Two ways to extend the life of heavy equipment

Contractors and rental companies face a dilemma when high-value pieces of heavy equipment in their fleets begin to show signs of wear and tear. Once a machine accumulates a high number of hours, key components start to fail, and the machine loses productivity. It may spend more time in the repair shop than out in the field being productive. At this point, the contractor faces a dilemma: sell the machine and buy new, repair and replace worn parts, or even take the machine in for a complete overhaul.
With the cost of a new piece of off-road construction machinery running into the hundreds of thousands of dollars, buying a new machine may not be justified if it is only the engine or powertrain, for example, that needs replacing. In this situation, contractors could look at another option that several original equipment manufacturers (OEMs) have developed to prolong the lives of used heavy equipment: remanufacturing.
The exchange model
In remanufacturing, a customer with the defective part, known as the core, sends it to the manufacturer, who remanufactures (remans) the part for it to be sold later in as-new condition, usually with a warranty equivalent to the original part. The customer with the defective part simply exchanges the used part for the remanufactured part. The core is then disassembled, cleaned and inspected. Parts are refurbished or replaced, then reassembled and re-painted, before being tested to meet OEM specifications. Parts that pass this final quality control check are then placed into the inventory for later sale as an exchange part.
Cat Reman, a Caterpillar subsidiary, uses the one-to-one exchange model, whereby a customer needing a replacement part for a Cat machine buys a reman part at a considerable discount to the new part. The price includes a core deposit that is refunded to the customer after the core is delivered. The customer ends up with a remanufactured part with the same warranty and quality as a new component but at a lower cost.
Cat started remanufacturing on-highway diesel truck engines back in 1973 through a facility in Bettendorf, Iowa. It now has 17 remanufacturing centres across and Asia, with its flagship reman operation based in Corinth, Missouri.
At Corinth, cylinder heads, cylinder packs, blocks, crank shafts, water and oil pumps, and complete engines are all given a new lease on life.
In February 2014, the facility was expanded to produce C175 remanufactured engines, used in Caterpillar’s largest mining trucks and portable power applications. The project represented a corporate investment of $14.8 million.
Cat Reman has sophisticated salvage processes. Take cylinder heads, for example. Rather than being scrapped, the cylinder head can be machined to a flat surface and then sprayed with metal to bring it back to original specifications.
“We’ve become pretty good at adding material to worn surfaces. And it’s not just steel. It could be aluminum or stainless steel or any variety of alloys that can be custom selected to the specific wear application,” said Dick Snodgress, commercial manager at Caterpillar, who heads the marketing for the company’s remanufacturing program.
“There’s a real long list of technology that we have in our toolbox that we can use to help us re-use parts.”
Through salvaging, Cat Reman is able to offer the remanufactured part at a much lower price than new, by saving the original parts that were returned with the core. Of course, there are parts that cannot be salvaged. These include piston rings, bearings and gaskets.
“Beyond that, it becomes a judgment call,” said Snodgress. “We’re able to understand the original design validation tests that were conducted and what the operating environment is of the part, and what the expected design fatigue life is of the part. From there, we can determine whether the part can withstand operating for a second or a third or a fourth life, or not.”
Machining is performed on core material to bring parts back to OEM specifications. Machining specifications are developed in conjunction with John Deere factories to ensure the reman components will deliver the same levels of performance and reliability as the new component.
Caterpillar isn’t the only company to operate a successful remanufacturing program based on the exchange model. At John Deere, remanufactured components are stocked in parts distribution centres. John Deere dealers handle customer requests for remanufacturing, order parts and return the core to one of Deere’s remanufacturing factories in Springfield, Missouri and Edmonton, Alberta.
The Springfield facility remanufactures diesel engines and diesel fuel injection components, while the Edmonton reman centre handles the parts of the machine pertaining to the powertrain, including hydraulic pumps, motors, transmission spinal drives, final axles and gear boxes.
