Reprocessing and repairing white and brown goods - the R.U.S.Z case: An independent and non-profit business

Lechner, Gernot; Reimann, Marc Article Reprocessing and repairing white and brown goods - the R.U.S.Z case: An independent and non-profit business Journal of Remanufacturing Provided in Cooperation with: Springer Nature Suggested Citation: Lechner, Gernot; Reimann, Marc (2015) : Reprocessing and repairing white and brown goods - the R.U.S.Z case: An independent and non-profit business, Journal of Remanufacturing, ISSN 2210-4690, Springer, Heidelberg, Vol. 5, Iss. 3, pp. 1-29, https://doi.org/10.1186/s13243-015-0012-9 This Version is available at: https://hdl.handle.net/10419/155506 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. http://creativecommons.org/licenses/by/4.0/ Lechner and Reimann Journal of Remanufacturing (2015) 5:3 DOI 10.1186/s13243-015-0012-9 CASE STUDY Open Access Reprocessing and repairing white and brown goods - the R.U.S.Z case: an independent and non-profit business Gernot Lechner*† and Marc Reimann† *Correspondence: [email protected] †Equal contributors Department of Production and Operations Management, University of Graz, Universitaetsstrasse 15/E3, Graz, Austria Abstract Reprocessing of used products is a growing field, with respect to both scientific and practical approaches. In this context, we present an in-depth case study dealing with the reverse logistics processes at Repairand Service Center R.U.S.Z, an Austrian Work Integration Social Enterprise (WISE) located in Vienna, Austria. The main business segments of R.U.S.Z are reprocessing, repairing, and servicing of (used) products and repair services. The reverse logistics activities include relevant processes like acquisition, testing and grading, and disposition/reprocessing of used goods. Based upon the case study, we present the gained insights and furthermore identify research opportunities. Our main findings are: (1) the reverse logistics activities of this non-profit-organization are equivalent compared with the profit-driven approaches used in literature; (2) the business of R.U.S.Z is not solely profitor cost-driven but the company is based on the triple bottom line and pursues environmental and social goals, too; (3) in spite of legislation aiming at the reuse of used products, there is lack of collaboration between manufacturers and reprocessors. Keywords: Reprocessing; Reuse; Independent remanufacturer; Case study; Social Economy - Work Integration Social Enterprise Background “Mr. Eisenriegler, you will understand that it is not in our interest to help establish a competitor in the market sector of low-priced products.” This statement made by a representative of a large retailer for electric and electronic products to Sepp Eisenriegler, the head of Repairand Service Center R.U.S.Z (Reparaturund Servicezentrum R.U.S.Z), represents the general attitude of manufacturers and retailers towards reused products not only in Austria. Another often mentioned aspect is the fear of negative brand image effects induced by remanufactured or refurbished goods offered on secondary markets. Not surprisingly such reservations are reflected in an extremely low reuse rate of full products ranging from around 1 % for white goods to 1.34 % for consumer electronics in Austria in 2013 [1]. Reuse organizations like R.U.S.Z suffer from such low rates, despite the fact that Austria has agreed to implement the ‘Waste Electrical and Electronic Equipment Directive’ (WEEE) directive at national level. The collection targets for used electrical or electronic (EE) products are currently 4 kg per person and year until the end of 2015, 45 % of sold © 2015 Lechner and Reimann. This Open Access This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made. Lechner and Reimann Journal of Remanufacturing (2015) 5:3 Page 2 of 29 EE products (in terms of average weight) until the end of 2018 and at least 85 % (in terms of product mass) starting in 2019. The corresponding national law [2] specifies that any seller (manufacturer or retailer) needs to accept used EE products on a 1:1 basis when selling a new unit. Alternatively, in mail-order or e-retailing context the seller needs to specify at least two local collection points where used products can be returned. In Austria, there are a total of about 2000 collection points which potentially prepare and forward reusable products to reprocessors. The collection system is not centralized, rather European initiatives like the ERP (European Recycling Platform, see http://erp-recycling. org/), covering manufacturers like Braun, Electrolux, HP and Sony, or the EARN (European Advanced Recycling Network, http://www.earn-service.eu/) initiated by electronics recycling companies, coexist with national consortia and networks like ElectroRecycling Austria GmbH or Umweltforum Haushalt [3]. The problems associated with the implementation of these laws are manifold. First, the decentralized nature of and discretionary participation of manufacturers and retailers in these collection systems restrict the access of reuse companies to certain types of EE used products. Second, the WEEE guideline and the associated Austrian laws, while explicitly mentioning the priority of reuse over recycling, specify a joint target for reuse and recycling. This essentially justifies any action supporting the initial statement presented at the beginning of this section, regardless of any economic or environmental benefits of reuse. Third, the law specifies that the choice of the reuse option is contingent on the technical state of an item and consequently the economic feasibility of reuse and its environmental meaningfulness [2]. Here the way collection and initial processing are performed is currently not targeted at reuse. Many of the used units will enter a shredder and only the remaining fractions are commercially utilized through mostly material recycling [4]. This destroys the economic feasibility of reuse in many cases. Some of the above mentioned problems, as well as others, have been recognized by Austrian legislators and changes have been brought into use, or are about to be introduced. These include the restriction of illegal exports of used EE products, an improved access of reuse companies to used products, thereby increasing the anticipated share of reused products, as well as the specification of treatment standards along the reverse logistics chain to enable reuse [2]. Yet, while these changes may increase the feasibility of reuse, the economic benefit still needs to be established. For