1 

 

 Tervo, Tomi 

Improving Demand and Supply Balance in a 
Closed-Loop Supply Chain: A Case Study in a 

Dynamic Reuse Spare Part Business 

 

 

 

 

 

 

 

 
  

Vaasa 2023 

School of Technology and Innovation  
Master’s thesis in Industrial Management  

Master of Science in Economics 



2 

UNIVERSITY OF VAASA 
School of Innovations and Management  
Author:     
Title of the Thesis:   
 
 
 
Degree:     
Programme:    
Supervisor:    
Year: 
Pages:  

Tervo, Tomi 
Improving Demand and Supply Balance in a Closed-
Loop Supply Chain: A Case Study in a Dynamic Reuse 
Spare Part Business 
 
Master of Science in Economics 
Industrial Management 
Jouni Juntunen 
2023 
86 

 
ABSTRACT: 
Many companies have adopted closed-loop supply chain (CLSC) systems in pursuit of greener 
operations through reuse product offering. Contrary to traditional forward supply chains, CLSCs 
combine both supply chain directions, forward and reverse. As well, the CLSC incorporates cir-
cular manufacturing process into the loop, such as repairing, refurbishing, or remanufacturing. 
The combination of multiple simultaneous processes leads to added complexity in a circular sys-
tem. This results in a wide range of challenges faced by a CLSC. The CLSC process challenges 
present themselves as unbalanced demand for reuse products and supply for returning end-of-
use cores. As a result, this study’s purpose was to identify the most critical challenges contrib-
uting to an unbalanced demand and supply. Also, the study aimed to provide improvement pro-
posals to improve the situation at the case company. To realise this purpose, the study followed 
the format of a qualitative case study with a maritime company Wärtsilä as the case company. 
The research data was collected using open interviews with eight key stakeholders involved in 
the case company’s CLSC. Data from the interviews was then transcribed and analysed with a 
thematic analysis method; categorising found challenges into challenge categories identified 
from the existing literature. To examine the most critical CLSC challenges, the study performed 
a criticality analysis using Process Failure Mode & Effect Analysis (PFMEA). PFMEA assigned se-
verity to each found challenge while also evaluating the case company’s current methods for 
prevention and detection. The analysis resulted in 14 different challenge categories expected to 
contribute to unbalanced demand and supply. Two new challenge categories, challenges with 
process knowledge and challenges with a missing seeding strategy, were added to the body of 
knowledge. Regarding criticality, seven challenge categories were found as critical. Critical chal-
lenges in reverse supply chain processes related to limited internal and external process 
knowledge and visibility of returning cores. Critical challenges in circular manufacturing pro-
cesses related to low core availability, pull-ordering system, outdated inventory management 
practices, and a missing seeding strategy. Finally, the study proposed improvement proposals 
for the critical challenges that would result in more balanced demand and supply. These findings 
stress the individual needs of each CLSC system to perform in an optimal manner. The case com-
pany’s single source for cores created new challenges that were yet to be identified by the ex-
isting literature. Also, the separation of critical challenges aids managers in focusing on the most 
critical ones in often problem-rich CLSCs. 
 
 

KEYWORDS: Closed-Loop Supply Chain, Reuse Products, Circular Economy, Spare Part, Single-
Source Product, Inventory Management 

 



3 

Contents 

1 Introduction 7 

1.1 Background 7 

1.2 Objectives and research questions 8 

1.3 Research gap 9 

1.4 Structure of the thesis 9 

2 Theoretical background 10 

2.1 Circular economy and circularity strategies 10 

2.1.1 Circularity strategies in closed-loop supply chains 13 

2.1.2 Flows of a closed-loop supply chain 14 

2.2 Circular manufacturing 15 

2.2.1 Remanufacturing and refurbishing 16 

2.2.2 Challenges in circular manufacturing 18 

2.3 Managing demand in a closed-loop system 21 

2.3.1 Demand forecasting 21 

2.3.2 Managing demand uncertainty with inventory 22 

2.3.3 Product lifecycle 24 

2.4 Managing supply in a closed-loop system 25 

2.4.1 Return strategies 25 

2.4.2 Forecasting core returns 29 

3 Case company and process 31 

3.1 Wärtsilä and Wärtsilä Global Logistics Services 31 

3.2 Case process 32 

4 Methodology 34 

4.1 Research design and strategy 34 

4.2 Data collection 35 

4.3 Data analysis 38 

5 Results 39 

5.1 Recognised challenges 39 



4 

5.1.1 Demand and supply challenges 39 

5.1.2 Information and knowledge challenges 42 

5.1.3 Material flow challenges 45 

5.1.4 Core challenges 50 

5.1.5 Operational challenges 51 

5.2 Summary of recognised challenges 54 

5.3 Analysis of criticality 56 

6 Discussion 59 

6.1 Theoretical contributions 60 

6.2 Improvement proposals for the case company 63 

7 Conclusion and future research 67 

References 69 

Appendices 78 

Appendix 1. Predetermined interview questions 78 

Appendix 2. PFMEA – Process evaluation criteria tables 79 

Appendix 3. PFMEA – Action priority table 81 

Appendix 4. PFMEA – Sales 83 

Appendix 5. PFMEA – Purchasing 85 

 

  



5 

Figures 
 
Figure 1. Butterfly diagram by EMF (2019) 12 

Figure 2. Value Retention Processes adapted from Nasr et al. (2018) 13 

Figure 3. CLSC process flows adapted from Abbey & Guide Jr (2018) 15 

Figure 4. Remanufacturing process steps adapted from Steinhilper & Butzer (2019) 17 

Figure 5. Remanufacturing process challenges adapted from Kurilova et al. (2018) 19 

Figure 6. Product life cycle curve adapted from Kopp (2022) 24 

Figure 7. Product lifecycle distributions by Umeda et al. (2005) 30 

Figure 8. Availability monthly: reuse fuel pumps and injection valves (Wärtsilä, 2022) 33 

Figure 9. Ordering blocking reasons from 2021 – 2022 46 

Figure 10. Time spent waiting for cores from 2021 – 2022 46 

Figure 11. Orders waiting for cores per product type 2021 – 2022 47 

Figure 12. Reuse fuel pump lead times, external supplier 52 

Figure 13. Reuse injection valve lead times, internal supplier 53 

 

Tables 
 
Table 1. Research Interviews 36 

Table 2. Recognised challenges 54 

Table 3. Criteria for severity adapted from AIAG, 2019 and Zhu et al., 2021 79 

Table 4. Criteria for occurrence adapted from AIAG, 2019 79 

Table 5. Criteria for detection adapted from AIAG, 2019 80 

Table 6. Action priority table adapted from AIAG, 2019 81 

 
  



6 

Abbreviations 
 
AP  Action Priority 

CAM  Core Acquisition Management 

CLSC  Closed-Loop Supply Chain 

EMF  Ellen Macarthur Foundation 

EOU  End-Of-Use 

EOL  End-Of-Life 

ERN  European Remanufacturing Network 

EU  European Union 

CE  Circular Economy 

IPR  Intellectual Property Rights 

PFMEA Process Failure Mode & Effect Analysis 

PS  Parts Supply 

RL  Reverse Logistics 

VRP  Value Retention Process 

WGLS Wärtsilä Global Logistics Services 



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1 Introduction 

Companies operating closed-loop supply chains (CLSC) with reuse products face addi-

tional challenges compared to traditional linear supply chains due to circular process 

setup (He et al., 2020; Kurilova et al., 2019). Kurilova et al. (2018) and Schenkel et al. 

(2019) have provided an essential overview of the potential CLSC challenges; however, 

due to the diverse nature of circular systems, not all the challenges have been identified. 

As well, the criticality of each challenge has not been assessed in the existing literature. 

This research aims to contribute by examining any new challenges contributing to de-

mand and supply imbalance in a circular system with single-source products. The re-

search also aims to point out the most critical of those challenges. This chapter proceeds 

to describe the background of this research, followed by objectives and defined research 

questions. Finally, before closing the chapter, a presentation on the identified research 

gap and the overall structure of this thesis are provided. The limitations of this study are 

discussed in the Conclusion and future research - chapter. 

 

1.1 Background 

The circular economy has been a trending development direction in recent years when 

the world aims to decouple economic growth from the depletion of natural resources 

(Nasr, 2019). The transition towards the circular economy can only be expected to speed 

up as governmental parties acknowledge it’s importance. In Europe, European Commis-

sion states that the European Union must transition to a circular economy to realise the 

union’s 2050 climate targets (EC, 2022). The circular economy aims to eliminate pollution 

and waste by extending products’ useful life and circulating products at the highest value 

(EMF, 2014). When in a traditional linear system, an end-of-use product would be thrown 

away after use, in the circular economy, this product is taken back for life-extending op-

erations such as repairing, refurbishing, or remanufacturing. Companies have acknowl-

edged the benefits of providing reuse products as an alternative to a new product as 

reuse offering contributes to all three aspects of sustainable development, environmen-

tal, economic, and social (He et al., 2020; Nasr, 2019). 



8 

Pursuing circular business models created the need to integrate reverse supply chain 

operations with traditional forward supply chains (Abbey & Guide Jr, 2017). As a result, 

this led to the introduction of a closed-loop supply chain (CLSC) system. A CLSC is a sys-

tem in which the products or materials that have reached the end of their useful life are 

collected, sorted, processed, refurbished, remanufactured, or recycled back into the 

same or similar product (Steinhilper & Butzer, 2019; Östlin, 2008). In contrast to linear 

supply chains, CLSCs are highly complex systems presenting various challenges. These 

challenges include the management of reverse logistics, quality control, stakeholder col-

laboration, information management, and compliance with regulations and standards 

(Battini et al., 2017; Kurilova et al., 2018; Schenkel et al., 2019). Additionally, closed-loop 

supply chains can suffer from imbalances between the demand for reuse products and 

the supply of used products or materials due to variability in returns, timing issues, col-

lection and sorting issues, and coordination issues (Kurilova et al., 2018; Steinhilper & 

Butzer, 2019). The perceived CLSC system challenges vary from each CLSC system to an-

other due to the nature of products and industry-specific requirements (Guide Jr & Van 

Wassenhove, 2009). 

