Sustainable manufacturing for Indonesian small- and medium-sized enterprises (SMEs): the case of remanufactured alternators

Yun Arifatul Fatimah 0 1 Wahidul Biswas 0 1 Ilyas Mazhar 1 2 Mohammad Nazrul Islam 1 2 0 Sustainable Engineering Group, Curtin University , Perth, Australia 1 postgrad.curtin.edu.au 2 Department of Mechanical Engineering, Curtin University , Perth, Australia Achieving sustainability is a great challenge for most of the Indonesian manufacturing small- and medium-sized enterprises (SMEs). Remanufacturing has been considered to be a key strategy to attain sustainable manufacturing by maximising the use of old components and minimising landfill size and energy usage. However, SMEs, which are undoubtedly the engine of the Indonesian manufacturing industry, do not have adequate experience, skill, resource, technology and financial support in the remanufacturing area. This paper proposes a new concept for sustainable manufacturing assessment framework through remanufacturing strategies in Indonesian SMEs. In this sustainable manufacturing assessment framework, the existing remanufactured products are assessed using sustainable manufacturing criterion (e.g. reliability, life cycle cost, employment opportunity and greenhouse gases). This framework identifies improvement opportunities, including eco-efficiency, cleaner production and green technology to make existing remanufactured products technically, economically, environmentally and socially sustainable. The sustainability of remanufactured alternators produced by Indonesian SMEs has been assessed to validate the aforementioned sustainable manufacturing assessment framework. - The manufacturing industry is a wealth-producing sector of the Indonesian economy accounting for 24% of gross domestic product (GDP) followed by agriculture (15%) and other economic sectors [1]. Large enterprises and small- and medium-sized enterprises (SMEs) accounted for 43.28% and 56.72% of the total GDP in the manufacturing sector, respectively, while SMEs alone represent 99.96% of total number of manufacturing industries (3.27 million companies) and also absorb employment for 87.47% of the total industry workers [2]. However, the proportion of SMEs for total manufacturing export and GDP is still low compared to the large number of enterprises due to a lack of innovative technology, inefficient production processes, limited skilled workers, insufficient capital investments and unqualified and unclassified standardisation products [3]. Most of SME exports are dependent on large enterprises, and their contributions are usually unrecorded and undermined. As a result, SMEs cannot expand their market independently [4]. Furthermore, many Indonesian manufacturing SMEs are not environmentally conscious and contribute a large amount of pollution and resource depletion due to inefficient equipment usage [5]. Thus, Indonesian manufacturing SMEs do not comply with the economic, social and environmental objectives of sustainable development. This is because the objective of sustainable manufacturing is to develop and improve human life continually over time through the optimization of production and consumption activities by conducting efficiency on material and energy consumptions, focusing on poverty reduction and maintaining the resources for human beneficial reasons [6]. The main strategies for attaining sustainable manufacturing are remanufacturing, reuse, recondition and recycling [7]. Remanufacturing which is defined as a series of manufacturing steps acting on an end-of-life part or product in order to return it to like-new or better performance, with warranty to match [8], appears to be the most appropriate strategy to attain sustainable manufacturing in Indonesia due to the following reasons. Firstly, it fulfils three objectives of sustainable manufacturing. Remanufacturing is economically viable by maximising the use of old components or product, and it is environmentally friendly by reducing the size of landfill, minimising the energy usage, and it is socially viable by providing employment opportunities and developing prosperity flows [9-11]. For example, an automotive engine remanufacturing company reduced metal consumption by 7,650 tonnes, conserved energy of 16 million kW h and decreased emission of about 11,300 to 15,300 tonnes CO2 equivalent (CO2eq) [12]. In the UK, remanufacturing contributes to the workforce around 50,000 employees and provides 2.4 billion GDP in 2009 [13], while in the USA, 73,000 remanufacturing industries employed about 480,000 people [14]. In addition, the increased employment opportunity, job satisfaction, income and clean environment will improve the quality of human life. These advantages significantly place remanufacturing as the main contributor to the sustainability of prosperity [10]. Secondly, since 1997 - when the economic crisis took place Indonesia - the new products became unaffordable and expensive for majority of the Indonesian people. Consequently, refurbished, reconditioned, cannibalised, reused and remanufactured products such as electronic, household appliances, automotive components and office furniture have become the usual products in the Indonesian market [15]. Unfortunately, the development of the remanufacturing industry which is mainly held by SMEs is still undercover, neglected and environmentally unfriendly. Many SMEs feel doubtful that their remanufacturing business will continue to grow due to high competency in the global market. Only few giant companies (e.g. PT Sanggar Sarana Jaya, PT Komatsu Remanufacturing Asia) have recognised the value of remanufacturing strategies in Indonesia as they can offer economic, social and environmental benefits to the manufacturing sector of Indonesia [16,17]. State of the art of Indonesian-remanufactured auto parts The automotive industry sector is growing alarmingly in Indonesia in the recent years. The production growth was about 35.21% from 2009 to 2011, while the market growth was 37.54% [18]. The total number of automotive industries was around 445 which are mainly held by SMEs absorbing around 185,000 to 204,596 employees [19]. In the case of motor vehicle industries, sales were 894,164 units in the last 2011, and the prediction shows that the percentage will be increased to 50% in the next 5 years [18,20]. As a result, the use of auto parts such as engine, transmission, steering gear, starter and alternator will increase. Alternator is part of the automotive components which can potentially be remanufactured. The remanufactured alternator dominates the remanufacturing market around 22% [21]. The remanufactured alternator offers 50% cheaper costs than the new ones and consumes 60% less energy and 70% less material compared to the new product. Also about 80% of the alternator parts can potentially be reused [22,23]. The legislations (e.g. End-of-Life Vehicle Directive and Energy-Using-Product Directive), which are crucial drivers for a successful implementation of the remanufactured products in developed countries (e.g. UK, Japan) [10], ha (...truncated)