example, in [5], based on empirical data and interviews with company executives in Austria, the logistics cost associated with a system preserving the reusability of used units were estimated to exceed the cost of the - above mentioned - current system by about 50–100 %. These extra cost may not be covered by the revenues associated with sales of reused products. In fact, in Austria a significant fraction of reuse activities is currently carried out by Work Integration Social Enterprises (WISE), which are not primarily profit oriented. One of these companies is R.U.S.Z, which is the subject of this case study. In light of the above mentioned initiative to increase reuse as well as profitability issues associated with reuse, we were interested in shedding light into the main characteristics of R.U.S.Z. The following guiding research questions were formulated and guided our research: •What are the main characteristics and decisions of the processes at R.U.S.Z and how do they interact? Lechner and Reimann Journal of Remanufacturing (2015) 5:3 Page 3 of 29 •What are the main drivers of business at R.U.S.Z? Which factors affect the decision-making at R.U.S.Z, and how does the company cope with these influences? •What are the unique properties of a non-profit organization dealing with reverse logistics, if there are any? How are the reverse processes organized at an NPO/SCC? How does such a firm differ from conventional profit-oriented business? The remainder of the paper is organized as follows: in Section ‘Case description’ we introduce company R.U.S.Z and present an overview of the organizational structure, goals, economic and environmental issues and the company’s reverse logistics. In addition we describe the applied methodology used in this study. The observations related to reprocessing of white goods and analyses of business data are detailed in Section ‘Discussion and evaluation’. This section also contains a comparison of our findings with current scientific literature. Finally, conclusions are drawn in Section ‘Conclusions’. Based on the insights gained from the case study we raise questions in order to indicate potential fields of research. Case description R.U.S.Z is a Work Integration Social Enterprise focusing on reprocessing, repairing, and servicing of used products. Founded in 1998, the company pursues goals in economical, ecological, as well as social directions. Particularly, the objectives include cost recovery, reprocessing/repairing of about 8,000 used products/year, reduction of problematic waste due to prolongation of product usage phases, and reintegration of permanently unemployed persons.1 Organizational structure of R.U.S.Z Since the foundation of R.U.S.Z in 1998, the focus is on employment of long-term unemployed people. Currently, 21 people work for the company, whereof two persons focus on strategic activities like long-term projects and calculations. Fifteen workers are assigned to three departments: nine workers are responsible for white goods, five persons focus on consumer electronics/brown goods, and one cares about reconditioning of computers. All of these workers are responsible for any of the activities which occur within a department, e.g., remanufacturing, spare parts recovery, and disposal of used products. Besides the workers, two apprentices are trained, and one person is solely responsible for the used-goods receiving. Another two part-time employees as well as Sepp Eisenriegler, the general manager of R.U.S.Z, are assigned to an overhead cost center. From 1998 to 2007 hundreds of long-term unemployed people were reintegrated, they did a 12-month on-the-job training funded by the Public Employment Service Austria. Since the beginning of 2008, R.U.S.Z has turned to be a private non-profit company. However, still long-term unemployed people are trained. As the costs for this are not covered by public authorities in terms of subsidies, R.U.S.Z has developed a specific Corporate Social Responsibility-concept: private profit-oriented companies take over the sponsorship for the on-the-job trainings. The productive efficiency of a new worker is estimated at 50–70 %, and the sponsorship covers the costs to cope with this reduced efficiency. On average, the worker achieves the full potential after a half year on-the-job training. Lechner and Reimann Journal of Remanufacturing (2015) 5:3 Page 4 of 29 Goals of R.U.S.Z Contrary to many companies engaged in the reprocessing business, R.U.S.Z is not profitoriented but organized as a non-profit organization (NPO). As it is postulated in the common definition of social economy, ecological and social goals play a major role for decision-making at R.U.S.Z, next to economic objectives [8]. Although R.U.S.Z does not actively pursue the objective to maximize profits, decision - making and the company strategies must ensure financial sustainability to keep business running in the future. This is related to the fact that R.U.S.Z is self-feeding; public support is solely granted under strict conditions for the reintegration of long-term unemployed people. Therefore, the main economical objective is to earn sufficient to cover all types of costs (investments, staff, etc.). Due to the fact that R.U.S.Z is a comparatively small company, it is limited in terms of budget and investment capital. Naturally, these limitations cause that the capacities are restricted. However, from R.U.S.Z’ point of view, limited reprocessing capacities are also part of the business strategy to avoid the risk of overwhelming (and subsequently, costly) resources. According to R.U.S.Z, this is one of the key factors for a sustainable business, as it helps to cope with the risk of potential supply or demand shortages due to low fixed costs. R.U.S.Z also considers ecological and social objectives. Remanufacturing and refurbishing of used items and the subsequent reuse result in extended product usage phases. Consequently, less virgin resources are consumed, and at the same time, waste is reduced. Additionally, an optional upgrading process significantly reduces the energy consumption of washing machines. Therefore, as an ecological goal, R.U.S.Z wants to provide consumers as many reprocessed used products as possible to minimize environmental impact. Another aspect concerns consumer education: next to convincing people to repair broken products instead of throwing them away, buying of high-quality durable goods is promoted. Regarding the social responsibility, R.U.S.Z wants to provide socially disadvantaged people with energy-efficient durable goods at