times as many jobs in the short term, while simultaneously helping to reduce the chances of catastrophic warming in the long term. In fact, the number of jobs could be many times more than that, according to the institute’s modelling. At the highest end, green investment could create thirty-four times more jobs than just building another pipeline.” (Klein, 2014)
R&D Labs: This includes specialised institutions, which can (and often are) linked to a university; but are very much linked to applied studies, research and knowledge development in revalue activities in industry. One of the worlds leading revalue R&D Labs’ is the The Center for Remanufacturing and Resource Recovery (C3R®) at Rochester Institute of Technology in the (US):
“Since 1991, C3R® has worked to develop, test and implement efficient and cost-effective remanufacturing processes while also promoting the design of products that have minimal negative environmental impacts.” (from http://www.rit.edu/gis/remanufacturing/about.php 18/01/16)
And in Germany is the new remanufacturing centre, linked with the Fraunhofer at Bayreuth University, who’s experience goes back many decades.
More recently is a the Advanced Remanufacturing and Technology Centre in Singapore, which is comprised of Manufacturers and Nanyang Technological University:
“Important contributors to the ATRC's credentials are the founding organisations supporting the private-public sector venture. From the private sector, organisations including IHI, Siemens, Rolls Royce, 3M, ABB, Carl Zeiss and TRUMPF were founding members, with Nanyang Technological University from the public sector.” (Retrieved February 17, 2016 from http://www.remanufacturing.org.uk/news-detail.php?news=621)
Scotland has also made a continued commitment recently to revalue activities with the creation of the ‘Scottish Institute for Remanufacture,’ which s funded by the Scottish Funding Council and Zero Waste Scotland; and is hosted at, and built on the experience from, the University of Strathclyde, with these three objectives:
“Increase innovation through stimulating and co-funding collaborative projects between industry and HEIs [Higher Education Institutions]."
Increase activity and engagement from the academic community to build capacity.
Establish the Scottish remanufacturing community.” (Retrieved February 17, 2016 from http://www.scot-reman.ac.uk/what-we-do/objectives/)
And there is also GSCOP in France.
Any region wanting to develop revalue activities, should consider developing a collective centre of development and knowledge, to both reduce the local costs to new knowledge, and increase the local specialised but broad expertise required.
Higher Education: As mentioned above, this links to the ‘R&D Labs,’ however not every University involved in revalue activities has a specialised R&D Lab. Examples include:
University of Strathclyde (Scotland), WASEDA University (JP), Nanyang Technological University (Singapore), Fraunhofer IPA & University of Bayreuth (DE), TUBerlin (DE), and University of Cambridge Institute (UK).
Knowledge Networks: This group also overlaps with R&D Labs and Higher Education, but again, there are independent groups helping to build and spread knowledge in revalue activities that are neither an R&D Lab or a Higher Education Facility. Here are some below:
As with ‘R&D Labs,’ regions wanting to develop their own revalue strategy should be thinking of how to build on existing expertise a specific local knowledge network on revalue activities.
Action Groups: Action Groups can be a mix of any of the actors across the revalue chain and Infrastructure and Institutions. These groups are those that have been formed, to promote and help build strategies and tangible projects in revalue. Here are a few examples:
Zero-Waste Scotland, The All-Party Parliamentary Sustainable Resource Group UK, Innovate UK: Technology Strategy Board, Scottish Institute for Remanufacture, and H-Enea Living Lab (SP).
And like ‘R&D Labs’ and ‘Knowledge Networks,’ ‘Action Groups’ should also clearly be created locally, and as revalue is systemic, these working groups (or clusters) should be promoted as a common platform that brings together many of the actors in the revalue chain together, looking to build collective benefit. This common platform requires a mix of technical knowledge, and also experience of building and maintaining trust and dialogue.
Flows: These flows (Financial Capital, Technology, Information & Expertise, (skilled) Workforce, and Raw Materials - including in this case cores) are the main flows through the economy. All these inputs have corresponding outputs (Profit, Efficiency, IP, Jobs, Goods and Services) once they have passed through the value chain.
Many of the barriers to revalue activities (and, in fact any industrial activity) are often based around, to some extent, the impedance (‘friction’ in economics) to the development or maintenance of these key flows, which all need to be present at a minimum level (Flows do not include other potential barriers, such as the importance of power in the value chain, which is linked to access to markets, and the different forms of competition for instance).
Written by Tom Snow
There is still a lot of discussion in this field about terminology. And one realises, very quickly, how terminology can both help frame information, but if incoherent, can complexify things very quickly. The writer then adds this new term with this in mind, in the hope that it will help do the former.
Sometimes, remanufacture, repair, or recondition can be used as the umbrella term for some, or all of the activities defined in this study. However, these activities are also relatively clear activities in their own right, and so mixing them as an umbrella term, potentially moves the terminology dial towards confusion.
