production planning and control for remanufacturing: industry

Ž .Journal of Operations Management 18 2000 467–483www.elsevier.comrlocaterdsw

Technical Note

Production planning and control for remanufacturing: industrypractice and research needs

V. Daniel R. Guide Jr. )

A.J. Palumbo School of Business Administration, Rockwell Hall, Duquesne UniÕersity, 600 Forbes AÕenue, Pittsburgh, PA 15281 USA

Received 1 December 1999; accepted 11 January 2000

Abstract

Remanufacturing represents a higher form of reuse by focusing on value-added recovery, rather than materials recoveryŽ .i.e., recycling . Remanufacturing systems are widespread in the United States and are profitable. However, the managementof production planning and control activities can differ greatly from management activities in traditional manufacturing. Wereport on managerial remanufacturing practices via a survey of production planning and control activities at remanufacturingfirms in the United States. Production planning and control activities are more complex for remanufacturing firms due touncertainties from stochastic product returns, imbalances in return and demand rates, and the unknown condition of returnedproducts. We identify and discuss seven complicating characteristics that require significant changes in production planningand control activities. We also describe the research opportunities that exist for each of the complicating characteristics.q 2000 Elsevier Science B.V. All rights reserved.

Keywords: Environmental issues; Production planning

1. Introduction

Remanufacturing is an environmentally and eco-nomically sound way to achieve many of the goalsof sustainable development. Remanufacturing closesthe materials use cycle and forms an essentiallyclosed-loop manufacturing system. Remanufacturingfocuses on value-added recovery, rather than justmaterials recovery, i.e., recycling. There are esti-mated to be in excess of 73,000 firms engaged inremanufacturing in the United States directly em-

Ž .ploying over 350,000 people Lund, 1998 . Remanu-facturing operations account for total sales in excess

) Tel.: q1-412-396-6242; fax: q1-412-396-4764.Ž .E-mail address: [email protected] V.D.R. Guide Jr. .

Žof $53 billion per year U.S. Environmental Protec-.tion Agency, EPA 1997 . As a point of reference,

consider that the US steel industry has annual salesof $56 billion per year and directly employs 241,000Ž .Lund, 1998 . The EPA cites remanufacturing as anintegral foundation of reuse activities and reportsthat less energy is used and less wastes are produced

Ž .with these type of activities U.S. EPA 1997 . How-ever, very few guidelines are available to the practic-ing manager to aid in planning, controlling andmanaging remanufacturing operation.

The evidence suggests that production planningand control activities are inherently more complexand difficult for remanufacturers. A recent industry-

Ž .wide assessment Nasr et al., 1998 shows that fewtechnologies and techniques have been developed

0272-6963r00r$ - see front matter q 2000 Elsevier Science B.V. All rights reserved.Ž .PII: S0272-6963 00 00034-6

( )V.D.R. Guide Jr.rJournal of Operations Management 18 2000 467–483468

specifically for remanufacturing, and that the lack ofthese tools may limit the growth of remanufacturingas an industry.

Remanufacturing is ‘‘ . . . an industrial process inwhich worn-out products are restored to like-newcondition. Through a series of industrial processes ina factory environment, a discarded product is com-pletely disassembled. Useable parts are cleaned, re-furbished, and put into inventory. Then the newproduct is reassembled from the old and, wherenecessary, new parts to produce a fully equivalent-and sometimes superior- in performance and ex-

Žpected lifetime to the original new product.’’ Lund,.1983 . Remanufacturing is distinctly different from

repair operations, since products are disassembledcompletely and all parts are returned to like-newcondition, which may include cosmetic operations.Remanufacturing is a form of waste avoidance sinceproducts are reused rather than being discarded.These discarded products are usually landfilled, de-spite any residual value. Remanufacturing also cap-tures value-added remaining in the product in theforms of materials, energy and labor.

Firms based in Europe, or doing business in theEuropean Union, have added incentives to engage inrecoverable operations: legislative acts. The GermanRecycling and Waste Control Act requires that man-ufacturers actively seek techniques and products thatavoid waste and the reuse of non-avoidable wastesŽ .Rembert, 1997 . Additionally, scrapped productsmust be taken back and recycledrreused at the endof their life. This act applies to firms doing businessin Germany, as well as German companies. TheEuropean Union is rapidly following the Germaninitiative with Austria, Belgium, Finland, France,Italy, The Netherlands, Spain and Sweden all passing

Ž .stringent laws on reuse Rembert, 1997 . In the US,several states have passed laws, or are consideringlaws aimed at reducing waste. Massachusetts nowprohibits the landfilling or incineration of cathode

Ž .ray tubes CRTs , Minnesota has proposed strictrequirements for electronics product stewardship, andCalifornia has proposed laws mandating producer

Ž .responsibility for plastics Lindsay, 1998 .Ž .Lund 1998 has identified 75 separate product

types that are routinely remanufactured, and hasdeveloped criteria for remanufacturability. The seven

Ž . Ž .criteria are: 1 the product is a durable good, 2 the

Ž .product fails functionally, 3 the product is standard-Ž .ized and the parts are interchangeable, 4 the re-

Ž .maining value-added is high, 5 the cost to obtainthe failed product is low compared to the remaining

Ž .value-added, 6 the product technology is stable,Ž .and 7 the consumer is aware that remanufactured

products are available. Our research findings supportthese criteria and provide further support for Lund’swork. In their recent nation-wide assessment of re-

Ž .manufacturing, Nasr et al. 1998 report averageprofits margins of 20%, showing that remanufactur-ing is also profitable.

2. Remanufacturing literature

Previous research on remanufacturing has ad-dressed a variety of problems, and we summarize theefforts relevant to production planning and control inTable 1. A thorough discussion of this literature is

Ž .available in Guide et al. 1999 , so our discussionhere will be limited. While a number of topics havebeen covered in depth by the existing body ofknowledge, significant areas have not been addressedin previous works. A very limited number of case

Žstudies exist Thierry et al., 1995; Ferrer, 1996;.Guide, 1996 , and the majority of these studies are

limited to a specific functional activity, such asscheduling.

