©Centre for Remanufacturing & Reuse 2009
Report on the remanufacturing of refrigerated display cabinets
Opportunities and recommendations
March 2009 Page 1 of 38
©Centre for Remanufacturing & Reuse 2009
About the CRR The CRR has been formed to promote, where appropriate, the activities of remanufacturing and reuse. The Centre is embedded within Oakdene Hollins Ltd, a clean technology and resource management consultancy based in Aylesbury, Bucks. Our work is largely funded by Defra but we work with a range of regional agencies to reach our targets. We will work directly with companies, although individual support does require paid-for contribution. Work that assists sectors or helps not-for-profit and third sector organisations is free, as is our advice to the ordinary consumer. We believe that remanufacturing and reuse (r&r) are underused means of conserving resources; significant extra savings in materials and energy use are possible whilst boosting skills, employment and economic activity. To this end, the Centre is developing an evidence base which will enable Government and industry to take actions to boost r&r. Core to our purpose is the implementation of actions that will boost - in particular - remanufacturing. These policies and strategies are designed to help businesses (both consumers of remanufactured goods and remanufacturers), governmental policy makers, OEMs and trade bodies to deliver more remanufactured goods and thus reduce our impact on the environment, and at a profit. We generate the supporting information that the remanufacturing industry needs to make its case and raise its profile. For further topic information and advice please visit our website: www.remanufacturing.org.uk
For additional information on this report please contact: Ben Walsh, Technical Consultant, CRR, c/o Oakdene Hollins Ltd, 3rd Floor, Pembroke Court, Cambridge Street, Aylesbury, UK, HP20 1RS Tel: +44 (0)1296 337165 Fax +44 (0)1296 330351 Email:
[email protected]
This report has been prepared by: Ben Walsh Checked as a final copy by:
David Parker
Reviewed by:
Jo Pearson
Date:
1st June 2009
Contact:
[email protected]
File reference number:
BOND01 178 Public.Docx
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Contents ACKNOWLEDGEMENTS
4
TERMINOLOGY
5
EXECUTIVE SUMMARY
6
1
8
INTRODUCTION
1.1
What is a RDC?
1.2
What is remanufacturing?
10
1.3
Remanufacturing RDCs
11
2
BENEFITS OF REMANUFACTURING
8
14
2.1
Introduction and general benefits
14
2.2
RDC energy usage
15
2.3
RDC energy improvements
15
2.4
RDC carbon footprint
16
3
MARKET REVIEW
21
3.1
Current activity and future activity
21
3.2
Opportunity
24
3.3
Customer Survey
25
3.4
Summary
27
4
BARRIERS AND RECOMMENDATIONS
28
4.1
Barriers
28
4.2
Recommendations
31
5
CONCLUSIONS AND WAY FORWARD
APPENDIX
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Acknowledgements We would like to thank retailers and remanufacturers for their contributions. Their anonymity has been preserved.
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Terminology CO2
Carbon dioxide gas, a major contributor to climate change
CO2e
Effects of other gases expressed as the equivalent mass of CO2 carrying the same global warming potential
Carbon footprint
The carbon dioxide (and equivalents, see CO2e) released during the stated life phase of the article in question
CRR
Centre for Remanufacturing & Reuse
CSR
Corporate Social Responsibility: is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large
Defra
Department for the Environment, Food and Rural Affairs
ECA
Enhanced Capital Allowance: a scheme which provides favourable tax incentives to businesses that buy energy efficient, energy using products
End of Life
(EoL) The point at which a product fails or otherwise does not meet the user‟s requirements, thus initiating disposal including landfill, scrapping, sale, donation or return to supplier.
Greenhouse Gas
Gas whose action within the atmosphere is to increase heat retention, generally believed to cause global warming
LCA
Life Cycle Analysis: A proceduralised method for evaluating the diverse environmental impacts of the manufacture, use and disposal of products or materials.
RDC
Refrigerated Display Cabinet
Reuse
Term to embrace a range of product reuse options including remanufacturing, refurbishment, repair and remarketing.
TBG
The Bond Group
Whole Life
An approach that considers the relevant factors and impacts pertaining to raw materials extraction, manufacture, transport, retail, use and disposal of an item (see also LCA).
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Executive Summary This report was commissioned to explore the case for remanufacturing refrigerated display cabinets (RDCs). In particular, the report examines the financial and environmental benefits, the market potential for RDC remanufacture in the UK, and an assessment of factors that are hindering, as well as those that could promote its uptake. Remanufacturing is the process by which an end of life product is returned to an as-new condition with an equivalent warranty. RDCs are ideally suited to this process as they can be upgraded to meet current energy efficiency specifications (It should be recognised that the majority of the carbon footprint from an RDC is derived from its use phase). When an RDC is remanufactured such that its energy efficiency matches that of the latest designs, the remanufactured RDC saves 2,100 kg of carbon dioxide emissions (CO2e) compared to the manufacture of a new RDC. This is equivalent to the emissions generated from an average car that has been driven for 8,700 miles. The current, potential and future activity within the remanufacturing sector was also investigated. The current market size for remanufactured remote RDC stands at nearly 4,000 per year and is expected to remain stable to the year 2015. The net effect of current remanufacturing activity is to prevent the production of 8,200 tonnes of CO2e annually. If remanufacturing became prevalent throughout the entire retail sector (for both integral and remote units), the industry could prevent the generation of approximately 144,000 tonnes of CO2e annually, which is equivalent to the average annual emissions of nearly 50,000 cars. The main reason retailers use remanufactured RDCs is not for environmental advantages, but to reduce costs. Other benefits to the retailer include the ability to perform cost-effective energy upgrades and to enable specified customisations to enhance the retail brand. Several factors are preventing growth of remanufacturing in the RDC market: The use of low-cost new RDC imports has eroded but not obviated the cost advantage of remanufactured goods. A poor reputation, largely earned through certain disreputable remanufacturing dealers, makes selling more difficult, with remanufacturers often relying on their reputation with particular individuals within the buying departments of retailers to make sales. A whole life cycle view which can be an incentive to value the longevity of the products is largely absent amongst RDC buyers. However, purchasing structures within retailers frequently favour a „cheapest is best‟ choice. This is despite the fact that the cheapest new RDCs can fail prematurely and are of such poor build quality that they are unsuitable for subsequent remanufacture. Page 6 of 38
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The current taxation regime encourages users to buy the most efficient RDC, but, this only applies to new purchases. Equally efficient remanufactured units are at present ineligible for these tax allowances.
There are three remanufacturing:
general
recommendations
to
increase
the
level
of
Engage and educate retailers on the benefits of remanufacturing. Expand tax allowances to include remanufactured RDCs. Evolve remanufacturers into service-led businesses with expanded ranges of options for purchasers including leasing both new and remanufactured RDCs.