reasonable prices; offering these energyefficient second-life products should substitute sales of throwaway products. Therefore, the socially disadvantaged people get a discount of 20 % on all services and products offered by R.U.S.Z. Besides this goal, the main related social objective is to solely employ long-term unemployed people: R.U.S.Z provides regular work to reintegrate them in the working world. Consequently, the unemployed people get practical experience. The goal is to place all of these people in open-ended jobs, both at R.U.S.Z and other companies. All in all, 400 long-term unemployed people were employed and trained, whereof 300 people were placed in open-ended jobs. To give a résumé, economical objectives make sure the financial continuation of the company by covering costs but not by maximizing profits, while ecological (maximize the ecological surplus, maximize the sales of reprocessed products under certain restrictions like budget, capacities, human resources) and social goals (reintegrate long-term unemployed people, on-the-job training to convey a maximum amount of knowledge) are pursued actively, too. Financial and economic implications of R.U.S.Z’ activities The main business segments of R.U.S.Z - as indicated in Section ‘Case description’ - are reprocessing of used products and the repair service. The analysis of the revenues in Fig. 1 Lechner and Reimann Journal of Remanufacturing (2015) 5:3 Page 5 of 29 Fig. 1 Analysis of revenues at R.U.S.Z shows that the repair service is by far the biggest business: more than 63 % of the total annual revenue of about e800,000 in 2014 stem from this sector. Related to this, nearly 20 % of the income comes from estimates of costs, which are offered in order to determine a potential economically viable reparability. The third largest revenue with more than 12 % share is generated by selling reprocessed goods. Interestingly, grants and public financial support account only for 2.35 % of total revenue. While R.U.S.Z’ total business including all branches is profitable, reprocessing activities per se are not cost-covering. Though, as the same working abilities are required for repairing and reprocessing, the segment can be seen as an appropriate complement to the provided repair service. Taking a look at the shares of different types of costs shown in Fig. 2 provides some insights into the cost structure at R.U.S.Z (data is solely available on an aggregated level for all activities). It is obvious that due to the high degree of manual work the main item of expenditure is costs for staff. Further types of costs exceeding 10 % of total costs are ‘Rent and other Operating Costs’ and ‘Production Costs’, while all other amount to less than 5 %. In summary, due to the hardly obtainable cost coverage reprocessing of white or brown goods rather fits for non-profit organizations of the Work Integration Social Enterprises with financial support from the government. For small-scaled, independent, private companies with limited output economic sustainability is hard to achieve by only focusing on reprocessing of these products. Finally, an economic side-effect of the offered services is the local value creation: contrary to producing new goods, which is mainly outsourced abroad, the added value remains inland. Energy efficiency and environmental impact of R.U.S.Z’ activities The energy-saving method ‘Tuning of Washing Machines’ developed by R.U.S.Z used for upgrading products increases the energy efficiency category of washing machines and improves the energy efficiency category from, e.g., C to A. This can be achieved by a reduction of water consumption resulting in energy demand of around 20 %. In detail, in case of washing machines the energy-intensive water heating can be optimized by reducing the total water consumption. Consequently, the total energy consumption for heating Lechner and Reimann Journal of Remanufacturing (2015) 5:3 Page 6 of 29 Fig. 2 Analysis of costs at R.U.S.Z the water is decreased, while the quality of the washing process remains at the same level. However, as the supply with washing machines with an energy efficiency category of C declines due to the fact that nearly all of these have been returned and replaced by better ones, upgrading washing machines will vanish in near future. As a side effect of reprocessing used products, environment is impacted by the extension of the product usage phase of a reprocessed product by about ten years. Selling remanufactured/refurbished products induces a postponement of the resource consumption for producing new products. Additionally, the second life of reprocessed products including a related extended usage phase potentially reduces the overall consumption of resources. Contrary to these resource savings from an extended life cycle, potential environmentally friendly innovations must be considered to get a holistic view on the environmental impact. These innovations may decrease the resource consumption of new products in the usage phase and reduce or even (over)compensate benefits from an extended usage phase. For an overview of the ongoing scientific discussion concerning the eco-efficiency of refurbishment of white goods we refer to [9–11]. Reverse logistics for white goods at R.U.S.Z One of R.U.S.Z’ main businesses - besides offering repair services for household appliances, consumer electronics, and computers - is reprocessing of used white goods, mainly Lechner and Reimann Journal of Remanufacturing (2015) 5:3 Page 7 of 29 washing machines, dishwashers, ovens, dryers, and washer-dryers. Used white goods come from different sources of supply: on the one hand, private persons can donate their (even not working) products to R.U.S.Z. Recurring media campaigns remind the Viennese public of this possibility. As it is sponsored by the Viennese municipality, R.U.S.Z can offer a low-priced collection service. This enables the acquisition of used machines which are at the end of their first usage phase and therefore sorted out by private persons. By offering a collection at the customer’s home, staff can already pre-sort and pre-classify the white goods as reusable/non-reusable by identifiable characteristics (e.g., visual inspection of the condition of the casing, indication of malfunction). On the other hand, R.U.S.Z cooperates with commercial collectors of electrical and electronic equipment, which provide them with used items. However, as these cooperations currently result in negligible quantities of used products, we do not consider them in this work. After transportation to