A number of characteristics that significantlycomplicate production planning and control activitiesmay be inferred from the research literature. Specifi-cally, seven complicating characteristics have beenproposed in various forms by researchers. No re-searcher identifies more than four of the complicat-ing characteristics, and many of the characteristicsare only mentioned in passing. The seven character-

Ž .istics are 1 the uncertain timing and quantity ofŽ .returns, 2 the need to balance returns with de-Ž . Ž .mands, 3 the disassembly of returned products, 4

the uncertainty in materials recovered from returnedŽ .items, 5 the requirement for a reverse logisticsŽ .network, 6 the complication of material matching

Ž .restrictions, and 7 the problems of stochastic rout-ings for materials for remanufacturing operations andhighly variable processing times. Table 2 shows eachof the complicating characteristics investigated by

( )V.D.R. Guide Jr.rJournal of Operations Management 18 2000 467–483 469

Table 1Remanufacturing research

Forecasting Reverse logistics Production planning and con- Inventory control and man- Generaltrol agement

ŽStatistical models Literature review and Disassembly operations Independent demand periodic Ferrer, 1996,Ž Ž Ž .Goh and Varaprasad, problem structure Brennan et al., 1994; Guide review systems Inderfurth, 1997a,b , Gungor et

. Ž . Ž .1986 Fleischmann et al., and Srivastava, 1998 1996, 1997; Richter, 1996a,b, al. 1998 , Lund. . Ž .1997 1997 1983, 1998 , Thierry

Ž .et al. 1995Reusable container Problem structure Disassembly economics Continuous review systems

Ž Ž Ž Žreturns Kelle and Sil- Flapper, 1995a,b, Johnson and Wang, 1995; Muckstadt and Isaac, 1981;.ver, 1989 1996; Sarkis et al., Penev and de Ron 1996; van der Laan, 1997; van der

.1995; Driesch et al., Lambert 1997; Zussman et al Laan et al., 1996.1997 1994; Veerakamilmal and

.Gupta, 1998

Ž ŽPart recovery Krupp, Network design and Aggregate planning Clegg et Mixed remanufacture and. . Ž1992 collection strategies al., 1995 new Salomon et al., 1994;

ŽKroon and Vrijens, van der Laan and Salomon,1996; Krikke, 1998; 1997; van der Laan et al.,

.Jayaraman et al., 1995, 1996, 1999.1999

ŽScheduling and shop floor Dependent demand Flapper,Žcontrol Guide, 1996; Guide 1994; Gupta and Taleb 1994;

and Srivastava 1997; Guide Guide and Srivastava, 1997;.et al., 1997a,b Taleb et al. 1997; Inderfurth

.and Jensen 1998

Ž ŽCapacity planning Guide and General overview Corbey et.Spencer, 1997; Guide et al, al., 1998

.1997c

Table 2Research literature indentification of complicating characteristic by production planning and control activity

Complicating characteristic Production planning and control activity

Forecasting Logistics Schedulingrshop Inventory controlfloor control and management

Ž .1 The uncertain timing and U U U U

quality of returnsŽ .2 The need to balance returns U

with demandsŽ .3 The disassembly of returned products U U

Ž .4 The uncertainty in materials U U

recovered from returned itemsŽ .5 The requirement for a reverse U U

logistics networkŽ .6 The complication of materials U

matching restrictionŽ .7 The problems of stochastic U

routings for materials and highlyvariable processing times


research in specific production planning and controlactivities.

A part of the purpose of this research is toidentify areas that have not been fully addressed, orthat have not been investigated at all. In the researchissues section, the current research needs are recon-ciled with previous research issues. A shortcomingof the existing literature is that no research developsintegrated systems for planning and control of ope-rational activities, and much of the research failsto consider the interactions between complicatingcharacteristics. In Section 5, we present empiricalevidence that supports each the complicating charac-teristics, and show how production planning andcontrol activities are specifically affected.

Given the high profitability, growing number oflegislative initiatives and growing consumer aware-ness, the time is right for the formal development ofsystems for managing remanufacturing processes. Atpresent, these systems exist on a number of scales,ranging from facilities remanufacturing brake shoesto facilities remanufacturing entire aircraft. However,they all lack an integrated body of knowledge ofhow to design, manage and control their operations.

Remanufacturing firms have a more complex shopŽstructure to plan, control and manage Guide and

.Srivastava, 1998; Guide et al., 1997b . This addi-tional complexity is a function of stochastic product

returns, disassembly operations, and highly variablematerial processing requirements. We discuss theseand other factors in detail in the following sections.A typical remanufacturing facility consists of threedistinct sub-systems: disassembly, processing, andreassembly, all of which must be carefully coordi-

Ž .nated see Fig. 1 . Disassembly is the first step inremanufacturing operations and provides the partsand components for processing. Disassembly is alsoan important information gateway, as discussed inthe following section. Remanufacturing operationslayouts are most commonly in a job-shop form be-cause of the use of general-purpose equipment, and

Ž .the need for flexibility Nasr et al. 1998 . Less thanŽ .one-fifth 17.4% of remanufacturers report using

specialized CNC equipment or manufacturing cellsŽ .Nasr et al., 1998 . This may be, in part, from thediversity in products remanufactured and the low

Ž .production volumes. Nasr et al. 1998 suspect thatthe low level of technology is because of a lack ofspecialized production and control systems. Re-assembly is the final stage in a remanufacturingsystem. Because of the high variability of remanufac-turing processing times and the large number of

Žoptions for parts new, remanufactured and substi-.tutable , the task of scheduling is more complex and

more likely to be done with simple rule-of-thumbtechniques. Remanufacturers may carry a variety of

Fig. 1. Elements of a remanufacturing shop.


