Is remanufacturing the new recycling? Petar Ostojic certainly thinks so. As CEO of Neptuno Pumps, a $13 million Chilean company that makes industrial equipment for the mining industry, he’s become a leading spokesman for what’s known as the circular economy: a system in which manufacturers reclaim old products, reengineer them to brand-new status, and resell to customers in a continual, virtuous cycle.
Today, 60 percent of Neptuno’s products are refashioned from recycled pumps. Within five years, Ostojic expects to bump that figure up to 90 percent, he said during a recent presentation he made to the Entrepreneurship and Competitiveness in Latin America program at Columbia Business School. (Professor Emeritus Peter Kolesar and Adjunct Professor Murray Low was his advisors.)
To implement the new circular model, Neptuno is in the midst of what Ostojic considers a fourth rebirth. His grandparents first used the site of the company’s factory to make candles. Ostojic’s father gave Neptuno its current name in 1972 when he created a foundry and machine shop to serve the fishing industry.
Headquartered in Chile’s Atacama Desert — which is not only the driest place on earth but also a world-renowned mining locale – the company again rebooted its factory a decade ago to cast pipes for mining. But as the bottom dropped out of the commodities market and customers suddenly became cost conscious, the company revisited its business model once again in 2015. The challenge: to make their products cheaper, more efficient, customizable, and higher tech in a world that is turning to seawater rather than fresh water as a key component of operations.
“We are a 40 year-old company, 10 years with pumps,” said Ostojic. “It took us nine years to know who we are.”
Today’s circular economy model calls for Neptuno to make, sell, or lease then repair used equipment it resells to customers, a clear departure from the old “use and discard” practices common in the mining industry. The company touts clear advantages in this approach: Customers still get a one-year guarantee (the same that Neptuno issues for new products), but pumps are 60 percent to 70 percent of the cost of new products and can be delivered in a much shorter time frame.
Neptuno has rejiggered its design processes to make its pumps easier to disassemble and provide easier access to the equipment’s most expensive parts. It also works with customers to actively source material that it can recycle. And, going forward, it expects to build more local manufacturing capability to stay closer to its recycling suppliers.
Although large competitors have not yet followed suit, Ostojic said the world is starting to catch on to the advantages of a circular economy. The World Economic Forum suggests the linear economy squanders nearly 80 percent of the $3.2 trillion value of consumer goods each year. The Ellen MacArthur Foundation forecasts that European manufacturers could save $630 billion a year in material costs by adopting a circular model. The circular economy, notes Ostojic, could be particularly beneficial for fast-growing emerging markets, where development cash is scarce and the time and logistics needed to deliver heavy-duty solutions to remote locations is precious.
Beyond the Desert
Ostojic feels Neptuno is poised to tap the global marketplace for pumps, noting that the same large mining customers he serves in Chile often have operations in other parts of the world. Last year Neptuno opened its first offices in Peru and is in the midst of tripling its sales staff. The company also installed the largest 3D printer in Latin America, which it uses to make pump molds for its foundry.
Noting that all the company’s historic reboots have been self funded, Ostojic does not rule out another change in its identity. Although he doesn’t dismiss the possibility that products could someday change, he does expect Neptuno will follow the remanufacturing credo no matter which direction it goes. “Pumps have been a way to get here,” he said. Following the circular economic approach, “we can do anything we want in the future.”