And sometimes, studies just focus on remanufacture; but this looses the overall view, as Winfred Ijomah et al (2007) illustrate there are “A hierarchy of secondary market production processes” available, and remanufacturing is but one process within a spectrum of possibilities, which should be taken into account when developing a strategy for a company, or an industry, or at regional level.
So, we came up with a new overall term, that encompasses, all the relevant design and business activities (‘Design for Revalue’), all the ‘Recapture’ systems, all the ‘Reverse Engineering’ activities, all the ‘Recycling,’ and all the ‘Reselling’ and more.
This term is ‘Revalue.’
Non of the above...
Written by Tom Snow
Anyone that knows a little about remanufacturing has probably been told or read about the large multinational OEM (Original Equipment Manufacturer) examples of Caterpillar Inc., Xerox Inc., Rolls Royce Aircraft Engines, and Michelin…; and more recently Ricoh, and Renault.
These case-study examples are great, in showing how, in many cases through a mix of luck, being in the right place at the right time, historical, war, economical and regional contexts, and of course a persistence to go beyond the norm, these companies are clearly one of the first places to learn about concrete examples of revalue, and particularly remanufacturing, activities.
However, if you are not a multi-national, a lead manufacturing company (a company that leads it’s upstream and downstream supply chains - like Caterpillar Inc.), then you might be wondering as ‘non of the above,’ can your company even consider transitioning into this field - it already seems ‘out of our league’. And if one just focuses on the many of the typical case-study companies, and not the system and the processes, and the local opportunities in a region, then this reflection is valid - and probably quite typical.
Advanced After Sales Services
Written by Tom Snow
Revalue, and remanufacturing in particular, is really a company level strategy, and so its success can weigh a lot on the buy-in and leadership from the top of an organisation, and the subsequent collaboration between the different departments. Without the leadership from the top, the next place to look for leadership maybe within the Marketing or R&D departments; however, if there is no leadership from the top, revalue can go against the typical short-term objectives of these departments (particularly R&D) to continue to reduce costs (which can also be linked to short-term bonuses systems). So, if there is no access to the top, and Marketing and R&D are not motivated, is there somewhere else revalue activities could start?
Many manufacturing companies, wherever they are in the supply chain, have an After-Sales-Service department. This department is already involved in revalue activities, and so this is a logical place to start a transition into more advanced revalue activities. For example, some companies already repair some products under warranty, either on-site or at the customers site, or through exchanging the faulty product like-for-like and then repairing the faulty back at the factory. In this last case, the company is already actually quiet advanced in reverse engineering. The motivation for the After-Sales-Sevice department is, if it’s well managed, that these new activities can create jobs, create new income streams, and bring the department more in a leadership position for change within the company. Now, which After-sales-service manager wouldn’t like the sound of that?
Written by Tom Snow
Any company already in the reverse-engineering, or thinking to enter into reverse-engineering activities, should look at them as a spectrum of possibilities, and that strategies can be made either towards remanufacturing or towards maintenance. For instance, it may make sense for a company that is already working in refurbishment, to actually start developing activities to the 'left' of the spectrum - in maintenance - rather than looking to moving 'right,' to recondition or remanufacturing for example. A Remanufacturer, in many cases, has the ability to choose the most appropriate process they want to follow for each end-of-cycle product that enters their facility, whereas, a Refurbisher does not often have this same luxury. And so, a remanufacturer can also add more activities to the left - and they often do so naturally, as reconditioning frequently makes a lot of sense for many of the recaptured products.
“…don’t repair what is not broken, don’t remanufacture what can be repaired, don’t recycle what can be remanufactured.” (Walter Stahel, 2013)
Choosing the right intervention from the spectrum of options (reverse-engineering process and/or Inventory/Cannibalisation) for the specific end-of-cycle product, is key to economic success. But what is the right intervention? Is it the most cost efficient, or the best for the environment? Can it be both? To make it both, each and every product/component/material that enters into the revalue process needs to be screened with a efficient and effective process, that is able to identify the right course of action for revaluing each good. As Stahel highlights, 'don't repair what is not broken,' underlines the critical point that it may seem more efficient to develop bulk processes for all situations, but this may cause a lot of waste (materials and time), and so, effective systems need to be in place, whereby companies can be flexible, product-by-product, so that the right solution is made for the right problem each time; whilst connecting this to tight feed-loops that assess the screening criteria and the results of the interventions that were made.
Pioneer or Follower
Written by Tom Snow
When looking at a regional strategy for revalue, a reflection on chronological development maybe helpful.
Starting with this question: What’s the difference between a pioneer or a follower, when looking at development strategies for ‘revalue’?