 

The case company of this thesis offers reuse fuel injection parts for marine engines. After 

initiating its reuse part programme, the company has been struggling with unbalanced 

demand and supply. The situation becomes apparent through low and fluctuating stock 

availability for the reuse parts. The stock availability figures indicate that the company 

does not satisfy the current level of customer demand. The low availability is expected 

to arise from the CLSC challenges mentioned above. Additionally, the company’s CLSC is 

further complicated due to single-source products, which prohibits sourcing end-of-use 

products elsewhere. 

 

1.2 Objectives and research questions 

The objective of this research is to identify factors that contribute to unbalanced demand 

and supply in a CLSC. This is followed by a criticality analysis to highlight the most critical 

issues. As mentioned above, CLSCs are complex systems with many potential problems 



9 

ongoing simultaneously. Therefore, this study aims to filter out the most critical issues 

for a company’s management to focus on. After identifying the most critical issues, the 

study provides improvement suggestions which, when implemented, should give a bet-

ter balance in the CLSC. To better guide the research towards its objectives, below re-

search questions were drafted:  

 

1. Why reuse spare parts often suffer from a poor balance between demand and 

supply? 

2. What are the most critical issues regarding demand and supply balance? 

3. How should the CLSC be improved to secure a better balance of demand and 

supply? 

 

1.3 Research gap 

This study contributes to the body of knowledge by broadening already identified CLSC 

process challenges and examining new challenges that can only be observed in a dy-

namic reuse spare part CLSC with single source products. In addition, this research pro-

vides support for managers and future research by narrowing them down to the most 

critical. This is relevant as companies may not know which challenges pose the most 

significant performance risk to their operations.  

 

1.4 Structure of the thesis 

This thesis has been shared in seven primary chapters. After the introduction, the study 

proceeds to the theoretical background, laying the ground for the research. From here, 

the study moves to introduce the case company and case process. This is followed by 

the methodology chapter, where used research methods are presented. Then the study 

continues to the results chapter, which is the core of this paper. Finally, the study dis-

cusses found results in a discussion chapter before closing the study with conclusions 

and suggestions for future research. 



10 

2 Theoretical background 

Here, the applicable theory to this study is reviewed. This section begins with a review 

of the circular economy as it is an umbrella theme for the remainder of the study. A focus 

is given to different circularity strategies. This is followed by a look at how circularity 

strategies connect with closed-loop supply chain (CLSC) management theory, which is 

the main theoretical framework of this study. From here, the study proceeds to individ-

ual CLSC system sub-processes. In the centricity of these chapters are circular manufac-

turing operations, demand, and supply management.  

 

2.1 Circular economy and circularity strategies 

The circular economy has gained growing interest from businesses and organisations re-

cently. The growing concern for depleting natural resources and care for the environ-

ment has pushed businesses and decision-makers to look for alternative ways to enable 

future economic growth. The current linear take-make-waste economy has limitations 

while causing great harm to the planet (Weetman, 2021). A circular economy may an-

swer these concerns, as it aims to decouple economic growth from using natural re-

sources, which has been the way until now (Ranta & Saari, 2020).  European Commission 

realised the current challenge and adopted the first circular economy action plan in 2015 

(European Commission, 2022). The plan was later revised in March 2020. The circular 

economy action plan is a part of the European Commission’s European Green Deal which 

is to take the European Union (EU) towards sustainable growth and a climate-neutral 

tomorrow within the continent. With this action plan, European Commission is pushing 

the EU from a linear economy to a more circular one. Some of the objectives of the ac-

tion plan are to make sustainability a standard feature of products, empower consumers, 

reduce produced waste, and take a leading role in the circular economy globally (EMF, 

n.d.; European Commission, 2022). 

 

Defining the circular economy has proved to be a challenge in academia. This has re-

sulted in many competing definitions. Kircherr et al. (2017) reviewed 114 definitions and 



11 

concluded that circular economy means different things to different people. Ellen Mac-

Arthur Foundation (EMF) is one of the loudest voices pushing the world towards more 

circular business models. According to EMF (2021), the circular economy is based on 

three principles: “eliminate waste and pollution, circulate products and materials (at 

their highest value), and regenerate nature.”. At the core of these principles is the initial 

design of the product or service. Goods produced for the traditional linear system do not 

consider what will happen to products at End-Of-Life (EOL). In comparison, products de-

signed with circularity in mind have ways to manage EOL already considered. Managing 

EOL is at the core of the circular economy (EMF, 2014). 

 

Circularity strategies enable the circular economy. The types and number of circularity 

strategies can vary depending on the definition of the circular economy. Kircherr et al. 

(2017) found that the most circular economy definitions included strategies: recycling, 

reuse, and reduce. Recycling and reuse were mentioned in over 70 per cent of the 

definitions, while reduce was noted in 54 per cent. Circularity strategies are often de-

scribed with R-frameworks where 3R is commonly combined from Recycling-Reuse-

Reduce and 4R from 3R framework + Recover (Kircherr et al., 2017). Authors have 

proposed circularity strategies beyond the 3R and 4R frameworks. EMF (2019) presented 

seven circularity strategies in their butterfly diagram (see Figure 1). The butterfly 

diagram is EMF’s attempt to visualise the circular economy. Here, the left side of the 

diagram is referred to as the biological cycle, which presents cycles for biodegrading ma-

terials. In contrast, the right side of the butterfly diagram is called the technical cycle 

(EMF, 2019). The technical cycle presents circularity strategies for products in use. EMF 

circularity strategies are sharing-maintaining-reusing-redistributing-refurbishing-

remanufacturing-recycling. Some of the strategies overlap. Other frameworks with more 

than four strategies are, for example, Potting et al. (2017) definition and framework with 

nine circularity strategies and Sihvonen and Ritola (2015) with four high-level strategies 

and six sub-strategies. Their four high-level strategies were Reduce-Reuse-Recycle-

Recover. Reuse was divided into six sub-strategies Repurpose-Direct Reuse-Repair-

Refurbish-Remanufacture-Resynthesize.  



12 

 

Figure 1. Butterfly diagram by EMF (2019) 

 

Russell and Nasr (2019) and Nasr et al. (2018) have different take on circularity strategies 

with their Value Retention Processes (VRPs). The VRPs consist of only circularity strate-

gies that allow for retaining products’ embedded value at EOL. Therefore, it can be said 

that the goal of VRPs is to replace the EOL phase with an End-Of-Use (EOU) phase. Recy-

cling, which is seen as a cornerstone of the circular economy (EMF, 2019; Kircherr et al., 

2017), is not listed as a VRP because products lose their embedded value when recycled. 

The embedded value comprises energy, labour, and other resources needed to produce 

the product (EMF, 2019). According to Russell and Nasr (2019), there are two categories 

of VRPs with five separate processes (see Figure 2). Full-service VRPs are remanufactur-

ing and comprehensive refurbishment. Full-service VRPs ensure full or almost full-ser-

vice life to a product after going through a VRP. The second category is partial service life 

VRPs. These are direct reuse, repair, and refurbishment. Among partial service life VRPs, 

the VRP operations only partially renew the product’s service life. Partial-service life 

VRPs generally have shorter lifecycles in comparison to full-service life VRPs. This, how-

ever, is highly dependent on the type of product (Russell & Nasr, 2019). Nasr et al. (2018) 

emphasise that material recycling cannot be avoided entirely, as no product has an 



13 

indefinite lifetime. VRPs ensure that the product’s function and embedded value are 

maintained as long as possible. When this is not viable anymore due to degradation, 

then products become a subject for recycling. Products are recycled for raw materials 

and components that can be used in actual VRPs, before what is left over to an incinera-

tion plant for energy recovery (Nasr et al., 2018).   

 

 

Figure 2. Value Retention Processes adapted from Nasr et al. (2018) 

 

2.1.1 Circularity strategies in closed-loop supply chains 

Circularity strategies and Closed-Loop Supply Chain (CLSC) management are topics that 

go hand in hand. Whereas circularity strategies aim to create product flow loops, CLSC 

management provides the strategies to manage these loops (Russell & Nasr, 2019; Souza, 

2017, p. 5). Guide Jr. and Van Wassenhove (2009) define CLSC management as “the de-

sign, control, and operation of a system to maximize value creation over the entire life 

cycle of a product with dynamic recovery of value from different types and volumes of 

returns over time.”. CLSC management can be shared into three sections: the engine, 

demand side processes, and supply side processes (Abbey & Guide Jr, 2017; Priyono et 

al., 2012). The engine is a circularity strategy that acts as an “engine”, creating flows and 

requirements for supportive processes. Abbey and Guide Jr (2017) include 



14 

remanufacturing as their circular system engine. However, the engine could be 

refurbishing or any other circularity strategy that uses EOU products as process inputs. 

Returning EOU products are called “cores” in the CLSC context (Russell & Nasr, 2019). 

Demand-side processes aid in managing the demand uncertainty of a CLSC system. 

These activities aim to drive reuse product sales and ensure products reach the market 

(Abbey & Guide Jr, 2017). Reuse product demand forecasting is at the core of demand 

management (Matsumoto & Komatsu, 2015; Priyono et al., 2012). Supply processes 

manage the sourcing and returning of cores from the field for circular manufacturing 

operations with acquisition management. A well-functioning acquisition management 

process is the cornerstone of a CLSC, helping to alleviate supply uncertainty in the 

system. Without a sufficient flow of cores, the company pursuing circular manufacturing 

will run into issues eventually (Abbey & Guide Jr, 2017). Only when all three activity 

categories, the engine, demand, and supply processes, are in line can CLSC perform as 

expected to create a profitable business (Abbey & Guide Jr, 2017; Guide Jr & Van 

Wassenhove, 2009). 

