Introduction
Manufacturers and their supply chains are entering a new phase of great uncertainty. After a historic pandemic, the world is trying to get back on track, both socially and economically. New harsh realities are being combined with lessons learned to make new formulas for advanced inventory, sourcing, and production strategies.
Linear supply chains are no longer beneficial for the future. For a business to keep growing and cut down on waste, and to protect the environment, it is now important for supply chains to be strong, easy to track, and circular. Let’s get more insights into how the future of the supply chain needs to be circular and traceable.
The need for a circular and traceable supply chain
Circular Supply Chain
Around 98% of all direct CO2 emissions in the industrial sector come from manufacturing units, which are also struggling to meet sustainability and net zero emission goals.
Circular value chains will be essential for achieving these sustainability goals. Still, many business owners seem to be okay with the fact that there doesn’t seem to be a plan or a way to get there. So, we need to quickly turn things around and speed up the change from a linear supply chain to a circular supply chain. The current market scenario includes,
- Fast-changing customer preferences
- Increased supply and demand shocks
- Customization that requires speed and flexibility
- Expectations for sustainable processes and products from consumers, governments, and investors
Traceability is a key component for a circular economy to flourish. Better tracking of where inputs arrive and where they go next can help in finding opportunities to reuse, reduce, remanufacture, or recycle. Traceability is also essential to driving more resilient and efficient supply chains, which organizations must also strive for alongside improved sustainability. Traceability assists companies in balancing several business objectives, including
- Efficiency
- Resiliency
- Responsiveness
- Sustainability
Real World Examples of Circular Supply Chain with traceability
- Product-as-a-Service Models
A major hurdle in developing a circular supply chain is that gathering products for reuse or recycling can only be accomplished with the help of the consumer. Because of this, some companies, like Signify, are moving toward product-as-a-service models, which give them more control over their products for the whole time they are on the market. Like any big city, Washington, DC, has a significant energy expenditure. Signify promised to assist in minimizing these expenses by deploying 13,000 LED lights without any initial cost to the city authority. To compensate for this free installation, Signify will cover its costs from the approximately $2 million in annual savings achieved through less energy expenditure. This plan creates a win-win situation for the District of Columbia and the environment by helping the city minimize electricity use and associated expenses.
- Incentivized Recycling
The “product-as-a-service” model is an ideal way for companies to ensure that their products don’t end up in junk yards. Another way is to offer incentives to customers who return their purchased products to the company or recycle them. Vodafone’s smartphone trade-in program is an excellent example. Any old working device can be traded in for money that can be used to buy a new one. Meanwhile, old smartphones traded in by customers can be dismantled to extract usable parts and recycled by the company, thereby reducing waste.
The clothing company H&M is also heading in a similar direction. The firm has declared that it’s going to make supply chain operations “circular,” and one of the ways proposed to achieve the goal is by collecting used-up H&M clothing and recycling it into fresh new clothes. The company stores now have collection bins where customers can drop off their used H&M clothes. The company claims that more than 50% of the material it uses in stitching new clothes is now recycled or sustainably sourced and is planning to increase that to 100 percent by 2030.
Conclusion
If a company manages to convert its supply chain to be circular and make it digitally traceable, it can gain a competitive advantage that will result in higher revenue growth, lower costs, increased environmental friendliness, increased market share, improved stakeholder returns, and better returns on investment. A circular supply chain with traceability is not a choice but a necessity to survive in this ever-changing market landscape.