And specific actions that might be taken by the RDC manufacturing and remanufacturing industry itself are: Adopt industry wide standards on the quality of new RDCs, for example specifying the use of stainless steel bases to enable subsequent remanufacturing. Develop an industry recognised code of practice for remanufacturing to ensure quality and comparability, thus reducing the risk of purchase for the retailer. Promote the environmental benefits of remanufacturing to retailers and government, taking a more structured, quantified and targeted approach. Advertise the ability of the environmental benefits of RDC remanufacturing to form a valid and significant part of a retailer‟s Corporate Social Responsibility report, not least by publishing quantities of RDCs bought, both new and remanufactured. Agree a public, discriminating, auditable set of test standards for RDC (both new and remanufactured) energy efficiency rating that fairly reflect as-used performance.
In summary the industry should seek to bring about a mindset amongst retailers where remanufacturing is the standard procedure. Only where an RDC cannot be remanufactured should a new one be considered. If that practice was adopted then we estimate that an additional 58,000 RDCs would be remanufactured each year in the UK. This would save 123,000t CO2e and generate an estimated 3,050 new jobs in remanufacturing in the UK. Page 7 of 38
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1 Introduction This report has been compiled with the support of The Bond Group (TBG) as a study of the potential market for remanufactured Refrigerated Display Cabinets (RDCs) in the UK. TBG is a keen advocate of remanufacturing and wishes to take a lead amongst its peers by exposing the case for remanufacturing, financial and environmental; a view of its potential in the UK; and an assessment of factors that are hindering, as well as those that could promote its uptake. Because the majority of this report and its conclusions and recommendations will be of general benefit to the sector, all aspects of the work have been financed and conducted with Defra support, acting through the Centre for Remanufacturing and Reuse (CRR). The wider scope of work aims to: Deliver a balanced assessment of the current, potential and future capacity in the UK to remanufacture RDCs. Understand the carbon benefit of remanufacturing RDCs. Identify the barriers to increasing remanufacturing of RDCs. Propose recommendations to encourage the remanufacture of RDCs. The audience for this report includes central government officials, RDC remanufacturers, original equipment manufacturers (OEMs) and retailers or other users.1
1.1
What is an RDC? RDCs are devices that enable the sale and storage of chilled and frozen food and beverage products in a retail environment. They are common to all supermarkets and convenience stores selling chilled food. They serve two purposes: to ensure that the produce sold is fresh and to enable the customer to view produce prior to selection and purchasing, Figure 1.1.
1
For clarity, this document will use the term retailer to encompass all users of bother integral and remote RDCs including supermarkets, smaller convenience stores, food outlet stores and RDC leasing ventures.
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©Centre for Remanufacturing & Reuse 2009
Figure 1.1: A refrigerated display cabinet (RDC)
The design, shape and size of RDCs can vary greatly depending on their specific use, but are a largely cosmetic feature of the overall functionality of a unit. RDCs operate in an identical manner to domestic fridges: A compressed refrigerant gas, cooled to below ambient temperature by rapid expansion, chills the air in the RDC via a cooling coil. The gas is then compressed, away from the cool zone, and the resultant waste heat is radiated (remotely in the case of a domestic fridge). There are two main types of RDC: integral and remote, which are differentiated by their method of gas compression and waste heat radiation. Integrated models contain compressors and heat radiators within the unit; whereas remote units are not supplied with a compressor or heat radiator. The coolant for remote units is provided from a compressor, generally situated onsite behind the supermarket, which provides coolant to several remote RDCs at once. Remote RDCs reduce the amount of waste heat expelled into the store and are overall more energy efficient with lower compression costs. They are generally situated in larger superstores where the outlay of the high powered compressor and the requirement for plumbing lines can be justified. Integrated units are cheaper to install and are deployed anywhere power can be accessed. Hence integrated units are more popular with smaller supermarkets, convenience stores and stores where chilled food sales are limited.
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1.2
What is remanufacturing? Remanufacturing is defined as returning a used product, via a manufacturingtype process, to at least its original performance with a warranty that is equivalent or better than that of the newly manufactured product. A remanufactured product should be practically indistinguishable from a new product from the purchasers‟ point of view. The process of remanufacturing involves disassembling a product, inspecting and replacing worn parts and consumables, applying a surface finish, reassembling the product and thoroughly testing it to ensure that the product complies with original performance specifications. Remanufacturing is an important, but under-exploited, method of reducing our environmental burden, and is estimated to be worth at least £5bn to the UK economy.2 It is important to state that there is a common misconception that remanufacturing and recycling are synonymous. Recycling is a process for reusing materials: During recycling the function or physical form of the recycled product and its components is lost through physical or chemical destruction. Remanufacturing is a process for reusing products, where the form and function of a device or its sub-components are retained to the fullest extent3. A simple example is a glass bottle: If it is washed, has a new label affixed to it, refilled and sealed the product form and function have been retained, and could be considered as having been remanufactured. If the bottle is crushed melted and reformed into a glass bottle only the material has been preserved and should be considered as recycling. Remanufacturing a product removes the need to use virgin materials and consume energy in its manufacture. Broadly speaking, the remanufacture of a product produces fewer carbon dioxide emissions than manufacturing from new. Also, because the embodied energy in the construction of the product is retained, remanufacturing involves a lower carbon footprint than scrapping and recycling materials and – all other factors being equal – is a preferential option to recycling. The exception to this occurs most often where the product consumes energy in its operation and where energy efficiency improvements in new product design have reduced the overall energy consumption of a device whilst in use. Under such circumstances, savings made through delivering a remanufactured product may be lost through the inefficiencies of persisting with the use of an older design. This issue can be eliminated if a remanufactured unit can be upgraded to attain the energy efficiency standards of a new unit. Remanufacturing is an important and integral aspect of numerous UK sectors. Its prevalence and application are dictated by several factors including cost of original product, speed of technological advance and the ease with which a product can be disassembled and remanufactured. Industries such as aerospace are exemplars, in which remanufacturing is built into the business models of all component manufacturers and is seen as an essential way to reduce costs. The aerospace example also counteracts concerns that the remanufactured product
2 3
Remanufacturing in the UK, 2004, Oakdene Hollins Ltd Parts or components that are unfit for reuse may be sent for recycling, recovery or landfill as the next best option.
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will not perform as well as a new item. The wide-spread use of remanufactured parts in a heavily regulated and safety-conscious industry demonstrates that a remanufactured product can achieve as good as new performance and perform in a strictly delineated manner.