 

2.1.2 Flows of a closed-loop supply chain 

Figure 3 presents a visualisation of theoretical flows in the CLSC. The circular flow begins 

as goods enter the market through forward supply chain activities. After the customer 

use period, goods start their reverse journey. Some products go directly to the EOL waste 

stream due to wear. At the same time, the remainder of EOU goods become cores 

entering the reverse supply chain as raw materials and sub-components. Manufacturers 

manage core returns with the aforementioned acquisition management process. The 

acquisition management process is reviewed later in more detail. From the acquisition 

management, the cores are shared into different circular manufacturing activities 

(Abbey & Guide Jr, 2018). Some organisations have incorporated core quality grading in 

their acquisition process, guiding incoming cores to subsequent processes based on core 

quality (Wei et al., 2015). In Figure 3, component and product reprocessing phases 

present cores’ life extension processes such as refurbishing and remanufacturing. Here, 

the circular manufacturing process renews cores back to the market or the forward 



15 

supply chain as sub-components. Any unfit parts continue to recycling (material 

reprocessing in Figure 3). Salvageable material is fed back into the forward supply chain, 

and non-salvageable material moves to the EOL waste stream (Abbey & Guide Jr, 2017).  

 

 

Figure 3. CLSC process flows adapted from Abbey & Guide Jr (2018) 

 

The following chapters dive deeper into three activity categories within CLSC, starting 

with circularity strategy as the process engine. From here, the study continues to 

demand management, focusing on demand forecasting. The theoretical part is 

concluded with supply activities with acquisition management processes. 

 

2.2 Circular manufacturing 

Remanufacturing is the most widely discussed circularity strategy in CLSC literature. 

MahmoumGondabi et al. (2021) reviewed the literature on the circular economy within 

the CLSC context; 117 articles of 254 discussed remanufacturing, the most extensive 

portion before other circularity strategies. The high share of remanufacturing articles 

could be partly explained by challenges related to defining different circularity strategies. 

Nasr et al. (2018) highlight that the definitions of circularity strategies vary between in-

dustries and even company-level differences have been observed. A company may ad-

dress its goods as remanufactured, while the correct term may have been refurbished 



16 

or repaired (Chen & Chen, 2019). As an example of the terminology challenge, ERN, in 

their publication by Parker et al. (2015), observed that the machinery sector in Europe 

used the terms “rebuild” or “retrofitted” for remanufactured goods. Other commonly 

met terms were “reconditioned” and “refurbished”. The terminology was found to vary 

also between companies and countries (Parker et al., 2015). As a result, the remainder 

of this study avoids separating different circular manufacturing strategies and mainly 

supports on literature from remanufacturing. In the text, circularity strategies are 

referred to as “circular manufacturing” and finished circular manufacturing products as 

“reuse products”. The next chapter provides a view of often used circularity strategies in 

the CLSC context, remanufacturing and refurbishing. 

 

2.2.1 Remanufacturing and refurbishing 

Remanufacturing and refurbishing have grown in importance due to their contribution 

to all three aspects of the triple bottom line, economic, environmental, and social. These 

operations create economic opportunities, lower environmental impact through more 

resource-efficient processes, and contribute socially through created jobs (Russell & Nasr, 

2019). From an economic and social perspective, remanufacturing, as an example, has 

gained ground since it is currently a multi-billion-dollar industry globally, led by the 

United States as the most significant contributor. In Europe, remanufacturing industry 

generated around 30 billion Euro turnover while employing around 190.000 people in 

2015. European Remanufacturing Network (ERN) estimates remanufacturing to reach 70 

– 100 billion Euro turnover by 2030 (Parker et al., 2015). Remanufacturing and refurbish-

ing are also vital environmentally. Nasr (2019) highlights the importance of these activi-

ties, as these keep products out of recycling and landfills by retaining the product’s func-

tion and embedded value. At the same time, these processes require a reduced amount 

of energy and resources compared to manufacturing. A remanufactured Caterpillar cyl-

inder head requires 85 per cent less energy than a manufactured one (Caterpillar, 2021). 



17 

 

Figure 4. Remanufacturing process steps adapted from Steinhilper & Butzer (2019) 

 

Remanufacturing is a thorough process where the remanufactured product is renewed 

with a new full-service life (see Figure 2) (Russell & Nasr, 2019). It is referred to as: 

 

A comprehensive and rigorous industrial process by which a previously sold, 

leased, used, worn, remanufactured, or non-functional product or part is re-

turned to a like-new, same-as-when-new, or better-than-when-new condition 

from both quality and performance perspective, through a controlled, reproduc-

ible and sustainable process. (ANSI, 2021)  

 

Nasr (2019) adds to the above definition that a remanufacturing process is typically 

carried out in an industrial facility or a factory. According to Steinhilper and Butzer (2019), 

the traditional remanufacturing operation has five steps: disassembly, cleaning, 

inspection, reconditioning, and reassembly (see Figure 4). During the process, worn-out 

parts are either restored to their original state or replaced by an alternative working 

component. Products that contain many electronics usually require a six-step process as 

the process begins with an entrance diagnosis. Sundin (2004) takes a similar view by 

mentioning that a remanufacturing operation comprises steps: cleaning, inspection, dis-

assembly, storage, reprocessing, reassembly, and testing in a varying sequence. The 



18 

arrangement and type of remanufacturing activities depend on the industry and the 

remanufactured product (Steinhilper & Butzer, 2019; Sundin, 2019). Other impacting 

factors include raw material sources, demand level, and industry-specific regulations 

(Sundin, 2019).  

 

Refurbishing is defined as: “Return a product to good working order. This can include 

repairing or replacing components, updating specifications, and improving cosmetic ap-

pearance.” (EMF, 2021). Russell and Nasr (2019) share a similar view mentioning that a 

refurbishing operation can result in a new partial-service life but not a new full-service 

life (see Figure 2). The International Resource Panel, in their publication by Nasr et al. 

(2018), mention that some industries have a refurbishment process that is closer to 

remanufacturing than refurbishing. This process is called comprehensive refurbishing. 

The definition follows the lines of traditional refurbishing but comprehensive 

refurbishing “takes place within industrial or factory setting, with a high standard and 

level of refurbishment” (Nasr et al., 2018). The process of refurbishing often follows 

similar steps as remanufacturing while being less structured and resource-intensive 

(Nasr et al., 2018). Reconditioning is a competing term for refurbishing; on many occa-

sions, these are considered equal. For example, International Standard Organization con-

siders reconditioning and refurbishing interchangeable terms (ISO, 2017). As well, one 

can notice similarities in EMF’s (2021) above refurbishing definition and BSI’s (2009) 

reconditioning definition, which is an action that “return a used product to a satisfactory 

working condition by rebuilding or repairing major components that are close to failure, 

even where there are no reported or apparent faults in those components.”. Both 

definitions aim to bring a product into good or satisfactory working condition. 

 

2.2.2 Challenges in circular manufacturing 

A circular manufacturing system faces many operational challenges due to a complex 

process setup. Kurilova et al. (2018) reviewed 119 articles on remanufacturing system 

challenges and categorised them into industry, system, and process levels (see Figure 5). 

The industry-level challenges include legislation and environmental regulation, customer 



19 

preferences and technological change. In comparison, the system challenges involve the 

product’s lifecycle phases and interaction between process stakeholders. Finally, the pro-

cess level challenges are observed in the workshop floor where cores are remanufac-

tured to new condition (Kurilova et al., 2018). When studying remanufacturing 

challenges with four case companies, Kurilova et al. (2018) observed challenges from 

seven challenge categories out of all presented in Figure 5 that had an immediate effect 

on system performance. Three challenge categories from the system level were ob-

served: demand and supply, material flow, and information and knowledge. Challenges 

on the process level were studied in greater detail as the study covered categories: core, 

operations, product, and costs (Kurilova et al., 2018). 

 

 

Figure 5. Remanufacturing process challenges adapted from Kurilova et al. (2018) 

 

On the system level, demand and supply challenges create the most trouble in circular 

systems (Goltsos et al., 2018; Kurilova et al., 2018). The main challenge is balancing de-

mand with the stochastic nature of core returns. An unbalanced situation can lead to 

overstocking or stockouts where reuse parts are unavailable when needed (Guide Jr, 

2000). Demand and supply challenges result when a company lacks tools to match the 



20 

number of core returns with reuse part sales. Balancing demand and supply require of-

ten forecasting both supply of returning cores and the demand for finished reuse prod-

ucts. Challenges arising from complex reverse supply chain network and core collection 

point infrastructure also create demand and supply challenges, as complex return net-

work contributes by adding unpredictability to core returns (Kurilova et al., 2018). Ma-

terial flow challenges are closely related to the above-mentioned demand and supply 

challenges. The varying flow of cores can create challenges for the company’s inventory 

control and management practices. Similarly, unmanaged replacement sub-components 

may extend process lead times, eventually leading to excess sub-component inventories 

or stock-outs when the demand is high (Kurilova et al., 2018). Challenges in poor process 

information and knowledge can lead to added processing time. In a circular system, in-

formation regarding a returning core is valuable. Valuable information for the circular 

manufacturing operator could be returning product type, model, manufacturing year 

and condition (Kurilova et al., 2018). Similarly, information about reuse part demand is 

vital in circular manufacturing (Matsumoto & Komatsu, 2015). Without prior information, 

the company cannot start operative preparations beforehand. For example, replacement 

part sourcing and production planning may have to wait until the core has returned. 

 

On the process level, core challenges contribute the most to extended and varied lead 

times disturbing reuse product supply. Core challenges result from difficulties acquiring 

and managing core components (Kurilova et al., 2018). Additionally, the core category 

covers challenges related to the problem of evaluating cores’ remaining useful life and 

deciding on the optimal time for the product’s life-extending operation. These chal-

lenges result from the quality, quantity, and timing issues in returning cores (Wei et al., 

2015). A company is required to do some level of quality categorisation to separate non-

manufacturable parts from parts that are too degraded and therefore are ready for re-

cycling. Operations challenges have a significant impact on reuse product lead time. 

Without the possibility of planning beforehand, the time needed for the work is difficult 

to estimate, which can lead to long processing and waiting times. Additionally, since 

cores return in varying conditions, the labour and resources required per core can vary 



21 

significantly (Guide, 2000; Kurilova et al., 2018; Rönkkö et al., 2021). Remanufacturing 

product challenges result from customers' reliability and safety concerns about remanu-

factured goods. Therefore, remanufactured products need similar quality controls as 

newly manufactured goods (Kurilova et al., 2018). Finally, managing and controlling costs 

can be challenging with reuse products, as the resources needed per unit can differ due 

to varying core conditions. Parts not fit for circular manufacturing should be filtered out 

from the process to avoid processing parts that are too degraded (Kurilova et al., 2018).  