the reprocessing site, the machines are manually tested and sorted with respect to their further usability. Reusable products are classified in one out of three categories based on specific quality criteria, while non-reusable items are either determined for spare parts recovery or disposal/recycling. Up to the result of this sorting/grading/test procedure, the products are remanufactured and optionally upgraded, refurbished, cannibalized to extract spare parts, or recycled. The option to upgrade a product results in an improved energy efficiency category of a washing machine, based on an energy-saving method developed by R.U.S.Z. After reprocessing, the reusable white goods are offered in the R.U.S.Z-shop as second-life products. Thus, customers can buy, e.g., a reprocessed washing machine with a life expectancy of - according to R.U.S.Z - ten years at a reduced price which is comparable to a new, low-quality washing machine. In Fig. 3, a process map concerning the reverse logistics at R.U.S.Z is shown. All of the activities and processes are discussed in detail in Section ‘Discussion and evaluation’. Methodology The first contact with the head of R.U.S.Z, Mr. Eisenriegler, was in the course of an invited talk and a subsequent discussion at the University of Graz. This was the stimulus for a cooperation and led to this scientific exploration of the reverse logistics at R.U.S.Z. Fig. 3 Process map of reverse logistics at R.U.S.Z Lechner and Reimann Journal of Remanufacturing (2015) 5:3 Page 8 of 29 Regarding the methodology, we decided to use case study research due to several factors. Case study research has played an important role for the development of research in the area of reverse logistics and closed-loop supply chains (RL/CLSC). Well-known examples for case studies giving impulses for scientific work are about IBM [12] and ReCellular Inc. [13]. Furthermore, a review of case studies in the area of reverse logistics is presented in [14]. Yin considers a case study as ‘an empirical inquiry that investigates a contemporary phenomenon in depth and within its real-life context’ [15]. Due to several reasons given below, an in-depth, explorative case study is an adequate methodology to deal with the investigation of R.U.S.Z. First of all, using explorative case study research is supported by the fact that NPOs with entire reverse logistics processes from acquisition of used products to remarketing can rarely be found. Next, the case study allows to get a holistic view on processes and decision-making of R.U.S.Z. Both the holistic view and the type of questions (‘what?’, ‘how?’) favor the case study method. Additionally, R.U.S.Z can not be studied without considering its case-specific context; for example, the complex acquisition of used products and the sale of reprocessed products instead of new ones with consequential questions regarding warranty or pricing have to be included and studied in the case study to guarantee an overall understanding. Finally, the case of R.U.S.Z is an investigation of a contemporary phenomenon. All of these arguments are in line with literature related to case study research (see, e.g., [15–17]). The R.U.S.Z - case study is mainly based upon a company visit on April 24th, 2013, including interviews with the head of R.U.S.Z and an employee. Questions asked during the interviews are based upon an intense literature review to identify characteristics already known in the scientific community. Furthermore, the guideline of questioning prepared for the interviews followed the generic reverse logistics flow established in research literature (e.g., the processes acquisition, grading, and disposition of used products [18]). This procedure allows and supports us to find differences compared to standard process models used in scientific literature. We conducted a semi-structured interview with the head of R.U.S.Z (duration: 150 minutes), consisting of open-ended questions; with this approach we were trying to get a holistic view on R.U.S.Z’ business and decisions. The main focus was on the logistics processes, decision-making, and challenges for R.U.S.Z, both on a strategic and an operational level of business. Furthermore, a company tour tracking the processed items helped to clarify and make sure the logistics processes and flow of material at R.U.S.Z. In the course of this company tour, another interview with a duration of 15 minutes was conducted with an employee responsible for receiving and classifying of acquired used products. The interviews were conducted in German, and the information was documented directly by detailed handwritten notes. Next to interviews, some additional data sources were available. R.U.S.Z publishes yearly reports concerning their business development. These reports include data from operations and descriptions of the strategic concepts. Furthermore, data could be gathered at presentations given by Mr. Eisenriegler, the head of R.U.S.Z. Finally, R.U.S.Z provided us with the entire business database of the day-to-day business, including datasets for the years 2011, 2012, and 2013. This database contains detailed information regarding operations, e.g., delivery dates, quality of returned used products, decision-making, and completion dates. Lechner and Reimann Journal of Remanufacturing (2015) 5:3 Page 15 of 29 Fig. 5 Relative quality distribution in 2011, 2012, 2013, and total class 1-products increased. This may be explained by the increased consumer awareness to return only high-quality items, as this is promoted by R.U.S.Z. As mentioned above, the total supply with used white goods declined in 2013. Contrary to that, the quantity of recycled items is - in absolute values - the largest in that year. Simultaneously, the number of items classified as class 2 or class 3 dropped. Both effects are results of the strict selection strategy concerning the two quality classes. Naturally, also the amount of needed spare parts reduces with a decreasing number of reprocessed items. Disposition process and reprocessing activities In this section, the reprocessing activities are described in detail. Acquired used products can be remanufactured and - optionally - upgraded, refurbished, cannibalized to extract spare parts, or recycled. According to R.U.S.Z, the main cost driver for all types of reprocessing and spare parts recovery is the manual workload, as automation fails due to the variety of error types and the resulting complexity. The second-ranked cost driver is the Table 3 Quality grading of receivings in 2011, 2012, and 2013 Class 1 Class 