Circular Supply chain
Out with the old and in with the new – circular supply chain might just save the environment
Good news! Businesses can now increase their profits and reduce their carbon footprint at the same time.
As it stands, the supply chain industry follows the traditional linear supply chain methodology (source, create, and discard) but with our already limited resources and the expected rise in the global population (10 billion citizens by the year 2050), this idea of “input equals output” is an overall economic dead-end and environmental threat.
The linear model has been left relatively untouched since the 1980s since a linear economy promotes financial growth by sourcing large amounts of affordable, easily accessible resources.
With the increased focus on reducing our carbon footprint, this is being replaced by the
circular supply chain model.
Linear Supply Chain
The linear supply chain model. Source: ResearchGate.net
Circular Supply Chain
Circular Supply Chain. Source: supplychain247.com
The principles of circular supply chain
Waste equals affordable resources: Biodegradable materials such as cardboard boxes and tissue paper are returned to nature and non-biodegradable products are stripped down to its raw form.
Reuse: Certain products, or parts of products that are still functional, can be used to create new merchandise.
Repair: Faulty products can be repaired and resold
Recycle: Discarded material can be restored.
Energy from renewable resources: Circular supply chain aims to eliminate the use of fossil fuels in the supply chain.
What we can expect in a circular economy
The circular supply chain methodology is becoming more and more popular as production costs continue to rise. Whereas the linear supply chain model ends when a product is sold and ultimately discarded, supply chains become circular when a connection is made between the beginning and end of the chain.
Instead of producing “disposable” products, businesses are choosing to “upcycle” certain used parts to revert them back to their raw material form to be used again. The product is used for as long as possible to get the most value during its life cycle.
From an organisational standpoint, here’s how businesses can benefit from the circular model:
- It creates new profit opportunities
- Production costs are lowered
- Businesses can enjoy a good public reputation for their role in preserving the environment.
But unfortunately, there is a downside.
- Prolonging the life cycle of a product will negatively influence the sale of replacement products.
- Product quality may suffer. Certain materials such as plastic are designed with a limited life cycle in mind. In time, these materials become brittle, especially if it’s used too many times.
Here’s how we as consumers will benefit from a circular economy –
- Greenhouse gas emissions will be reduced by 2 – 4% per year.
- Adding an extra link to the supply chain will encourage job creation
- Consumers will enjoy more durable products, therefore saving them money in the long run.
- The use of land, soil, and water will be managed more effectively.
- Products will be more affordable if materials are recycled and reused rather than sourced from scratch.
- It will put an end to the global resource scarcity
- By paying less for products, consumers can enjoy an increased disposable income
These countries have already started using the circular model to reduce their carbon footprint.
The European Union (EU): In 2001, it was announced that all countries within the EU will be required to recycle at least 50% of all their packaging waste.
Japan: As the most efficient country when it comes to recycling, Japanese businesses and households must follow strict recycling laws and ensure that all packaging materials are recycled and reused.
The United Kingdom (UK): As of 2007, all UK-based organisations are obligated to recycle or treat their own waste, regardless of its size.
Luckily, the linear supply chain method is likely to be phased out entirely which means we’ll be a step closer to a waste-free planet.
Be part of the change and register for one of IMM’s Supply Chain programmes or online short courses. Start your career, or if you’re already working, boost your career with an internationally recognised qualification from the IMM Graduate School. Applications for 2020 are now open! https://imm.ac.za/