What is a Circular Supply Chain?

Circular Supply Chain Blog Article

At QAD DynaSys we proud ourselves on delivering solutions that determine the precise future capacity requirements for an enterprise to trade into the future.  As companies grow, capacity requirements grow. And the planet earth is no different. As populations grow the number of planets required to provide the water, energy, and food for the future population will grow.  However, in this case, we are capacity constrained. There is only one planet earth.

The solution to this problem will be holistic.  It will combine engineering, technology, politics and law-making.  However, there is no doubt that supply chain will play a vital role.

Environmental issues and supply chains have been discussed hand-in-hand for many years.  They come to us under a number of names such as sustainable supply chains, green supply chains, environmental supply chains, and closed-loop supply chains.  These terms have largely been used interchangeably.

So why are we are hearing about circular supply chains?  Is this an old topic with a new hat or is it something very new?  

Circular supply chains are an extension of the concept of green and sustainable supply chains.  Circular supply chains are supply chain networks that underpin the “circular economy”. The Ellen MacArthur Foundation explains that a “circular economy is restorative and regenerative by design.”.  In summary, a circular supply chain replaces the dominant linear (take, make, and dispose) economic model with (make, use, restore/regenerate) model. Circular supply chains systematically restore technical materials and regenerate biological materials toward a zero-waste vision.  It requires system-wide innovation in business models and supply chain functions from product/service design to end-of-life and waste management.

Is this a fad or is this here to stay?

It is true that sustainability and supply chains have had an off/on relationship for several years.  And why is now any different. One could argue that it has to happen because there is no second planet earth.  However, that has been known for some time and yet action has been slow. There are two main factors why the circular supply chains discussion is here to stay. 

Firstly social awareness of environmental issues is at an all-time high.  Environmental policy dominates the agenda of various economic forums and election platforms of potential leaders.  We watch social media videos of enormous floating plastic islands in our oceans or of ice-caps melting. Environmental factors now influence consumer buying preferences.  We live in a connected world where the carbon footprint of our purchase is instantaneously accessible. This is the age of the electric vehicle and solar-powered home where Tesla dominates the headlines.  Even meat substitute products are becoming mainstream.

The second factor is technology.  Technology plays a major role in support the circular supply chain.  This includes product design to ensure the entire product is designed in a manner that is equally fit for intended purpose as it is fit for regeneration.  Technology will promote the design of supply chain networks that equally balance supply and demand for materials as they balance the supply and demand for waste.

A product in a linear supply chain starts life at material procurement and finishes with the consumer purchase.  A product in a circular supply chain starts life at material procurement and finishes when there is no physical evidence of that product ever existing on the planet.

A product in a circular supply chain finishes life when there is no physical evidence of that product ever existing on the planet.

Why (the environment).

Historically the drivers for environmental initiatives within manufacturers were most often regulatory or social.  Regulatory environmental action is required to be adherent with the law and is a cost of doing business. Social environmental action occurs most often to communicate brand image and good corporate social responsibility policies.  It can also be a risk mitigation strategy to avoid the brand being associated with an adverse event. Some companies may even possess an altruistic desire to do what’s best for the environment.

What has been missing is a tangible commercial advantage for manufacturers to engage in circular supply chains.  However, this advantage is already becoming evident and the advancements of technology and regulations will promote caring for the environment as a core value proposition and unique differentiation of modern manufacturers.

And next?

This journey still has a long way to go.  At QAD DynaSys we expect the impact on supply chains will be transformative in several ways.

  • Circular economy supply chains require deeper collaboration between supply chains actors.  This type of collaboration will transcend normal demand-supply relationships and will cross-industries to match output (waste) and input (material supply).
  • Circular economy models will require supply chains to re-evaluate their core capabilities.  It may need to regenerate or rework material or waste to bring it to a consumption grade.
  • Enterprises operating in a circular economy model will become part of a wider supply chain ecosystem of partners to deliver solution with zero-waste.

It is a long journey, but there is no planet earth B.

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