 

2.3 Managing demand in a closed-loop system 

As mentioned in the Challenges in circular manufacturing-chapter, a well-performing 

CLSC requires the circular manufacturer to balance the demand for reuse parts with the 

supply of cores. An unbalanced situation can lead to unfavourable situations such as 

stock-outs when demand surpasses supply or excess stock value when supply is high and 

demand is low (Östlin, 2008). Both are unfavourable situations in the eyes of a circular 

manufacturer. This chapter presents how companies can manage demand with 

forecasting, inventories and how product lifecycle status affects CLSC. 

 

2.3.1 Demand forecasting 

Demand forecasts are an efficient way to balance the situation from the demand point 

of view. A demand forecast provides an estimated view of future events that aid the 

company in evaluating requirements for operations and material supply (Krajewski & 

Malhotra, 2022, p.314). An effective demand forecast requires cross-functional 

collaboration from sales and marketing to operations and supply chain management. 

The latter two plan operational factors, such as production output, inventory levels, and 

service and material procurement, based on the provided forecast (Krajewski & 

Malhotra, 2022, p.315). Multiple forecasting techniques are available, and each has 

strengths and weaknesses depending on what is being forecasted. Forecasting 

techniques are shared into two method types, judgment-based and quantitative.  



22 

Judgment methods are qualitative forecasting technique that predicts future demand 

based on non-historical demand data (Krajewski & Malhotra, 2022, p.315). The demand 

forecast is often built by looking at past events. However, there are cases where 

historical data is not available. A good example is a new product introduction where 

sales personnel do not have past demand to support. In this case, the sales personnel 

use their best judgment and expertise to create an estimation of the demand. Similarly, 

a quantitative forecast can be adjusted with judgement methods if the sales 

organisation knows that some market conditions will impact the demand (Chopra, 2019, 

p.188). Judgment methods build forecasts on sales personnel estimates, executive 

opinion, and market research (Krajewski & Malhotra, 2022, p.323).  

 

Quantitative forecasting methods include multiple quantitative forecasting tools such as 

causal methods, time-series analysis, and trend projection using regression (Krajewski & 

Malhotra, 2022, p.315). All of these tools rely heavily on historical data to predict future 

demand. Causal methods create a forecast by analysing how independent factors impact 

demand. When using causal methods, the company must first identify the factors 

influencing future demand and how strongly each factor contributes to total forecasted 

demand (Chopra, 2019, p.188). Commonly analysed factors are promotional campaigns 

and economic conditions. Time-series analysis builds future demand forecasts on what 

happened in the past during that same period. Time-series analysis is widely used due 

to its easy-to-use nature and the fact that many companies have access to their past 

demand data. Trend projection using regression is a method that uses both causal 

methods and time-series analysis to generate a demand forecast. This method allows 

managers to combine the predicted impact of independent variables with past demand 

data to estimate next-period demand (Krajewski & Malhotra, 2022, p.318). 

 

2.3.2 Managing demand uncertainty with inventory 

By holding inventory, a company can alleviate demand and supply uncertainty. The un-

certainty results from the fact that the company does not know how many pieces and in 

what time interval customers are purchasing (Krajewski & Malhotra, 2022, p. 363). A 



23 

demand forecast helps somewhat, but this is only the best estimate. There are multiple 

types of inventories, but here the study focuses on a safety inventory and cycle inventory. 

The safety inventory allows companies to prevent stockouts when actual demand is 

higher than what was forecasted. It is a buffer of excess products that able the company 

to handle that additional demand. The safety inventory aid companies in preparing for 

other supply chain challenges, such as a variable amount of supply and lead times from 

suppliers. The safety buffer also allows the company’s operations to continue through 

turbulent demand and supply conditions (Chopra, 2019, p.325). 

 

Most companies with supply chain operations build some cycle inventory. A cycle inven-

tory results when a company produces or purchases products in lots of multiple products 

rather than the exact amount demanded by the customer (Chopra, 2019, p.278). Why 

companies handle products in lots rather than by a single unit has to do with cost opti-

misation. Managing the supply of products in lots allows companies to lower material 

and processing costs through economies of scale. The lot size is defined based on order-

ing or production intervals. If a lot is ordered every ten weeks, one lot must cover the 

10-week demand. The cycle inventory level is at its highest when the new lot arrives at 

the start of the time interval. While the cycle inventory is at its lowest at the end of the 

time interval just before the arrival of the new lot (Krajewski & Malhotra, 2022, p. 363). 

 

Effective inventory management is a balance between having enough materials available 

to satisfy demand and not having too much, which would result in high inventory holding 

costs (Krajewski & Malhotra, 2022, p. 360). A company's important inventory perfor-

mance indicator is product availability, also known as customer service level. Product 

availability measures how effectively a company satisfies customer demand from avail-

able inventory (Chopra, 2019, p.372).  A high product availability figure means that cus-

tomer demand is well satisfied. To reach high availability figures, the company is required 

to hold more extensive inventories, which results in higher inventory-holding costs. A 

well-adjusted availability target satisfies customer demand while optimising cost. Also, a 

correct availability level maximises supply chain profits (Chopra, 2019, p.372).  



24 

2.3.3 Product lifecycle 

The product lifecycle stage is a factor that can have a significant impact when balancing 

demand and supply in a reuse CLSC. The lifecycle stage influences quantities sold, 

eventually affecting how many cores return for circular manufacturing (Atasu et al., 

2008). During the product introduction and growth phase, the demand for reuse prod-

ucts can be high while the supply for cores is close to none (Östlin et al., 2009). To bal-

ance the situation, the manufacturer must support on other sources of cores. A manu-

facturer that can acquire cores from additional sources can get ahead of the competition. 

One method to increase supply is to use a seed stock of new components (Östlin et al., 

2009). Cores will eventually start to return from the field when first sold products are 

nearing the EOU state. When the first cores return, the circular manufacturer has a sense 

of urgency to manufacture those parts as soon as possible to fulfil the high demand for 

reuse products (Östlin et al., 2009).  

 

 

Figure 6. Product life cycle curve adapted from Kopp (2022) 

 

When products are past the growth stage and start to enter maturity, returning core 

quantities and demand for reuse products can be expected to be more in balance (Guide 

Jr et al., 2000; Östlin, 2008). In Figure 7, product sales start to plateau first time after a 

rise period. In the decline phase, the demand for reuse products starts to get lower while 

the supply of cores is higher. This shifts the demand and supply balance. The main 

challenge of the decline phase is high core and reuse product inventories. If the product 



25 

has moved to a newer version, the circular manufacturer can consider upgrading older 

declining version products to the latest version, which would decrease inventories and 

avoid obsolescence. Also, the updated old product can aid in fulfilling the high demand 

for newly released products (Östlin et al., 2009). 

 

2.4 Managing supply in a closed-loop system  

Managing the supply of cores is equally crucial when balancing the scale between 

demand and supply. Authors have proposed acquisition management practices for 

managing returns to make the supply more manageable. Wei et al. (2015) propose a 

Core Acquisition Management framework built on the original Product Acquisition 

Management framework from Guide Jr and Jayaraman (2000). Core Acquisition Man-

agement (CAM) aims to secure a better balance between demand and supply by provid-

ing tools to manage core returns (Abbey & Guide Jr, 2017; Guide Jr & Jayaraman, 2000; 

Wei et al., 2015). CAM is defined as “the active management of the core acquisition pro-

cess in remanufacturing to achieve a better balance between return and demand, by 

dealing with the uncertainties in terms of return volume, timing, and quality” (Wei et al., 

2015). CAM is combined of three core activities: return strategies, core acquisition con-

trol, and forecasting core return (Wei et al., 2015). Core acquisition control is presented 

as a sub-theme for return strategies as Wei et al. (2015) found out that literature equates 

core acquisition control to acquisition effort, i.e., how much a remanufacturer should 

pay for cores to motivate return behaviour. Since this theme is visited in return strategies, 

the acquisition control is included there as a sub-theme. The report continues to core 

return strategies before returns forecasting. 

 

2.4.1 Return strategies 

A company can enhance their control on returning cores by applying a correct return 

strategy. Östlin et al. (2008) studied return strategies under circular supply chain 

relationships. They identified seven relationship types within researched 



26 

remanufacturing case companies: ownership-based, service-contract, direct order, 

deposit-based, buy-back, and voluntary-based. 

 

In ownership-based relationships, a product is provided to a customer for use while still 

owned by the vendor (Östlin et al., 2008). This strategy is typical in rental, leasing or 

product-as-a-service business models. The ownership-based relationship is a strong 

bond between the two parties requiring two-sided cooperation. Often in ownership-

based relationships, the seller is responsible for ensuring that the product performs as 

expected; therefore, the seller is responsible for maintaining or replacing the product 

during the contract period. In terms of core recovery, this kind of relationship allows the 

service provider to monitor the condition of their installed base in steady intervals. This 

enhances supply chain visibility allowing better operations planning.    

 

The service contract relationship shares many similarities with the ownership-based 

contract. The main difference is that in the service contract relationship, the ownership 

of the product has moved to the customer (Östlin et al., 2008). This naturally reduces 

the seller’s control of the product. Service contracts move the ownership to the 

customer but state that lifetime extension activities such as remanufacturing must be 

done according to specific intervals at the seller’s workshop. From a core recovery point 

of view, service contract relationships can be problematic, as returning a product for 

maintenance can mean a stop of operations for the customer. Service contract 

relationships require planning from both sides to support all parties (Östlin et al., 2008). 

 

In the direct-order relationship, the customer sends a product to a workshop for 

remanufacturing. This type of exchange is also called a make-to-order service. From a 

service provider point of view, this relationship model has many benefits since most of 

the risk has been pushed on the customer’s side. The service provider does not 

necessarily need to hold an inventory of cores as it is for other mentioned relationships. 

The customer supplies the cores to the process. From the customer’s point of view, direct 

order relationships can be problematic for the same reason as service contract 



27 

relationships. When the product is sent to a service provider for operation, this can mean 

a stop of operations until the product has returned. Additionally, the remanufacturing 

cost is unknown before the remanufacturer has inspected the part and determined the 

resources needed for the operation (Östlin et al., 2008).  

