What are the factors that drive your customers’ expectation regarding the use of refurbished service items or refurbished service parts? This was a question that was discussed among service professionals and the answer was “it depends”. This article explores what we determined it depended on.
In the world of reverse logistics, companies rely on utilizing refurbishing parts to satisfy their field service needs to reduce their service costs. The reduced cost of refurbishment comes in two main areas:
1. When the cost of refurbishing the part is significantly less than the cost of the new part. At Cokeva, we often find that we can refurbish a part to new specifications for 25%-33% of the cost of the new part.
2. The other major benefit of having a refurbishment program for parts is to avoid having to make a large life-time-buy. When a part that you need to support goes end-of-life, often times the manufacturer will have to forecast the life-time need for that part. The only thing you know for sure is that the forecast will be wrong. The manufacturer will either have too many parts in the end and be forced to scrap material or will not have enough to satisfy future customer demand. By having a repair & refurbishment program, the OEM only repairs those parts that are needed can often reduce the expense of that life-time-buy decision by 90%.
A quick survey of a few large companies’ return policies reveals different approaches to the use of refurbished materials in the repair of a product.
1. Commercial Electronics Company: Equipment may contain components that are (i) previously unused; or (ii) remanufactured to contain the most current updates, meet all relevant test specifications and be functionally equivalent to previously unused components
2. Consumer Electronics Company: …may use parts or products that are new or refurbished and equivalent to new in performance and reliability.
3. Sportswear Company: …will repair or replace the product with an existing comparable model at the technician’s discretion. (confirmed that item will be replaced with a new one)
4. Apparel Company: …our first option will be to repair the item, free of charge. If the product is not repairable, or if the cost of repairing the item exceeds the cost of a new one, we will replace it. (confirmed that item will be replaced with a new one)
5. Automotive: When making warranty repairs on your vehicle, the dealer will use or remanufactured or other parts that are authorized by , at the discretion of .
This got us thinking of what are the driving factors that determine the expectation of having failed items replaced with a new unit, repaired with new parts or replaced/repaired using refurbished material?
Situations where we felt there was an expectation of an item repaired with new parts by an OEM authorized repair provider or replaced with a new item:
• Personal items (clothing)
• Has to do with safety (helmet)
• Low cost or disposable items (stapler)
• Fails in short period of time
(new TV fails out of box)
• Items with sentimental value
(vintage watch: repair only)
Situations where there is an acceptable expectation that the item will be repaired using refurbished parts or will be replaced with a refurbished unit.
• Older part, that is no longer made:
(OEM starter 1975 Trans Am, 3 year old PC)
• Large gap between cost of new versus refurbished part (notebook computer)
• Impersonal item (shovel, drill)
• Item near the end or outside the warranty period (big screen TV)
This isn’t an all inclusive list for sure and every company is free to set their own warranty and service policy. As we have found, the policy on using refurbished parts to repair or providing refurbished items as a replacement varies significantly industry to industry. It is making sure your policy meets the expectation of your customer that is important.
Cokeva is a world-class, industry leading third party aftermarket hardware support and services provider of high technology and complex products. Our core competency is in providing high-quality, cost-effective technical repair and supply chain solutions to the high-value, mission critical commodities arena.
RLMKen Ueltzen, Vice President, Business Development, Ken has over 30 years of experience in electronics manufacturing and aftermarket product support. He began his manufacturing career at Unisys and Intel, followed by Packard Bell NEC where he was the Vice President of Manufacturing. Ken came from Dell Computer where he was the Director of Operations for the Home and Small Business PC Division. He has an Engineering Degree from Cal Poly and an MBA from Sacramento State University. Ken is the holder of two patents and has taught for the Graduate School of Business at Sacramento State University.
Mark Anderson, Vice President, Repair Solutions, Mark has over 30 years experience in the service parts industry. He began his career at Texas Instruments where he was Customer Service Planning Manager. He joined Hewlett Packard as the Global Support Logistics Planning Manager where he implemented a worldwide inventory management system for HP’s support organization. He later joined Agilent Technologies as the company’s Support Planning Manager where he was appointed to head the Corporate Strategic Supply Chain Development Program. As VP of Supply Chain Solutions, he guided Baxter Planning Systems to a leadership position in the service parts planning industry before joining Cokeva in 2013.