Resource: Case Studies: Perkins Engines (CAT Group)
Perkins Engines is a manufacturer of diesel engines which is able to draw on the experience of its US parent, Caterpillar, to further its long established remanufacturing activity.
Friday, 17th November 2006
About Perkins Engines
For over 70 years, Perkins Engines has been making a range of diesel engines in the UK for use in OEM products in the 5-800 kW power range. End uses are in agriculture, construction, mining and materials handling, military, auxiliary power (35%) and rail transport applications, embedded into others' products. Perkins employs around 2,500 people in Peterborough, Shrewsbury and Stafford, generating a turnover of over �100m in 2001. Over its 70 year life, the company has manufactured around 15 million units, of which 5 million are still in the field in mobile or static applications. Remanufacturing is a significant proportion of the activity (about �25-30 million per year), but is hidden within the total service offering of overhaul, components, peripherals and consumables. Perkins also owns a remanufacturing operation in France that takes in core from all over Europe. Special Features of Perkins Operations Perkins has long experience of remanufacturing, and the skills and processes to support it. Its products are often embedded into other OEMs end products. This complicates control over the after-market for the goods. Engine remanufacturing has come in and out of fashion, heavily driven by the economic climate of the times. The parent, Caterpillar, has historically been more committed to recovery, largely through its roots in haulage in the USA. Large-inventory, cost-conscious haulage contractors have driven a need for sophisticated, integrated recovery and remanufacturing sites in the USA. This experience is being transferred to Europe, and specifically to the UK. Caterpillar and Perkins will rely on remanufacturing as part of a future extended service offering. They will also take advantage of specific EU legislation that is reversing the trend in longer service lives, by forcing overhaul or swap-out to upgrade performance. Key to the success of their remanufacturing facility will be management of core, which will require the field teams to filter out what is or is not viable for remanufacture. In the USA, Caterpillars dealerships screen and pre-sort all core so that only viable stock is returned: most reject is then sent direct to other recovery routes. In the UK it has become easier to obtain core, despite the lower overall number arising. This is because Perkins has reduced the number of variants, increasing the abundance of available core.
Remanufacturing is seen as a way of offering upgrade paths and tying in customers to the product. Part of the service offered is to re-engineer (upgrade) by specific mechanical modification, or novel combination of proven components.In addition, customers are requiring more facilities management contracts for, say, power supplies. This gives the supplier an incentive to make the goods last, which is more eco-friendly, incurring a service element from the OEM. Special Features of the Sector To the customer, the benefits of remanufacturing in this sector are clear. Modern build reliability means that core remains in place longer between services. Well maintained units continue to provide service life almost indefinitely for modest expenditure. This could mean that todays core is several generations old, and incapable of upgrade. However, pressure from emissions standards now prompts a re-examination of the performance every 4 or 5 years, with upgrades or swap-outs available. Auxiliary systems, such as electronic controls, are evolving but are relatively easy to upgrade as stand-alone packages. Based on diesel engines, technology improvement has seen progressive advances over the last ten years, and is expected to continue into the future. The use of sophisticated control electronics continues to add value to the product by both managing the power efficiency better, and by reducing its abuse. Value for money is an increasing priority for purchasers. In the past, much of the income stream for products has come from aftermarket sales out to around year 8, after which major overhaul may occur. Increasing reliability has now decreased in this income stream, which has also been eroded by generic component suppliers. Remanufacturing and total service options including facilities management offer a route to reclaiming this value. Increasingly, independent operators are being driven out of the industry. They cannot get hold of sufficient core to achieve economy of scale; nor can they keep pace with rapidly changing technologies, black box electronics and new production techniques; nor do they necessarily have QA required to work with large manufacturers of core. In response there has been drop-out, amalgamation and, significantly, a tendency for large operators to align with specific OEMs to access core and data.