 

In a deposit-based relationship, the customer acts as the core source. When purchasing 

a remanufactured product, the customer must return the old EOU core in exchange 

(Östlin et al., 2008). This relationship type does not consider the quality of the EOU 

deposit core when returned. In theory, this type of relationship creates a 1-to-1 match 

between demand and supply. In reality, the return rate is still not 100 % due to 

complexities in the process. For example, the part can get lost in delivery, or a 

remanufacturer’s sales personnel fail to demand a product return from the customer. 

The benefits of this type of relationship are apparent as the customer is provided with a 

working reuse product when the EOU core is returned. Therefore, any disturbances to 

customer’s operations can be minimised. The deposit-based relationship is an excellent 

way to secure higher return rates but is still subject to timing challenges. Since the first 

core source is the customer, the vendor may need to support on a seed stock of new 

components to enhance reuse part availability. This is especially important at the 

beginning of market introduction as cores will only start returning when parts wear 

closer to EOU and become subject to replacement (Östlin et al., 2008). 

 

The credit-based relationship is similar to the deposit-based relationship, except instead 

of a deposit, the customer receives credits for their EOU part returns. According to Östlin 

et al. (2008), other differences are that customers can return more than one product 

since the exchange is not bound directly to a product delivery like it is in the deposit-

based system. Also, the returned cores are often ranked based on the return condition. 

Cores in better condition receive a higher amount of credit than lower-quality cores. The 

remanufacturer can also pay higher credits for high-demand items to incentivise more 

frequent returns. The attained credits can be later used in other purchases. This type of 

system gives the remanufacturer some tools to manage demand and supply. Though, 



28 

more return flexibility to the customer results in more uncertainties at the 

remanufacturer’s end. Other challenges can be how to control customers’ use of credits. 

If the customer returns old products of low value and exchanges these credits for a high-

value product, there is a good chance that the vendor ends up making a loss. The 

complex crediting system also tends to require more administrative resources from the 

service provider (Östlin et al., 2008). 

 

In buy-back relationships, the remanufacturer buys the cores for its remanufacturing 

operations. The potential sources can be dealers who have specialised in sourcing cores, 

scrap yards, or customers. The buy-back relationship is the most commonly used in 

remanufacturing companies (Sundin et al., 2016; Östlin et al., 2008). This relationship 

type is either the primary way to source cores or buying cores is used to support other 

core sourcing relationships. A well-functioning buy-back relationship often requires a 

deeper relationship with the core supplier. The competition can be fierce, and each 

remanufacturer wants to source the best cores at the best price. Core acquisition control 

is mainly applied in the buy-back relationship since the remanufacturer may have an 

urgent need for cores. Therefore, they are willing to pay a higher price (Wei et al., 2015). 

By changing the acquiring price, the remanufacturer has some tools to control the timing, 

quality and quantity of returning cores (Guide Jr & Jayaraman, 2000; Wei et al., 2015). 

Besides the buy-back relationship, control can also be applied in credit and debit 

relationships though the effectiveness may be limited. 

 

Voluntary-based relationships rely on customers’ willingness to return the product after 

use voluntarily. Governments can force this type of relationship with directives that 

require companies to take back cores. This type of relationship is often found in the 

recycling business. A good example is empty toner cartridges which are hazardous waste 

with additional recycling requirements. A remanufacturer can provide means to recycle 

the cartridges while collecting valuable cores for remanufacturing with little cost. The 

costs for the remanufacturer associated with this type of relationship are only 

transportation and material handling costs (Östlin et al., 2008). 



29 

Caterpillar and their Reman programme are commonly used as an example when 

discussing remanufacturing of machinery.  Caterpillar has adopted a credit-based return 

strategy to incentivise core returns. When customers return a core, they receive a credit 

that can be used for another Caterpillar Reman product (Caterpillar, 2022). The returning 

process begins when a customer returns EOU core to a Caterpillar dealership. Here the 

core goes through visual inspection, and the customer is given credit based on the core 

condition. Cores must meet specific criteria to be credited, and cores in better condition 

often receive higher credit than those of lesser condition. Jeff Gutzwiller, Caterpillar 

Reman product manager, points out that a core in better shape can be remanufactured 

for less cost and resources (Caterpillar, 2022). From the dealership, the cores are then 

delivered to Caterpillar’s global core sourcing facility for sorting before sending them to 

a remanufacturing factory.  

 

2.4.2 Forecasting core returns 

Forecasting core returns is often seen as an essential element of the circular manufac-

turing system (Guide Jr & Jayaraman, 2000; Matsumoto & Komatsu, 2015; Östlin et al., 

2009;). Forecasting core returns refers to estimating when a core returns for circular 

manufacturing operations (Goltsos et al., 2018).  As mentioned in earlier chapters, the 

information on returning core can be precious for the company (Clottey et al., 2012; 

Kurilova et al., 2018; Priyono et al., 2012; Östlin et al., 2009). The current forecasting 

systems are built on the understanding that product returns tend to follow a normal 

distribution (Goltsos et al., 2018). Therefore, a forecast could be made on past product 

sales data (Priyono et al., 2012; Östlin et al., 2009). Figure 6 presents a distribution of 

product sales and product disposals. Here, average product life is used to predict the 

timing of core returns. With a sales date known, a company would have a good guess on 

when the product is about to be due for replacement. In this kind of system, factors such 

as the forecasted product type, the rate of technology innovation, mean product lifetime, 

and failure rates impact the forecast system design (Östlin et al., 2009). For example, 

Clottey et al. (2012) developed a forecasting model to derive the distribution of used 

product returns. This information was coupled with a case company’s production 



30 

planning and control operations. The case company reduced onhand inventory through 

this setup, resulting in cost savings. Examples of forecasting studies in remanufacturing 

using past return data and new product sales data are Geda and Kwong (2021) and Liang 

et al. (2014).  

 

 

Figure 7. Product lifecycle distributions by Umeda et al. (2005) 

 

Many authors agree that forecasting core returns are a rather complex endeavour with 

many moving parts that limit the forecast accuracy (Goltsos et al., 2018; Wei et al., 2015). 

Due to this, only a limited number of studies have been done on this topic (Wei et al., 

2015). A return forecasting system may help to provide a rough image of returning cores, 

but it will lack accuracy due to the dynamic nature of supply chains (Souza, 2017, p. 100). 

Returning cores may face obstacles, for example, in logistic or customs processes that, 

as a result, hinder the core’s return journey. As a result, the number of returning cores 

will always be lower than the disposal distribution. Another challenge of the returns 

forecasting system is incorporating returning core quality into the forecast. Cores are 

returned in varying quality, of which only a certain amount are still fit for circular manu-

facturing (Goltsos et al., 2018). Among academia, forecasting for reuse product demand 

has been a more studied field in the CLSC context (Goltsos et al., 2018). 



31 

3 Case company and process 

This chapter describes the case company and the business unit affiliated with the case 

process. Similarly, a brief description of the case process is given.  

 

3.1 Wärtsilä and Wärtsilä Global Logistics Services 

Wärtsilä is a multinational company founded in 1834 (Wärtsilä, 2022). The company of-

fers an extensive portfolio of products and services to marine and energy markets, with 

a total annual revenue of around 5 billion Euros. It has a global presence with over 200 

locations in 68 countries, employing approximately 17,000 professionals. Wärtsilä’s core 

offerings for marine markets are ship engines, propulsion products, and marine systems. 

The offering for energy markets consists of engine power plants, energy storage solu-

tions, and associated optimisation systems. Both business units mentioned above are 

supported by Wärtsilä services which make an essential part of the company. Due to 

their product offering, the company is positioned in the middle of tomorrow’s clean 

transportation and energy generation. Wärtsilä has acknowledged this as decarbonisa-

tion is a leading strategic priority for the future. Currently, the company is developing 

engines that run on low and eventually zero-carbon fuels (Wärtsilä, 2022). 

 

Wärtsilä Global Logistics Services (WGLS) is a business unit within the Wärtsilä corpora-

tion. The responsibility of WGLS is to manage the complete logistical chain for Wärtsilä 

Spare Parts, from order intake to customer delivery (Wärtsilä, 2021). WGLS organisation 

comprises six smaller entities, Parts Coordination Management, Parts Supply, Parts De-

livery, Operations Support, Supply Management, and Global Customs Management. The 

central case organisation of this study is Parts Supply (PS) which manages activities such 

as sourcing, purchasing, quality, inventory planning and customs data expertise. In other 

words, Parts Supply manages the whole process of incoming goods from suppliers to 

stocking in the WGLS warehouse. PS manages approximately over 1 million different ma-

terials, of which around 40.000 thousand are managed actively. Annually the organisa-

tion processes more than 100.000 order lines (Wärtsilä, 2021).  



32 

3.2 Case process 

The case organisation’s reuse parts programme holds the name Exchange parts process. 

It has seen multiple iterations; the latest revision was released in March 2022 (Wärtsilä, 

2022). The case company refers to reuse components as “exchange parts” and EOU cores 

as “exhausted parts”. An exchange part can be a reuse component or a completely new 

component. The share of reuse parts presents a marginal portion of the case company’s 

spare part business. It amounts to 1 per cent of total sales but is expected to grow rapidly 

in the upcoming years (Wärtsilä, 2022). The case company approaches the reuse parts 

market by defining three market positions: defensive, strategic, and business-driven. 

Parts with defensive market position alleviate price-lowering pressure from new compo-

nents by offering a lower-priced reuse alternative. This allows the company to reach 

price-critical customers. Strategic components are the case company’s core business as 

the components contain Wärtsilä technology. The reuse parts programme enables the 

collection of used parts from the field, which helps the company to protect its intellec-

tual property. Parts with business-driven market position aim to produce profitable busi-

ness for the company without further strategic goals. Across all reuse parts, the incentive 

for a customer to buy a reuse part is a lower price compared to the price of a new com-

ponent. Reuse parts are promised the same warranty and performance guarantees as 

new components (Wärtsilä, 2022). 

 

The case organisation offers a variety of engine parts that have a reuse option available.  