2 Class 3 Spare Parts Recycling 2011 2012 2013 2011 2012 2013 2011 2012 2013 2011 2012 2013 2011 2012 2013 Jan20102325175 43271 113 45177 19 Feb23172625164 45413 252234104 21 Mar 19 17 6 22 8 0 40 34 0 12 12 1 9 16 28 Apr21171619143 39480 131420201154 May 33 27 10 21 25 1 37 50 1 11 16 22 8 34 20 Jun17193 21100 37542 26403 5 353 Jul 5 24 26 19 17 6 47 37 2 6 20 0 3 21 44 Aug9 177 3 103 17230 1 7 31572135 Sep 8 21 8 7 21 4 29 42 3 0 17 5 94 37 51 Oct 33 33 6 22 9 2 37 10 1 9 18 7 57 65 31 Nov34250 148 0 61120 4 354 373238 Dec31108342560 822426885 Sum 225 238 131 206 158 32 457 384 13 126 226 176 343 291 429 Lechner and Reimann Journal of Remanufacturing (2015) 5:3 Page 16 of 29 material cost in terms of recovered - or even new - spare parts. Another aspect concerning costs is that a high-quality product causes less reprocessing cost than a used item in a bad condition; thus, reprocessing cost correlates negatively with the quality of a product. R.U.S.Z traces this back to several reasons: products classified as reusable are typically manufactured by brands which design durable and robust products. Usually the design of those products allows a faster replacement of broken parts compared with non-branded goods due to an eased accessibility. Consequently, reprocessing causes less labor cost. Furthermore, the brands are often market-dominating and have big shares in the market. Thus, a large proportion of the acquired products are branded goods, and consequently, appropriate spare parts can be recovered cost-efficiently. Reprocessing procedures A product as good as new can be obtained by applying a remanufacturing process to a used product. In the case of R.U.S.Z, the average additional usage phase of a reprocessed and, in particular, remanufactured item is about 10 years. As the remanufacturing process is expensive and time-consuming due to the complexity of the process and the resulting large proportion of required manual work, only the used products classified as class 1 - which indicates an excellent condition of the returned item and consequently low remanufacturing cost - are chosen for this process. While the average time needed to remanufacture an item is one hour, the effort varies between 30 minutes to 3 hours, depending on the condition of the product. Refurbishing a product means to improve the quality condition of a used item so that specified minimum quality requirements are fulfilled. Different from the items undergoing a remanufacturing process, a refurbished product is observably a used product. However, in case of R.U.S.Z, refurbishing a used item needs similar resources as remanufacturing with required manual work time of 30 minutes to 3 hours and an average reprocessing time of about one hour. Potentially, most of the refurbished goods could be remanufactured by spending a much higher effort, which would result in an excessive cost-intensive reprocessing. Although the refurbished products can be sold only at a lower price than remanufactured ones, the refurbishment is profitable and does pay off. The upgrading/tuning process can be applied to reprocessed class 1/2 - products within one hour of working time and results in an upgraded product with an increased performance compared with the original. Thus, upgrading is an innovative process, which improves the product compared with the original product and provides some additional benefit, e.g., in terms of saving energy (see Section ‘Energy efficiency and environmental Fig. 6 White goods and spare parts inventory (Source: R.U.S.Z) Lechner and Reimann Journal of Remanufacturing (2015) 5:3 Page 17 of 29 Fig. 7 Repair shop and recycling container (Source: R.U.S.Z) impact of R.U.S.Z’ activities’ for details concerning R.U.S.Z’ energy efficiency activities). Spare parts can be extracted from all white goods, independent from their classification (see Fig. 6). However, the best sources for spare parts are acquired items in a bad but still usable condition. Products with better qualities are preferably prepared for reuse due to their superior profitability. According to R.U.S.Z, several spare parts can be recovered from one item, e.g., in the case of washing machines, program selector switches, pumps, motors and so forth. Interestingly, the parts oftentimes are standardized, thus they can be used for several product types of a brand or even for reprocessing products of different brands. The cannibalization of designated used products needs an amount of work of about 20 minutes. Besides the reprocessing of entire products, a special case is the recovery of washing machinemotors:becauseofthelargequantitiesofpreciouscopperusedfortheproduction of these motors, investing 15 minutes of worktime in disassembling the motor pays of in any case, as the value of these recovered resources exceeds the spent effort. Thus, even broken washing machine motors are dismantled. Next to the usage for reprocessing, spare parts are sold to do-it-yourselfers in rare cases. A further aspect concerns the repair service offered by R.U.S.Z: as customers prefer new spare parts, spare parts gathered from used items are hardly used for customer repairs. All remaining white goods are recycled in cooperation with a waste collection service provider (see Fig. 7). Error-proneness of the grading process Although the used products are classified in a grading process, it often turns out that the actual quality of a product was determined imprecisely. This is caused by the type of sorting process: as R.U.S.Z performs a visual inspection, the quality of the acquired used product can only be estimated. The actual quality is observed in the course of reprocessing, when the product is (partially) disassembled. Thus, the disposition decisions on reprocessing the items are made based on an erroneous grading process. This interesting observation is explored in Table 4, which presents a comparison of the grading decisions and the actual disposition decisions. Due to restricted capacity and resultant lags of time before processing, not for all of the received used products reprocessing is finalized. These items - for instance, items received shortly before end of year 2013 - are stocked and marked as ‘No Final Decision’. About 48 % of used products classified as class 1 were sold, 18.5 % were used for spare parts recovery, and around 6 % were collected for recycling. Concerning the remaining Lechner and Reimann Journal of Remanufacturing (2015) 5:3 Page 18 of 29 items, no final disposition decision has been made. The proportion of products used for spare parts recovery or being