Firstly, this question needs to be broken into (A) the micro-economic view - the view of the firm and its’ value chain, and (B) the macro-economic view - the view of the region, including its’ soft and hard infrastructure and institutions.
A) Looking at a pioneer company, economical historian David S. Landes (2003), suggests that a pioneer company carries the highest economic burden, in two ways:
“…a pioneer in any field incurs additional expense owing to ignorance and inexperience; and in theory those who follow may profit by his mistakes.”
This is also known as the ‘economics of backwardness’, and focuses on the costs of breaking the new path. However, Landes follows with an important tranquilliser for the followers:
“Yet this assumes on the part of the imitators a wisdom that historical experience belies. If the pioneer often sins on the side of excessive modesty, the follower often suffers from excessive ambition; if the one does not quite know where he is going, the other knows too well and undoes himself by his eagerness. There is such a thing… as machines that are too big, engines too powerful, plants that are too capital-intensive.”
Landes, however, goes on to suggest that this reason for the higher economic burden carried by the pioneer is over-cited, and is a lesser factor when compared to the second, which is the adjustments to subsequent changes - known as ‘related costs.’
“…the burdens imposed by interrelatedness, that is, the technical linkage between the component parts of the industrial plant of an enterprise or economy.” (Landes, 2003)
No machine in a factory rests in a vacuum: “…the engine, the machine it drives, and the means by which it transmits power are all built to fit.” (Landes, 2003)
And so, it is rare that the upgrading, removal or addition for example, of machines or processes can be considered in isolation. Changes to machines can also often be influenced (or obliged) by outside actors (i.e., clients, supply chain partners, regulators).
This issue of interrelatedness goes beyond the walls of the factory, and this is even more true when talking about process changes along value chains. An example was Britain in the mid-to-late nineteenth century, who's pioneering steel factories were hemmed into cities that were not designed for them. Integrating backwards, which often requires more space, was not an option, and this prevented many innovations that proceeded from ‘follower’ countries, that had the advantage of foresight to develop in areas with more space.
“The very sight of the spacious arrangements of the Homestead plant in the United States made Windsor Richard wish he ‘could pull down the whole works at Bolckow’s and start afresh.'” (Landes, 2003)
And so, taking in mind that the development gap between the pioneer and the follow must not be too large, then at the micro-economic level the advantage may lie with the latecomer.
B) Looking at the issue from the view of the region - the macro-economy, the answer is not the same: the greatest cost of developing the new industrial activities, from the macro-economical perspective, falls heaviest on the region that is following.
Why is this? Well, large scale mechanised manufacturing and assembling requires not only the value chain shown in the map above (the central column), but it also requires the hard and soft infrastructure and institutions. In terms of revalue, this includes legislations, norms, financial services, transport systems, education and training facilities, R&D labs, access to technology (see the section on hard and soft infrastructure for more details)….
These are all costly, can take a lot of time to develop/build, investments are not regular, and all go beyond the financial capabilities of any one company, and so the burden here is clearly on the regional government. If the following nation is too far behind the pioneer country in question, it can mean that the leap might be too great:
“The much vaunted freedom of the latecomer to choose the latest and best equipment on the basis of the most advanced techniques has become a myth.” (Landes, 2003)
Countries like Sweden, Germany, Scotland and the UK as a whole, as an European example, are all nations that are (or are in the process of) maximising their soft and hard infrastructural and institutional assets to maximise the opportunities for firms at the micro-economic level. All are developing their own strategy, which is based on their own specific hard/soft infrastructural and institutional context - which is already in place.
Conclusion for the Follower
As a follower, the strategy at the micro-economic level maybe to look at ‘revalue’ as a ‘Portfolio of potential Strategies,’ and ‘Business Models’ and develop the most appropriate for the firm (or group of firms) - learning (as much as is possible) from the successes and failures of the many different types of pioneers - whilst not forgetting that context is key, as revalue activities can not be ‘cut-and-paste’ from one company or region to another.
At the same time, as a follower at the macro-economic level, institutions should help to develop a ‘healthier’ context for those companies managing or wanting to develop revalue activities in their region. As mentioned above, this is potentially very expensive, and so a strategy should maximise the the use of existing resources (institutions and infrastructure) where appropriate. And in an ideal situation, develop a road map, similar to the ‘Big Push Theory,’ where policies are selective - targeted to maximise backward and forward linkages along the supply and value chains. The state can also implement complementary indicative investment planning, where the government clearly communicates where it is willing to invest, this then can also encourages private investors to enter directly, and indirectly into complimentary areas, and then firms have the choice to transition their activities towards the government goal, and benefit from these credit and/or subsidy opportunities. The government, with its unique view across the entire state, can also help:
“[identify] the interdependence of investment decisions and sequencing the investments... the state can ensure that risk is reduced as a barrier to investment and that increasing returns are exploited." (Toner, P. et al. 2009)
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