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25 June 2008

Equipment Maker Caterpillar Works to Spare Environment

Remanufacturing plants are company’s fastest growing units

Caterpillar plans to expand its remanufacturing operations from parts to entire machines, such as these in a company training area.

This article is the first in a series on sustainable manufacturing.

By Andrzej Zwaniecki
Staff Writer

Washington -- Caterpillar Incorporated is like a secretive alchemist. Not only does it wring gold from the old, it leaves no footprints. Environmental footprints, that is.

Based in Peoria, Illinois, Caterpillar is the world's leading manufacturer of heavy equipment with more than $25 billion in assets. 

The company takes machine parts back at the end of their first lives. Used engines, transmission pumps and other components are returned to company plants where workers take them apart, restore to “same-as-new” condition and reassemble.

Caterpillar has learned that giving a component a second, third or even fourth life can be both profitable and friendly to the environment.

The quality and performance standards of remanufactured parts can be exceptionally high because every part is checked for quality flaws, whereas quality assurance in manufacturing processes relies on sample checks.

Remanufacturing also allows for upgrades when new technologies have been introduced during the product’s original lifespan.

For the company, this advanced recycling is pure win. Remanufactured components produced at a fraction of the original costs have attractive profit margins even though they are sold at discount prices with the same warranty as new ones.

These photos show a component before the remanufacturing process (left) and after.

“The business pillar of our sustainability strategy is very strong,” Joseph Allen, a manager at the Caterpillar remanufacturing division, told America.gov.

The remanufacturing division, with 17 plants worldwide, has become Caterpillar’s fastest growing unit with annual revenue exceeding $1 billion in 2004, according to Business Week magazine. This makes the company almost recession-proof, because when new-equipment orders fall due to a slowing economy, revenues and profits from remanufacturing continue to rise.

Inspired by the success, the company wants to apply its remanufacturing model to entire machines as well as to electronic waste -- defunct or unwanted electrical or electronic devices.

The benefits of remanufacturing go well beyond the company’s bottom line. By extending the products’ lifecycles, it reduces use of materials, energy and water as well as greenhouse gas emissions and waste.

These environmental benefits combined with the financial advantages have encouraged Caterpillar and other U.S. producers to expand remanufacturing operations and aim at higher goals. As processes advance, Caterpillar hopes to reduce landfill use to zero.

Remanufacturing also contributes to economic development:  Buyers in the developing world can purchase components that they otherwise could not afford, according to Allen.

He said the Caterpillar corporate culture has contributed greatly to the success of its remanufacturing division.

“All [workers] in the operation know that a key part of their job is [to] not only manufacture high-quality products but also do it with the least waste possible,” he said.

Workers at remanufacturing plants tend to be more innovative and engaged, he said, because advanced recycling requires a constant flow of ideas and gives them a chance to see concrete results from their entrepreneurship.

More information on remanufacturing is available on the Caterpillar Web site.