Executive Briefings

Remanufacturing: A Strategy for Lowering Supply-Chain Costs

Don Olson, senior director of remanufacturing business operations with Alcatel-Lucent, explains how the concept of remanufacturing can reap cost, environmental and customer-service benefits for high-tech companies.

Remanufacturing involves the taking of a used piece of equipment from a telecommunications network and returning it to the market in "like-new" condition, with a brand new warranty. Possibly incorporating new technology, the refurbished item comes with the same look, feel and functionality of new product, Olson says.

The technique offers a number of advantages to telecom manufacturers. It carries a lower price than new equipment, with the same quality. Customers like the fact that a remanufactured component is delivered more quickly than new product, yet has the same level of maintenance and technical support. From the standpoint of corporate metrics, the practice results in a lower cost to the company, which doesn't have to incur additional inventory. "You measure it as cash savings, inventory reduction and high-margin product," says Olson. "It's a very profitable sale for the company."

Technology can help to promote the practice of remanufacturing. Olson refers to the concept of "creative destruction," a term coined by economists. It means that every time an original equipment manufacturer (OEM) creates a new product or technology, it destroys an earlier version. But remanufacturing finds residual value in the older technology. "The idea," says Olson, "is to take that product back and give it a second or third life."

Despite the cultural obsession with newness, customers are still open to the purchase of remanufactured equipment. In the U.S. and the Americas, Olson says, "we have sold remanufactured products to every single [telecom] carrier." In the process, companies lower their capital expenditures and free up cash for the funding of new technology.

To view video in its entirety, click here


Keywords: supply chain, supply chain management, high-tech supply chain, remanufacturing, supply management, supply chain planning, supply chain management: High-Tech/Electronics

Remanufacturing involves the taking of a used piece of equipment from a telecommunications network and returning it to the market in "like-new" condition, with a brand new warranty. Possibly incorporating new technology, the refurbished item comes with the same look, feel and functionality of new product, Olson says.

The technique offers a number of advantages to telecom manufacturers. It carries a lower price than new equipment, with the same quality. Customers like the fact that a remanufactured component is delivered more quickly than new product, yet has the same level of maintenance and technical support. From the standpoint of corporate metrics, the practice results in a lower cost to the company, which doesn't have to incur additional inventory. "You measure it as cash savings, inventory reduction and high-margin product," says Olson. "It's a very profitable sale for the company."

Technology can help to promote the practice of remanufacturing. Olson refers to the concept of "creative destruction," a term coined by economists. It means that every time an original equipment manufacturer (OEM) creates a new product or technology, it destroys an earlier version. But remanufacturing finds residual value in the older technology. "The idea," says Olson, "is to take that product back and give it a second or third life."

Despite the cultural obsession with newness, customers are still open to the purchase of remanufactured equipment. In the U.S. and the Americas, Olson says, "we have sold remanufactured products to every single [telecom] carrier." In the process, companies lower their capital expenditures and free up cash for the funding of new technology.

To view video in its entirety, click here


Keywords: supply chain, supply chain management, high-tech supply chain, remanufacturing, supply management, supply chain planning, supply chain management: High-Tech/Electronics