1.3
Remanufacturing RDCs It is important to understand the process of remanufacturing as it is applied to RDCs. As a basis, The Bond Group (TBG) has kindly allowed us to characterise their remanufacturing activities. TBG is one of the largest RDC remanufacturers in the UK. Based in Sheerness on the Isle of Sheppey, Kent, TBG employs around 210 staff. In addition to the Sheppey remanufacturing hub, TBG has three regional service and distribution centres in Swindon, Stoke-on-Trent and Falkirk which offer onsite repair services. In 2008, TBG remanufactured approximately 4,000 RDCs at Sheppey. TBG operate a product-oriented service business model: They do not own any RDCs but support RDCs already in the field (for extending life or upgrading) by remanufacturing on the retailer‟s behalf. In general, the old, remanufacturable cabinets are stored in TBG‟s warehouse. When TBG receives an order to refit a store, the number and type of RDC required is determined. The stored cabinets at TBG are remanufactured and the old in-store stock is replaced with the remanufactured units. Any salvageable cabinets from the in-store stock are placed in storage ready for remanufacturing, with the remainder being sent for disposal. This system requires the retailer to have a surplus stock of RDCs, but allows the old stock to continue operating whilst TBG remanufactures the stockpiled cabinets. An advantage to this system is that the lead time between placing an order and installing the remanufactured cabinets is significantly shorter than buying new: The whole process takes between two and four weeks. There are several other advantages to remanufacturing RDCs. For example, the ability to mix and match old functional store cases with remanufactured cases when performing a partial refit enables the store to keep RDCs looking aesthetically similar. The purchaser saves twice: Once from the reduced cost of the remanufactured product and again from reusing serviceable RDCs within the refit. By holding older units in stock, TBG also has the facility to trade RDCs between retail companies to fill a large or unusual order. To service and repair such a wide selection, TBG has had to develop an extensive knowledge base, encompassing detailed technical drawings of hundreds of RDC models. The remanufacturing process performed at TBG has been developed to ensure that the RDC reaches the retailer in the expected specified condition. A brief description follows illustrating the steps performed to remanufacture a remote RDC. Page 11 of 38
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Initial inspection The RDCs are inspected both in-store and then on return to TBGs warehouse. Unsuitable units are stripped of reusable parts and then sent for disposal. This has led to TBG carrying some 80,000 spare parts for a wide range of RDCs. In fact, they are now a source of spare parts for other remanufacturers and OEMs in need of parts for older models.
Deconstruction, repair and resurfacing of cosmetic and functional components The RDCs are stripped down and the facing panels are removed, cleaned and inspected for damage. They are then repaired and refinished with a powder coating paint. The shelving and brackets are treated in the same way: they are removed, repaired, replaced and then resurfaced. The aim of these operations is to ensure, from a consumer‟s perspective, the RDC looks new. Spare facing panels and shelves can be accessed through TBG‟s spares store. It is also possible to incorporate new components into the remanufactured units. The remaining case is then cleaned ready for further processing.
Inspection and replacement of the fans The largest energy-using component of remote RDCs is the cooling fans that drive cool air throughout the RDC. These parts are generally replaced with new during remanufacturing because of the stresses imposed on the components over the life of the unit. There is however, the option to replace the fans with more efficient models which can significantly reduce the overall operational cost of the unit. This decision is largely a commercial one made by the retailer.
Inspection and replacement of the cooling coils Depending on the age and type of the RDC, moves to higher evaporation temperature refrigeration cycles may require changes to the design of the evaporator coils. These are replaced on older units to bring the remanufactured RDC up to modern efficiency standards.
Inspection and replacement of the controlling circuitry TBG inspect, test and upgrade the electronic controlling circuitry.
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Re-assembly and final inspection The RDC is then reassembled and final engineering checks are made to ensure that the unit is performing as expected. Where significant modifications have been made to the case, cooling system or fans, the unit can undergo a rigorous energy and cooling efficiency test on-site to ensure it meets a specified standard. This can also be used to re-certify the unit with a new energy efficiency rating. The final product is then packaged ready for installation in-store.
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2 Benefits of remanufacturing This section describes general remanufacturing benefits prevalent in all industry sectors and quantifies the waste reduction and carbon benefit of remanufacturing a single „average‟ RDC.
2.1
Introduction and general benefits There have been several studies showing both the environmental and business benefits of remanufacturing.4,5 In addition to the reduction in greenhouse gas emissions and material use delivered by remanufacturing, and the cost benefits realised by both remanufacturer and purchaser, there are several less measureable benefits from remanufacturing. These include:
Enhanced skills and employment Anecdotally, the skills level and pay of the staff involved in remanufacturing are higher than counterparts who are involved in recycling. The main reason for this is that the operations within a remanufacturing factory are more complex and the remanufactured product is significantly more valuable than equivalent recycled material. A higher workforce skills rate has positive implications for the wider economy. A more skilled workforce is required to compete with our main international rivals: the higher skills set and higher pay also result in a net increase in gross value-added per employee, which is a key indicator of economic success. Based on this argument, policy makers should (all other variables being equal) be encouraging remanufacturing over recycling.
4 5
Remanufacturing in the UK, 2004, Oakdene Hollins Ltd See also for example www.remanufacturing.org.uk
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Enriched customer relations There are opportunities for remanufacturers to develop closer ties with customers. Where service-type agreements are developed, or where an organisation remanufactures products to order, there is greater contact between client and provider. Such activities lead to the development of good business relationships, which can lead to further business or the resolution of other areas of business where there have been problems.
Improved product failure knowledge A key problem for OEMs is in obtaining statistical data on modes of failure of their products outside of warranty. Such data could be used to improve the reliability of their product. It will also highlight less critical failures such as unusual wear patterns or long-term unexpected behaviour of the product. Third party remanufacturers can use this to their advantage to design out any defects present in the original product, which can then be used as a selling point.
2.2
RDC energy usage With the open-fronted design currently in favour, RDCs require significant amounts of energy to chill products. In general, they will operate 24 hours a day over a period of 5 to 8 years. We estimate that the usage phase accounts for approximately 95% of the total carbon emissions produced over its lifetime. Accordingly energy efficiency improvements which address the use phase are a priority. For this assessment an „average‟ 12ft RDC with a total display area of approximately 6.5m2 is used. If the best case scenario is taken (whereby the RDC conforms to the ECA requirements for a Class M1 remote display unit operating between -1°C and 5°C) the RDC will require 74 kWh of electricity per day to chill, or 27,000 kWh per year. Remote RDCs have a life of between 5 and 8 years, therefore over an average 6.5 years‟ lifetime 176,000 kWh of electricity will be consumed, corresponding to about 76 tonnes CO2e, which is equivalent to the average annual emission of 25 cars.
