There are people who buy a new car every year or two. And there are contractors who never keep a piece of equipment more than two or three years. Vanity usually drives new car fans, but there is a long-standing school of thought that says continually turning over near-new construction equipment is the best way to maintain high productivity and eliminate downtime.
There’s another group of equipment managers, however, who keep equipment for longer periods of time and replace major components – such as engines, transmissions, cylinders and hydraulic systems – with like-new remanufactured components on an as-needed basis. These aren’t contractors who are too poor to buy new equipment. On the contrary, the remanufactured component strategy is used by some of the country’s biggest quarries and construction companies. Over the course of 10 years or so these equipment managers extract more value from a single machine kept healthy with remanufactured components than they can buying and selling three new machines.
Granted there isn’t a big market for used million-dollar-plus mining and quarry trucks, hence perpetual rebuilds have been a way of life in these fleets for years. But thanks to a new emphasis by many heavy equipment manufacturers, the reman strategy is making better sense than ever for the owners and managers of smaller equipment too.
“We think remanufacturing is a great business from the customer’s perspective,” says Steve Fisher, managing director of Caterpillar Remanufacturing Services. “They’re getting a like-new product for about half the cost.” In the past four years Cat’s reman business has doubled, Fisher says, and is expected to double again by the end of the decade.
Plug and play
One of the main reasons remanufactured components are growing in popularity is that even those companies that have extensive shops and experienced technicians don’t always have the time or the technical sophistication to repair and rebuild the components themselves.
“One of the challenges we face and dealers and customers face is a shortage of qualified technicians,” Fisher says. “Reman is a good use of a technician’s time. It’s a plug-and-play option.” Rather than tie down your mechanics for days in tedious tasks like honing cylinders or piecing together component subassemblies you can simply pull the used component, turn it in for a core credit and bolt on the reman part.
In most reman programs you turn in your used component and receive a core credit for the part. With most parts you will get a 100 percent core credit as long as they aren’t damaged. For large components such as engines, the value of your core credit goes down in proportion to the amount of damage.
“There is a core grading process our dealer network uses to determine what they believe is the core credit to be given to the customer,” says Bruce Luehmann, manager of aftermarket at John Deere Power Systems. Typically, to get full credit the engine must still turn over, it must be the same size and type as the one being exchanged and it must not be ventilated – no holes or visible cracks, Luehmann says.
Turning used parts into remanufactured components often requires sophisticated machining technology.
Today there are a handful of components that are simply too complex for a traditional shop to repair or test. Engine fuel systems, transmissions and hydraulics often require expensive machining and testing equipment that are beyond the reach of even the biggest equipment fleet shops. Hydraulic systems, in particular, once they’re opened up, require an almost hospital-like level of cleanliness to prevent contamination.
“One of the things we’re seeing is that it is becoming more and more difficult for smaller, independent fuel repair shops to stay up with the electronic fuel systems,” says Paul Schmitt, program manager for fuel systems aftermarket support at John Deere Power Systems. “Not because they’re not knowledgeable enough, but because of the investment that’s required in capital equipment to repair and remanufacture electronic fuel systems going forward.”
Many of these fuel system shops are sophisticated, but system integration is the challenge. “Rebuilding an engine hasn’t changed a lot in the last 50 years, but when you start adding in the complexity that ties the electronics of the engine control unit to the electronic fuel systems and the transmissions, making sure that all that works properly together, that’s where the challenges come in,” Luehmann says.
Better than new
One of the less obvious benefits to using reman parts is that in many instances, the reman part you plug into an older machine will often be better than the original part was new. This doesn’t mean you can jack up the power on your excavators like you might a Corvette. But most manufacturers make small, subtle changes and improvements to components over the lifetime of that design and most OEM reman parts will include the latest upgrades, Luehmann says.
Often this simply means the part will continue to perform longer than the original part. But putting a reman engine into something like an excavator that has been struggling with a tired engine will increase the long term productivity of the engine and the equipment.
One caution Schmitt adds is that you shouldn’t be tempted by shops that say they’ll turn your fuel pumps up to produce more power. First, you may be violating emissions regulations or standards. Second, every machine is designed to operate as a balanced system. Throw one component out of balance and you’re liable to induce added wear or problems in other components.
Environmentally sound: As much as 85 percent of the initial energy used in manufacturing can be preserved with a remanufactured product.
Variety of customers
As mentioned earlier, big mining trucks are frequent candidates for remanufacturerd components and engines. And it follows that the bigger the equipment, the more economic sense it makes to keep it longer.
“From our perspective, the customers who are using reman the most are the high-production operations – aggregate producers and pipeline, water and sewer contractors,” Baxter says. “Their critical issue is downtime and they look at it as a repair option. They could fix the machine or the dealer could fix the machine, but those are lengthy repairs. The reman option gets them back up and running quickly.”
Baxter also thinks contractors with bigger fleets and bigger equipment are more sophisticated about operating costs and are more likely to see the value in keeping machines alive long term with remanufactured components. “Ask the dealer or the OEM how long will this component last and when you should budget to replace it, so you can build in some of those upfront costs at the time of purchase,” he says.
The new revolution
In the manufacturing industry, remanufacturing is being characterized as the “second industrial revolution,” and that’s not just hype. The business of remanufacturing is booming as end users realize it helps them squeeze more value and work out of each machine and manufacturers realize they can capture two or three additional bits of residual profit off each machine sale.
Cat Reman started back in 1973, and for the first few years was viewed as a necessary evil, Fisher says. “We had to be in the business because some of our customers wanted us in the business,” he says. “But about five or six years ago, we realized this could be a very attractive business and the company put a lot of focus on it.” Today Cat has some 2,500 people working in remanufacturing, nine reman facilities around the world and is remanufacturing not only components from its own machines, but automotive components for other companies as well.
The environmental/resource conservation angle is also remarkable. Industry statistics show 80 to 85 percent of the initial energy consumed when you manufacture a new product is preserved in a reman product. Japanese auto makers have led the charge on this for years, designing every component in their Toyotas and Nissans with an eye for recycling or remanufacturing – a point not lost on heavy equipment OEMs.
“Designing for remanufacturability is where it all starts,” Fisher says. “We work closely with our design engineers to make sure that as they’re creating a cylinder head or block or water pump or whatever, that they’re building more than one life into those components. We may put an additional penny here or an extra millimeter of steel there to make sure the customer can get a second or third or fourth life out of a product.” Calling it the ultimate form of recycling, Fisher notes that Cat remanufactured more than 100 million pounds of its own products last year.
“The key thing is that it’s a great value for the customer,” Fisher says. “People are becoming more and more aware of it and in five or 10 years reman products will play a significant role in society.”