A Case for a Circular Supply Chain

Reduce, reuse, recycle. It’s good for the environment and good for your supply chain. The traditional approach to supply chain management is a linear progression from producer to consumer, but times they are a changin’. As sustainable manufacturing becomes more important for both environmental impact and profitability, the traditional supply chain model is beginning to shift. The newer, more sustainable approach adopts a “circular” or “closed-loop” model of production, distribution, and consumption. Meaning, discarded or returned products are continuously fed back into the supply chain to be repurposed or recycled.

Green manufacturing

Sustainable and lean manufacturing practices are about optimizing resources to reduce or eliminate waste in the production process by reusing and recycling materials. This is not only good for reducing impact on the environment, it’s also an opportunity to save money on materials. 

Investing in green, sustainable practices may be more expensive in the initial set-up, but could ultimately save money in the long run. Implementing technologies like solar panels as an energy source and energy efficient equipment may command a potentially hefty price tag, but will save money long-term in utilities expenses.

Prioritize reverse logistics

According to the Reverse Logistics Association, “the annual volume of returns in the U.S. is estimated to be as much as $200 billion.” That’s $200 billion worth of products that could potentially be recycled back into production as raw materials. A circular supply chain with optimized reverse logistics could vastly increase profitability, while greatly reducing waste. Reusing and repurposing returned, defective, and damaged goods as raw materials or sold as-is derives value and profit from items that would otherwise be garbage, wasting money and filling landfills.      

Happy customers

Today’s customers care about the sourcing and sustainability of products in a way that directly impacts their buying behaviors. According to a national survey, 59% of consumers consider environmental sustainability to be very important in their buying decisions. 56% said they would potentially pay a lot more for an environmentally-friendly product. Circular supply chains support green manufacturing and overall sustainability. Giving customers what they want isn’t just about the finished product. Social responsibility is becoming a requirement for today’s savvy, ultra-connected consumer, so sustainability becomes a marketable trait. Sustainable practices are rewarded by potentially increased sales, contributing to overall ROI on the implementation of green manufacturing and a circular supply chain. A win-win; better for business and better for the environment. 

See what else is trending in manufacturing supply chains in 2016