Ž .inventories: cores products not yet remanufactured ,new parts, spare parts, finished goods, and WIP, andthis variety requires continuous monitoring. Addi-tionally, remanufacturers may need to dispose ofexcess parts periodically, and this requires uniquedecision making tools.

Remanufacturing firms must be able to managethe additional variety inherent in their environment.The nature of multiple product positioning strategiesto serve niche markets, and the resulting need forproduction planning and control systems capable ofmanaging diverse objectives place significant de-

Žmands on any Production Planning and Control PP.& C system. The structure of the remanufacturing

shop and the inventory control problem both add tothe complexity of the control problem.

3. Survey design and overview

Next, we report on the survey instrument devel-oped and used to assess production planning andcontrol activities, and provide an overview of theproduction planning and control environment. Thesurvey instrument consisted of 75 questions coveringseveral areas: general company information, demandmanagement, materials management, productionplanning and control, and miscellaneous information.A copy of the survey is available upon request fromthe author. Most of the questions asked managers to

Žprovide details on specific applications e.g., disas-.sembly operations and required considerable time

on the part of a manager. We used selected industryexperts to provide feedback in a small pilot study ofthe survey. Their feedback led to additional ques-tions and improved responses. The American Pro-duction and Inventory Control Society Research and

Ž .Education Foundation APICS E&R provided fund-Ž .ing Grant a97-14 for the survey and access to the

Remanufacturing Specific Industry Group member-ship list. The membership list yielded 320 firmsactively engaged in remanufacturing. We excludedconsulting firms, academics, and firms that wereinterested in remanufacturing, but not presently en-gaged in remanufacturing. The response rate was15%, or 48 useable surveys. Multiple responses fromthe same firms were combined and counted as one

Žresponse we had 12 responses from three firms thatwe averaged and counted as three separate re-

.sponses . The vast majority of firms respondingŽ .95% are not original equipment manufacturersŽ .OEMs . We believe our sample is representative ofthe population as our respondents were comparable

Žon several dimensions e.g., sales, OEM, product.type with a more general assessment of remanufac-

Ž .turing technology conducted by Nasr et al. 1998 .Ž .The survey by Nasr et al. 1998 reports on a number

of technical functions, such as cleaning operations,reverse engineering and material handling tech-niques. Our survey is focused exclusively on produc-tion planning and control activities and provides amore detailed view of current practice. Firms reman-ufactured a variety of products ranging from automo-

Ž .tive 33% of respondents to aerospace, machinery,office equipment, bearings, gears, pumps and othersmall items. The majorities of the respondents’ posi-

Ž .tions were in materials management 25.6% , andŽ .production 28.2% , but several were plant managers

Ž . Ž .12.8% , or vice presidents 12.8% .

4. An overview of PP & C for remanufacturing

Remanufacturing firms must obtain products thathave failed functionally. Acquiring cores — failedproducts — requires reverse logistics activities, andthese activities, in turn, require significant modifica-tions to traditional production planning and controlsystems. Remanufacturing firms commonly serve anumber of smaller niche markets, and use diverseproduct offerings and strategies to serve these oftendissimilar markets. However, even serving smallerniche markets is profitable; 78% of the firms re-sponding had sales in excess of $21 M per year.Firms reported remanufacturing, on average, over1400 product types and over 50,000 part types per

Ž .facility. The majority 80% of remanufacturing firmsŽ .uses a mix of make-to-stock MTS , make-to-order

Ž . Ž .MTO , and assemble-to-order ATO strategies,within a single remanufacturing facility. Only one-fifth of firms surveyed reported having pure MTS,MTO or ATO strategies. Further, almost a quarter ofthe firms report that the mix of MTS, MTO, andATO changes based on market conditions. In orderto manage this amount of product diversity manyremanufacturing firms surveyed reported using hy-brid PP & C systems. These systems included cus-

Ž .tomized material requirements planning MRP sys-


Ž .tems, combined with Just-in-Time JIT techniquesŽ .such as Kanbans, Theory of Constraints TOC tech-

niques such as drum-buffer-rope, and classic inven-Žtory control techniques reorder point and economic

.order quantity ; although not all remanufacturers usedall techniques.

5. The complicating characteristics of remanufac-turing

Ž .Nasr et al. 1998 conclude that there is a signifi-cant lack of specific technologies and techniques forremanufacturing logistics. Based on our survey re-sults, we discuss in detail the seven major character-istics of recoverable manufacturing systems that sig-nificantly complicate the production planning andcontrol activities. The characteristics discussed herewere developed from the data from our survey,on-site facility visits, and a review of the currentliterature.

5.1. Uncertainty in the timing and the quantity ofreturns

Ž .Characteristic 1 , the problem of uncertainty intiming and quantity of returns is a reflection of theuncertain nature of the life of a product. A number offactors including the life-cycle stage of a product andthe rate of technological change will influence therate of returns.

The product returns process is highly uncertainwith respect to timing, when cores are available forremanufacturing; and quantity, how many cores areavailable. The problem of core acquisition requiresthat core availability be forecast for planning pur-poses, for both quantities available and the timing ofavailability. This forecast should be compared withthe demand forecast to determine whether sufficient

Žcores are available to meet demand which we dis-.cuss in Section 5.2 . Firms report activities that assist

in the control of the timing or the quantity of returns,Ž .but not both. Over half 61.5% of the firms report

that they have no control over the timing or quantityof returns. Firms reporting some degree of controlmainly used some form of core deposit system. Coredeposit systems are intended to generate a core whena remanufactured product is sold. Most companiesreport requiring a trade-in, or charging a premium if

Ž .no core is returned 80% . A small percentage ofŽ .firms 5% use leasing of the item to reduce timing

uncertainties. However, these activities only reducethe quantity uncertainty of returns. Return policiesdo little to reduce the timing aspect of returns since asale generates a return — a stochastic event itself.Leased equipment may have the lease renewed or theequipment purchased. Because of these uncertaintiesin returns quantities and returns timing, remanufac-turing firms report core inventories account for one-

Ž .third of the inventory carried Nasr et al., 1998 .Presumably, higher levels of cores are held to bufferagainst variation in the supply of cores and thevariability in demands.

