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What are Circular Supply Chains, and Why are They Important?


Circularity and circular supply chains now replace the titles "green supply chains" and "sustainable supply chains" if you read the latest blog posts and companies' marketing literature. I even have a course teaching you how to make your supply chain more circular. You may be sitting back and wondering what makes a supply chain circular.


Most of our typical consumption patterns, as global consumers, is a linear consumption models. Virgin raw materials are extracted, processed into finished goods, and distributed online and through retail locations to the customer (straightforward supply chain for the sake of the example); the customer uses the product and at the end of the product's life by choice of the consumer, or the product is no longer helpful, the product is disposed of in a landfill. In this model, the supply chain flow of goods is in one direction, from the raw materials to the product’s end of life. There may be some returns of expired products or consumer returns, but for the most part, the product travels a linear path from its cradle (extraction of raw materials) to the grave (landfill).


In circular supply chains, outputs go through reverse logistics as they are put back into the system as inputs instead of retiring to their grave. The graphic below illustrates the process where the outputs are now recycled, repaired, or remanufactured for use as inputs to another system. First, let's look at the upstream opportunities for circularity in the supply chain. It will be the reverse logistics of collecting and transporting waste to either a processing facility in the case of recycled packaging or post-industrial waste (meaning after production). Then, it is often sold to another industry as a raw material input. In this example, think of particleboard. It takes waste wood scraps and glue and makes the board much of your furniture is manufactured from.

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


The supply chain and reverse logistics play a critical role in the circular economy.


So let's now 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 need to be perfect at it; you must start.


  1. Save money

  2. Reduce risk

  3. Build brand preference


When you start eliminating waste in your supply chain, whether it is from the packaging you no longer need to purchase, redesigning your logistics network to take advantage of more local suppliers, or finding other manufacturers willing to buy your post-industrial waste, you are saving money. When working through your supply chain for circularity, the first rule is to eliminate all waste outputs from the source whenever possible. Circularity is about dealing with waste, but you are already ahead if you don't need to manage the waste because it was eliminated at the source. If you are just getting started on your circularity journey and are two months in, I can guarantee you have already started saving money.


Reducing risk is also about removing excess waste first but when looking at waste through the risk lens is slightly different. Waste causes risk in the supply chain when there is future uncertainty. For example, the price of diesel is future uncertain. Reducing as much waste in your logistics network reduces the risk of purchasing future fuel. Reducing the number of suppliers you have for waste materials such as packaging means that you don't need to pay for recycling dumpsters for that packaging, but you also do not need to have those materials shipped to you.


Lastly, adding circularity practices to SCM integrates with building a brand preference. I say this with a caveat; It only enhances your brand building when you use small metrics updated over time with concrete action plans reported to your stakeholders. I strongly discourage you from writing a statement that your organization will be Net Zero in the next ten years. You will not be, and your stakeholders don't believe you either. I am positive you will not be Net Zero anything in the next ten years because the technology to be Net Zero in the next ten years does not exist on a global scale, and since your supply chain is likely global, that means you cannot accomplish it. Your supply chain’s ability 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% Net Zero in ten years? The answer is No.


Denice Viktoria Staaf

Supply Chain Diva | Sustainability and Circularity Expert | EPD and HPD Approved Preparer | Mentor and Coach | Supporter Women's Empowerment | Green Building Advocate


Member, Education and Research Executive Board (EREB)

VCARE Academy Inc.


Founder

Labeling Sustainability Inc.

📩 dstaaf@labelingsustainability.com

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