This study focuses on 4-stroke reuse spare parts. The 4-stroke reuse engine parts cate-

gory consists of parts such as fuel pumps, injection valves, and cylinder heads. This study 

takes fuel pumps and injection valves under closer scrutiny. The scope consists of two 

fuel pump types and three injection valves. In a nutshell, the process cycle begins by 

selling a customer a reuse part. When the reuse part is delivered to the customer, the 

replaced EOU core is returned to Wärtsilä logistic centre by the customer. After recover-

ing the core, it is sent to Wärtsilä’s workshop or an external supplier for circular manu-

facturing. After the operation, the part is returned to the logistic centre as a reuse part. 

At the warehouse, the part is stocked until yet sold again (Wärtsilä, 2022). 



33 

The reuse parts programme involves stakeholders across the whole organisation. The 

spare parts sales team is the leading party guiding the process as they initiate the cycle 

by offering the customer a reuse part. Similarly, the sales team is responsible for ensur-

ing that cores are returned. Other essential parties are workshop personnel, purchasing 

team and inventory planning, who guide the circular manufacturing operation between 

the logistic centre and the workshop. The purchasing team and inventory planning are 

responsible for securing the availability of reuse spare parts (Wärtsilä, 2022).  

 

Figure 8 below presents monthly availability figures for fuel pumps and fuel injection 

valves participating in the reuse parts programme. Two availability graphs are displayed, 

availability at the sales date and availability at the required sales date. Availability at the 

sales date measures the availability at the time when the sale was made, while the avail-

ability at the required sales date measures availability at the time requested by the cus-

tomer. The latter is a later date, showing a slightly higher availability graph. The bar chart 

in blue presents units sold monthly. Both availability dates have fluctuated heavily re-

cently, creating challenges across the whole spare parts organisation. Availability drops 

directly after the more extensive sale have been made. The organisation is continuously 

monitoring stock availability levels. The availability target for availability at the required 

date is set to 97 per cent for reuse parts (Wärtsilä, 2022). 

 

 

Figure 8. Availability monthly: reuse fuel pumps and injection valves (Wärtsilä, 2022) 



34 

4 Methodology 

This chapter describes methods that were used during this study. First, the research 

strategy used is explained. Here also the criticality analysis method is introduced. This is 

followed by a description of the research data and how it was collected. The chapter is 

closed with data analysis methodology. 

 

4.1 Research design and strategy 

This study follows a qualitative research methodology and is explanatory in nature. Ac-

cording to Saunders et al. (2019, p. 179), qualitative research studies participants’ un-

derstanding and relationships associated with the studied phenomenon. The eventual 

goal of qualitative research is to create a new conceptual framework or contribute to 

existing theory. Qualitative research supports on non-numerical data, where interview-

ing is a commonly applied data-gathering method. After data collection, data is often 

analysed using sorting and categorisation. Qualitative research types are many, out of 

which explanatory is one of them. Explanatory studies are looking to understand causal 

relationships between study variables. For example, explanatory research can focus on 

how certain variables affect a studied problem or phenomenon. Therefore, explanatory 

research questions commonly begin with “How” or “Why”. Similarly, interview questions 

for data collection will likely start with the exact words (Saunders et al., 2019, p. 187).   

 

This thesis uses a case study as the research strategy. Case studies are among the pri-

mary research strategies applied in qualitative research methodology (Saunders et al., 

2019, p. 179). According to Yin (2014, p. 30), the case study strategy allows a deep study 

of a specific phenomenon in a particular context. At the centre of case study research is 

the need to understand how surroundings and study context are connected to the stud-

ied topic (Saunders et al., 2019, p. 196). Case studies provide the researcher with con-

crete and profound knowledge regarding a real-world topic. The potential fields of ap-

plication are nearly unlimited since case studies are used across almost all scientific dis-

ciplines. Case studies have been used in, for example, business, social, and educational 



35 

research (Yin, 2014, p. 30). Similarly, potential subjects are broad. The case study can 

seek to gain an understanding of a person, organisation, or other real-world phenomena.  

 

This research uses Process Failure Mode & Effect Analysis (PFMEA) tool to evaluate the 

criticality of found process challenges. PFMEA is a systematic approach to highlighting 

potential risks in products or processes (AIAG, 2019). The tool’s strength comes from its 

capability to identify potential failure risks, observe possible causes, and explain what 

could result from a failure. The tool is commonly applied for manufacturing processes 

but has also proved helpful in other processes (Zhu et al., 2021). PFMEA analysis begins 

by cutting the case process into single process steps that will be analysed in depth (see 

Appendix 4 and 5 for finished PFMEAs). For each process step, the team performing the 

PFMEA defines potential failure modes. The potential failure mode is a presumption of 

something that can go wrong in the process (AIAG, 2019). Then, the team evaluates the 

potential effects of the failure mode. The potential effects are assigned with a severity 

number that ranges from very low to high (1 - 10) (see Appendix 2 for evaluation criteria 

tables). Next, the potential causes resulting in this failure mode are evaluated. As well 

here any existing cause prevention controls are listed. The existing prevention controls 

are given points on how well they prevent the failure mode. The scale runs from 1 – 10 

(see Appendix 2). Thirdly, the tool analyses how well the current tools detect potential 

failure modes. Any existing detection methods should be listed and given a grade be-

tween 1 – 10 based on detection performance (see Appendix 2) (AIAG, 2019). After scor-

ing severity, occurrence, and detection, the identified failure mode is given an action 

priority level to determine whether it requires actions from the management (see Ap-

pendix 3 for the action priority table). The range goes as low, medium, and high. The high 

AP failure modes require immediate action from the process stakeholders, while me-

dium and low should have less urgency if high AP challenges have emerged (AIAG, 2019). 

 

4.2 Data collection 

The primary data for this study was collected using recorded unstructured and semi-

structured interviews. According to Saunders et al. (2019, p. 437), unstructured and 



36 

semi-structured interviews are qualitative interviewing methods that explore partici-

pants’ experiences, feelings and understanding of the studied subject. These allow the 

researcher to proceed to greater depths as the interviews are not bound to strict inter-

view limits. The researcher can follow the participant’s reply with a follow-up question 

that can reveal additional information. Semi-structured interviews allow similar flexibil-

ity in the interviewing situation. The main difference to unstructured interviews is that 

the researcher has a predetermined list of themes covered during the interview. 

 
Table 1. Research Interviews 

Interview no. Interview Date Participant’s job function Interview language 

1. (PM1) 30.09.2022 Product manager Finnish 

2. (OP2) 15.12.2022 Operative purchaser Finnish 

3. (OP3) 16.12.2022 Operative purchaser Finnish 

4. (OP4) 19.12.2022 Operative purchaser English 

5. (SP5) 19.12.2022 Strategic purchaser Finnish 

6. (WF6) 21.12.2022 Workshop foreman Finnish 

7. (PE7) 03.01.2023 Process expert English 

8. (IP8) 03.01.2023 Inventory planner Finnish 

 

A total of eight one-hour-long interviews were conducted during this research. Table 1 

above presents the conducted interviews and used interview language. The study par-

ticipants were chosen so that all aspects, demand, supply and operations, of a CLSC 

could be covered. The interviews were guided using predetermined questions, while 

most of the interviews followed a format of unstructured interviews. Appendix 1 pre-

sents a general list of interview questions. This study offers direct quotes from conducted 

interviews. The author has translated the quotes from Finnish to English where neces-

sary. Qualitative past delivery data supported the primary research data as a secondary 

source. The case company provided the data. 



37 

Interviews commenced with a manager responsible for the case company’s reuse parts 

programme. The discussion provided valuable background information on how the cur-

rent circular system operates. From here, the interviews continued to purchasing per-

sonnel responsible for ensuring a sufficient supply of reuse parts to meet customer de-

mand. A total of four purchasing team members were interviewed with varying job func-

tions and experience. The operative purchasers’ primary responsibility in the reuse parts 

programme was order placement and management of open orders. Among operative 

purchasers, the purchasing role experience was spread as the most experienced opera-

tive purchaser had been working for 25 years, followed by nine years of experience and 

one year of experience for the newest team member. The fourth purchasing team mem-

ber worked as a strategic purchaser. The strategic purchaser’s function was noticed to 

carry more responsibility than the function of an operative purchaser. The strategic pur-

chaser’s primary responsibilities were securing a stable supply of reuse parts, product 

data management, and price negotiations. The person was also involved in strategic dis-

cussions with surrounding key stakeholders. The interviewed strategic purchaser had 

been working in the role for eight years. 

 

After purchasing team, interviews proceeded with other stakeholders involved in the 

process. A workshop foreman overseeing the reuse part circular manufacturing opera-

tion was interviewed. The interviewee managed a group of three workshop workers. The 

foreman had long experience in the current role, while experiences among the workers 

varied from less than a year to multiple years. The following person interviewed was a 

process expert from the case company’s sales organisation. The interviewee was respon-

sible for building current sales side processes in the reuse part programme, creating nec-

essary training materials, and giving training to sales personnel. The interviewee had 

good insight into the process flow from a spare part sales and core returns perspective. 

The person had been working in the role for four years. A final interviewee was an in-

ventory planner. The inventory planner's primary responsibilities were to ensure that the 

case company had material available for sale while ensuring that stocks had a good ro-

tation and that inventory costs were optimised. The inventory planner was regularly 



38 

involved in discussions regarding which parts and quantities were to be kept in stock. 

The interviewee had been working in the role for six years. 

 

4.3 Data analysis 

Acquired research data were analysed using a thematic analysis method with an abduc-

tive approach. According to Saunders et al. (2019, p. 651), thematic analysis helps the 

researcher to identify emerging themes and patterns by sorting findings into categories 

or codes. The analysis procedure depends on whether the research applies a deductive, 

inductive, or abductive approach. With the deductive approach, the researcher analyses 

the study results considering the existing theory. The purpose is to identify whether the 

current theory can be said to apply also in a new context that may be yet uncovered by 

research. Whereas the inductive approach aims to build new theories and frameworks 

based on the research data findings. Finally, the abductive approach is a hybrid of the 

approaches mentioned above, as the abductive approach aims to revise or further 

deepen the existing theory (Saunders et al., 2019, p. 641). The choice for the abductive 

approach can be motivated by the researcher’s initial observations that there is more to 

a particular phenomenon than what is currently explained by the existing theory  

(Piekkari & Welch, 2019). 

