Q&A: The Road to a Circular Economy in Logistics and Manufacturing

As public attention grows, companies large and small are experimenting with strategies to build a circular economy. The circular economy focuses on recycling activities to reuse materials as much as possible and eliminate waste streams.

Scott Russell, Customer Success, Executive Board Member of SAP, an enterprise application software company based in Walldorf, Germany. “Logistics and distribution systems across the supply chain are obvious places to implement new standards.”

FreightWaves interviewed Russell to get a better understanding of what it takes to transition to a circular economy.

Interviews have been edited for clarity and length.

FREIGHTWAVES: What is your background and knowledge of the circular economy?

Russell: “One of my biggest priorities is to help our customers build more resilient and sustainable supply chains by incorporating circularity into our product design, manufacturing and logistics processes.

“The success of the circular economy model rests on three key factors. First, products must be designed for the future, including the use of renewable, reusable and non-toxic resources. Second, we need a mindset shift: Waste is a resource, we need to collect it for reuse and recycling, and we need the right infrastructure for that. need digital technology that can track, monitor and analyze relevant data throughout the process.”

Scott Russell (Photo: SAP)

FREIGHTWAVES: What are the market signals driving the transition to a circular economy?

Russell: “Sustainability is now a business imperative. Consumers, investors, regulators and employees are increasingly demanding more responsible products and services with circularity principles in mind. understood.

“Enhanced regulation has played an important role in circular economy practices. help.

“Plastic taxes are also surging, levied on companies that use materials that do not contain a certain amount of recyclable content.”

FREIGHTWAVES: How are companies responding to this idea?

Russell: “Historically, manufacturers designed their products based on cost and performance, but now they will focus on sustainability and recyclability, the new regulatory environment, and new technologies. , continues to release new products that enable manufacturers in various sectors to benefit from the circular economy.

“One company doing this well is Schneider Electric. Its energy and automation technologies have helped customers avoid 302 million tons of carbon emissions since 2018.

“One of the ways the company achieves this goal is by offering end-of-life collection services that recycle, reuse or destroy the sulfur hexafluoride gas found in our customers’ electrical equipment.

“Additionally, the rental, repair, and resell model is making strides in the retail industry. For example, SAP customer Ikea has launched several resell pilots over the past few years. Lizee is on a mission to “transform the retail industry from linear to circular” by helping retailers move from selling to renting to reselling. “

FREIGHTWAVES: Which sectors are most embracing circular design today?

Russell: “Packaging is a big problem. It frustrates manufacturers, retailers and consumers and causes immense environmental damage. However, the good news is that packaging is designed with reuse and recycling in mind. Circular business principles are applied in this area to ensure that

“A company I have seen do this well is LimeLoop, which offers everything a retailer needs: reusable packaging, reverse logistics, visibility, analytics. Helped divert more than one-use packaging from landfills.

read: Is the future of packaging reusable?

“Manufacturing, transportation and logistics are industries that have adopted circular economy principles.In the manufacturing industry, more and more companies are building new business models where they make goods once and customers reuse them. .

“They are also developing alternative methods of purchasing raw materials by recovering valuable materials from complex products, which is especially common in electronics. It can be more cost-effective and environmentally friendly than extracting raw materials.”

FREIGHTWAVES: How will circular practices affect costs and logistics?

Russell: “Traditionally, supply chains have been linear and unidirectional, but this is disrupted by reverse logistics and circular supply chains.

“Circular supply chains enable organizations to recover as much as possible and realize value from used products. can be obtained.

“Reverse logistics, on the contrary, almost always comes in the form of customer returns, which poses some challenges. It is estimated that global e-commerce returns will exceed $1 trillion over the next decade. It is estimated that shipping returned inventory generates more than 15 million tons of carbon dioxide in the United States alone.”

FREIGHTWAVES: What are the benefits and challenges of the circular economy?

Russell: “The entire planet stands to benefit from a circular economy. All humans, businesses, plants and organisms will benefit from an economy that produces less waste and pollution, uses products and materials longer, and regenerates natural ecosystems. You will benefit from the system.

“There is great potential, but it is not without its challenges, such as:

  • “Regulations. Large producers can face challenges as it is difficult to comply with different regulations for products in different regions.
  • “Complex legacy systems. Complex supply chains, heavy assets, and legacy technologies can hinder the adoption of circular economy practices as manufacturers navigate their digital transformation.
  • “Overall operations. Overseeing the lifecycle of thousands of products and materials in hundreds of regulatory systems around the world is arguably one of the biggest challenges brands face.

“This certainly comes with its challenges, but implementing these practices will be beneficial in the long run.”

FREIGHTWAVES: Do you have any advice for companies considering going circular?

Russell: “Think about every aspect of your business. Having a left-to-right view of your vision and strategy, right down to your value proposition for your customers, will help your company transition to a circular business more effectively.” I can do it.

“Leaders looking to adopt a circular business model should consider:

  • “We leverage digital technologies to improve circularity and authenticate. Thanks to an increasingly digital supply chain, we are better able to monitor the identity, location and condition of individual components and products.
  • “Investing in circular initiatives that demonstrate the long-term value this will bring to your business.
  • “We extend responsibility for making materials more sustainable throughout our organization, from purchasing to design to manufacturing.

“The shift to circular practices presents enormous social and economic opportunities. With increasing pressure to become more sustainable, delivery and logistics are obvious avenues for implementing environmental measures.

“These will help businesses stay competitive by using less energy and other resources and spending less money on deliveries, getting better returns on investments such as truck fleets, and identifying better delivery methods. It helps a lot in creating an edge.”

Click here for more FreightWaves articles by Alyssa Sporrer.

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