2.3
RDC energy improvements Simple modifications can be made to the RDC‟s design in order to reduce energy consumption. Fitting a set of doors can reduce the amount of electricity used for cooling by as much as half. However, doors are often seen as undesirable as they are believed to reduce the purchase of goods, or are impractical where frequent access by customers is required. In these cases protective night blinds may be used to cover the front of the display cabinet when access is not required. Page 15 of 38
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Potentially this can reduce the amount of power used by a third when the blinds are down. However, such savings require appropriate training and use by retail staff. Smaller design changes which do not affect the function or aesthetics of the cabinet can also reduce the use of electricity. Improving airflow within the cabinet or fitting more efficient fans can lead to energy savings of 6-7%. More recently technology such as energy efficient LEDs has been used to reduce the lighting power consumption. However these are not appropriate in certain cases as the colour spectrum of LEDs can perturb retail customers. These new technologies and designs do not require a significant change in case design and manufacture, and can easily be incorporated as part of the remanufacture process. Changes in fans and shelf design during remanufacture allow RDCs to be brought into line with the latest energy efficiency specification. If these design alterations are not made, the large contribution to CO2e emissions from the in-use phase mean that the environmental benefit of remanufacturing can be negated. Therefore within this study we assume that new and remanufactured RDCs have equivalent energy consumption, lifetime and performance.
2.4
RDC carbon footprint Description of Model To assess the carbon footprint associated with manufacture, and the potential material and carbon savings possible through remanufacture, we evaluate two different pathways, Figure 2.1. An identical path is followed by both units until they reach their end of life: both therefore undergo initial manufacture and use phases. After this point two different routes are taken. In the case of Route A the original unit is disposed of either through recycling or landfill. An entirely new RDC is then manufactured, which undergoes another use and disposal cycle. If Route B is followed, the original RDC unit is remanufactured and is returned as new for use. Therefore a single remanufacturing cycle will replace the manufacture of an entirely new unit and the corresponding extra disposal required. A more complete description of this methodology can be found in our previous work.67
6 7
Carbon footprint of tyres: new versus remanufactured, 2008, CRR Toner refills and cartridge world: Comparative carbon footprints, 2008, CRR
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Figure 2.1: Representation of the various fates of newly manufactured and remanufactured RDCs that enable the development of a carbon footprint comparison.
Route A – A succession of new units 1st RDC
Manufacture
2nd RDC
Disposal
Manufacture
Use
Disposal Use
Remanufacture
Remanufacture
1 RDC (but not necessarily the same RDC)
Route B – With one or more remanufacturing lives
Materials RDCs are constructed from a variety of relatively common materials, but their compositions vary due to the different designs. For this study, after discussion with industry, an average RDC composition has been defined. Table 2.1 describes the material composition of a typical 12ft wide unit with a total display area of 6.5m2 comprising materials weighing 750kg. The mass of materials replaced during the remanufacturing process was estimated using figures obtained from literature sources. Table 2.1: the material composition of an „average‟ 12ft RDC and the estimated material needs to remanufacture the unit.
Material
Kg
%
Remanufacture
% (of new)
Chipboard
15.0
2
0.0
0.0
Stainless Steel
15.0
2
0.6
0.08
Mild Steel
525.0
70
123.8
16.5
Glass
22.5
3
0.0
0.0
Copper
75.0
10
43.8
5.8
Aluminium
22.5
3
14.0
1.9
Plastics
22.5
3
15.0
2.0
Foam
45.0
6
25.0
3.3
Fibre Glass
7.5
1
5.0
0.7
Total
750
100
222
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Assumptions We estimate that the standard remanufactured RDC contains 30% new material by mass, the remainder being obtained from the original RDC without significant modification. The level of reuse is likely to be higher than this because the remanufacturing process can use salvaged parts and materials from other cases, which would further reduce the amount of new raw material used. However, this is difficult to estimate correctly without an in-depth trial and therefore we use the 30% baseline figure, thus avoiding an unsubstantiated, over-optimistic analysis. A number of other assumptions have been made in the comparison: The remanufactured unit is considered to perform as new. Therefore, the energy consumption and lifetime both of a new and of a remanufactured RDC are identical (as described above). Parts and materials come from similar sources for manufacture and remanufacture and therefore individually have equivalent carbon footprints. Recycling of un-reusable materials is accounted for in the carbon footprint values of materials manufacture, and is assumed to benefit components used in new and remanufactured components equally.. The carbon footprints associated with the activities of disposal through landfill or recycling and disassembly for remanufacture are assumed to be the same. Similarly, carbon footprints associated with original manufacture and the reassembly required for remanufacture are estimated to be the same. These assumptions are likely to be inaccurate. However, compared to the environmental burden of materials, the contributions from these activities are believed to be relatively low. At end of life, new and remanufactured RDCs are disposed of in the same way with the same environmental burden. The carbon footprint associated with both manufacturing and remanufacturing activities is taken to be 1/3 of the materials‟ carbon footprint for a new RDC.
For this model the manufacturing of the new RDC is defined as taking place abroad but within continental Europe, and remanufacturing is assumed to take place regionally within the UK. The level of recycling of raw materials is typically higher within Europe compared with other countries of manufacture, and the carbon footprint data used for the raw materials reflects this. Manufactured products from the Far East will – on the whole – incur a larger transportation impact. To simplify, the impact of transportation associated with the different routes is considered, with the following assumptions being made:
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Raw materials are assumed remanufacturing activities.
to
travel
1,000km
for
new
and
Transport of a new RDC is set at 1,000km from manufacturing site to installation site (i.e. European supplier). Remanufacture is assumed to take place in the same country, therefore this distance is reduced to 250km. This is included in the manufacturing/remanufacturing estimates. At end of life an RDC may be disposed of or remanufactured. The carbon footprint associated with the two transport activities is assumed to be the same at 250km.
Carbon footprint The results from carbon footprint (excluding use) calculations, using the method outlined above, are shown in Table 2.2.
Table 2.2: Results from the carbon footprint calculation comparing the production of a new and remanufactured RDC.
1 Cycle 1 Cycle
Two separate CO2e) Manufacture Disposal Manufacture Disposal Total
units
(kg
Remanufacture (kg CO2e)
3,936 249 3,936 249
Manufacture Transport to Reman. Reman Disposal
3,936 58 2,025 249
8,370
Total
6,267
Remanufacturing saves (rounded)
2,100
The carbon footprint for one lifecycle of manufacture, use and disposal of a single new RDC is estimated to be 80,000 kgCO2e. The use phase produces approximately 95% of these emissions, with manufacture and disposal accounting for only 5% (i.e. ca. 4,000 kgCO2e). Comparison between remanufacturing and manufacturing demonstrates that remanufacturing reduces the carbon footprint by an estimated 2,100 kgCO2e per remanufacturing cycle. Industrial sources indicate that it is possible to remanufacture an RDC two or three times. Therefore, if the remanufacturing cycle lowers the carbon footprint by the same quantity each cycle, and an RDC is remanufactured to the same degree an average of 2.5 times, the total reduction in carbon impact is 5.3 tonnes CO2e per RDC. This figure needs to be divided over the total number of lifecycles of the RDC (including the original manufacturing cycle). Figure 2.2 illustrates.
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Figure 2.2: The potential saving through several remanufacturing cycles of an RDC.