 

The analysis for this thesis began by transcribing each audio-recorded interview into a 

text format. Transcriptions were then screened, and findings were sorted into problem 

categories identified from the existing literature. As a part of the abductive analysis ap-

proach, these existing high-level categories were explored on a deeper level, contrib-

uting to existing theory by expanding it. The problem categories from existing literature 

can be found in the Challenges in circular manufacturing chapter. The challenge catego-

ries also provide the framework for the upcoming Results- chapter. The primary analysis 

phase was followed by PFMEA workshops to assess critical challenges in the CLSC. In 

these sessions critical and non-critical challenges were separated based on the PFMEA 

AP level (see Appendix 3 for the AP table). In this study, challenges ranked as high AP 

were considered critical and taken for further analysis. 



39 

5 Results 

This chapter presents the results of this research. First, recognised challenges are listed 

as the result of a systematic identification process. A summary table of these challenges 

follows before closing the chapter with severity analysis with the PFMEA tool. 

 

5.1 Recognised challenges 

The interviews aimed to identify factors influencing demand and supply imbalance 

within the case company’s CLSC. The performed interviews pointed to three sections in 

the case CLSC where the challenges took place: reverse supply chain processes, circular 

manufacturing ordering process, and circular manufacturing operation. The found chal-

lenges are presented by categorising them into challenge areas discussed in this study's 

theoretical background section. High-level areas are further divided into sub-categories. 

 

5.1.1 Demand and supply challenges 

Challenges relating to demand and supply management study the case company’s CLSC 

system, how it was designed, and current efforts to balance demand and supply. It was 

observed that the current system was more demand-driven, and any purposeful at-

tempts to balance demand and supply were made from the supply side. 

 

Demand management 

According to the Product manager (PM 1), the case company’s sales personnel did not 

deliberately push or control reuse part demand, i.e., through marketing. A standard sales 

process was initiated by the end customer. The end customer requests a specific spare 

part with a part number that they looked up from a provided spare part manual. The 

spare part manual contains a part number for a new spare part; if available, a reuse part 

number is provided as an alternative. Ultimately, the customer chooses whether to buy 

new or reuse spare parts. The Product manager (PM 1) mentions that only a handful of 

spare parts have a reuse alternative since the business is still in its beginning phases. 



40 

It could be said that reuse part demand was managed with a reactive pull system. Once 

reuse parts were sold, this initiated supply-side processes. The demand for these parts 

was not pushed with tools such as demand forecasting, which would make the system 

more proactive towards the customer. Some study participants saw demand forecasting 

as a critical development direction since the reuse part volumes were anticipated to 

grow in the coming years (PM1). However, study participants ensuring the reuse spare 

part supply were uncertain whether this would be possible with the current process 

setup (OP 3; IP 8). An uncertain supply of cores was seen as the main factor prohibiting 

forecasting system implementation for reuse parts. In the current process setup, using a 

pull system to manage customer demand was not seen as problematic since more alarm-

ing issues were on the supply side. However, once the supply side improves, a forecasting 

system may be warranted to coordinate the system more efficiently. 

 

Supply management – core recovery 

This section explores the case company’s core return strategy and how returns were mo-

tivated in the current system. In addition, any issues associated with these will be de-

scribed. The case company had implemented a deposit-based return strategy to manage 

core returns from customers. The returned core was part payment for the reuse part 

(PM1). Therefore, timely returns were motivated with strict terms and conditions where 

the case company reserved a right to invoice the customer in case of a late core return. 

By purchasing a reuse spare part, the customer agreed to these terms. 

 

The standard timeframe given for the return was 12 weeks. The timer started ticking 

when a reuse part was shipped from the case company’s logistic centre to the customer 

(PE7). Therefore, the 12 weeks also included activities: new reuse part delivery to the 

customer and installation during maintenance. After the first six weeks, a reminder to 

return the core was sent to the customer. The case was closed if the core was returned 

to Wärtsilä’s logistic centre within 12 weeks. When the core was not received within 12 

weeks, a spare part sales team member would send another reminder to the customer 

mentioning that a penalty may apply if the core was not returned. Issuing a penalty was 



41 

always discussed with an account manager who was responsible for all sales projects 

with that specific customer (PM1). An invoice would be sent if the account manager gave 

the green light to penalise the customer for the late return. The amount invoiced de-

pended on how many weeks late the return was. If the return exceeded 24 weeks, an 

invoice for the entire worth of the core was sent to the customer and the core was not 

expected back anymore. 

 

Invoicing customers for late core returns was a hurdle for the case company. The Product 

manager described that while there have been many late return cases, only a portion of 

these has been invoiced while operating the current return system (PM1). The process 

was noticed to lack a disciplined approach, which leaves a possibility that after 24 weeks, 

the case company does not receive the core nor get compensation for it. The main con-

cern was that invoicing the customer may hurt already established business relations. 

According to the Product manager:  

 

Penalty invoices for late returns have been waived off if the late return was caused 

by reasons not dependent on the customer. Or, if there was a big sales deal under 

negotiation with them, it was considered better to avoid bothering the customer 

with an additional invoice of minor value. (PM1)  

 

Reverse logistic network 

It was found out that the primary responsibility to return the core was on the customer’s 

side. After the EOU core was removed from the engine, the customer was to package it 

into a provided box and ship it to the case company’s logistic centre (PE7). In the current 

process, it was necessary to return cores to a single warehouse location in central Europe. 

Limitations in the current setup had already been recognised by the company as the 

Product manager (PM1) commented that a single point of return was a challenge in the 

reverse supply chain. One location increases process variables and logistics costs since 

the cores were returning worldwide. A preferable option would be to have a return lo-

cation closer to the customer (PM1). The Process expert shared similar experiences: 



42 

If we are talking about a customer based in Europe who needs to return cores to 

our central logistic warehouse in Europe, then everything is easy. The customer is 

likely able to return parts within the given timeframe. But we are a global organi-

sation. This means that we are dealing with customers who are based on the other 

side of the ocean. In such a case, the return process evidently takes longer. (PE7) 

 

Process expert (PE7) also raised concerns regarding reverse supply chain visibility. Since 

the customer took care of the return delivery, the case company had little information 

regarding when the cores might return. “There are big issues with the return delivery 

because we cannot control what the customer does.” (PE7). The purchasing team also 

mentioned the lack of information on returning cores (OP2; SP5). The information re-

garding returning cores was seen as valuable for the purchasing team.  

 

5.1.2 Information and knowledge challenges 

Many study participants named challenges relating to information and knowledge 

among the most influential hampering the process performance. This chapter explores 

challenges observed in internal and external process knowledge. 

 

Internal process knowledge 

It was found that some of the CLSC process issues could be traced back to internal pro-

cess knowledge. Mainly this was noticed to disturb the spare part sales team’s reverse 

supply chain processes for core returns. The Product manager and Process expert (PM1; 

PE7) estimated that the rate of core returns could be hindered due to stakeholders not 

being fully aware of the nature of reuse parts and what kind of processing is needed. 

The product manager emphasised: 

 

One of the challenges is to create an understanding internally and towards the 

customer that when a reuse part is sold, the core must be returned within the 

given schedule. Otherwise, there will be a fine as per order conditions. (PM1)  



43 

The Product manager (PM1) continued that, as the reuse spare part sales volumes are 

only a small piece of the case company’s entire spare part business, a normal salesperson 

might deal with reuse spare parts perhaps a couple of times per year. Since people are 

often not involved with the process, the steps may be forgotten. Process expert (PE7) 

added that spare parts sales organisation has many instructions and exceptions that 

should be considered. The case company also had an old parallel reuse part process still 

in place, which was said to complicate processing, as the sales personnel were not always 

certain which process should be followed and communicated to the customer. The Pro-

cess expert (PE7) emphasised that the spare parts sales personnel are an organisation 

with around 250 members where each person has a specific customer market area glob-

ally—as a result, spreading knowledge and understanding in such an organisation is 

tricky since “whenever you are dealing with plus 200 people. It is always difficult to im-

plement new processes, and the learning curve is slow. Especially when you think a per-

son might be handling this kind of case twice yearly, perhaps.” (PE7) 

 

Some level of process knowledge issues was also observed in the interviewed purchasing 

team. The respondents reported that process responsibilities and agreed ways of work-

ing with the reuse parts were not always clear (OP3; OP4; IP 8). The interviewed Strategic 

purchaser (SP5) commented that any ordering process issues started already when the 

reuse part process was initially released. When the current process was developed, there 

was no purchasing team presentative to ensure that the purchasing team’s needs would 

be considered. The Strategic purchaser commented: 

 

My feeling is that none of the purchasing department’s process developers was 

involved in the development of the current reuse part process, even though the 

purchasing team has a clear part to play in it. Therefore, any issues that purchasing 

may face have gone undiscussed. Until now, the process has been coordinated by 

the spare part sales process development (SP5). 

 

 



44 

Customer process knowledge 

There were concerns about whether customers were fully aware of how to deal with 

reuse spare parts (PM1). These issues would be closely connected to spare part sales 

personnel’s process knowledge, as sales were the first point of contact for the customer. 

The limited customer process awareness was expected to contribute to reverse supply 

chain challenges, as the customers had a significant role in the return logistics. Process 

expert (PE7) was doubtful if customers fully acknowledged the terms and conditions in 

force when they decided to purchase a reuse spare part. The Process expert explained: 

 

If the spare part sales personnel send the general terms and conditions via e-mail, 

you cannot take it for granted that the customer will read it. So, you cannot say 

that you have informed the customer. You cannot force the customer to read eve-

rything you send him. The communication part is always the trickiest, especially 

when you are dealing with customers. (PE7) 

 

The Product manager (PM1) explained that the already mentioned newness of the reuse 

spare part business also impacts customer process awareness, as it does for internal pro-

cess knowledge. The fact that the core must be returned can be new to some customers. 

Additionally, hundreds of spare parts can be replaced in an engine during standard 

maintenance. Therefore, the returnable core can go unnoticed if the customer does not 

know to pay focus to it (PM1).  