Deere product marketing manager Mark Wagner described a similar remanufacturing process as Caterpillar, where the used part is exchanged for a remanufactured one and then the core is stripped down to its essential components, which are inspected and replaced if they do not meet OEM specifications, then reassembled, thoroughly tested and put on the shelf for later sale.
Like Cat, Deere emphasizes the importance of upgrading the remanufactured part with the latest innovations and using OEM components.
“If we’ve got a superior shaft or housing that we can put into that component, we will install those components whether or not the original has failed,” said Wagner. “All the replacement parts we use to replace the scrapped components are going to be OEM parts. It’s not going to be a replica part, it’s not going to be an aftermarket part. It’s going to be the very same part that went into that component when it was built the first time.”
He estimated the cost of a remanufactured part at around 65 to 70 percent of new and the quality of a remanufactured part to be equivalent to a new one.
“The reliability and durability of our reman components will be very similar to the new equivalent, because we use the same parts and processes to ensure the reman component is going to meet the customer’s expectations,” he said. “We do everything possible to make our reman components a premium repair solution.”
Liebherr also offers an exchange program for its remanufactured parts, but the program is run slightly differently than Caterpillar and Deere. At Liebherr, most of the company’s exchange parts are remanufactured at its main reman centre in Ettlingen, Germany, and are then shipped to Liebherr’s North American reman headquarters in Burlington, Ontario.
The 3,000-square-foot Burlington facility concentrates on overhaul and repair of mostly engine components. They also remanufacture hydraulic components, pumps, motors and transmission parts. Liebherr is currently in the midst of expanding the reman centre in Burlington, more than tripling its footprint to enable a capacity of 400 to 500 engine rebuilds per year. The centre is customer-focused for fast turnaround of repairs, overhauls and exchange components.
“We basically build an engine from remanufactured or new components. So, we will bring the engine in, we look at our demands for all the parts and disassemble the whole engine, and to some degree the majority of the components go back into our inventory,” said Mets Kramer, general manager responsible for the reman program at Liebherr. “Then when we have to build an engine for stock or for a customer, we pull all the components like we would for a new-build engine, except that we use components that have been remanufactured and some parts that are obviously always new.”
Kramer noted that in many cases, remanufacturing means machining the part, something that Liebherr specializes in.
“We don’t just build the parts that we use in the components, we also build the machines that build the parts that go into the machines,” he said.
The rebuild option
Sometimes a remanufactured component, or series of components, are used in the process of rebuilding an entire machine. Finning, a Caterpillar dealer, has its own remanufacturing program, called OEM Reman, based in Edmonton. The 350,000-square-foot facility focuses on the remanufacture of engines and powertrain components.
Cat will also rebuild machines through its Certified Rebuild Program, which offers a like-new machine with a new warranty and serial number, at a significantly lower cost than a new machine. The program is run through Caterpillar’s dealer network.
“The program starts with a complete machine inspection. Then the machine is completely disassembled and rebuilt from the ground up to include all Cat product updates,” according to Caterpillar. “More than 350 tests and inspections (plus the automatic replacement of more than 7,000 parts) ensure the same high level of quality as a new Cat machine.”
“They can either do a complete machine or just the powertrain, or in the case of an excavator, just the hydraulics,” Snodgress said. “Typically they use a number of reman components in the course of that complete machine rebuild. They literally strip the machine down to its bare chassis and rebuild it.”
Rebuild or buy new?
Wagner, from Deere, said a customer looking to rebuild an off-road construction machine could save between 35 and 45 percent of the cost of buying new, although he noted the cost varies considerably depending on the condition of the machine.
It’s also important to recognize that the way a machine is rebuilt will dramatically alter the cost of the rebuild. Using remanufactured components can bump the cost up quite a bit more than if components are repaired or swapped out with non-OEM parts. However, contractors who try to save money this way run the risk of further downtime and repairs by purchasing parts without an OEM warranty or neglecting to replace worn parts; a rebuild using remanufactured components avoids such problems.
