The past few months have disrupted nearly every aspect of the global economy, including supply chains. As a result of COVID-19, it has become clear just how vulnerable and unsustainable each supply chain is.
However, supply chain leaders who look to the circular economy will be able to find and build more stability into the process. Some of the benefits that come from joining the circular economy include improving the resilience of raw materials, enhancing environmental responsibility, and strengthening customer engagement.
There are three rules for the circular economy, which are:
- Reduce waste and toxicity, allowing for reprocessing of products
- Maintain the highest quality of raw materials for as long as possible
- Aim to protect the environment and find ways to return materials to it
To start benefiting from the circular economy, supply chain leaders should take on six initiatives including optimize product design, improve internal and external collaboration, and reduce cost inefficiencies.
Circular Economy Improvement
For supply chain leaders to benefit from the circular economy, there needs to be a long-term focus and commitment. Consider the products that could be adapted to fit into the circular economy. This includes looking for products with raw materials that are able to be refurbished, harvested, or recycled to promote sustainability.
Supply chain leaders should also create a strategy along with some goals for identified products. These goals should move the products along their journey into the circular economy. It is important to understand and accept that the circular economy will be a learning process as you move towards integrating your company and products into it.
Start with some pilot projects to gain experience and understanding. These projects can also serve to promote the idea of a circular economy to company leaders. Having the support of senior leaders will give you the freedom to move more products into the circular economy.
Focus on the Customer
On your path to transition your supply chain to the circular economy, think about how to make the process understandable and easier for your customers. For example, if you are looking for voluntary participation in the program, such as having customers return products for recycling or refurbishing, make the process as clear and simple as possible. If your return process is too complicated, it will reduce the number of customers willing to participate. This, in turn, will have a negative impact on your journey into the circular economy.
Improve Internal and External Collaboration
Transitioning your supply chain to the circular economy should be a team effort. You should cultivate a team of like-minded individuals who can help oversee materials that have reached their end life. To solidify the connection, search for team members that see the value and rewards in the circular economy.
Build partnerships that will be beneficial to each party. Partner with organizations like professional waste management companies. They can provide you with the end-of-life materials you need. Employ logistic teams that can collect the materials in a single place. Connect with suppliers that are capable and willing to reprocess the raw materials.
Assess Residual Materials Value
As part of your long term strategy, calculate the cost of reprocessing raw materials. To determine the full value of the circular economy, consider the costs of residual material value, the volatility of raw material prices, as well as your reputation among consumers, and meeting your environmental commitments.
Keep in mind that not every product is a good candidate for the circular economy. Throughout your journey, update your strategy. This may mean a change of products that you reclaim at end-of-life. Staying flexible is the best way to reap the benefits and rewards of adapting your supply chain to the circular economy.
Optimize Product Design
A key component to participating in the circular economy is the design of your product and packaging. While this has normally not been an area where supply chain leaders participate often, it is vital to do so if you want to be a part of a sustainable supply chain model like the circular economy.
When considering the design of your organization’s product, look to incorporate materials that have the most potential for reprocessing or recycling at the end. It is also important to think about the environmental impact that your product design has. Encourage your design teams to use circular metrics for the design. The more people you have onboard working towards building a stronger circular economy, the more benefits you’ll see.
Mitigate Costly Inefficiencies
Before you begin, do a reckoning of what kind of financial impact your organization will face if you transition to a circular economy. While a circular economy’s value goes beyond dollars and cents, it is important to understand what the cost will be to your company. Keep in mind that while storing product materials until they can be reprocessed might have a negative effect on your company’s working capital, it will bring about security for raw materials.
The COVID-19 pandemic has revealed the vulnerability of the supply chain. The reality is the current global supply chain is not resilient in these types of scenarios. Companies will see more benefits from moving to a circular economy.
There are three main advantages of the circular economy including improving customer engagement with your company, demonstrating environmental responsibility, and having a positive impact on the use and reuse of raw materials.
Supply chain leaders looking to move toward the circular economy can take six easy steps to get there including, committing to a long-term sustainable strategy, building collaborative partnerships, evaluating product design from a circular economy standpoint, and mitigate any cost inefficiencies.