Exploring inter-organizational relationships in automotive component remanufacturing

Journal of Remanufacturing Exploring inter-organizational relationships in automotive component remanufacturing Sebastian Lind David Olsson Erik Sundin One of the industry sectors with the longest history in remanufacturing is the automotive industry. Remanufactured parts include brake calipers, engines, servo pumps and alternators. A big challenge for automotive component remanufacturers is to achieve a steady flow of cores (parts that are used for remanufacturing). This flow could be secured by making agreements with core suppliers, such as an original equipment manufacturer (OEM), a core broker or another actor in the market. The remanufacturer can also choose to collect the cores without closer collaboration with the core suppliers. One crucial aspect in choosing how to collect the cores is that it has to be lucrative. The aim of this paper is to explore how remanufacturers manage their inter-organizational relationships in the closed-loop supply chain. A case study was conducted within the European research project 'CAN-REMAN', and empirical data was collected from six participating companies within the project, all European small and medium-sized (SME) remanufacturers of automotive components. These companies were investigated, and their relationships, defined in earlier research with core suppliers, were evaluated. A key finding of the research is that the most problematic parameter with supplier relationships is to receive the ordered quantity of cores from the supplier. This parameter is continually ranked as one of the most important, and the participating companies also claim to have problems with it. A successful relationship and take-back system was pointed out by one of the companies to never be the owner of the actual cores, and only perform the remanufacturing activity (service) for an OEM. This new relationship, called reman-contract, is where the OEM owns the core and the remanufacturer just performs remanufacturing including some sorting and storing. It was found that with this kind of relationship, the ordered quantity of cores was fulfilled to a higher degree, and thus the challenge of achieving a steady flow of cores was met. Reverse logistics; Reverse supply chain; Remanufacturing; Automotive; SME; Inter-organizational; CAN-REMAN - Background Remanufacturing is an industrial process whereby used/broken-down products (or components) - referred to as cores - are restored to useful life [1]. Remanufacturing means that a product is reprocessed or upgraded in an industrial process. During this process, the core passes through a number of remanufacturing operations, e.g. inspection, cleaning, disassembly, part reprocessing, reassembly and testing, to ensure it meets the desired product standards [2]. The remanufacturing business in the automotive aftermarket has existed for a long time, but in recent years has become more interesting due to higher consciousness of environmental issues and directives from the European Union such as the end-of-life vehicles (ELV) directive. The ELV directive was proposed to decrease the amount of waste in the automotive industry by increasing the percentage of a cars weight that has to be reused; in the year 2000, 75% of the cars weight was reused, while in 2015, the aim is to reuse 95% [3]. A fairly new and interesting area within remanufacturing in the automotive industry concerns mechatronics (e.g. power steering systems, central locking systems and anti-lock braking systems) and electronic systems (e.g. engine control units and distance control units) communicating via a controller area network (CAN) bus. These kinds of CAN bus components were also the focus in the research project called CAN-REMAN, of which this research is a part. The purpose of CAN-REMAN was to develop innovative diagnosis methods and technologies for automotive mechatronic and electronic remanufacturing and investigate the closed-loop supply chain; in other words, how the collection systems of cores are formed in the participating companies today [4]. The project, funded by the European Union, was conducted by Bayreuth University (Germany), Linkping University (Sweden), the University of Applied Sciences Coburg (Germany), the Fraunhofer Project Group Process Innovation (Germany) and eight European small and medium-sized enterprises (SMEs). When the work on this study was initiated, interviews had already been completed and data collected at five of the six remanufacturers participating in the CAN-REMAN project. These interviews are reported in Dunbck and Sundin [5,6]. Based on these interviews, four different types of core suppliers were identified: These four kinds of core suppliers and their relationships to the remanufacturing companies will be further investigated in this study. The aim of this paper is to explore how remanufacturers of automotive components in Europe manage their inter-organizational relationships in the reverse supply chain, and to identify which parameters are important to determine the efficiency of the relationships with their suppliers. Previous research on relationships in a closed-loop supply chain There are three main activities for a remanufacturer: the collection of cores, the remanufacturing process and the redistribution of remanufactured products [7]. As this paper addresses the relationships between remanufacturer and core supplier, it is the collection of cores that will be in focus. One of the biggest challenges when collecting cores is to manage the quantity, timing and quality of returns [8]. This theory is supported by Fleischmann et al. [9], who state that returns are dependent on the former users requirements, and not the remanufacturers. Geyer and Jackson [10] argue that there is limited access to end-of-life products in the closed-loop supply chain, and therefore also for remanufacturers. This, together with Wit and Meyers [11] argument that no firm can be autarchic and must collaborate with other firms, makes it interesting to study how remanufacturers, being a firm, collaborate with their suppliers of cores. According to stlin et al. [12], there are seven different types of common relationships between a remanufacturer and a customer or supplier. stlin et al. [12] have identified the following relationships within a closed-loop supply chain: ownership-based, service-contract, direct-order, deposit-based, credit-based, buy-back and voluntary-based. The level of relationship focus and core control varies between the relationships, as shown in Table 1. 1. Ownership-based The manufacturer owns the product and leases it to a customer; the manufacturer 2. Service-contract The customer owns the product but the manufacturer performs service on it. 3. Direct-order One core is sent to a remanufacturer; after it has been remanufactured, the exact 4. Deposit-based The customer must return a similar core to be allowed to purchase a remanufactured one. 5. Credit-based The customer receives a cre (...truncated)