“Sometimes, depending on who does it, it could be a third-party independent repair shop that goes in and takes the engine apart and puts new piston rings and new bearings in, puts it back together and gives it back to the customer. And there are a lot of systems in an engine that that’s not sufficient for,” Snodgress explained.
Usually, several factors are involved in the decision whether to rebuild or buy new. They include: the size of the equipment; whether it is a production machine, meaning it used on a regular basis versus a machine such as a skid steer that is more appropriately used as part of a rental fleet; the age of the machine and whether replacement parts are available; the number of hours on the machine and how close it is to the end of its life; and the application of the machine, with tough jobs such as repeated digging in rocky terrain causing greater wear and tear than softer applications such as hauling mulch or soil.
Rebuilds tend to make a lot more sense with large machines compared to small ones since for smaller machines, such as skid steers or track loaders, it is more economical to buy new. A mining truck, for example, might get rebuilt three or four times, before reaching its maximum number of hours.
To a significant extent, where the machine is at in its life cycle will govern the contractor’s decision to buy new or rebuild.
“If your machine is in decent shape but has a lot of hours on it, putting in a reman powertrain might be a no-brainer compared to what it would cost to buy a new machine,” said Wagner. “There are certainly some trade-offs and many factors to consider, but it comes down to a financial decision in most cases.”
Government regulations could also be a factor, if the jurisdiction requires bidders on jobs to have the most recent engine emissions technology.
“In that case a contractor might say, ‘I really need the latest equipment because if I want to work on these jobs I’m going to have to do that.’ But if the bid specifications don’t require it, a contractor might decide to go put a remanufactured engine in his older machine instead,” Wagner said.
“The cost of new technology to meet emissions requirements is getting quite high. Sometimes a contractor may want to avoid that cost,” continued Wagner. “In that case a reman component might look like a really attractive option for them because they’re avoiding having to pay for the Tier 4 technology when they can get by with their older Tier 3 machine just by putting the reman components in it and getting more life out of it.”
There’s also the question of time. A machine that’s in for a rebuild could be out of production for up to 12 weeks.
At Liebherr’s Burlington reman facility, they will consult with the customer to decide to what extent the engine will be rebuilt, and whether the parts will be remanufactured or provided by the customer. Customers pay a bit more if they go the reman route but they get their engine back faster. An engine overhaul using reman parts might only take a week to turn around, versus several weeks if the customer wants to use their own parts.
Demand for reman strong
The market for remanufacturing follows the utilization rate of the machinery; as utilization increases, so does the frequency of reman. Over the years, remanufacturing has also seen an inverse relationship with economic growth.
“We tend to see reman as countercyclical in that as the economy slows down, customers get more tight with their money, more focused on minimizing their costs, and they tend to increase their use of reman,” said Snodgress, who noted the financial crisis of 2009 was an exception to this rule, when the downturn was so significant that Cat’s reman business didn’t see any growth at all.
Another interesting trend, according to Snodgress, is the differing acceptance of reman depending on the market sector. While North American customers tend to see remanufacturing as an acceptable way to prolong the lives of used equipment, Asian customers prefer to buy new. When Caterpillar opened a reman facility in Shanghai, they had to get creative in describing the facility, because the word “remanufacture” didn’t exist in Chinese.
Snodgress said the company is being challenged to increase awareness of reman in developing markets, but success is seen as a way to boost growth in those markets. One way that developing-world customers are being educated on the benefits of reman is through multinational companies such as mining firms, which operate North American–made equipment in a number of countries.
“As they spread around the world, they take this knowledge of reman and this mentality of machine utilization and maximizing the availability with them, and so that’s one way that the word about reman is spreading.”
For Liebherr, the expansion of its remanufacturing facility in Burlington – along with a new, over 25,000-square-foot reman centre currently opening in Edmonton for mining truck components – is a testament to the success of the company’s reman business.
