Remanufacturing in a changing world: An interview with John Disharoon of Caterpillar Inc.

Remanufacturing emerged more than 100 years ago as a business strategy for lowering the ownership costs of high-value assets for consumers. Today, remanufacturing is attracting new attention from companies in search of more sustainable production methods and as material supply chains become increasingly volatile. They are swayed by the strong economic argument remanufacturing makes; it is a proven and profitable model for consuming less energy, keeping materials in use for longer, and emitting fewer greenhouse than traditional manufacturing.

Disharoon’s broad global experience spans corporate and governmental affairs, marketing, industry relations, sustainability, and mining. He serves on the Industry Trade Advisory Committee (ITAC 2), advising the U.S. Secretary of Commerce and U.S. Trade Representative on international trade matters. He is also a former board chair for the Remanufacturing Industries Council (RIC).

Here, Disharoon puts remanufacturing into a global context, highlighting some of the best opportunities for the industry to flourish internationally.

Interview with John Disharoon

Q: Remanufacturers need to account for far more contingencies upstream in their supply chain than most conventional manufacturers do. That’s because remanufacturing relies on “cores,” which are used products and components sourced from markets across the globe. Once returned to a facility, a core undergoes careful analysis to determine if it can be remanufactured and, if so, how. But getting a core to a facility means first addressing a larger layer of uncertainty: the trade policies and regulations that determine what counts as a core and whether it can cross a country’s borders. How does Caterpillar negotiate uncertainty within its remanufacturing operation, especially when it comes to sourcing cores from international markets?

A: One of the benefits of Caterpillar’s Reman business model is that it is essentially a closed-loop system. Caterpillar sells a remanufactured product to a dealer and charges a core deposit on the sale. When the core is returned, the deposit is refunded, thus lowering the total transaction cost for the customer and ensuring a high likelihood of the core return. If the core is not returned, the customer pays the same price as a new product. We have a long-established core management system that tracks remanufactured sales by dealer (and thus location) and informs us where the core is located and when its due back to the factory.

Q: As the world’s leading remanufacturer, Caterpillar is a model for how a company can apply circular economy principles to exceed customer expectations, create business opportunity, and dramatically reduce its use of raw materials and energy. This is a fine balancing act: Are there any lessons you’ve learned about how to balance this “three-legged chair” that smaller remanufacturers could benefit from?

A: It all starts with serving the customer. Providing a repair option that meets the quality, durability, and investment that a customer finds acceptable to their own business is key to our success. Because Caterpillar designs and engineers high-value products during original production, we can give new life to these products—at the end of their original service life—through remanufacturing. In the remanufacturing process, we use fewer natural resources, less energy, and create less waste when compared to new manufacturing, while providing our customers same-as-when-new performance. That’s a win for Caterpillar, our customers, and the environment. If a company is not producing a high-quality, durable product at the time of original manufacture, they will struggle to remanufacture it. Remanufacturing is not a process that is well-suited to single-use goods.

Q: U.S. policymakers increasingly consider remanufacturing to be an enabler of the circular economy, where waste and pollution are designed out, products and materials are kept in use for as long as possible, and natural systems are regenerated. Caterpillar is a member of the REMADE Institute (part of Manufacturing USA™), a research-and-development consortium established by the U.S. Department of Energy that brings together industry, academia, and government to advance U.S. manufacturing through the circular economy. What value do policies that foster public-private partnerships like REMADE have when it comes to advancing the circular economy? Are other kinds of policies needed?

A: We believe there is tremendous value in collaborating with academia, industry, and the U.S. government through the REMADE Institute. When you combine the experience of industry and the research of academia with matching funds from, in this instance, the U.S. Department of Energy, you create an atmosphere that facilitates a more rapid advance to commercialized projects that may not have had the focus with just a single entity pursuing it. When we look at the expanding membership and number of projects underway within the REMADE Institute, it certainly suggests others agree. The challenge will always be to manage the bureaucracy of these consortiums at a high level, to allow the project teams to execute and achieve results. 

Remanufacturers are unique in that we do not seek policies that solely benefit our industry. Our request is simple: treat us the same as new products. We will apply the same rigor to place our remanufactured products on the market as we do our new products. When governments treat remanufactured products as second-hand goods, or “used” products, they destroy the value created for our customers, economies, and the environment (mentioned above).

Q: Over the course of its 100-year history, the terms used to describe remanufacturing processes and products have led to considerable confusion within—and without—the industry. This has caused consumer misperceptions, harmful trade policies, and roadblocks to assuring consistent quality. As chair of the RIC board, you were instrumental in efforts to put in place a standard definition for U.S. remanufacturing, most notably the 2017 American National Standards Institute (ANSI) standard “RIC001.1-2016: Specifications for the Process of Remanufacturing.” About four years on, do you think the standard has changed how businesses and policymakers talk about U.S. remanufacturing today? What do you think the prospects are, if any, for internationally binding policies that address remanufacturing processes and product categories?

A: The RIC Remanufacturing process standard was certainly a positive step forward, establishing a standard that has been referenced around the world. While it is an American National Standards Institute (ANSI) standard, many foreign policymakers have looked to it to inform their own standards-setting processes. RIC is in the process, right now, of updating the standard. We don’t believe it will change much, but we’re looking to add some clarification based on feedback we’ve received over the past four years. With this foundation laid, jurisdictions outside the United States have a benchmark standard against which they can evaluate their own efforts.