Keep an Open Mind About Closed-Loop Supply Chains
If your car won’t start during the blast of cold weather currently pounding much of the country, it might be time for a new battery. Your old one will be recycled as part of a closed-loop supply chain that keeps old batteries out of landfills.
Also known as a “circular” supply chain, this practice is gaining the attention of purchasers and manufacturers of other products, such as consumer goods. “The challenge is how to introduce circularity to conventional supply chains that are designed to move product forward into markets in a linear fashion,” Penske noted in a recent blog.
The solution, it said, can be found with the help of “creative logistics solutions.” Penske said there are five things to consider when implementing circularity:
- Network design — “Used product or components come in countless forms and have to be moved between various nodes, including pick-up and storage points, recycling or refurbishment centers, and manufacturing plants,” Penske said. “It is often necessary to configure these nodes and the product flows between them to support just-in-time production schedules.”
- Balancing supply and demand — This can be tricky, particularly in niches such as consumer electronics, where “the supply of materials for reuse fluctuates with the amount of end-of-life product discarded by users.”
- Transportation — Depending on the product, a a tailored transportation component might be required.
- Collaboration — A circular supply chain cannot be created by a single organization. “The concept of one company’s waste becoming another company’s feedstock is at the heart of circularity,” Penske noted. “Bringing this concept to reality requires companies to look for suitable partners and to establish mutually rewarding relationships, which can take much time and effort.”
- Innovation — Planning and implementing a closed-loop system requires creativity. “An example is how to establish efficient return channels for used product — a significant challenge, especially in consumer markets,” Penske observed. “New solutions are emerging. For example, some companies are exploring the use of e-commerce returns services as convenient channels for collecting end-of-life product.”
One thing is certain: Most companies won’t be able to ignore for long the pressure to go circular. “Companies are being held more accountable for sustainability initiatives not only through legislation and mandates, but also by customers who demand a healthier and cleaner environment,” Penske said. “And, while circular supply chains require initial investment, recycling and reuse efforts can be turned into profit through lower-cost materials and cost of waste.”