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Circular Supply Chain Management: Enabling Sustainable Manufacturing

Circular Supply Chain Management: Enabling Sustainable Manufacturing
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by Sanjeev Kapoor 24 Nov 2022

Nowadays environmental performance and sustainable supply chains are at the very top of the political agenda (e.g., of the European Green Deal)  and of the strategic agendas of industrial organizations. This leads manufacturers and other industrial enterprises to focus on the circular economy and to manage their supply chains with sustainability in mind. The circular economy concept was first introduced by British economist Arthur Pigou in 1920 when he suggested that manufacturers should be taxed for creating negative externalities like pollution or waste. It wasn’t until the late 2000s, however, that the term “circular economy” became widely used by governments around the world as a way for businesses to increase profits through sustainable practices. Today, many companies from the manufacturing sector are already familiar with the concept of circular economy and are setting up their business operations accordingly.

In this context, industrial organizations are increasingly concerned about extending their supply chain management processes towards circular supply chain management and sustainable manufacturing. The latter is a new way to handle manufacturing and supply chain processes by embracing sustainable development. Circular supply chain management is the process of designing, creating, and delivering products and services in ways that minimize waste and pollution throughout the entire product life cycle. Specifically, in a circular supply chain, a product’s design is optimized to maximize its use and minimize waste. The product can then be repaired or recycled at the end of its life, rather than being disposed of as waste.


Understanding Circular Manufacturing Processes

Circular Supply Chain Management (CSCM) creates business value by designing, producing, and managing products that maximize resource productivity.  It also helps companies move away from a linear business model where products are designed for obsolescence, towards a more sustainable model where products can be repaired, resold, or recycled at the end of their lifecycle. Nowadays, several enterprises are also looking at “circular production by design”. Circular production by design is an end-to-end approach to circular manufacturing that considers sustainability optimizations from the product design stage all the way to the product manufacturing and recycling processes. It enables companies to reduce their environmental footprint while helping them meet growing consumer demand for sustainable products.

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The implementation of circular production by design is based on the consideration and deployment of circular economy principles across the entire production lifecycle. Such circular principles include:

  • Waste reduction: Modern approaches to waste reduction attempt to eliminate all the different types of waste. Specifically, they attempt to: (i) Reduce what they use in order to reduce what they throw away; (ii) Reduce what goes into their products or services; (iii) Reduce their energy consumption, water use and carbon emissions; (iv) Reduce how much packaging they use; (v) Reduce transportation distances by buying locally produced goods and services whenever possible, towards reducing fuel consumption and greenhouse gas emissions; (vi) Reduce their use of natural resources such as water, land, forest products and minerals through sustainable sourcing strategies as well as recycling processes.
  • Recycling: This involves recycling what cannot be reused or repurposed into something else useful (i.e., “closing the loop”). Recycling entails turning discarded materials into new products rather than simply disposing of them as trash, which requires additional energy investment in collection services.
  • Remanufacturing: Remanufacturing is a key to repurposing products for a new use or repairing them for resale. This includes using the same materials but with different design and engineering.
  • Product Repairs: This practice involves repairing damaged goods so they can be sold again. Alternatively, repaired products are sometimes resold as used goods.
  • Upcycling: It is about reusing materials in manufacturing to make new products. This could include taking electric components from old cars and using them in new ones, or even using plastic bottles to make furniture.
  • Downcycling: This aims at converting materials into less valuable ones. For instance, it is possible to turn paper into cardboard or plastic bottles into fiberglass insulation material.


Circular Chain Use Cases

The above-listed circular economy principles enable a wide range of circular manufacturing use cases.  Here are some prominent examples:

  • Many re-manufacturers produce goods using recycled materials. They purchase used products that are still functional, repair them, and then sell them as new or refurbished goods.
  • Innovative manufacturers (e.g., electric cars producers) design their products so they can be easily disassembled and reused once they’ve reached the end of their usefulness. Such innovative products can help prevent e-waste by allowing consumers to upgrade parts instead of replacing entire devices.
  • Many companies are working with their suppliers to develop sustainable supply chains where they share information about raw materials in order to reduce waste throughout the supply chain process. The latter waste reduction processes exploit available information across the entire supply chain i.e., from raw material acquisition all the way through end-of-life management. For example, a car manufacturer may lease its vehicles to consumers who then return them for refurbishing or resale after the end of their lease period. A manufacturer might also sell off used equipment to a remanufacturer who will refurbish it for use in another part of their operations.


Evolving Supply Chain Management Systems to Circular Chain Management Platforms

In a supply chain, the flow of goods, services and information is controlled to ensure that products are produced, distributed and sold effectively. Traditional supply chain management (SCM) involves planning, deploying and controlling all aspects of the supply chain. It also includes managing relationships with suppliers, customers, partners, and other stakeholders to improve overall business performance. As the manufacturing industry shifts toward sustainable production models, SCM systems have been extended with features and capabilities for managing circular chains and sustainability processes. For instance, SCM systems are integrating information about the CO2 emissions of production processes, while implementing circular chain analytics on top of them. As another example, collaborative planning and optimization solutions are considering sustainability as an optimization parameter. Moreover, SCM processes and tools are currently integrating reverse logistics software to facilitate recycling and remanufacturing processes. At the same time, SCM software functionalities are becoming available to circular actors, including recycling enterprises, remanufacturers and circular economy policy makers.


The future of sustainable manufacturing is about rethinking your business model and creating new revenue streams. This includes finding ways to use recycled materials in your products, as well as redesigning your supply chain processes to account for green optimizations and the best possible environmental performance. It is also linked with to remanufacturing, which involves an integrated network of environmental protection and producers that minimize resource consumption, maximize material recycling and conserve natural resources.

At a basic level, a circular manufacturing system aligns with the concept of extended producer responsibility and addresses key challenges associated with waste and product obsolescence. Circular manufacturing can be implemented in existing manufacturing systems through incremental steps. Defining a solid strategy and building a good plan is essential to successfully move forward with this transition.

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