5.2. Balancing returns with demands

Ž .Characteristic 2 , the problem of balancing re-turns with demands, is also a function of a product’sexpected life and the rate of technical innovation.The goal, in order to maximize profits, is for a firmto be able to balance the returns of items fromconsumers with demand for remanufactured items.This need to balance return and demand rates com-plicates inventory management and control func-tions, and requires additional coordination betweenfunctional areas to effectively manage.

Remanufacturing firms seek to balance return anddemand rates to avoid excessive amounts of inven-

Žtory from building up where returns exceed de-. Žmands , or low levels of customer service where

.demand exceeds returns . Almost half of the firmsŽ .46.1% report that they attempt to balance returnswith final demand. The remaining firms do notattempt to balance returns with demands, preferringinstead to dispose of excess inventories on a periodicbasis. About half the firms base core acquisition on amix of actual and forecasted demands, but one-thirdof firms report using only actual demand rates. Firmsusing only demand-based rates to acquire cores gen-erally use MTO or ATO strategies, and commonlyuse work-in-process inventory to buffer againstlead-time and demand uncertainty. The MTS firmsrelying solely on actual demand rates reported nodifficulties obtaining sufficient cores. However,one-quarter of the firms report that no excess ofcores exists, and their major product acquisitionmanagement problem is identifying reliable sourcesof sufficient quantities of cores. The remaining firms


report several methods of dealing with excess mate-Ž .rials, including using excess parts as spares 5% ,

placing the excess cores into a holding warehouseŽ .22.7% , trading excess cores with other remanufac-

Ž .turing firms 10% , and selling the excess parts andŽ .cores to scrap dealers 41% .

The core acquisition problem requires coordina-tion amongst the various functional areas to providethe proper balance of cores and purchased replace-ment parts, and to ensure a balance of return anddemand rates. Core acquisition activities at a typicalfirm include identifying the potential sources forcores, and establishing preferences based on various

Ž .criteria e.g., quality, cost, etc. . We defer this dis-cussion to Section 5.5.

Secondary effects of this characteristic includematerials management, and resource planning. Mate-rials management activities are influenced by coreacquisition activities since replacement lot sizing isdependent on the expected volumes and condition ofcores. In the event replacement parts are not avail-able, excess cores may be cannibalized for neededreplacement parts. Inventory control and manage-ment techniques should be developed specifically forcores since many remanufacturing firms report thatexcess cores require costly storage space, and thatdisposal costs may be high. Finally, production deci-sions with respect to staffing and scheduling aredependent on core acquisitions and timing. Whennew parts production co-exists with remanufacturingusing shared resources, this information becomeseven more crucial since resource contention becomesmore pronounced.

5.3. Disassembly

Ž .Characteristic 3 , returned items must be disas-sembled before the product may be restored to fulluse. The effects of disassembly operations impact alarge number of areas, including production control,scheduling, shop floor control, and materials andresource planning. The disassembly and subsequentrelease of parts to the remanufacturing operationsrequires a high degree of coordination with reassem-bly to avoid high inventory levels or poor customerservice.

Disassembly is the first step in processing forremanufacturing and acts as a gateway for parts to

the remanufacturing processes. Products are disas-sembled to the part level, assessed as to their reman-ufacturability, and acceptable parts are then routed tothe necessary operations. Parts not meeting minimumremanufacturing standards may be used for spares, orsold for scrap value. Purchasing requires informationfrom disassembly to ensure that sufficient new parts

Ž .are procured. Nasr et al. 1998 report that disassem-bly is not simply the reverse of assembly, and that agood design for assembly is not necessarily a gooddesign for disassembly. Two-thirds of remanufactur-ing firms must practice reverse engineering to gener-ate disassembly sequences, and this set of activities

Žis time consuming average time 22.7 days per prod-. Ž .uct and expensive average cost $37k per product .

Our survey findings indicate that three-quarters ofproducts remanufactured are not designed for disas-sembly, and this has a significant impact on opera-tions. Products not designed for disassembly have

Ž .less predictable material recovery rates MRRs ,higher disassembly times, and generate more waste.Parts may be damaged during disassembly, espe-cially on products not designed for disassembly, andthis often increases material replacement rates.

In general, disassembly operations are highlyvariable with respect to the time required. Our re-spondents reported that disassembly times rangedfrom minutes to weeks, with very large variances inrequired times to disassemble like-units. The averagetimes reported to disassemble a typical product rangesfrom a low of 5.54 h to a high of 300 h. All productsexhibit a wide range of average times for the disas-sembly of identical products. The variances associ-ated with disassembly times may be very high, with

Ž .coefficients of variance CVs as high as 5.0. Thisuncertainty makes estimating flow times difficult andsetting accurate lead times almost impossible. Themajority of remanufacturers stated that they wereunder constant pressure to reduce lead times in orderto remain competitive with OEMs.

One of the decisions facing a planner is how torelease parts from the disassembly area to the reman-ufacturing shops. Firms report using pull, push, andpushrpull release mechanisms. Our experience hasshown that careful coordination is required betweendisassembly and reassembly to provide short, respon-sive lead times. Disassembly activities are also laborintensive with no automated techniques reported.


This is a function of the current paradigm of designfor disposal, and as design engineers become moreaware of the problems associated with disassembly,presumably the outcome of disassembly operationswill become more predictable.

5.4. Uncertainty in materials recoÕered

Ž .Characteristic 4 , materials recovery uncertainty,reflects that two identical end items returned mayyield a very different set of remanufacturable parts.Parts may be reused in a variety of applications,depending on their condition. For example, partsmay be remanufactured, used for spares, sold tosecondary markets, or recycled. This uncertaintymakes inventory planning and control, and purchas-ing more problematic.

