The value of remanufacturing

If you run the world’s biggest manufacturer of construction and mining equipment and diesel engines, controlling costs is pretty important. At Caterpillar Inc, 35% of total costs are in overheads and 65% lie in material costs. Which one has the bigger capacity for finding savings, do you think?

Material savings come from reclaiming the value in products with plenty of life left. Since 1973 Caterpillar has developed a sophisticated remanufacturing business model, salvaging materials, remaking parts and offering them with the same warranty as new parts. Caterpillar now offers many products as either a new or “Reman product as standard. About 10% of a typical Cat product like an earth-moving machine can be remanufactured, covering an array of moving parts including transmissions, engines, short and long blocks, pistons, water pumps, oil pumps and cylinder packs. The value tied up in used components is huge, and the $47 billion company has put remanufacturing – or Cat Reman – at the heart of its business.