Supply chains and the importance in a circular economy

In this article, we discuss the concept of supply chains, circular supply chains and their importance.

Consumption patterns

Most of our typical consumption patterns, as global consumers, are linear consumption models. New raw materials are extracted, processed into finished products and distributed to customers online and through retail locations. Straightforward supply chain for the sake of example:

The customer uses the product. At the end, of the product's life, at the consumer's option, or if the product is no longer usable, the product is deposited in a landfill.

In this model, the supply chain of goods is one-way. From raw materials to the end of product life. There may be some returns of expired products or consumer returns. However, for the most part, the product follows a linear path from the cradle (extraction of raw materials) to the grave (landfill).

Circular supply chains

In circular supply chains, outputs go through reverse logistics. This is because they are put back into the system as inputs instead of retreating to their grave. The image below illustrates the process by which outputs are now recycled, repaired or refurbished for use as inputs to another system.

First, let's look at the upstream opportunities for circularity in the supply chain. It becomes the reverse logistics of collecting and transporting waste to a processing facility in the case of recycled packaging or to post-industrial waste (i.e., after manufacturing). Then it is often sold as a raw material to another industry. In this example, consider particle board. It takes waste wood scraps and glue and the board is made from much of your furniture.

Looking at downstream supply chain activities from the customer back to manufacturing and processing. In this scenario, reverse logistics transports end-of-life finished goods to other consumers, as is the case with reusing fashion by donating it to a thrift store or transporting the product to a repair/refurbishment facility, and finally the product can be recycled, such as a PET bottle or aluminum can.

Supply chain and return logistics play a crucial role in the circular economy.

The essence of circular supply chains

Now let's talk about why circular supply chains are essential. There are three main concepts of the circular supply chain that, when started, will immediately affect your bottom line. The key is that you don't have to be perfect at it; you have to start.

Saving money
Reducing risk
Building brand preference

Saving money

When you start eliminating waste in your supply chain, you can save money. Whether it's:

The packaging you no longer have to buy;
Redesigning the logistics network to take advantage of more local suppliers;
Finding other manufacturers willing to buy your post-industrial waste.

When going through the supply chain for circularity, the first rule is to eliminate all waste output at the source whenever possible. Circularity is all about dealing with waste, but you are already ahead of the game if you don't have to manage the waste because it has been eliminated at the source. If you're just starting your circular journey and you're two months into it, I can guarantee you that you've already started saving money.

Reducing risk

Reducing risk is also about getting rid of excess waste first. But when you look at waste through the risk lens, it's something else.

Waste creates risks in the supply chain when there is future uncertainty. For example, the price of diesel is uncertain in the future. By reducing as much waste as possible in your logistics network, you reduce the risk of future fuel purchases. By reducing the number of suppliers you have for waste materials, you don't have to pay for recycling containers, but you also don't have to have those materials shipped to you.

Building brand preference

Finally, adding circularity practices to SCM integrates with building brand preference.

I say this with a caveat; it only improves brand building when you use small metrics that are updated over time with concrete action plans reported to your stakeholders.

I strongly advise against writing a statement that your organization will be Net Zero in the next ten years. You won't be, nor will your stakeholders believe you. I am certain that you will not be Net Zero in the next ten years because the technology to be Net Zero in the next ten years does not exist on a global scale. Since your supply chain is probably global, that means you cannot achieve it.

The ability of your supply chain to be Net Zero Anything in the next ten years is determined by the weakest link in your circular supply chain. Can that weakest link be 100 percent Net Zero in ten years? The answer is no.

Want to learn more about circular supply chains?

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VCARE is a renowned training institute that certifies supply chain professionals worldwide. VCARE's dedicated research and development team continually develops internationally recognized accredited certification programs. In doing so, VCARE collaborates with many international affiliates around the world to provide internationally accepted professional qualifications. With a certificate from VCare, you demonstrate that you are an industry expert.

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Having control over a broad spectrum of manufacturing activities that occur within a typical manufacturing or process industry can be viewed as a competitive edge in today's fast-paced economy. The CPIA course aims to enhance a student's understanding of the business environment, focusing on the role of manufacturing in particular.

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Having effective inventory and warehouse management can really give you a leg up when competing in today's fast-paced market where customers demand instant gratification. The CSSC program aims to enhance your understanding of the store's role, the responsibilities of store staff, and how inventory is handled and circulated within the store.

Certified Supply Chain Leader

The Certified Supply Chain Leader (CSCL) program is an advanced training course created for professionals looking to enhance their skills in supply chain management. This program offers participants practical and operational knowledge necessary for efficiently managing and leading supply chain operations.

Based on a hands-on, real-world approach, the CSCL program teaches the fundamentals as well as the intricacies of supply chain management. It is designed to provide participants with a comprehensive grasp of different facets of the supply chain, such as inventory management, procurement, production, storage, transportation, and the most recent developments and technologies in the industry.

VCARE Academy

This article on transformation goals was written by Denice Viktoria Staaf, from VCARE Academy.

Who is Denice?

Member, Education and Research Executive Board (EREB).

VCARE Academy Inc. Founder

What are circular supply chains and why are they important?