To appear Environmental Science and Technology, accepted April 2011 1 REMANUFACTURING AND ENERGY SAVINGS Timothy G. Gutowski∗a, Sahil Sahnib, Avid Boustania, Stephen C. Gravesa,c a. Department of Mechanical Engineering, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139 b. Department of Materials Science and Engineering, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139 c. Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139 Abstract Remanufactured products that can substitute for new products are generally claimed to save energy. These claims are made from studies that look mainly at the differences in materials production and manufacturing. However, when the use phase is included, the situation can change radically. In this paper, 25 case studies for eight different product categories were studied, including: 1) furniture, 2) clothing, 3) computers, 4) electric motors, 5) tires, 6) appliances, 7) engines and 8) toner cartridges. For most of these products, the use phase energy dominates that for materials production and manufacturing combined. As a result, small changes in use phase efficiency can overwhelm the claimed savings from materials production and manufacturing. These use phase energy changes are primarily due to efficiency improvements in new products, and efficiency degradation in remanufactured products. For those products with no, or an unchanging use phase energy requirement, remanufacturing can save energy. For the 25 cases, we found that 8 cases clearly saved energy, 6 did not, and 11 were too close to call. In some cases we could examine how the energy savings potential of remanufacturing has changed over time. Specifically, during times of significant improvements in energy efficiency, remanufacturing would often not save energy. A general design trend seems to be to add power to a previously unpowered product, and then to improve on the energy efficiency of the product over time. These trends tend to undermine the energy savings potential of remanufacturing. 1. Introduction to Remanufacturing Remanufacturing is generally seen as the most environmentally friendly of “end of life” treatments for a retired product. If the remanufactured product can be considered a substitute for a new product, then a credit is usually claimed for the avoided resource use ∗ Corresponding Author Phone: (617) 253-2034; fax: (617) 253-1556; e-mail: [email protected] appear Environmental Science and Technology, accepted April 2011 2 and emissions associated with the new product production. The biggest savings is generally from the avoided new materials production, but the difference between new manufacturing and remanufacturing can also be significant. At the same time, remanufactured products generally sell for about 50-80% of the new product. Hence remanufacturing can be seen as a win-win; it saves money (for the consumer) and it saves the environment. In the United States, remanufacturing is at least a $50 billion industry with direct employment of about 480,000 in 73,000 firms (1). Remanufactured products include automotive and aircraft parts, compressors and electrical motors, office furniture, tires, toner cartridges, office equipment, machine tools, cameras and still others (1). One of the primary requirements for remanufacturing is that the retired products have significant residual value at the end of life. The second is that the remanufacturing firm can effectively capture the retired product. And the third is that the product can be restored to like-new condition (in terms of product function) with only a modest investment. In terms of number of remanufacturing plants, the largest remanufacturing categories in the US are tires, followed by motors and generators and motor vehicle parts (2). The fact that a product can have significant residual value at its end of life can present a dilemma for the original equipment manufacturer (OEM). For example, if the OEM decides to not remanufacture its own products, then it might find itself competing with its own products remanufactured by another firm. To avoid being placed in this situation, an OEM might employ a variety of strategies to defeat “third party” remanufacturing. These strategies might include making spent products inoperable, rapid (minor) design changes, using a “prebate” system, and buying back the spent products. All of these strategies have been employed by various printer OEMs with varying success in an effort to protect their ink cartridge business. For example, the prebate system employed by Lexmark, attempts to enter into a contractual agreement with the buyer to return or throw away the spent ink cartridge in exchange for a discount. However, the U.S. District Court of Kentucky barred this practice recently citing a U.S. Supreme Court 2008 decision inTo appear Environmental Science and Technology, accepted April 2011 3 Quanta Vs. LG Electronics (3), interpreting it as an attempt to avoid the patent exhaustion doctrine. An alternative position is to embrace remanufacturing and to make it part of the OEM’s business strategy. A variety of firms have done this, particularly for truck tires and heavy equipment (e.g. Caterpillar, Cummins, Goodyear, Michelin). This strategy can build a strong long term relationship with customers. As a general method for supplying products to customers however, remanufacturing presents some challenges. One challenge is to match supply and demand. The early steps in remanufacturing, which consist of recovering the spent product (sometimes called “the core”), cleaning it and testing it, all represent an investment. To capture the value of that investment and to guard against fluctuations in core supply, a remanufacturer may have to maintain a large inventory of cleaned and tested cores. A second challenge is that remanufacturing is labor intensive. The condition and variety of incoming cores can vary significantly. This means that remanufacturing must be flexible. Hence