recycled increases in the case of class 2/3-products, in particular since October 2012 when the classification strategy has changed. Although those used products were intended to be sold, large amounts of products were treated differently than the previous grading result suggested. Vice versa, caused by data inconsistencies, used items classified for spare parts recovery or - in exceptional cases - recycling were sold, and some products intended to be recycled functioned as spare part suppliers. Summing up, the actual quality of an item is not determined at the grading process but at its reprocessing. The grading process delivers an estimation of the product condition. However, the question why to conduct the grading process in consideration of the errorproneness of the grading process remains. Although this question can not be answered exhaustively in the course of this case study, an indication for a potential answer can be identified in the next Section ‘Lead time analysis of reprocessing’. Lead time analysis of reprocessing R.U.S.Z is limited in terms of acquisition, testing/sorting, and reprocessing capacities, what may lead to consequences like the aforementioned process time lags or excessive inventories of used products/spare parts. The implications of limited capacity in the reverse logistics processes are explored with a lead time analysis. In this case study, the lead time is defined as the time between the arrival of a used product at R.U.S.Z’ site until the completion of activities (reprocessing, spare parts recovery, collection for recycling), whereby a lead time of 0 means a completion at the same day. In the years 2011, 2012, and 2013, 3,435 items were recorded in the business database. Out of this dataset, 48 records could not be used due to data inconsistency, and 387 items were not completed (no final decision). The items were split according to their actual use. Therefore, the analysis consists of lead times related to reprocessed items, used products for spare parts recovery, and items collected for recycling. Table 5 shows some statistics concerning the data records used for the analysis of lead times at R.U.S.Z. The 3,000 data records show that many used products were collected for recycling, while around 21.93 % were reprocessed. Both the median and the mean indicate thatreprocessingwasperformedatthesametimeorfasterthangatheringspareparts. This can be explained by the superior prioritization of reprocessing with subsequent sales compared with spare parts recovery. Interestingly, the median of used products which were destined for recycling is zero, so a good portion of used white goods was sorted out immediately after the arrival at the R.U.S.Z-site. This fact implies a potential answer to the question regarding the value of an error-prone grading process (see Section ‘Errorproneness of the grading process’). Used products which are apparently not reprocessable Table 4 Grading decision vs. actual disposition decision (2011, 2012, 2013) Classification decision Actual disposition decision Selection for reuse Classification Sales Spare parts Recycling No final decision Total YES Class 1 287 110 35 162 594 Class 2 131 108 63 94 396 Class 3 267 247 209 131 854 NO Spare parts 2 432 94 0 528 Recycling 2 18 1,043 0 1,063 Total 689 915 1,444 387 3,435 Lechner and Reimann Journal of Remanufacturing (2015) 5:3 Page 19 of 29 Table 5 Statistics concerning lead times Reprocessing Spare parts Recycling Number of data records Total 658 907 1435 <90 days 585 763 1255 Lead time (total dataset) Minimum [days] 0 0 0 Median [days] 8 8 0 Mean [days] 32.98 49.64 32.84 Maximum [days] 596 737 652 Lead Time (<90 days) Minimum [days] 0 0 0 Median [days] 7 5 0 Mean [days] 14.56 14.33 6.54 Maximum [days] 89 89 89 are eliminated before the actual reprocessing. Consequently, this saves costly space in the capacity-restricted goods inventory. Exceptional, long-lasting cases may bias the analysis. Therefore, an analysis including all data records with lead times of less than 90 days (or around 3 months) is shown in the lower part of Table 5. It turns out that - in contrast to the result above - in this setting the median of lead time for reprocessing is significantly greater than the one for spare parts recovery, while the mean only slightly differs. We provide more analyses regarding the distribution of the lead times in Fig. 8. On the left, the analyses contain lead time data over the whole period. According to the statistics in Table 5, a bigger part of used products is treated within a lead time less than 90 days. Thus, the figures on the right are limited to this period. Independent from the actual reprocessing decision, a great portion of used products was reprocessed within 29 days. Concerning the data including lead times with less than 90 days, the analyses are related reprocessing, spare parts recovery, and recycling. While the decision for recycling was made instantaneously in the course of the grading process in nearly 80 % of all cases, both reprocessing of items (12.82 % reprocessed within one day) and spare parts recovery (27.52 % finished within one day) were subject to varying lead times. In the following Table 6, the lead time analysis depending on the completion year of reprocessing is presented. Particularly interesting is the impact of the decision concerning the strategy change in 2012/2013 to apply a stricter classification procedure. Nevertheless, the lead time may also be influenced by the lower total acquisition quantity. However, the impact of this reduction of acquired goods can not be explored in detail with the available data. Overall, the lead times with respect to reprocessing, spare parts recovery, and recycling decreased significantly in 2013. This is true for the scenarios including all available data as well as for the data where the lead time is less than 90 days and concerns both mean and median values. The lead time without exceptional cases (lead time <90 days), which is more appropriate for determining lead times of day-to-day business, shows that for spare parts recovery and recycling the mean is less than the half. Interestingly, the decreased lead time concerning recycling is contrary to the fact that the recycled quantity increased. Lechner and Reimann Journal of Remanufacturing (2015) 5:3 Page 20 of 29 Fig. 8 Lead times in days for reprocessing, spare parts recovery, & recycling Additionally, also the average reprocessing lead time is considerably reduced by about 32 %, and the related median shows an improvement of even 50 %. The key factors of the