Cumulative Lifetime Effects of Reuse 18000 16000 Net savings over 3 cycles of reman
Embodied Carbon [kg]
14000 12000 10000 8000 6000 4000
1st Life
2nd Life
3rd Life
4th Life
2000 0 One-shot
Reman'ed
Based on this assertion, on average, a remanufactured RDC reduces the carbon footprint of manufacture by 1,500kg of CO2e per lifetime. The carbon footprint calculations give a good indication of the environmental benefit of the remanufacturing process. However, factors such as the consumption of virgin materials, fossil fuel depletion and waste disposal are not fully taken into account. Generally, remanufacture will reduce these effects compared with the construction of a new RDC. Therefore RDC remanufacture will have a larger benefit if the total environmental footprint is considered. For illustration, reusing steel saves 96% of the environmental impact over virgin steel.8 It is also important to state that the ability to remanufacture is dependant on the build quality of the RDC. If there is significant corrosion, (which is likely with the absence of a stainless steel base) then remanufacture is uneconomic, meaning the only suitable option for such cases is disposal. This reduces the potential benefit from remanufacturing.
8
“Reclaimed building products guide”, WRAP, 2008
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3 Market review Understanding current, future and potential activity within the RDC remanufacturing industry is central to determining its relevance to the UK economy and the corresponding environmental impacts. This section explores trends in market size of the industry and estimates the maximum economic and environmental contributions theoretically achievable through remanufacturing RDCs. It also outlines the views and experiences of buyers of remanufactured RDCs, which is necessary in understanding the motivations for and against purchasing them.
3.1
Current activity and future activity The appendix describes available literature on the estimated market size for both new and remanufactured RDCs. A summary of this analysis is outlined in Table 3.1.
Table 3.1: The (2008) estimated market for RDCs in the UK
Type
Total stock (units)
Integral Remote Total
412,411 217,611 630,023
Estimated old stock to be renewed or refurbished (units) 58,360 32,647 91,002
Stock refurbished each year (units)
New stock purchased to replace old stock (units)
Additional new units to increase capacity (units)
7,003 3,917 10,920
51,357 28,725 80,082
23,344 8,370 31,714
By analysing trends in the market situation since 1998, we have projected the future market for both integral and remote RDCs. Listed below are some assumptions used in this model: From 1998 to 2005 the remanufacturing market dramatically reduced from approximately 15% of the replacement market to approximately 6%. This decline was caused primarily by cheaper new units becoming available from continental Europe and the Far East. There was some improvement in the market between 2005 and 2008, with remanufacture increasing from 6% to 12%. The volume of remanufactured units is likely to increase until 2013, however, due to the growing frozen food sector: it is likely that the market share for remanufactured units will remain 12%, after which the remanufacturing share of the marketplace is expected to increase due to a slowing in the expansion in overall chilled and frozen food sector.
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The reliability and lifetime of high quality (UK manufactured) RDCs has been increasing since 1998 due to changes in technology. Although we estimate that the replacement level of stock will continue at the level of 20% it is more likely that with increased lifetime and a gradual slow down in the growth of the RDC market the level of replacement will fall from a level of 15% in 2008 to 10% in 2015. The increase in the number of remote RDCs in use is likely to slow in the coming years and, after 2015, the number of units in use will remain constant i.e. the market for new cabinets, after 2015 will be solely to replace EoL cabinets. We estimate that this scenario will result in a slow down in the increase in the number of RDCs in use from its present level of 7% per annum to approximately 2% per annum in 2015. The total stock of integral RDCs is higher than that of remote RDCs but there should still be a slowing of growth over the next 10 years. This growth will not diminish as much as for remote RDCs. The estimate is that this slowdown in growth will reflect in a decrease in the percentage of new units from its current level of 6% per annum to approximately 4% per annum in 2015.
Using these assumptions gives us the following overview of the RDC market (Table 3.2, Figure 3.1 and Figure 3.2): Table 3.2: Estimated market for Total RDCs 1999-2015
Year
Total stock (units)
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009e 2010e 2011e 2012e 2013e 2014e 2015e
360,590 385,831 412,839 441,738 472,660 505,746 537,882 568,238 598,309 630,023 663,472 692,119 722,063 753,364 778,553 804,650 831,690
Estimated old stock to be renewed or refurbished (units) 69,071 73,906 79,079 84,614 90,537 96,875 103,656 98,543 86,443 91,002 95,809 100,539 83,893 87,512 75,831 78,360 80,980
Stock refurbished each year (units) 6,907 7,391 6,326 6,769 7,243 7,750 6,219 9,854 8,644 10,920 11,497 12,065 10,067 10,501 9,100 11,754 12,147
New stock purchased to replace old stock (units) 62,164 66,515 72,753 77,845 83,294 89,125 97,437 88,689 77,799 80,082 84,312 88,474 73,826 77,010 66,731 66,606 68,833
Additional new units to increase capacity (units) 23,590 25,241 27,008 28,899 30,922 33,086 32,136 30,357 30,070 31,714 33,449 28,647 29,944 31,301 25,189 26,097 27,040
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Figure 3.1: The historical and projected sales of both new and remanufactured RDCs 140,000
30,000 New RDC
Remanufactured RDC
120,000
Volume of new cabinets
100,000 20,000 80,000 15,000 60,000 10,000 40,000
Volume of remanufactured cabinets
25,000
5,000
20,000
0
19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 e 20 10 e 20 11 e 20 12 e 20 13 e 20 14 e 20 15 e
0
Year
Number of cabinets in use
Figure 3.2: Growth of the total UK RDC stock over the period 2005 to 2015 (estimates 2009-15)
Year
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This analysis would indicate that the number of remanufactured RDCs is expected to reach over 12,000 units per annum in 2015. It is likely that the number of overall RDCs in use will plateau at around 900,000 units between 2015 and 2020. The number of additional new units required to accommodate expansion in the market increased between 1999 and 2004. However, there was a decrease in this requirement between 2004 and 2007. It is estimated that there will be a constant requirement of approximately 30,000 new units between 2009 and 2015 indicating a slowing of growth in the market. New stock required to replace old stock will also decrease from about 2009 due to an increase in the level of remanufacture over this period. The overall level of replacement stock (remanufactured and new-for-old) will therefore plateau at around the 80,000 per annum mark.
