Spare parts remanufacturing strategy
Case study
Context
In the spare parts market, an equipment manufacturer was losing price-conscious customers to offers cheaper than its new original parts. Competing OEMs sell compatible replacement parts, and one of them remanufactures and resells the manufacturer’s own parts. Independent distributors sell new aftermarket parts at roughly half the price of original parts, as well as used parts. Some thirty of them also remanufacture and resell the manufacturer’s parts. The manufacturer’s remanufactured parts accounted for only 0.1% to 9% of its parts revenue, depending on the market.
Activity was spread across nine sites with no common remanufacturing strategy, and each market applied its own core charge policy. Without a systematic core charge, dealers sold their cores to competitors. As a result, the manufacturer could not build the volumes needed for a profitable business.
Our approach
We analysed the three links of the value chain: core collection, remanufacturing and parts sales. We combined sales data by product line, interviews with aftersales teams, a voice-of-the-customer workshop and a review of competing offers. This phase mapped the sites and the friction points in core collection.
We then assessed each part family on its design, residual value and sales volume. Compressors and electronics emerged as the strongest candidates. We compared these findings with the practices of manufacturers in other sectors, which apply a core charge to all exchangeable parts and consolidate their core flows, to build the remanufacturing strategy. The analysis showed that, in one market, the manufacturer was selling more of its competitor’s remanufactured compressors than its own.
Results
We defined a four-part roadmap:
- a systematic core charge on all exchangeable parts;
- core flows consolidated through the distribution centre network;
- remanufacturing focused on high-value, high-volume parts;
- electronics repair centres.