Material recovery uncertainty is measured as theMRR: the frequency that material recovered off a

Žcore unit is remanufacturable Guide and Spencer,. Ž .1997 . The majority 95% of remanufacturing firms

use simple averages to calculate MRR, although atleast one firm responding used more sophisticatedmultiple regression models. Firms reported a widerange of stability for most MRRs, ranging fromcompletely predictable to completely unpredictable.Products are equally likely to contain parts withknown predictable recovery rates, as to contain partswith no known pattern of recovery.

Material recovery rates may be used in determin-ing purchase lot sizes and remanufacturing lot sizes,and may play an important role in the use of MRPsystems. Firms are almost evenly split with respectto incorporating MRRs into purchase lot sizing. Firmsmust purchase replacement parts and materials to usewhen original parts may no longer be returned toserviceable condition. Purchased replacement partsaccount for, on average, one-third of parts on a fully

Ž .remanufactured item Nasr et al., 1998 . The averagepurchase lot size for remanufacturing firms is rela-tively small, only 334 units, and the average cost ofa purchase order is $11k. Of the firms using recoveryrates in calculating purchase lots, three-quarters usethe historical rates and the remaining firms reportthat planners use subjective judgement. This is sur-prising, since if a fixed schedule of end items isknown in advance, the required replacement materi-als may be calculated with certainty, given the ap-

Ž .propriate MRRs. Many managers 32.8% reportednot being aware of material recovery rates, suggest-ing a lack of communication between engineers andmaterials managers.

Purchase lot sizing is done using a variety oftechniques, and over one-quarter of the managersreported using multiple lot sizing techniques. Themost common purchasing lot sizing techniques aredynamic lot sizing rules where historical consump-tion patterns, price breaks, and service level require-ments may be taken into account. Lot-for-lot pur-chasing is also common because of the simplicityand the perception of holding lower amounts ofinventory. Finally, one-fifth of firms routinely usefixed purchase lot sizing; the reason most cited beinga vendor’s minimum purchase requirement. Purchaselot sizing provides a level of protection against vari-ability in material recovery rates since orders arecommonly planned to cover multiple periods. Man-agers cited a number of concerns with purchasing,

Ž .the most common ones were: 1 long lead timesŽ . Ž .90% , 2 sole suppliers for a part or componentŽ . Ž . Ž .75% , 3 poor visibility of requirements 65% , andŽ .4 small purchase orders and, as a result, unrespon-

Ž .sive vendors 55% . Purchase lead times reportedwere highly variable; the mean time to receive anorder ranged from 0.5 to 90 weeks. The variation inlead times is also very high, with coefficients ofvariation as high as 3.0 not uncommon. Purchased

Ž .parts also cause a high percentage ;45% of lateorders.

MRRs also make lot sizing for remanufactureditems more complex since uncertain recovery ratesmay delay release of lots until a batch of parts hasaccumulated from disassembly. Additionally, theproblem of stochastic routings makes remanufactur-ing lot sizing a more complex problem than tradi-tional manufacturing lot sizing. We defer our discus-sion of remanufacturing lot sizing until a later sec-tion.

A final area that merits discussion is the use ofMRP in a remanufacturing environment. The use ofMRP is widespread among remanufacturers andthree-fourths report using some form of MRP. A

Ž .high percentage 86.2% of firms report the MRPsystem is customized to some extent, and the uses ofMRP vary greatly in this environment. Firms com-monly use MRP for planning purchase and remanu-


facturing order releases, maintaining bills of materi-als, and materials tracking. There was no evidencethat firms using MRP systems were less likely toexperience significant problems with purchase or-ders, inventory control, or due-date performance.Firms that incorporated MRRs into the purchaseorder release calculations were less likely to citeconcern with poor visibility of requirements, but stillcited visibility as problematic. This poor visibility is

Ža function of the short planning lead times average.less than 4 weeks and dependence on actual demand

rather than forecasts. Few firms report being satisfiedwith their MRP systems, yet few report using alter-native techniques.

5.5. ReÕerse logistics

Ž .Characteristic 5 , a reverse logistics network ishow products are collected from the end user andreturned to a facility for repair, remanufacturing orrecycling. This requirement is a very complex one initself. It involves a number of decisions such as thenumber and location of take-back centers, incentivesfor product returns, transportation methods, third-party providers and a number of other decisions. Wediscuss the impact of this characteristic from theview that a successful production planning and con-trol system must adapt to the additional supply-drivenuncertainties. The management of product acquisi-tion activities is a key research issue for this charac-teristic.

A large portion of reverse logistics is concernedwith core acquisition management, which we dis-cussed briefly in a previous section. This area isresponsible for core acquisition and ensuring an ade-quate supply of cores for remanufacturing. Mostfirms acquire cores directly from the customerŽ .81.8% by requiring a trade-in when a remanufac-tured item is purchased. Since the majority of prod-ucts remanufactured by the firms surveyed were of

Ž .relatively high value $141,000 , customers weremotivated to return the products themselves. This isan important distinction from reuse networks for

Ž .relatively low value items e.g., recycled goods ,where the consumer may require incentives even toprovide the products for collection. The design of areturns network in a value-added remanufacturingsystem may not be as critical for success as in

material-recovery operations; further investigation iscertainly needed. The other three methods to acquire

Ž .cores were core brokers 9.2% , third party agenciesŽ . Ž .7.3% , and seed stock 1.7% . Core brokers act asmiddlemen, speculating on cores that have no formalmarket presently and serving as a consolidator forsmaller volume core collectors. Managers reportedthat core brokers charged a premium for their ser-vices, and that cores obtained were often very costlyto remanufacture due to poor condition. Third partyagencies are information brokers that provide infor-mation about cores, arrange for a core exchange, orconnect buyer and seller. These third party agenciesdo not exist for many remanufactured products, butare extensive in the automotive parts industry wherethere is a large established trade organization. Leas-ing is an option that more remanufacturers are takingadvantage of, but it represents a relatively small

Ž .portion 5% of returned products for the firms sur-veyed. It may be worthwhile to note that leasingdoes reduce timing uncertainty, but it does not elimi-nate it since a lessee has the option to renew. Finally,in order to provide remanufactured products wherethe original products have not been in use longenough to provide sufficient returns, seed stock maybe used. Seed stock is composed of products thatfailed OEM specifications at the manufacturing plantand is purchased by a remanufacturer to providecustomers with current product designs or features. Ifthe remanufacturing firm is an OEM subsidiary, seedstocks may be provided as part of customer service.Core acquisition management controls how productsare acquired and from what sources, in order to meetcustomer demand. As discussed earlier, balancingreturn rates with demand rates is a related function.

