Closing the loop: building circular supply chains
In the discourse of building a circular economy, circular design and circular business models are often the focus of the conversation. But are we actually capable of managing the reverse flow of materials which we have sold or rented out across the globe? What regulations and quality considerations do we have to consider for used devices and materials? What kind of operations do we need to have in place for refurbishment and parts recovery, and where to locate these?
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Thijs Maartens and Hans Leijen are experts in circular economy and supply chain management at Philips Engineering Solutions. During a recent webinar they shared their valuable insights and learnings on building circular supply chains.
A circular supply chain is a key enabler for successful deployment of circular business. At Philips, we already offer trade-in with responsible reprocessing for large medical equipment globally, and it is our objective to expand these activities to all medical equipment by 2025. Philips Engineering Solutions supports our business units to develop and build circular supply chains in circular economy projects and programs.
During this webinar, our consultants shared their experience on:
- the pitfalls and hurdles when starting circular activity in existing supply chains
- the potential of circularity in the mitigation of the global material shortage issues
- the approach to assess circular supply chain capabilities and to design solutions, including data driven modelling and simulation
- the influence of circular product design on the success of the circular supply chain
Watch the webinar building circular supply chains
Questions and answers | webinar building circular supply chains
It is not really new, as in many industries there is already some form of reverse logistic. There are however important new elements:
- The reverse volumes will increase significantly when we are closing of the loop, whereby reverse could in theory become as big as linear in terms of volumes!
- Active planning is needed to create maximum value from the returns, bringing in life cycle and triage perspectives.
- Reverse operations require different capabilities than linear.
Our observation is that network, processes, and systems are in most cases not set up for scaled reverse operations. From that perspective I would claim that circular supply chain is a new expertise domain in supply chain.
Like linear supply chain design, a good understanding of the product characteristics (volumes, values, physical features, etc.) and the capability requirements in the operations are essential to determine the best fit supply chain architecture, and the selection of actors in the chain. As a result, the reverse supply chain for electronic consumer products may be very different from equipment chains.
In fact this an application of parts recovery, whereby the recovered parts are used for repair. The local for local approach is one of the potential solutions in the supply chain design, but important to make sure of the fit in terms of technical complexity and quality requirements.
Research & Development and Quality evaluation and approval for products and parts in the reverse portfolio and quality management in the reverse operations is essential in the release process for refurbishment and parts recovery. This includes for instance lifetime evaluations of parts, triage specifications, testing methods etc.
Circular economy is about closing the loop and from the sustainability perspective you would like to assure that this can be done for all products. In the circular strategy and business model you need to evaluate whether to take own control or leave to other parties. The scale for the reverse supply chain that you need to manage in the company is a result of this evaluation.
It is relevant to have decisions based on multi-criteria models, whereby not only financials, but also Environmental, Social and Governance (ESG) impact is included. As for the financial evaluation, it is important to evaluate based on scaled volumes and the end state circular supply chain, and make sure that the models are really end-to-end, including circular cost and revenues.
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Senior Supply Chain Consultant
Sustainability and Circular Economy Lead