3.2
Opportunity Given the current level of remanufacturing, there is an opportunity to increase the level of activity for both remote and integral RDCs. This may spur further competition from OEMs, which is likely to get tougher as the requirement for additional capacity for new RDCs begins to fall post 2015. To maintain or increase levels of new sales, OEMs may well focus on the replacement market, which will increase pressure on remanufacturers. We have estimated that almost 4,000 remote RDCs were remanufactured in 2008, representing 12 % of the total remote RDC population. This level of remanufacturing activity produces an estimated carbon saving of over 8,200 tonnes CO2e per annum. Based on current trends, the level of remanufacture is predicted to remain stable until 2015. Taking an average 2.5 remanufactures (i.e. 3-4 “lifetimes”) per remote RDC implies a CO2e saving of approximately 49,000 tonnes per unit. Strictly, to estimate the total potential impact of remanufacturing RDCs, (integrals and remotes), a second carbon footprint for integrals is required. However, with the simplifying assumption that broadly similar benefits can be achieved from remanufacturing both integral and remote RDCs approximately 144,000 tonnes of CO2e pa could be saved. This is roughly equivalent to the remanufacture of 69,000 RDCs per year. Summary statistics are provided in Table 3.3. If this level of remanufacture is met, an extra 58,000 RDCs will be remanufactured. TBG currently employs 210 people and remanufactures approximately 4,000 RDCs. Based on these figures, an extra 3,050 new jobs in the UK will be required to remanufacture these extra units.
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Table 3.3: The current, future and total opportunity for remanufacturing RDCs in the UK and the associated CO2e savings.
Type
Prediction basis
Remote
Integral and remote
3.3
Current (2009)
No of Cabinets remanufactured 3,917
CO2e 8,200
Future est. (2015)
3,937
8,200
Potential (2009)
23,300
49,000
Potential (2009)
69,000
144,000
Customer Survey Background A series of interviews was conducted with retailers to obtain their views on remanufactured RDCs, and thus understand motivations for or detractions from their purchase. Some of the respondents have incorporated remanufacture of RDCs for over a decade, with it being an integral part of the purchasing process. The number of remanufactured units in any particular store varied, but remanufactured units were sourced first for refits and, when unavailable, new units considered. In some circumstances – in new store openings for example – new units are purchased as a first choice, but these are then remanufactured when they reach end of service life. (Suitability for remanufacture will depend on the condition which is influenced by design, such as having a stainless steel base) In all interviews, it was evident that the concern for the customer‟s perception was paramount, and if remanufactured models did not appear „as new‟ from the customer‟s perspective, then they would not be used.
Drivers Price The main driver for use of remanufacture was not environmental issues but price, both in terms of capital outlay and efficient use of resource. Whilst the cost savings were not as large as in the past (due to low-cost imports becoming more widely available in the UK), actual savings are still believed to be substantial, particularly over the long term. One retailer stated that some of their units, still at high functional standard, are in use in stores after 15-20 years service, and had been through three or four remanufacturing operations.
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The quality of cases used in remanufacturing means that, when compared with lower cost models, issues arise which result in larger outlays. For example a new, low-quality unit may have a fault with a single component, but dismantling problems may make it more cost effective to scrap the RDC and buy new. Examples such as this have resulted in service lives of less than four years for lower quality new RDC models.
Customisation Another driver discussed was dissatisfaction with the standard products available. Very little customisation could be requested with new models, as they are mass produced. The extent of retailer influence over the model was limited to visible cosmetic factors, such as colour and design of shelving. For greater control over these factors, one retailer specially commissioned the design and production of their own RDCs. This allowed EoL considerations to be factored into design, and units were created modularly, allowing easier reclamation of components at end of service. Under the customer‟s control, design for deconstruction was also considered: For example, joints were not welded and wear parts were easy to access for maintenance. These cabinets are being remanufactured regularly. Overall, however, the environmental benefits of remanufacture are only a secondary consideration.
Upgradeability In recent years, remanufacturing or refurbishing units has been perceived as a way of increasing energy efficiency without having to replace the full range of RDCs. An example was quoted where the hot gas defrost process had been modified to an „off cycle‟9. Existing casings were reused, but the valves and other components were removed and replaced. Although not classed as complete remanufacture (since the warranty was limited), significant efficiency savings were realised; further these types of upgrades could be relatively simply incorporated into fully remanufactured units. Another example involved the installation of new, more efficient fan motors. 12,500 were exchanged by one retail chain in 2008. RDCs were taken from one store, remanufactured, and then cascaded as replacements in the following store, leaving minimal waste. These replacements reduced the heat generated during running, reducing the need for further cooling. Although the cost to upgrade the cabinets was substantial, running cost savings of £2.25 million per annum were realised resulting in a pay-back period of approximately one year. In addition, CO2e savings of 21,000 te per year were realised.
9
This type of unit has no defrost timer or heaters. It operates on the basis of the refrigerator operating at a temperature high enough to defrost the coil when the compressor is not running.
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In addition to changes in fan design and the energy efficiency savings realised by such measures, the move of the retail sector, partly through legislative changes, to more environmentally benign refrigeration gases is seen as an opportunity for remanufacturers. Alternative refrigerants will generally not require a change of coil, which is far more cost effective and less resource intensive than whole unit replacement.
Other drivers In the premium food retailing market, high standards sometimes result in functional RDCs being discarded for aesthetic reasons, rather than the machine being at the end of its life. These can be sold as-is, or after remanufacture, to small independent newsagents or cafes through remanufacturers. Having relationships with remanufacturers that enable the retailer to perform this activity is seen as an advantage as it removes the need to dispose (scrap) of a machine and enables the retailer to extract value from the product through resale. Corporate Social Responsibility (CSR) is not a major driver in encouraging remanufacture and remanufactured RDCs are not generally highlighted in company reports. This is partly due to difficulty in recognising and quantifying the benefits of remanufacture and because, in fairness, the historic focus has been on removing ozone depleting refrigerants and energy efficiency in operation. However, retailers were receptive to the inclusion of the environmental benefits of remanufacturing RDCs within their published environmental reports.
3.4
Summary From our analysis, the level of activity of UK remanufacturers suggests that they produce a significant CO2e saving. However, the potential opportunity is considerably higher, and could result in 144,000 tonnes of CO2e saved annually. It appears that there is at least some willingness, for both commercial and environmental reasons, from major retailers to purchase and, in some cases, to preferentially purchase remanufactured RDCs. It is important however to capture reasons why retailers do not use more remanufactured RDCs. This problem is discussed in the next section.
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4 Barriers and recommendations A prime objective of the report is to determine the reasons preventing the uptake of more remanufactured RDCs. Conversations with industry sources including retailers, third party remanufacturers and original equipment manufacturers have revealed a number of barriers. This section outlines these barriers and discusses possible solutions.
4.1
Barriers The following are barriers preventing the uptake of remanufactured RDCs which may be actual or perceived:
Poor industry perception and technical understanding by retailers Retailers have expressed opinions that, whilst the majority of current remanufacturers in the industry remanufacture to a constantly high standard, historically this was not always the case. Some – now defunct – remanufacturers delivered sub-standard remanufactured RDCs, which resulted in returns and contract cancellations. This problem has largely been rectified; however, the damage to the reputation of the remanufacturing industry has yet to heal. An increase in technical knowledge of the retail buyers could mitigate this issue. For example, giving engineers responsibility in RDC procurement will lead to a deeper understanding of the processes involved in remanufacturing, instilling more trust in remanufactured RDCs. Indeed, several different retail organisations that actively sought remanufactured RDCs suggested that the incorporation of engineers within the purchasing decision would increase demand for remanufactured RDCs. The reality is, however, that most remanufacturers are perceived as „refurbishers‟ or, if they are also an OEM, any remanufacturing performed by the organisation is often perceived as a non-core area of work to the business, and thus probably of inferior standard. This lack of understanding of remanufacture, particularly when purchasers do not have an engineering background can be an issue even without any previous knowledge of poor performance. The word remanufacture can be synonymous with second hand and its associated negative connotations.