5.6. Materials matching requirements

Ž .Characteristic 6 , part matching requirements iswhere the customer retains ownership of the productand requires the same unit returned. This require-ment may be customer-driven, e.g., when a customerturns in a unit to be remanufactured and then re-quests that same unit is returned to them. Xeroxoffers customer-driven returns as a part of customerservice for copier remanufacturing. A unit may alsobe composed of a mix of common parts and compo-nents and serial number specific parts and compo-


nents. This characteristic complicates resource plan-ning, shop floor control, and materials management.

The requirement for parts matching compels thefirm to coordinate disassembly operations carefullywith remanufacture operations and reassembly. Thisrequirement is common for remanufacturers practic-ing a MTO product position strategy where thecustomer retains ownership and provides the productto be remanufactured. A full 15% of firms reporteddepending solely on customer-owned assets. Thisdependence on customer-owned assets has the ad-vantage of no risky core acquisitions based on pro-jected demands. However, the major disadvantage isa very short planning horizon with very low visibil-ity for replacement parts. Replacement parts andcomponents are more expensive for customer-ownedassets, almost 25% on average, greater than for MTSparts. Remanufacturers report offering customer re-quired returns as a service to customers for a varietyof product types, including copiers, network equip-ment and avionics.

The other major impacts of this characteristic areon scheduling and information systems. In order toprovide the same unit back to the customers, partsŽ .up to 40-k parts on a relatively simple productmust be numbered, tagged and tracked, and thisplaces an additional burden on the information sys-tems. The reassembly of a unit composed of matchedparts may be easily delayed since a specific partnumber, not just a specific part type, may delay theorder. Remanufacturing firms relying on a MTOstrategy are less likely to use an MRP system formaterial procurement. The majority of firms usedsimple re-order point systems for inexpensive parts,and ordered more expensive replacement parts as-needed. The purchase lead times for these firms wereamong the highest of all remanufacturers, averagingalmost a full year. Make-to-order firms also reportedsome of the shortest planning horizons, with manyfirms planning materials and resources requirementsonly after products are returned from the customers.Order release is exclusively one-for-one and thismakes set-up reduction programs popular. However,in order to provide reasonable remanufacturing leadtimes, firms routinely carry excess capacity for criti-cal resources.

Firms report using a variety of methods to trackmaterials and parts, including MRP, in-house devel-

oped database systems, and manual tagging andtracking. Remanufacturing lot sizing, when this char-acteristic is present, is most commonly lot-for-lotbecause of the unique requirements of remanufactur-

Ž .ing operations we discuss this fully in Section 5.7 .Priority control of parts to provide a predictablearrival of parts in the reassembly area is also acommon concern among remanufacturers. Firms re-port using a set buffer size for common parts whereservice levels trigger replenishments. Parts that aremore expensive are pushed to the reassembly area bythe use of priority dispatch rules, or pulled by a finalreassembly schedule. Purchase orders are often prob-lematic for reasons discussed earlier-low volume andvisibility. These two factors are often more pro-nounced in an MTO environment.

5.7. Routing uncertainty and processing time uncer-tainty

Ž .Characteristic 7 , stochastic routings and highlyuncertain processing times are a primary concern atthe operational level. Stochastic routings are a reflec-tion of the uncertain condition of units returned. Apart will have a maximum set of processes thatshould be performed to restore the part to specifica-tions. However, these routings represent a worst-casescenario, and the majority of parts will only require asub-set of these processing steps. Highly variableprocessing times are also a function of the conditionof the unit being returned. These additional forms ofuncertainty make resource planning, scheduling, shopfloor control, and materials management more diffi-cult than in traditional manufacturing environments.

Stochastic routings should not be confused withpurely probabilistic routings common in repair shopsor in the modeling of job shops. In remanufacturingoperations, some tasks are known with certainty,e.g., cleaning; however, other routings may be prob-abilistic and highly dependent on the age and condi-tion of the part. Routing files are a list of all possibleoperations, and for planning purposes, the likelihoodof an operation being required is maintained. Not allparts will be required to route through the same setof operations or work centers, indeed, few of themwould go through the same series of operations as anew part. This adds to the complexity of resourceplanning, scheduling and inventory control. Shifting


bottlenecks are common in this environment becausematerial recovery from disassembly will vary from

Ž .unit to unit hence, remanufacturing volumes , highlyvariable processing times, and stochastic routings.

ŽThis makes resource planning both machines and.labor and estimating product flowtimes difficult.

This characteristic is cited as the single most compli-cating factor for scheduling and lot sizing decisions.Order release mechanisms are limited to one-for-onecore release, except for some common parts forwhich release may be delayed in order to provide aminimum batch size.

Remanufacturing lot sizing is complex and thereis no agreement on the best method. A standard lotsize of one unit was reported in over one-third of thefirms because of the unique requirements of remanu-facturing; that is, unique routings for identical parttypes. Only one-quarter of firms reported using afixed lot size, usually based on the EOQ. Almostone-half reported using dynamic lot sizing tech-niques based on capacity constraints, projected de-mand, or service fill-rates.

Cleaning operations represent a major portion ofthe processing time, with an average of 20% of total

Ž .processing being spent in cleaning Nasr et al., 1998 .Parts may return for multiple processing at the clean-ing operation, and almost half of remanufacturingfirms reported additional difficulties in cleaning dueto part materials and sizes. Parts must be cleaned,tested, and evaluated before any decision is made asto remanufacturability. This late determination of apart’s suitability further complicates purchasing andcapacity planning due to the short planning horizon.Firms also report that the variability in a parts’condition creates problems in machine fixturing andset-ups. These additional sources of variability fur-ther complicate the accurate estimation of flow times.

