Hybrid Remanufacturing/Manufacturing Systems: secondary markets issues and opportunities M. GALLO, L. GUERRA, G. GUIZZI Department of Materials Engineering and Operations Management University of Naples “Federico II” P.le Tecchio – 80125 Napoli ITALY mose.gallo@unina.it luigi.guerra@unina.it g.guizzi@unina.it http://www.impianti.unina.it Abstract: In this paper secondary markets opportunities for hybrid remanufacturing/manufacturing systems will be analyzed. Recovering options allow increasing product’s inherent value recovery rate and it have been experimented by many manufacturers for several years. Particularly, the remanufacturing has been receiving great attention from many OEMs. In this case, the joint presence of high quality returns and demand for such products on secondary markets (e.g. emerging markets), makes the management deciding about allocating these units on these secondary markets rather than remanufacturing them and supplying the primary market. To gain insight into such a system a simulation model has been developed by means of Arena and a statistical analysis of data obtained from some experimental campaigns has been carried out. In this way, the factors that mainly impact on system performance and the operating conditions in which selling on the secondary market is more profitable will be identified. Key-Words: Strategic analysis, Quality uncertainty, Remanufacturing, Secondary markets, Simulation. 1 Introduction The aim of product recovery is to retrieve a product’s inherent value when the product no longer fulfils the user’s desired needs. Product recovery involves concepts like reuse, remanufacturing and recycling. This article only investigates remanufacturing, which is defined by Fleischmann et al. as a process of bringing the used products back to `as new' condition by performing the necessary operations such as disassembly, overhaul and replacement [3]. Remanufacturing as a product recovery operation is extensive and includes product inspection, disassembly, cleaning and identification of parts, parts recovery, product re-assembly and testing to ensure it meets the desired standards. The order and the purpose of the different operations are not standardized, but are rather dependent on the individual remanufacturing cases and the needs for recovery of specific components [17]. Remanufacturing has proved to be economically and environmentally better than ordering new products. The concept of remanufacturing has spread during the latest decades through sectors such as electrical equipments, toner cartridges, home appliances, machinery, cellular phones and many others. Even if many producers specialize in remanufacturing products, some original equipment manufacturers (OEM) may choose to combine manufacturing and remanufacturing activities together. In this latter case an OEM have to coordinate manufacturing with remanufacturing operations. V. R. Daniel and Guide Jr. cited seven major characteristics of recoverable manufacturing systems that definitely make hard the production planning and control activities [5]. Large variations in the quality of returns is a major factor for uncertainties in the remanufacturing processing times and the recovery rates of the process. Consequently balancing demands with returns becomes quite complicated [2]. Large variations in the quality of returns is a major factor for uncertainties in the remanufacturing processing times and the recovery rates of the process. Consequently balancing demands with returns becomes a complicated problem [2, 5]. To manage this variability, one of the first operations of any remanufacturing process is the inspection/test of returns from the primary market. This activity aims to assign a quality level (high, medium, low) to returns on the basis of their functional and aesthetics. WSEAS TRANSACTIONS on BUSINESS and ECONOMICS M. Gallo, L. Guerra, G. Guizzi ISSN: 1109-9526 31 Issue 1, Volume 6, January 2009