lead time reduction are the reduction of the total amount of acquired used goods and the focus on high-quality products. Naturally, the former directly reduces the total needed capacity for quality grading and reprocessing. Secondly, high-quality products in a good condition impact the needed reprocessing capacity: Lechner and Reimann Journal of Remanufacturing (2015) 5:3 Page 21 of 29 Table 6 Statistics concerning lead times per year All data Lead time <90 days 2011 2012 2013 2011 2012 2013 Reprocessing Quantity 266 329 63 249 274 62 Min [days] 0 0 0000 Median [days] 7.50 12 4784 Mean [days] 22.24 45.63 12.29 13.92 15.99 10.81 Max [days] 241 596 104 82 89 69 Spare Parts Quantity 281 443 183 260 350 153 Min [days] 0 0 0000 Median [days] 8 15 1770 Mean [days] 24.62 64.13 52.99 14.61 18.40 4.51 Max [days] 313 663 737 87 89 84 Recycling Quantity 470 478 487 403 382 470 Min [days] 0 0 0000 Median [days] 0 0 0000 Mean [days] 33.69 53.19 12.05 7.70 9.19 3.40 Max [days] 338 652 490 85 87 89 both the comparably good quality of the used products and easily accessible components (as described in Section ‘Disposition process and reprocessing activities’) reduce the reprocessing effort and consequently, the lead time. Markets & demand According to R.U.S.Z, all of the remanufactured/refurbished products can be sold easily, as on average demand is greater than the number of finished items. Finished reprocessed goods are not always sold instantaneously but with time delays between the end of reprocessing and the actual sale, so the time when a product is finished may not necessarily coincide with the demand for a product. Besides the unknown demand time, also the demand size can not be determined exactly. The potential demand is great but not unconstrained: in detail, the number of socially disadvantaged households in Vienna with the need to exchange washing machines is projected at around 12,000 per year (about 50,000 in total Austria). Any potential conventional customers are added Fig. 9 Sales area of R.U.S.Z (Source: R.U.S.Z) Lechner and Reimann Journal of Remanufacturing (2015) 5:3 Page 22 of 29 to this number. As stated above, the supply with used products and the available production capacities of R.U.S.Z are limited. Consequently, the output of reprocessed white goods is restricted by the supply. Thus, the quantity demanded is far beyond R.U.S.Z capacities. Since October 2012, the business strategy of R.U.S.Z has been adapted. Instead of focusing primarily on socially disadvantaged households, R.U.S.Z wants to change its image from a pure socially-concerned company toward an image which attracts additional target groups, e.g., ecologically and/or socially concerned higher income earners or students living in apartment-sharing communities. One of the main drivers of the business diversification was the overbalanced consideration of products classified as class 3 forsocialpurposes.Thisresultedinsmallmarginofprofitorwas-insinglecases-even loss-generating due to the low sales price combined with a rather high reprocessing effort. Regarding the sales prices of the reprocessed goods, the rule of thumb is to charge 1/3 of the new product’s price for a reprocessed item. In case of remanufactured products in an as-new shape and with a prestigious brand image, the sales price can be up to 1/2 of the price of a new product. In detail, independent from the totally reprocessed volume the minimum sales price for a reprocessed washing machine must exceed e280 to ensure economical viability. The maximum price demanded for a remanufactured washing machine is about e500 for recent premium-quality branded goods. However, the final decision on the sales price is a matter of experience on the part of the R.U.S.Z sales team. According to R.U.S.Z, the popularity of reprocessed products does not solely depend on price: in the case that two technically similar products with differing ages and brands but identical expected durability are available, customers do not insist on the product with the favorable price. Customers also consider, e.g., brand awareness and age with respect to their buying decisions, so relatively new products of well-established brands are top sellers. Following and extending legal requirements, R.U.S.Z offers a guarantee of one year for reprocessed and sold used products. The distinguishing feature of R.U.S.Z’ guarantee compared to the implied warranty for sold second-life products is the voluntary waiver regarding the reversal of evidence while the duration of guarantee. Crucial for this is a strict compliance and documentation of checks and tests like the visual inspection before and both the functional and the safety test (specified in Austrian standard ÖVE/ÖNORM E 8701) after reprocessing in order to make sure meeting technical, legal, and consumers’ requirements. A detailed overview of those requirements can be found in the Austrian guideline for reuse [5]. In the case of a legitimate claim, R.U.S.Z primarily tries to repair the broken part. However, in case the repair is not possible (e.g., due to overwhelming cost), the broken reprocessed product is exchanged with a comparable product free of charge. Interestingly, the guarantee was an additional driver for the change of strategy in autumn 2012: the original production materials used for items graded as class 2 or class 3 are of poor quality. This resulted in increased exchanges of products and repairs. So even in case the sales of items may have been profitable, the free after sales service for those broken refurbished products caused losses due to excessive expenditures of work and on material. If an accident with a reprocessed product happens laws on product liability and product safety, respectively, are concerned. According to the Austrian guideline for reuse [5] and to the best of the authors’ knowledge, there is no current jurisdiction regarding the liability Lechner and Reimann Journal of Remanufacturing (2015) 5:3 Page 23 of 29 of original manufacturers or reprocessing companies. This indicates that implemented safety mechanisms and quality checks work. Comparison of insights with other research results Overall, a comparison of the general activities concerning reverse logistics at R.U.S.Z with the existing literature shows that they are similar - and partially equivalent - to approaches known from and used in research (see, e.g., [13, 22, 23]). A detailed comparison with other case studies provides further insights. The case of Electrolux is studied in [24] in order to determine the eco-efficiency of refurbishment and