What are circular supply chains and why are they important?

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 the customer online and through retail locations. A straightforward supply chain for the sake of the example:

The customer uses the product. At the end of the product’s life cycle, at the consumer’s discretion, or if the product is no longer usable, the product is disposed of in a landfill.

In this model, the supply chain of goods is one-way, from raw materials to the end of the product’s life. There may be some returns of expired products or consumer returns. However, for the most part, the product follows a linear path from cradle (extraction of raw materials) to 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 retiring to their grave. The image below illustrates the process where output is now recycled, repaired, or refurbished for use as input for another system.

Let’s first look at the upstream opportunities for circularity in the supply chain. It involves the reverse logistics of collecting and transporting waste to a processing facility in the case of recycled packaging or post-industrial waste (i.e., after production). It is then often sold as a raw material to another industry. In this example, think of particleboard. It requires waste wood residues and glue, and the board is used to make a large portion of your furniture.

Looking at the downstream supply chain activities from the customer back to production and processing: in this scenario, reverse logistics transports finished goods at the end of their life to other consumers, as is the case with fashion reuse 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.

The supply chain and reverse 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 initiated, will immediately impact your bottom line. The key is that you don’t have to be perfect at it; you just 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 is:

• The packaging you no longer need 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 wherever possible. Circularity is about dealing with waste, but you are already ahead if you don’t have to manage the waste because it was eliminated at the source. If you are just starting your circular journey and you have been at it for two months, I can guarantee that you have already started saving money.

Reducing Risk

Reducing risk is also about first removing excess waste. But when you look at waste through the lens of risk, it is something different.

Waste causes risk in the supply chain when there is future uncertainty. For example, the price of diesel in the future is uncertain. 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 within the next ten years. You won’t be, and your stakeholders won’t believe you either. I am certain that you will not be Net Zero in 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. Since your supply chain is likely global, this means you cannot achieve this.

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% Net Zero in ten years? The answer is no.

Want to know more about circular supply chains?

ATIM is a provider of training courses from VCARE Academy. Are you brushing up on your knowledge with a course?

VCARE is a renowned training institute that certifies supply chain professionals worldwide. VCARE’s dedicated research and development team continuously 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.

Certified Production and Inventory Analyst

Having control over a wide range of production activities that take place within a typical manufacturing or process industry can be seen as a competitive advantage in today’s dynamic economy. The CPIA course is designed to increase a student’s knowledge of a business environment, specifically the role of production.

Certified Store and Stock Controller

Good inventory and warehouse management can give you a significant advantage when competing in today’s ‘I want it now’ customer environment. The CSSC program is designed to increase your knowledge of the store’s role, the functions of store personnel, and how inventory is managed and moved in and out of the store.

Certified Supply Chain Leader

The Certified Supply Chain Leader (CSCL) program is an advanced course designed for professionals who want to enhance their expertise in supply chain management. This training provides participants with practical and operational knowledge essential for effectively managing and leading supply chain operations.

The CSCL program is based on a practical, realistic approach and teaches both the basics and the complexities of supply chain management. It is structured to give participants a thorough understanding of various aspects of the supply chain, including inventory management, procurement, production, storage, logistics, and the latest trends and technologies in the field.

VCARE Academy

This article regarding 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

Supply Chain Diva | Sustainability and Circularity Expert | EPD and HPD Approved Preparer | Mentor and Coach | Supporter Women’s Empowerment | Green Building Advocate
View her profile here.