The Remanufacturing Offer, : A Case Study of Volvo Construction Equipment Implementing and Expanding Reman in Russia

Sammanfattning: SUMMARY This thesis is about Reman (acronym for Remanufactured Products) which is an alternative to buying a new product. It is a product offering by Volvo Construction Equipment, and also by many other firms in various manufacturing industries. It involves a customer exchanging a used product for a “remanufactured” or Reman product. In specific, this research focuses on the Russian market – perceived as one restricted market – which is represented by Volvo Vostok. This Bachelor Thesis covers the advantages and disadvantages of Reman, as an alternative to the purchase of a brand new product. More importantly, this research identifies variables which are vital to the decision making process of implementing or expanding a Reman program, taking as a case study reference the Russian market. This thesis has identified the most important variables which must be analyzed when deciding upon the implementation or expansion of a Reman program – i.e. the set up of a Reman production plant, the expansion of a Reman production plant, and a set of standard operation procedures (SOPs) for a Reman trading system. These variables include market potential, critical mass of machines as well as the strategic importance of the market. Reman is not the ultimate option in every case as alternatives may be better in some cases – such as exchanging used parts of a machine for new spare parts or buying a reconstructed/repaired replacement. VCE buys back used machine cores as to perform Reman; therefore, the perceived and actual value of a new machine is higher when the customer realises that he can sell back to VCE his used core and components after a certain number of hours, instead of simply scrapping it. This also replaces a manufacturer’s scrapping costs, as they may be legally responsible to dispose of their customers’ used products (in some regions i.e. EU). The implementation or expansion of a Reman program is a strategic decision; it affects both sales of new machines and the after-sales product support. There is an unavoidable cannibalisation of new product sales by Reman sales, but this cannibalisation leads to higher total sales of parts. In other words, cannibalisation leads to mutual growth for both Reman and New products. Keywords: Competitiveness; Market Potential; Remanufacturing; Restrictions.