Resource: A Case Study of Volvo Construction Equipment Implementing and Expanding Reman in Russia
This 2006 Bachelor Thesis covers the advantages and disadvantages of Reman, as an alternative to the purchase of a brand new product, specifically based upon the variables vital to implementing or expanding a program in the Russian market.
Tuesday, 22nd September 2009
The Research Question...
In restricted markets, like Russia, what variables are necessary to define why and how Reman can be a possible alternative to buying a new product or simply repairing an existing one, and when are alternatives a better option?
Below are ten general findings, based on empirical research of databases and over 60 hours of unique interview sessions, followed by analysis.
- Reman is not the ultimate option in every case - sometimes, other alternatives are better - this is an especially important point in reference to importing Reman instead of producing it locally, as well as the option to exchange used parts for new spare parts!
- Reman is environmentally sustainable and hence part of Volvo CE's core values. The company and customers need therefore to be educated with the company's "environmental awareness" and the "general recycling concept" of Reman i.e. quality, rigid specifications, costs; and environmental effect.
- Once Reman is set up on appropriate circumstances, costs and machine downtime could decrease, when one considers the decreased amount of energy and raw materials needed its production as well as the exchange lag time between a used product and a Reman one (i.e. it can be a very fast process with the appropriate planning).
- Reman adds a competitive edge to manufacturing firms on after sales services as customers are given an overall cheaper product upgrade and wider product range at lower prices (for example, machine cores can be remanufactured up to 5 times, and a Reman engine costs around 60-70% of an equivalent new engine).
- The perceived and actual value of a new machine is higher when the customer realises that he can sell his used core and components after a certain number of hours, instead of simply scrapping it. This also reduces the manufacturer's scrapping costs, as they are legally responsible to dispose of their customers' used products (in some regions i.e. EU).
- Demand for Reman is significant and self sustainable, but today's customers do not truly differentiate between Recon and Reman performances.
- Communication and dedication to the Reman issue by all involved parties within Volvo International could help overcome a reasonable amount of trade restrictions, perhaps enabling the exchange of used products for Reman 33 products to Russia.
- Much of the expected growth of the Reman program is based on improvement in Dealer stocking. Dealers are reluctant to stock because of the impact of significant negative cash flow due to unpredictable demand.
- A Reman program is a strategic decision in manufacturing businesses; it will affect both sales of new machines and the after-sales product support. Some of suppliers to the main manufacturer might already be active in the remanufacturing market, and may be able to provide the main manufacturer with Reman components equivalent to the new components it already provides them with.
- Remanufactured products allow firms to add another product to the after sales market with the potential to capture a higher percentage of the service in the profitable after-sales market of construction equipment.