Test-bed: Driving economic growth through a remanufacturing business model
Norwegian firm Norsk Ombruk has developed an innovative business model that remanufactures kitchen and bathroom equipment to offer high-performing electronic equipment at half the cost, all while driving the economy for resource-efficient practices.
More than half of the e-waste produced globally consists of discarded kitchen, laundry and bathroom equipment, with dishwashers, washing machines and clothes dryers generating more than 11 million tonnes of waste.
As with most cases, this waste is costing money, and Norsk Ombruk estimates that the cost of this particular type of e-waste is worth around $52bn in discarded but reusable resources. While remanufacturing is hardly a new concept, there are some barriers to implementation.
Consumers purchasing remanufactured goods want assurances on issues such as price, endurance and performance, the latter of which is extremely prominent for kitchen and bathroom equipment. But the remanufacturing sector is still in its infancy in Europe; currently more than 7,200 companies make up a market worth €30bn, and innovative operations and technologies have to battle to find a route to market.
To put it bluntly, Norsk Ombruk’s route to market is its price mechanism; it’s not as simple as that, but for consumers it will be a huge driver. Established in 2013, the company’s proposition is that it can take products at the end of their first life and apply unique remanufacturing processes to create second-hand products that brands and stores can sell at half the price of a new machine or equipment.
The remanufacturing process adds an extra five years of what Norsk Ombruk calls “peak performance” to each machine. Norsk Ombruk’s focus is currently on the White Goods category, which includes refrigerators, washing machines, stoves, dishwasher and dryers. The company remanufactured more than 12,300 products last year.
Norsk Ombruk is currently selling remanufactured products to incumbent retailers and OEMs such as Electrolux and Ikea.
Norsk Ombruk places end-of-life products through an inspection process that focuses on high-quality branded items that can offer the greatest returns from remanufacturing. Brands handled by the inspection phase include Electrolux, AEG, Zanussi, Miele, Siemens, Bosch, Ariston, Hotpoint, Hotpoint Ariston, LG, Samsung, Whirlpool and others.
Inventory is checked and barcoded, with each detail – from age and quality of product – recorded on a “quality control system”. The average age of machinery dealt with by the company is around five years old.
According to Norsk Ombruk, around 48% of items are repairable based on current performance. Some products will be discarded through the sorting process, but those items have key value parts recovered for reuse. All remaining material is sent to Revac AS for recycling.
All remaining products are cleaned and sent for a work schedule, which is based on a diagnostics report on necessary improvements. Norsk Ombruk is actually able to enhance the performance of these components beyond the original product. Average remanufactured products usually improve from a C to B rating for energy performance.
Norsk Ombruk products achieve a 97% pass rate for warranty periods, with any defects usually sent back to the company within the first few weeks of use. If any issues arise within the first six months of purchase, Norsk Ombruk will fix the problem at its own expense.
Norsk Ombruk’s process extends the life of products while also preventing waste. Other businesses can save resources, carbon and energy, while consumers can save money.
From the 12,300 products remanufactured last year, Norsk Ombruk generated benefits totalling €9.4m. More than half (56%) of the benefits generated from the process have counted as societal improvements.
For every €1m spent by Norsk Ombruk on operating costs, €11m is delivered back to society, the economy and the planet. The company attributed €4,476,000 of benefits to greater access and affordability of products to low-income households. €441,000 was associated with brand value through reduced inventory and logistic costs, and a growth in customer loyalty.
As remanufacturing negates the needs to source external materials, Norsk Ombruk saved €2,131,000 on resource extraction, while energy savings of €1,568,000 were realised through enhanced performance ratings and less manufacturing.
Notional carbon price savings reached €12,000, and €768,000 of economic leakage was reduced by placing new jobs into national economies. Norsk Ombruk also records the “level of circularity” delivered through each product. This is categorised as the components of a product that were remanufactured for reuse – on average 48% - and the proportion of resources that are from recycled sources – on average 52%.
Following a start-up phase, the company is expanding operations to other countries across Europe, but emphasis will remain on Scandinavian markets.
Norsk Ombruk notes that its current benefits model is “highly sensitive” to change as product volume fluctuates. If more product volume is generated, financial and social benefits could increase rapidly year-to-year.
The company is looking to improve value chain collaboration to strengthen its market position and generate more circular economy and remanufacturing benefits. It’s recent whitepaper notes that there needs to be access to old stock of returned and damaged goods from retailers, as well as access to spare parts.
Ultimately, the company realises that the sharing of data and common standards across the value chain will be critical to driving business model growth. Policy incentives are also viewed as crucial, and it is estimated that remanufacturing in Europe could be worth around €90bn by the year 2030 – employing up to 600,000 people.