6. Research issues

The discussion of the complicating characteristicsshows that remanufacturing firms must be able tomanage complex tasks that are significantly differentfrom tasks in a traditional manufacturing environ-ment. We find that the complicating characteristicsmust be considered as a whole, rather than consider-

Fig. 2. Remaufacturing processes and information flows.


ing the effects of each characteristic separately. Fig.2 shows the inter-relations among key decisionpoints, and process and information flows for aremanufacturing production planning and controlsystem. In the following sub-sections, we discussmajor research issues for each of the complicating

Ž .characteristics see Table 3 . This section is based oninformation from the survey reported here, as well as

Ž .the survey by Nasr et al. 1998 , a thorough reviewŽof the existing literature including working papers

.and workshop presentations , and follow-up tele-

phone interviews with industry experts. In-depth casestudies, highlighting the effects of particular charac-teristics would provide insights into how firms man-age these complexities.

6.1. Uncertainty in the timing and the quantity ofreturns

Essential research issues in this area include aneed to develop strategies that create tools and tech-niques to manage both quantity and timing uncer-

Table 3Research issues by complicating characteristic

Complicating characteristic Major research issues

Ž . Ž .Uncertainty in timing 1 The effectiveness of methods e.g., leasing, deposits in reducing uncertainty in the timingand quantity of returns and quantity of returns.

Ž .2 Forecasting models to predict return rates and volumes.Ž .3 Reliability models to better predict product life-cycles for products with multiple lives.Ž .4 Inventory control models that explicitly consider batch arrivals of returned products.Ž .5 Joint inventoryrproduction models considering dependent return rates.Ž .6 Studies that track rate of technological advances that will influence product returns.Ž .Balancing returns with 1 Methods to examine the benefits of synchronizing returns with demands.Ž .demands 2 Product positioning strategies to serve multiple markets.Ž .3 Aggregate production planning models that consider returned products.Ž .4 Coordinated efforts by purchasing and inventory managers to plan, manage, and controlreturn rates.Ž .Disassembly of 1 Models to aid in planning what parts and components to recover in disassembly.Ž .returned products 2 Models and methods that examine the effectiveness of coordinating disassembly releasewith reassembly.Ž .3 Models for the design, layout and staffing of disassembly facilities.Ž .Materials recovery 1 Models that support material recovery planning and prediction, including reliability models.Ž .uncertainty 2 Studies examining the key differences between traditional purchasing activities and

Ž .purchasing for remanufacturing including purchasing lot sizing .Ž .3 Models that can predict amount of recovered materials based on age of product and usage rate.Ž .4 Studies examining the use of MRP, including modificationsrsuitability.Ž .Reverse logistics 1 Studies highlighting the differences between material reuse logistics and product reuse logistics.Ž .2 Models and systems for core acquisition management and strategies.Ž .3 Studies that can establish product recall strategies and minimize product breakdown.Ž . Ž4 Optimal channel choice for remanufacturers retailers, direct from the remanufacturer,

.or third party .Ž .Materials matching 1 Information systems to aid in materials tracking.Ž .2 Models and systems that provide visibility for materials requirements.Ž .3 Models and systems for shop floor control coordination.Ž .4 Remanufacturing lot sizing explicitly considering materials matching restrictions and Policies.Ž .Stochastic routings 1 Remanufacturing lot sizing models that consider the trade-off between set-up delays and

and highly variable unnecessary processing delays.Ž .processing time 2 Models that provide for scheduling coordination between disassembly and reassembly.Ž .3 Order release methods that consider the rapidly changing workloads in remanufacturingwork centers.Ž .4 Bottleneck scheduling heuristics based on cleaning operations.


tainty. Forecasting models designed to predict theavailability of returns are needed to reduce some of

Ž .the uncertainty. Works by Kelle and Silver 1989 ,Ž .and Goh and Varaprasad 1986 develop forecasting

models for returns of reusable containers. However,these products have very little in common withremanufacturable goods, and a careful evaluation isneeded. Reusable containers are also referred to as

Ž .refillable containers e.g., bottled gas , and thesetypes of products are simply re-circulated until thecontainer may not be safely re-used. The unsuitableproducts are discarded, and replacement units pur-chased. There is a body of reliability literature ad-

Ždressing repairable products Ascher and Feingold,.1984 , and the development of models considering

multiple product life cycles could providereliability-based models for returns.

The research literature in this characteristic hasfocused mainly on inventory models that assume thatreturns are exogenous variables, and that there is nocorrelation between sales and returns of productsŽsee van der Laan, 1997 for a complete discussion of

.inventory models in remanufacturing . More researchis needed on systems for inventory control and man-agement since much of the previous research hasassumed individual, rather than batch arrivals. Addi-tionally, models and managerial systems that linkinventory systems with reverse logistics are needed.

6.2. Balancing returns with demands

Critical research issues for this characteristic in-volve better methods to balance return rates withdemand rates. There are also very few reports ofsystems designed to handle the complexity of multi-ple sources and uses for parts in a dynamic environ-ment. Research regarding the most effective productpositioning strategies, and corresponding PP and Csystems to serve such diverse markets would also bewelcome. Aggregate production planning models de-tailing alternatives between core acquisition, partsdisposal, and purchased parts would be of benefit topracticing managers. This characteristic has mainly

Žbeen addressed by inventory theory models see van.der Laan, 1997 , but little has been done to integrate

these models formally into a production planningand control system.

