CSCMP's Supply Chain Quarterly
October 16, 2019
Forward Thinking

Beyond recycling: To form a truly "circular supply chain," companies need to go to the next level

A report from the consulting firm Accenture says that not enough companies are fully exploring opportunities to reuse, refurbish, remanufacture, or extend the life of their products.

It's time for companies to stop patting themselves on the back for having a recycling program, according to a report by the consulting firm Accenture on what it calls "the circular supply chain."

The "circular economy" concept was developed by two environmental economists in the late 1980s as an alternative to the traditional production model of "make-use-dispose." It involves reducing waste in the supply chain through efforts such as designing products to last longer; using renewable energy and supplies that are bio-based or fully recyclable; focusing on maintenance, repair, and reuse; looking for remanufacturing and refurbishing opportunities; and yes, recycling.

While more and more businesses say they are adopting these concepts, most companies' commitment only goes "skin deep," according to "Full Circle: Turning Waste into Value in Your Supply Chain," by Sudipta Ghosh, Kevin Eckerle, and Harry Morrison of the consulting firm's Accenture Strategy group. According to the report, 94 percent of companies surveyed said they are implementing elements of circular supply chains, but in truth, 44 percent are focusing their efforts only on the easiest aspect: recycling. Indeed, only?18 percent of companies are reusing or refurbishing materials they have recaptured at the end of a product's life, and just 30 to 40 percent are working on extending a product's life, according to the survey results.

The report does provide some examples of companies that are taking their circular supply chain efforts well beyond basic recycling to the next level:

  • Dell is manufacturing new items ?from plastics recovered from old computer products.
  • Michelin allows fleet customers to lease tires instead of buy them outright—in other words, it is selling "tires as a service."
  • Caterpillar's Cat Reman program offers customers the option of buying parts from existing equipment that have been refurbished to a "same as new" standard.

To be sure, implementing programs such as these is not easy. According to the Accenture report, it requires strong leadership or sponsorship from the top and strategic collaboration with suppliers and across functions such as research and development, procurement, supply chain, manufacturing, and marketing. Furthermore, managing a circular supply chain requires companies to use a certain level of advanced technology, such as analytics, the Internet of Things, and sensors. Companies without these types of technologies will be hard pressed to efficiently and effectively perform critical tasks such as tracking the condition of assets and products and sorting and recapturing materials.

Accenture believes, however, that taking these difficult steps will not only be good for the environment but also unlock significant growth opportunities and profitability.

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