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Poor availability of used units Supply problems are seen as a major issue in stifling remanufacturing potential. The nature of the remanufacturing industry means that supply is dependent on sourcing suitable EoL cabinets, which is not always feasible for larger orders. This is an acute problem where retailers are expanding their business. However, most remanufacturers recognise that there will be a need for new cabinets and, if they are of suitable quality, there will be available to remanufacture in the future. Another frustrating issue for retailers is that OEMs will only remanufacture ownmake units, resulting in unnecessary scrapping of RDCs at end of life.
Competition from low-price imports Currently, remanufactured RDCs can be purchased for approximately 70% of the price of new, “budget” units. (These price differentials are smaller than in previous years.) Additional storage leads to increased costs of remanufactured RDCs, which, if not absorbed by the remanufacturer, will push up prices and diminish the savings. Many companies (particularly those with generic „purchasing managers‟ or similar) do not have budgets allocated on a long term basis and insufficient understanding of the whole life benefits of remanufacturing RDCs reduces their uptake. The perceived poorer quality of lower cost RDCs means that retailers generally only consider them for scrap at the end of their lifetimes (usually after five years). However, if the case itself is in good condition these units may also be suitable for remanufacture. This is largely a perception issue held by retail buyers. As waste disposal becomes more expensive, remanufacture may become more attractive. Traditionally, UK supermarkets have wanted units customised with their own brand and look, which resulted in higher costs and specifications for RDCs. Now, in order to reduce costs, the supermarkets are using more standardised European and Far Eastern derived RDCs that are considerably cheaper. However, one of the potential advantages of remanufacture is that individual specifications can be developed.
Reliance on goodwill Although not directly raised by retailers as a barrier, asset managers must perform unit reviews (all cabinets in storage, on shop floor, and currently under remanufacture) to determine the need for new and remanufactured cabinets. This can occur relatively frequently, weekly in one case. This is not a technical process and can be handled by non-senior staff, but it still poses a burden on the retailer that they otherwise would avoid by buying new. The use of asset management tools is being used to mitigate of this problem. Historically, the drive to use remanufactured cabinets has been from key individuals within the supermarkets who promoted the use of such products. Page 29 of 38
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Within these organisations, the reputation of the remanufacturer ensured a steady flow of business. Now, market competitiveness and uncertainty dictates that the buyers default to much shorter planning and buying horizons. The volume of RDC purchases is also variable and dependent on a few key players. For example, Morrisons‟ takeover of Safeway led to a significant drop in the orders from Safeway; a similar scenario occurred when ASDA was bought by Wal-Mart.
Whole life costs are not considered Due to the purchasing procedures of several retailers, the tendency to buy new is reinforced. Yearly budgets and budgets which are focused on capital outlay mean that there is little incentive to purchase the most energy efficient cabinet, or cabinets which are suitable for remanufacture. Also, we have seen little evidence that retailers consider the environmental consequences of buying new as opposed to remanufactured RDCs.
Imbalances in fiscal incentives Financial incentives available for the new energy efficient RDCs are not open to remanufactured units. The Enhanced Capital Allowance (ECA) scheme was set up to encourage companies, through tax allowances, to choose energy-efficient plant. This scheme has been criticised by both retailers and manufacturers. The complexity in applying for ECA means that some retailers are not fully claiming under the scheme, which in turn is a disincentive for the manufacturer to apply. Remanufacturers are also affected. The ECA scheme specifies that “Only spending on new and unused energy-saving equipment can qualify for ECAs”10 ostensibly making remanufactured units ineligible for the scheme. Anecdotally though, there is some uncertainty over this point and further discussion with the Department for Energy and Climate Change is necessary. An additional problem is that, even if remanufactured RDCs meet the environmental standards, subjecting individual RDCs to the testing criteria will be prohibitive.
10
http://www.eca.gov.uk/etl/about/, accessed on 07/05/2009
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4.2
Recommendations Enhance retailer education A whole life cost model would fairly reflect the benefits obtainable from remanufactured RDCs and allow genuine comparison against new units of all price brackets. Suitably presented, there is potential to shift the purchasing decisions of the retailers. It is apparent that the organisational structure of retailers encourages buyers to look at the lowest initial cost of the products and not the lifetime impact of the initial purchase. Therefore engaging retailer buyers who have overall control of the purchasing process of cabinets is critical to the uptake of remanufactured RDCs. A change of focus to act through the CSR arms of retailers could also be productive. Since the issue was raised that reliable environmental savings data were not available, abstracting the figures and tables in this report will be a good step to addressing this. If at all possible, the final purchasing decision for RDCs should involve the engineers and the service personnel within the retailer. This should ensure that remanufacture is given sufficient consideration.
Make the case for accreditation and level tax incentives The Enhanced Capital Allowance (ECA) scheme was set up to encourage companies, through tax allowances, to choose energy-efficient plant. Certain new RDCs can also qualify for this scheme. Currently, the ECA scheme only covers new equipment to the detriment of remanufactured products. There is evidence that remanufactured RDCs can be as energy efficient as new, therefore there is a strong argument that appropriately remanufactured RDCs should also be included on the ECA lists. This could be achieved by carefully selecting certain remanufactured cabinets for inclusion into the scheme or by including remanufactured cabinets which meet the requirements of the ECA. The resulting tax relief could provide a large enough incentive to encourage the purchase of more remanufactured RDCs. Clearly, however, there are certain institutional and regulatory barriers that need to be overcome. One of the main concerns from policy makers is the potential for unscrupulous operators to offer equipment that has not undergone thorough remanufacturing protocols. Systems for accreditation and standardisation of the methodologies for remanufacturing RDCs need to be adopted to ensure that only energy efficient, high quality remanufactured cabinets are eligible for tax incentives. Additionally, since remanufacturers can upgrade fridges to meet modern efficiency targets, further discussions may be necessary to address the complexities of remanufactured RDCs meeting energy efficiency criteria with different configurations. In parallel, an investigation of the current testing Page 31 of 38
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procedures may be prudent to determine if, as reported through interviews, there is a disparity between the claimed efficiency ratings of some new RDCs and their actual performance. Based on these findings, it may be necessary for the RDC industry to adopt a set of transparent standards or protocols to address this problem.
