Productivity goes up; cost comes down. The circular economy isn’t just a theoretical concept, it can be implemented, and is often much easier than one would think. Find out how you can use reverse logistics to influence your supply chain and make the circular economy happen.
Logistics are critical to the success of circular economy initiatives. Projects are affected by the practicalities of moving resources from ‘A to B’, as well as the costs of implementation and operation. Teams face new and exciting challenges, such as planning the retrieval of waste materials.
A fundamental driver for adopting a circular economy business model is to improve productivity and further increase the efficiency of logistics. One common feature of a ‘circular’ business model is the adoption of ‘reverse logistics’; for example, utilising the empty space of a delivery vehicle to transport materials or products back to a factory or site.
In the initial stages of helping a client implement a ‘circular’ business model, we first look to eliminate waste where it is created, then to retrieve it as a segregated stream for local and relevant re-processing. Ideally, it would then return (in some form) to the sector it came from.
The factors affecting successful circular economy initiatives in a supply chain (such as retrieval of waste materials) include:
- The handling of waste materials on-site. Waste needs to be separated and stored on-site for cost-effective recycling/recovery. However, employees need to be educated, motivated and managed for this process to be successful.
- The value of the waste stream. The lower the value, the harder to justify any cost of recovery.
- The complexity of the supply chain. Extended supply chains that, say, cross international borders, are more difficult to manage.
- Storage of materials. Space restrictions, frequency of collection, fire safety impacts and other regulatory issues may constrain the implementation of solutions.
- Dealing with third parties. Logistics are often outsourced to a third party that is disconnected from direct manufacture and focused on the lowest cost of delivery rather than environmental performance.
- The size of the company. Larger companies will need additional management to create a more ‘circular’ way of performing generally, or when designing, delivering and managing a particular product from cradle-to-grave.
Very often, change in a supply chain is more easily driven by the organisation at its peak, such as the end client showing the necessary leadership to control and influence the supply chain and stakeholders, while creating a prosperous environment of eco-innovation. It is no co-incidence that the Ellen Macarthur Foundation has been amassing a group of 100 diverse corporates around the globe, establishing the critical mass for disruptive change to happen.
We’ve put together some insight from our team’s experiences designing, trialling and implementing closed loop projects:
- Communicate with management and staff the desire for a ‘circular’ business model.
- Create the environment for eco-innovation using commercial incentives: policy, specification setting, vendor tendering, supplier selection, management.
- Take a whole-system view of the supply chain to reveal the economic levers or incentives that can initiate change for more ‘circularity’ with each supplier: longer contracts, faster payment terms, sole supply agreements etc.
- Communicate the life cycle cost-impacts of current ways of working to stimulate innovation, both internally and also externally throughout other parts of the supply chain.
- Understand which stakeholders have both the motivation and capability to improve their operations.
- Understand who owns and operates the logistics fleets; and who manages the relevant operational personnel to sort, segregate, collect and process material waste.
FORD: REVERSE LOGISTICS IN PRACTICE
Suppliers in the automotive industry for manufacturers such as Ford (Europe), have successfully developed this approach over the past years by designing returnable, robust, re-usable storage trays for the delivery of components, rather than create endless packaging waste.
Once components have been delivered to site, the return journey of the delivery vehicle is filled with the packaging from a previous drop off. In a staged approach, recycling solutions may first be adopted, and with these in place, the supply chain is ready to progress to re-use options, as in the example at Ford above.
There are many different opportunities to help sectors and companies evolve their business into a more ‘circular’ way of operating. While some industries may eventually be faced with significant disruption externally, there are also ways in which a business can evolve more gradually towards this way of operation.