Kramer said the last 5 to 10 years have been good for the company; sales of cranes in particular have been strong, with Liebherr continuing to be recognized as a world leader in the manufacture of construction cranes. That growth has fostered a growing machine population in North America, which in turn has led to an increasing demand for reman parts. “It’s a recognition that the machine population, the base of our business that requires these components, is growing,” he said.
“I think contractors are becoming more sensitive to the cost of operating their equipment,” Wagner said. “They’re seeing reman as a way to get an OEMquality part without paying a new price for it. Reman components and rebuilding machines are great ways to minimize operating costs while still meeting the expectations of machine performance, not putting their operation at risk by using questionable parts that they don’t really know how long they’re going to last. They’re looking for a premium solution. John Deere reman parts are meeting that need for them. I think that’s really what’s behind the growth.”
For Deere, remanufacturing has seen steady growth year after year, and Wagner couldn’t see any reason why the growth won’t continue. He said reman simply makes good business sense for contractors who want to reduce their operating costs.
Caterpillar isn’t the only company to operate a successful remanufacturing program based on the exchange model. At John Deere, remanufactured components are stocked in parts distribution centres. John Deere dealers handle customer requests for remanufacturing, order parts and return the core to one of Deere’s remanufacturing factories in Springfield, Missouri and Edmonton, Alberta.
The Springfield facility remanufactures diesel engines and diesel fuel injection components, while the Edmonton reman centre handles the parts of the machine pertaining to the powertrain, including hydraulic pumps, motors, transmission spinal drives, final axles and gear boxes.
Deere product marketing manager Mark Wagner described a similar remanufacturing process as Caterpillar, where the used part is exchanged for a remanufactured one and then the core is stripped down to its essential components, which are inspected and replaced if they do not meet OEM specifications, then reassembled, thoroughly tested and put on the shelf for later sale.
Like Cat, Deere emphasizes the importance of upgrading the remanufactured part with the latest innovations and using OEM components.
“If we’ve got a superior shaft or housing that we can put into that component, we will install those components whether or not the original has failed,” said Wagner. “All the replacement parts we use to replace the scrapped components are going to be OEM parts. It’s not going to be a replica part, it’s not going to be an aftermarket part. It’s going to be the very same part that went into that component when it was built the first time.”
He estimated the cost of a remanufactured part at around 65 to 70 percent of new and the quality of a remanufactured part to be equivalent to a new one.
“The reliability and durability of our reman components will be very similar to the new equivalent, because we use the same parts and processes to ensure the reman component is going to meet the customer’s expectations,” he said. “We do everything possible to make our reman components a premium repair solution.”
Liebherr also offers an exchange program for its remanufactured parts, but the program is run slightly differently than Caterpillar and Deere. At Liebherr, most of the company’s exchange parts are remanufactured at its main reman centre in Ettlingen, Germany, and are then shipped to Liebherr’s North American reman headquarters in Burlington, Ontario.
The 3,000-square-foot Burlington facility concentrates on overhaul and repair of mostly engine components. They also remanufacture hydraulic components, pumps, motors and transmission parts. Liebherr is currently in the midst of expanding the reman centre in Burlington, more than tripling its footprint to enable a capacity of 400 to 500 engine rebuilds per year. The centre is customer-focused for fast turnaround of repairs, overhauls and exchange components.
“We basically build an engine from remanufactured or new components. So, we will bring the engine in, we look at our demands for all the parts and disassemble the whole engine, and to some degree the majority of the components go back into our inventory,” said Mets Kramer, general manager responsible for the reman program at Liebherr. “Then when we have to build an engine for stock or for a customer, we pull all the components like we would for a new-build engine, except that we use components that have been remanufactured and some parts that are obviously always new.”
Kramer noted that in many cases, remanufacturing means machining the part, something that Liebherr specializes in.
“We don’t just build the parts that we use in the components, we also build the machines that build the parts that go into the machines,” he said.
Company info
1015 Sutton Drive
Burlington, ON
CA, L7L 5Z8
Website:
liebherr.com/en/can/about-liebherr/liebherr-worldwide/canada/liebherr-in-canada.html