A logistics revolution: The circular economy
The circular economy is disrupting the logistics industry as we know it, yet there is great potential for logistics firms to develop plays in return services, enabling items to be reused or recycled.
A circular economy (see Figure 1) is an alternative to a traditional linear economy in which resources are made, used and then disposed of¹. The idea underpinning the circular – or restorative – economy is that maximum value is extracted from resources while they are in use; then, at the end of a resource’s service life, its constituent products and materials are recovered and regenerated. Based on nature’s resource-efficient use and reuse of biological nutrients, the practice could reap practical benefits in the logistics sector.
The requirement for businesses to minimize the use of ‘new’ materials reduces the number of potential new logistics commissions, but increases demand for complex return processes.Already embracing the practice are reverse logistics groups such as Cycleon, which specializes in managing end-to-end return processes. Circular economy business models are set to become more prominent as multinationals such as Dell and Philips undertake structural overhauls.³
The Government of Denmark is another proponent of circular economies.⁶ In concert with regional and municipal authorities, the Danish environment ministry has committed to use public procurement worth €5 billion to support a nationwide transition to a circular economy. Specifically, the partners’ procurement policies must adhere to green criteria on recycling, chemical use, long lifetimes and total cost of ownership.
Progression toward the circular economy has been limited to pioneers and first-moving global companies to date. There are a number of barriers to widespread adoption; from the geographic dispersion of supply chains; to the complexity of materials and deconstructing products. Digital and technology innovations are providing companies with the opportunity to overcome such barriers.⁷ Machine-to-machine and data analytics enable companies to match the supply and demand for underused assets and products. ‘The cloud’, in combination with mobile and social media, can dematerialize products or even entire industries. And 3D printing creates opportunities for manufacturing inputs that are biodegradable.⁸ For more information, please see the article: Transitioning to a sustainable world.
1. WRAP, “What is a circular economy?”, http://www.wrap.org.uk/content/wrap-and-circular-economy.
2. Ellen MacArthur Foundation, Circular Economy Reports, http://www.ellenmacarthurfoundation.org/business/reports.
5. Accenture Waste to Wealth, Palgrave Macmillan, 2015
6. Ellen MacArthur Foundation, “Public procurement in Denmark”, http://www.ellenmacarthurfoundation.org/case_studies/public-procurement-in-denmark.
7. World Economic Forum and Ellen McArthur Foundation. Towards the Circular Economy: Accelerating the scale-up across global supply chains. 2014
8. Accenture Waste to Wealth, Palgrave Macmillan, 2015