 

The lack of process knowledge concretises at the case company’s logistic centre. One 

clear sign is late returns, but the cores have also been noticed to return in varying con-

ditions and packaging, even though the case company provides instructions on how the 

parts should be returned (PM1; SP5). Customers were also required to include appropri-

ate product documentation to the return delivery that tells the logistic centre inbound 

personnel what is in the box (PE7). Cores returning without proper documentation were 

causing significant issues at the case company’s logistic centre: 



45 

Our customers are returning cores without proper documentation. This is causing 

many issues, especially in the inbound. Without documentation, we are not able 

to track what is in the box. So, this means that we are wasting a lot of time and 

resources trying to understand what we just received in this delivery. The customer 

should attach a label to the return that helps us to identify it, but the reality is that 

the customers are not doing it. (PE7) 

 

5.1.3 Material flow challenges 

The material flow challenges investigate how finished reuse products, cores, and sub-

components flowed in the case company’s process. The chapter also reviews challenges 

associated with seeding practices and issues resulting from inventory management. 

 

Circular manufacturing order creation 

According to the Operative purchaser (OP2), the ordering process for reuse parts starts 

when the stock balance has gone below pre-set safety stock level. As a result, the com-

pany’s ERP system calculates the shortage and creates a purchase requisition for opera-

tive purchasers to process. The purchase requisition indicated that operative purchasers 

need to order something to replenish the safety stock deficit. After opening the reuse 

part purchase requisition, the order creation process began by checking if enough cores 

had returned from the field. If cores are available, the operative purchaser places a cir-

cular manufacturing order and ships cores to the operating facility. If enough cores were 

not available, the operative purchaser put the order on hold until enough cores had re-

turned (OP4). Nearly half of all reuse orders were put on hold due to missing cores during 

the past years (see Figure 9). If an order had been put on hold due to missing cores, the 

time spent waiting until order placement was 36 days on average when considering all 

five reuse parts in this study. This had a significant contribution to the total lead time of 

reuse parts. Figure 10 below presents the number of orders during 2021 – 2022 and the 

average waiting times per reuse part type. The long waiting times were concerning to all 

purchasing team members. 



46 

 

Figure 9. Ordering blocking reasons from 2021 – 2022 

 

 

Figure 10. Time spent waiting for cores from 2021 – 2022 

 

It could be said that in the current ordering process, the reuse part supply stops when 

cores are not available. This was problematic as customers were promised reuse spare 

parts with a quoted lead time (OP3). The purchasers were questioned on what happens 

when there are no cores available. The Operative purchaser emphasised that “it is un-

clear what should be done if we have no cores available and reuse part stock is empty. 

Right now, we block the purchase requisition and wait for more cores to return” (OP3). 

 

 

 



47 

Core inventory management 

It was observed that core return rates varied among reuse parts. Based on orders put on 

hold due to missing cores during 2021 - 2022, reuse fuel pumps were more often facing 

a situation where there were not enough cores to send for circular manufacturing (see 

Figure 11). During this period, a third of all reuse injection valve orders were waiting for 

cores, while for reuse fuel pumps, the figure was double, as two third of all orders were 

waiting for cores. The pain point within the two reuse fuel pumps was especially fuel 

pump 2. This was estimated to result from the nature of these products. The reuse in-

jection valve could go through three circular manufacturing cycles, while reuse fuel 

pumps only one cycle before disposal. As a result, the total amount of reuse injection 

valves in circulation is much higher than in reuse fuel pumps (PM1).   

 

 

Figure 11. Orders waiting for cores per product type 2021 – 2022 

 
Occasionally, more cores were available than the demand for reuse parts at that moment. 

In this case, the company had no policy determining what to do (OP3). An Operative 

purchaser had observed the situation and saw there a possibility for improvement: 

 

What should we do with excess cores that do not have demand right now? Why 

don’t we just send those also for circular manufacturing, even if our reuse part 

stock level would go above the set safety stock? It would be better to have those 

parts in stock as finished reuse parts rather than as cores. (OP3) 



48 

Order lot sizing 

It became apparent that reuse part order lot sizes were not managed adequately across 

all case parts. The order lot size was determined based on core availability during order-

ing (OP2). If there were a need to place a reuse part order, for example, for 20 pieces 

and enough cores were available, operative purchasers would send all 20 pieces for cir-

cular manufacturing. Similarly, there was uncertainty regarding the minimum reuse part 

order quantity. If only three cores were available, an order for this quantity was often 

placed. The Operative purchaser (OP2) mentioned, “it is not clear what is the minimum 

order quantity per reuse part order”. 

 

Orders placed with too low quantities could be expected to increase logistics and han-

dling costs per unit. While too high amounts were causing concrete issues at the internal 

workshop. The Workshop foreman (WF6) emphasised that the workshop has limited 

space for intermediate storage. Therefore, too large core shipments disturbed the work-

shop’s operations. A well-manageable lot size would be 12 pcs (WF6). 

 

Sub-component inventory management 

Global supply chain challenges impacted the case company’s supply for sub-components. 

Respondent reported that sub-component lead times had drastically extended after the 

COVID-19 pandemic, which pressured the company’s operations (OP3). Additionally, it 

was noted that required sub-components for internally produced reuse parts suffered 

from outdated inventory management practices. The main issue was that some of the 

regularly needed sub-components were not kept in stock and had to be ordered sepa-

rately for each new reuse part order. Which, as a result, increased the total lead time. It 

was also found that sub-components already held in stock needed safety stock level ad-

justments to better support the current level of demand (SP5). As a part of the issue, a 

few reuse parts’ product structures were not up to date, which resulted in the issue that 

the company’s ERP did not reserve required sub-components when it was time to order 

reuse injection valves. At the time of the interview, the responsible strategic purchaser 



49 

had already become aware of the issues and solutions that were being looked for. The 

Strategic purchaser saw the situation as follows: 

 

We have been battling with low stock availability for reuse part sub-components. 

This has to do with the fact that some of the components have not been stocked 

using safety stocks. However, this should improve as we have started to update 

the reuse injection valve bill-of-materials and manage sub-components with 

safety stocks. This should help in managing sub-component inventories. (SP5) 

 

Balancing supply with seeding 

Using a deposit-based return strategy for core returns requires the company to supple-

ment the reuse part supply with new components to ensure sufficient stock availability. 

This originates from the stochastic nature of core returns. According to purchasing team 

members, there was no organised process to transfer new components into the reuse 

part stock. Some transfers had been done to create an initial inventory for a new reuse 

spare part or if there was an urgent customer order with much pressure from the spare 

part sales team (IP8; OP2). In case of an urgent order, the Operative purchaser would 

approach the responsible strategic purchaser with a request whether new products 

could be transferred into the reuse part inventory. Although, there was no coordinated 

approach to this, as respondents mentioned that it was not clear in which cases the 

transfer should be done (OP3). The interviewed Inventory planner highlighted the issue 

in the current way of working: “Now we are transferring new parts to reuse stock some-

times, but it is unclear when it should be done and who is the end responsible for deciding 

whether a transfer is needed.” (IP8) 

 

The possibility of supporting reuse part stock availability through seeding was further 

complicated for both reuse fuel pump types due to a material replacement process. Ac-

cording to the strategic purchasers (SP5), both original fuel pump variants had been re-

placed by a newer product version. This prohibited the case company from transferring 



50 

new pumps into the reuse stock since it preferred not to mix different product versions. 

The ongoing replacement process was found to disturb the reuse fuel pump supply. 

 

5.1.4 Core challenges 

Any issues observed in the interview data connected to the handling and management 

of cores are presented in this chapter. The chapter begins by describing issues arising 

from the core acquisition. Core quality management practices follow this. The topic is 

closed with a sub-chapter on core version management.  

 

Core acquisition 

The case company had no alternative sources to acquire cores than their customers. The 

components in the reuse part programme were unique in the sense that the components 

were designed either by the case company or in close collaboration with a supplier (PM1). 

This took away the possibility of using third-party sources for core acquisition. While the 

lack of external sources was partly a limiting factor, the situation had strategic benefits 

as the case company could have more control over their spare part business (PM1). 

 

Core quality control 

As in any CLSC system, the case company’s cores also returned in varying conditions after 

customer use (SP5). It became apparent that there were currently limited measures to 

filter out too worn cores when receiving them in the logistic centre. When a core returns 

to the warehouse, a check is done to confirm that the material number corresponds with 

the part that is being stocked. During the check-up, cores that have visible damage by 

visual inspection, i.e., cracked frame, can be removed from the cycle. However, there 

was no process to check for less visual damage that might indicate that the core is ready 

for disposal. Nor does the inbound centre personnel check how many times the core has 

already gone through the cycle. Reuse spare parts have a marking telling how many 

times those have been circular manufactured (PM1). 

 



51 

There have been a few occasions when broken or otherwise, EOL injection valve cores 

have reached the workshop (WF6). The workshop personnel then disposed such cores. 

Too degraded cores that reach workshops hinder the reuse product delivery as the work-

shop must under-deliver or ask to send more cores to process. The Product manager 

(PM1) acknowledges the challenge of returning core condition evaluation at inbound. 

According to the Product manager: 

 

There is currently no process in place to check the overall condition or markings 

on returning cores. The warehouse inbound personnel could be instructed to re-

move cores with disposal indicating markings on them. Deeper condition evalua-

tion requires more technical understanding, which is currently not available in the 

logistic facility. (PM1) 

 

Core version management 

As mentioned in one of the earlier chapters, the reuse fuel pumps underwent a version 

change (SP5). The case company faced a challenge of whether older type cores should 

be updated to a newer spec. According to the Strategic purchaser (SP5), the returning 

older version fuel pump cores can be updated to the latest version. However, this would 

come with a cost since one of the priciest sub-components requires changing. Therefore, 

the company had to estimate whether the update was worthwhile economically. The 

other possibility weighed was to create a new reuse fuel pump type to keep two versions 

separate (SP5). This would result in additional reuse products, which would require more 

follow-up. Also, this was estimated to create a question of which customer installations 

can and are willing to use older type reuse fuel pump when a newer would be available. 

 

5.1.5 Operation