recycling, respectively. The results indicate that refurbishment is the preferred option. According to the conducted life cycle assessment (LCA), producing a new washing machine needs more than 30 times the energy of refurbishing a used one. In comparison with R.U.S.Z some similarities, but also some distinguishing factors can be found. First of all, Electrolux focuses on their own brands, while R.U.S.Z as an independent reprocessing company reprocesses various brands. Also the collection areas are different: Electrolux receives used goods from whole Sweden, while R.U.S.Z focuses on Vienna and surroundings, what impedes comparability with respect to supply quantities and transportation costs. At Electrolux the majority (about 83 %) of the used products is refurbished, while R.U.S.Z remanufactures/refurbishes about 22 %. Though, different from the information in this work R.U.S.Z earns money with recycled materials and does not have to pay fees for recycling. The reprocessing procedures are very similar: both Electrolux and R.U.S.Z prefer using parts harvested from formerly processed products as spare parts but do not resist to order new ones. In both companies spare parts recovery can also take place directly after the first visual inspection; items in a very bad condition are recycled. In order to ensure product quality, extensive testing procedures are integrated in both reprocessing systems. Regarding marketing, R.U.S.Z sells reprocessed products directly to end customers, while Electrolux delivers the refurbished products to retailers. Contrary to R.U.S.Z, refurbishment at Electrolux is profitable. Related to this, instead of great staff costs due to high amount of manual work as in the R.U.S.Z-case, Electrolux faces high overhead costs, e.g., for large storage areas. A minor commonality concerns the use of gained knowledge: Electrolux introduces it into new production, and R.U.S.Z uses it for analyzing durability and subsequent development of an ecodesign label for durable and easy-to-repair electronic and electrical products (ONR 192102). In the work of Kissling et al. a typology for classifying reuse operating models for electrical and electronic equipment (EEE) is developed [25]. Following the results, R.U.S.Z as a not-for-profit and white goods-reprocessing company is closely related to “The Social Enterprise Model”. Apart from the difference that the public funding rate is much lower at R.U.S.Z similarities can be identified: •The major suppliers and customers are individual users. •The reprocessing product mix at R.U.S.Z is in accord with the findings of Kissling et al., with a focus on washing machines. •The costs for employees at R.U.S.Z are at the high end of the cost scale (40 %–70 %). Generic success factors and barriers with respect to the reuse of EEE are identified in [26]. The authors identify the sourcing of used products as the most important barrier, particularly driven by the lack of legislation aiming at the support of reuse. Interestingly, Lechner and Reimann Journal of Remanufacturing (2015) 5:3 Page 24 of 29 in spite of the high level of manual effort labour costs (R.U.S.Z: more than 60 % of all costs) were not considered as a big issue. Regarding sucess factors, the top three summarize a significant part of this study: ‘Quality and reliability of products distributed for re-use’, ‘Control of product and process quality during preparation for re-use’, and ‘Access to high quality used equipment (local or import)’. All these success factors are directly related to key issues at R.U.S.Z: supply with used goods in sufficient condition and ensuring a high quality reprocessing flow with the objective of obtaining zero-defect saleable products. O’Connell provides insights into Bryson Recycling (Northern Ireland) [27] and De Kringwinkel (Belgium) [28], two social enterprises acting in the field of reprocessing of white goods [29]. A major difference of De Kringwinkel from R.U.S.Z is the size of the company: it is not a small-scaled company but has more than 125 shops. Bryson employs skilled workers for the technical part of refurbishment and unskilled for collection and delivery, while De Kringwinkel focuses on training of unskilled workers in order to reintegrate them at the labour market. Supply with used products is critical as a minimum throughput is needed for reasons of viability: both companies face uncertain supply with used products at sufficient quality. The sources of supply are civic amenities and - very different from the R.U.S.Z-case - cooperating retailers in the case of Bryson Recycling; De Kringwinkel collects mainly at households, and additional quantities are obtained from reuse centers and municipalities. The reuse rate at De Kringwinkel is about the same as at R.U.S.Z with around 20 %, but the one at Bryson Recycling exceeds this value by far (about 72 %). Further economic and ecological insights can be added considering work presented in [10, 30]. The life cycle assessment-approach in [10] enables the exploration of the ecological and economical reasonableness of reusing used products with respect to the used products’ ages. Taking the results into account, the strategy change of R.U.S.Z toward refurbishment of high-quality, energy-efficient used products is most likely beneficial in both dimensions. Duflou et al. list 17 companies related to disassembly of products, thereof two concerned with reusing of household appliances [30]. Both companies integrate similar reprocessing activities as R.U.S.Z, and their profits are at about break-even point. A linear programming model indicates that full disassembly of all used products is only profitable when wages are at a very low level. This analytical approach supports the findings that economic viability in the field of reprocessing of white goods is hard to achieve. Conclusions In this section we conclude the results of the presented case study. Based on the information provided above we identify research fields that may be explored and raise related questions. Operative planning In the case of R.U.S.Z, reusable and non-reusable used products are classified and sorted right after the acquisition, while the actual reprocessing activities are executed at future dates. This is caused by the following facts: first of all, acquisition, grading, and disposition/reprocessing are separated processes. Furthermore, the reprocessing activities per se are uncoupled from the acquisition. Additionally, they are subject to limitations of reprocessing capacity. For instance, one capacity bottleneck is the availability of trained