Inventory and Value Management in Demanufacturing Facilities

Kenneth L. Gunter | PhD | 2004

Abstract:

Environmental issues are a growing concern for corporations, consumers, and governments. A particularly pressing issue is the proper management of the post-use stage of manufactured products, motivated by such factors as diminishing landfill space, take-back legislation, and an increase in lease programs. Currently, end-of-use products (EOUPs) that are not landfilled are destructively disassembled in order to recycle the material content in the products. However, focus is shifting from material recycling to value recover as a post-use option.

The goal of value recovery is to retrieve parts, assemblies, or modules from EOUPs wit the intent of reusing them in a new use cycle. Value recovery consists of demanufacturing and remanufacturing. Demanufacturing can be defined as the collection and disassembly of EOUPs for the purpose of recovering parts for reuse/remanufacture, and recycling the balance of the components, while remanufacturing consists of repackaging, repairing, and reassembly.

In Europe, legislated take-back, landfill bans, and taxation of wasted have motivated material and value recovery efforts, and a highly-developed infrastructure for collection and recycling exists. In the U.S., very little has been done to institutionalize EOUP management, with efforts and infrastructure left to develop via a free enterprise approach. Currently, only products which have large savings in production costs compared to the drop in value between new and recovered products are remanufactured. Therefore, a great number of consumer goods have the potential for product recovery and remanufacturing, but do not currently represent a profitable business venture. It is envisioned that and opportunity exists for companies to enter the EOUP recover arena by establishing stand-alone demanufacturing facilities. Assuming that companies may move to establish such facilities, it is desired to establish methods and technologies that will make these entities profitable. Such actions will ensure the economic survival of the companies and provide a benefit to the environment by reducing EOUP disposal levels.

One of the most important challenges faced by demanufacturing facilities is the management of inventory. For an independent demanufacturing facility to be economically viable, methods for determining EOUP value and an effective inventory management strategy are imperative. Effective management of recovered components and scrap necessitates the development of methods, models, and tools that can aid the demanufacturer in achieving profitable operation. This dissertation addresses this need by: developing analytical models for demanufacturing facility inventory management; establishing demanufacturing system simulation models to investigate the build-up of inventories and scrap, and to track associated costs and revenues; defining basic, fundamental concepts for end-of-use value, and proposing a rudimentary model for remaining product value; and investigating disassembly decisions based on value rather than market prices, including the effect of cut-off values and partial disassembly vs. total disassembly.

In this work, analytical models are developed for managing inventory in a demanufacturing facility based on traditional Economic Order Quantity (EOQ) models. Expressions are derived for the optimal selling point and time between inventory liquidations. Relations are also presented for the number of EOUPs and total revenue required in order to break even. It is demonstrated that the difference between total revenues (from recovered parts and scrap sales) and the total system variable costs highly influences system profitability.

A simulation model of a demanufacturing system is developed for a simple product with one disassembly sequence using Visual SLAM. The model simulates the build-up of inventories of recovered parts. Lacking any actual historical market price data for recovered components, a method is presented for simulating stochastic price data using an AR(1) time-series model. The basic analytical expressions for optimal selling strategy are compared with the results of the simulation model, and shown to be in good agreement.

The value of EOUPs must be known in order to plan for the demanufacture, remanufacture, and reuse of the product. Therefore, basic concepts of latent value and residual value are proposed and defined. In addition, a rudimentary model, based on a decomposition of total value into constituent part values, is presented to describe the remaining (and potentially recoverable) product value.

A simulation model is also developed using SIMAN/Arena to simulate the demanufacturing of a complex product. Disassembly and selling decisions for this model are made based on the remaining value in the parts and products. The model accounts for sales of scrap/recyclate as well as remanufacturable part inventories. The effect of a cut-off value (specifying whether EOUPs are disassembled or recycled) is investigated for the initial inspection stage in the model. In addition, the effect of partial disassembly vs. total disassembly on system revenue is demonstrated. It is shown that partial disassembly can have a positive impact on system revenue when cut-off values must be specified.

Go to List of Theses Previous Abstract

If you have any comments or suggestions please e-mail jwsuther@mtu.edu.