Core Acquisitions Planning in the Automotive Parts Remanufacturing Industry

An important problem faced by a remanufacturer is ensuring a sufficient supply of cores to support remanufacturing operations. The sourcing of cores to be remanufactured is a complex set of activities that requires careful coordination to avoid the uncontrolled accumulation of core inventory, or shortages leading to unacceptable levels of customer service. We report on current practice in the automotive industry via an extensive survey of North American automotive parts remanufacturers. The key results of the survey indicate that sourcing arrangements are mostly arms-length, core forecasts are mostly short-term and mainly based on management opinion with frequent forecast modifications, and few remanufacturers use optimization or statistical techniques to determine batch sizes, routings, and safety stock and lead times for remanufacturing. These findings represent lost opportunities for remanufacturers to better manage their supply of cores. We describe the managerial needs and the research opportunities that exist as a result of the findings of this study. 1. RESEARCH MOTIVATION AND OBJECTIVE Remanufacturing is the process by which products are recovered, processed and sold as like-new products in the same or separate markets. Due to increasing legislation and the realization that being „green‟ can be profitable, an increasing number of companies have been implementing comprehensive programs in order to reap the potential benefits of remanufacturing. In the U.S, laws mandating companies to be responsible for take-back of products are becoming prevalent at the state level. As an example, the Remanufacturing Institute (www.reman.org) reports that as at May, 2010, twenty-one states in the US had passed laws requiring OEM‟s to be responsible for taking back and reusing and/or disposing electronic products at end-of-life. However, few guidelines are available to the practicing manager to aid in planning, controlling and managing remanufacturing operations. In order to assure a sufficient quantity of cores, remanufacturers often use multiple sources for their supply of cores. The primary, and usually the cheapest, source of cores is product returns from the customer due to end-of-life or end-of-use. A secondary source is cores acquired from third parties (e.g. brokers, salvage operators and salvage