Form alliances between OEMs and remanufacturers The size of order that a remanufacturer is able to fulfil is limited to the amount of suitable end of life RDCs available to them. Ultimately, remanufacturers are reliant on five year old purchasing to enable them to effectively remanufacture RDCs. If the cases purchased are unsuitable for remanufacture then the remanufacturer cannot compete for business. A potential solution to this would be through the formation of a strategic partnership with an OEM. This could have benefits for both parties. The remanufacturer would be able to bid for orders which they could not normally complete through remanufacturing alone, and the OEM will find another outlet for their product. Although this may result in the OEM losing sales to remanufactured product, it also makes any bid more attractive due to the lower costs of the (cheaper) remanufactured RDCs as part of a larger bid package for the retailer. In addition, any orders which require the OEM to remanufacture units with which they are unfamiliar can be placed through the third party remanufacturer.
Deliver industry-wide changes through a trade organisation Although the interests of the RDC industry are represented by The Federation of Environmental Trade Associations (FETA) and the British Refrigeration Association (BRA), there have been concerns that the viewpoints of remanufacturers are under-represented. By developing a subcommittee within one of these trade bodies, the concerns and priories of the remanufacturing industry within the UK could be addressed. Developing and delivering industry reform through a trade association is likely to yield results faster than through direct governmental lobbying. Areas where industry collaboration could result in higher levels of remanufacturing include: Adopt an industry wide standard on the quality of new RDCs, for example specifying the use of stainless steel bases to aid the remanufacturing process. Develop an industry recognised code of practice for remanufacturing to ensure quality and comparability, and hence reduce the risk of purchase for the retailer. Promote the environmental benefits of remanufacturing to retailers and government, taking a more structured, quantified and targeted approach.
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Advertise the ability of the environmental benefits of RDC remanufacturing to form a valid and significant part of a retailer‟s Corporate Social Responsibility report, not least by publishing quantities bought and reused. Agree a, public, discriminating, auditable set of test standards for RDC energy efficiency rating that fairly reflects as-used performance and also ensures that new RDCs meet their advertised efficiency ratings.
Lease through the service model The ancillary support structure afforded by many remanufacturers to perform installation, servicing, on-site refurbishment and customer-led RDC stock tracking could potentially be utilised to modify the remanufacturing business model. Currently, retailers own most of the RDCs used in-store. This places the burden of determining which RDCs are suitable for remanufacture and which to buy new on the retailer. This presents a problem in that the effort required by the retailer can be prohibitive, leading retailers to prefer buying new rather than remanufacturing. A preference for remanufacture by a retailer is usually a consequence of specific individuals within the organisation. While these personal preferences are important, over-reliance on individuals could be detrimental to the future viability of the remanufacturer‟s business. The effort that a retailer has to expend to obtain remanufactured cabinets must be minimised. Certain remanufacturers, such as TBG, have to some degree begun to address this issue by introducing on-line stock-tracking software that the retailer can access. A more radical solution could be for remanufacturers to take ownership of the RDC and charge a leasing fee. This has several advantages over the current regime. For the retailer, it: Reduces overheads associated with the servicing, maintenance and purchasing of new RDCs. Reduces the up-front capital costs of buying new RDCs. Offers flexibility to increase or decrease the number of RDCs in stock. Removes the need to track stored stock at the remanufacturer. For the remanufacturer, it: Offers the opportunity to forge closer, long term relationships with retailers. Ensures that newly installed RDCs are optimal for remanufacture.
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Places the emphasis of cost reduction (and therefore increased remanufacture) on the remanufacturer. Enables the remanufacturer to be cost competitive even with poor quality new RDCs. Simplifies the purchasing decision, encouraging more trade with the retailer. There are, however some disadvantages: The retailer has a more complicated working relationship. Some infrastructural changes may be required of the retailer. Significant change may be required of the remanufacturer‟s business model. There is an increase in the capital expenditure for the remanufacturer. Overall however, such a change in business model may lead to more and repeat business with retailers.
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5 Conclusions and way forward RDCs are ideally suited to remanufacture and can be upgraded to meet current energy efficiency specifications. Most of the carbon footprint of the RDC is derived from its use phase. If the RDC can be remanufactured so that its energy efficiency matches that of the latest designs, the remanufactured RDC saves 2,100 kg of CO2e. Based on our estimates of the annual number of RDC replacements, if remanufacturing became prevalent throughout the entire retail sector, the industry could prevent the generation of approximately 144,000 tonnes of CO2e per year, which is equivalent to the average emissions generated annually by around 50,000 cars. There is an appetite within certain retailers in the UK to use remanufactured RDCs. The main reason retailers use remanufactured RDC is to reduce costs At present the environmental advantages of using RDCs are not a major consideration. Other advantages from the retailer‟s perspective include the ability to perform energy efficiency upgrades at a reduced cost, and to enable specified customisations which enhance the retail brand. Several factors are preventing growth of remanufacturing in the RDC market: The use of low-cost imports has eroded but not eliminated the cost advantage of remanufactured RDCs. A poor reputation, largely earned through disreputable dealers, makes selling remanufactured RDCs more difficult, with remanufacturers often relying on their reputation with individuals within the buying departments of retailers to make sales. A whole life cycle view which can be an incentive to value the longevity of the products is largely absent. However, purchasing structures within retailers frequently favour a „cheapest is best‟ choice. This is despite the fact that the cheapest new RDCs can fail prematurely and are of such poor build quality that they are unsuitable for subsequent remanufacture. The current taxation regime encourages users to buy the most efficient RDC, but only apply to new purchases.
There are three remanufacturing:
general
recommendations
to
increase
the
level
of
Engage and educate retailers on the benefits of remanufacturing.
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Expand tax allowances to include remanufactured RDCs. Evolve remanufacturers into service-led business with expanded ranges of options for purchasers including leasing both new and remanufactured RDCs.
And specific actions that might be taken by the RDC manufacturing and remanufacturing industry itself are: Adopt industry wide standards on the quality of new RDCs, for example specifying the use of stainless steel bases to aid the remanufacturing process Develop an industry-recognised code of practice for remanufacturing to ensure quality and comparability, and hence reduce the risk of purchase for the retailer. Promote the environmental benefits of remanufacturing to retailers and government, taking a more structured, quantified and targeted approach. Advertise the ability of the environmental benefits of RDC remanufacturing to form a valid and significant part of a retailer‟s Corporate Social Responsibility report, not least by publishing quantities bought and reused. Agree a public, discriminating, auditable set of test standards for RDCs (both new and remanufactured) energy efficiency rating that fairly reflects as-used performance.
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Appendix Additional modelling data Table A: Assumptions of the RDC market 1998-2015
Removed for client confidentiality
Table B: Estimated market for INTEGRAL RDCs 1999-2015
Removed for client confidentiality
Table C: Estimated market for Remote RDCs 1999-2015
Removed for client confidentiality
Estimate of RDC market size Removed for client confidentiality
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