6.3. Disassembly

There are a number of interesting research ques-tions dealing with disassembly operations. First, dis-assembly acts as an information gateway, and thisinformation is used in a number of decision areasincluding, purchasing, resource planning, final as-sembly, scheduling, and product design. Our re-search indicates that much of this information is notbeing exploited to the fullest extent possible. Disas-sembly operations provide data on material recoveryfrom individual units, and there are often lengthydelays in data entry into a tracking system. Nasr et

Ž .al. 1998 report that although specifications may bechanged substantially because of information fromdisassembly, few of these changes are communicatedto engineering. Formal models of information sys-tems could help understand the cross-functional in-formation requirements and the potential benefits ofsuch information systems. For example, informationon a product’s performance obtained at disassemblyshould be fed back to design engineers to provideimproved designs.

Scheduling systems that enable closer coordina-tion between disassembly and reassembly are alsoneeded to provide more predictable lead times andprovide better customer service, while minimizing

Žthe investment in unnecessary inventory see Guide.and Srivastava, 1998 . The research on the release

policies for materials is inconclusive and better mod-els are needed to fully understand the gating ofmaterials from disassembly operations. The disas-sembly process itself is an uninvestigated area; nomodels or guidelines exist for disassembly centerdesign or staffing. Alternative structures require in-vestigation, including disassembly line design andflexible worker allocation schemes.

6.4. Uncertainty in materials recoÕered

No research has used reliability models to aid inpredicting material recovery rates. The developmentof decision models for determining material recoveryoptions would also be of benefit, especially modelsfocusing on the expected residual value remaining in

Žthe part see Penev and de Ron, 1996; Lambert,.1997 . There is a body of reliability literature spe-


Žcific to repairable products Ascher and Feingold,.1984 and efforts are needed to incorporate these

results into improved predictive models of materialsrecovery. MRRs provide the foundation for otherdecision-making activities, and more accurate predic-tive techniques are of great interest.

There are no models that take into account theadded protection from purchase lot sizing, althoughpreliminary research by the author has shown thatsome purchase lot sizing techniques may help pro-vide more predictable remanufacturing schedules.The use of purchase lot sizing techniques that pro-vide for several periods of coverage buffer againstthe likelihood that recovery rates will often be lowerthan expected. However, techniques that allow man-agers to examine the trade-off between inventoryholding costs and customer service must be devel-oped. Certainly, the complications reported by man-

Žagers i.e., low visibility of requirements, long lead.times contribute to lower levels of customer service,

and all of these areas deserve further investigation.The use of MRP in this environment, with high

amounts of variation and the extensive modificationsnecessary requires considerable research. A numberof schemes for MRP design and use are reported in

Žthe literature Driesch et al., 1997; Flapper 1994;.Inderfurth and Jensen 1998 , but evaluations of these

systems with real data are needed. The use of MRPcombined with other forms of materials planningwas reported by many firms, but no clear guidelinesexist for inventory planners in this environment.Other resource planning activities, such as flexibleworker assignment policies, capacity planning andmachine scheduling should be documented and mod-eled.

6.5. ReÕerse logistics

Ž .Nasr et al. 1998 report that slightly less thanhalf of remanufacturers report using the same distri-bution channels as new products providers. How-ever, there are no details available as to what chan-nels are used. This requires further investigation asto what channels are used, and how these may differfrom traditional manufacturing distribution. Remanu-facturing executives expressed an interest in deci-sion-making tools that help evaluate choices among

sources for cores and to aid the core buying processitself. A clear model of how core acquisition man-agement activities coordinate between purchasing,production, and other functional areas would be ofbenefit to streamlining operations. Information sys-

Ž .tems using electronic commerce i.e., the Internetcould be beneficial in bringing buyers and sellers ofcores together. The development of value-added reusereverse logistics networks requires special attentionsince previous reverse logistics network models re-ported have focused mainly on material recoveryŽ .recycling returns. A complete discussion of reverselogistics models is available in Fleischmann et al.Ž .1997 .

6.6. Materials matching requirements

Fundamental research issues include providing re-manufacturers with greater visibility in requirementsfor very expensive materials, and developing cooper-ative relationships with suppliers. Hybrid inventorycontrol models are commonly used in this environ-ment, and there is no research investigating theeffectiveness of these tools. The unique requirementsfor materials tracking and control place a strain oncurrent shop floor control systems because of theadditional need for tight coordination between disas-sembly and reassembly. Models investigating thebenefits of lot sizing techniques and guidelines formanagerial use are also needed. Customer-drivenreturns may be a successful tool for green marketing,and help to encourage reconsumption by consumers.Cooperative research with marketing would providehard evidence of the potential of this option.

6.7. Routing uncertainty and processing time uncer-tainty

There are no decision-making tools to assist amanager in deciding whether the set-up savings fromremanufacturing lot sizing are greater than the addedprocessing delays from parts not requiring particularoperations. Other shop floor level decision modelscould address scheduling coordination between dis-assembly and reassembly activities, order releasemechanisms, and priority control techniques. Bottle-neck scheduling heuristics may be able to exploit the


high amount of time spent in cleaning operations, butdetailed cases of cleaning operations are first needed.

7. Conclusions

Remanufacturing executives were asked to iden-tify the greatest threats to industry growth over the

Ž .next 10 years. The majority 60% cited the in-creased pressure to reduce remanufacturing lead times

Ž .continuously, and many 38% others cited the lackŽof formal systems e.g., operations, accounting, lo-

.gistics for managing their businesses. Other threatsŽ .identified included lack of cores 50% , products

Ž .designed for disposal 34% , and rapid technologicalŽ .changes 28% . The need for academics to develop

new systems and evaluate the applicability of presentsystems is clear.

We have identified and described seven compli-cating characteristics of production planning andcontrol activities for remanufacturing firms. Thecharacteristics give focus to efforts in developingnew systems for remanufacturing production plan-ning and control. Firms use hybrid production plan-ning and control systems to control operations cater-ing to diverse markets. Most firms use a variety ofproduct positioning strategies and this further com-plicates the problems of planning, controlling andmanaging operations. We also note that remanufac-turing represents a much larger industrial segmentthan previously thought, and is deserving of fullattention by academics from all areas.

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