Building a circular economy for the next generation supply chain
It may be terrifying, if not shocking, to learn that human demand for natural resources far exceeds the regenerative capacity of the planet. Americans currently use the equivalent of about 1.7 earths each year. With global demand increasing, it is expected that we will need the equivalent of 3 earths by 2050. The current rates of resource consumption are obviously unsustainable and if we continue on this current path we will inevitably deplete all of the planet’s resources.
As the world population continues to grow and the demand for material goods increases, there is increasing pressure on companies to produce more and faster in order to remain relevant. To meet this feverish demand, humanity has relied on linear take-make-waste supply chains and throw-away economics. Products are thrown away and end up in landfills. Even more are being produced to meet an ever-growing demand.
In particular, the waste of electronic equipment poses one of the most blatant threats to the long-term stability of the planet. United Nations estimates that the 53 million tons of electronic waste currently accumulating annually will double by 2050, making it the world’s fastest growing waste stream. Likewise, the global production of plastics is currently over 360 million tons per year. Almost 50% of these are single-use plastics – they are produced, used once and thrown away. The cumulative total amount of plastics produced today is over 8 billion tons worldwide, of which around 10 million tons end up in the oceans every year.
It is time for the disposable “take-make-waste” economy that humanity created to change. To curb the willful consumption of the earth’s natural resources, stop plastic pollution and waste of raw materials, we need a circular economy that works for everyone. The good news is that steps are being taken towards such a model.
Slowing down the consumption of natural resources
Manufacturers must reduce the consumption of natural resources by recycling raw materials from end products and processing or repurposing their components for use in new products. For example, through the use of digital and Internet of Things (IoT) technology, manufacturers can enable consumers and employees to monitor the use, performance and overall health of factory or household appliances. Sensor technology can help predict problems and device failures, facilitate proactive maintenance, and ensure that devices remain functional at critical points. Products must be developed with both end-of-use and remanufacturing in mind. This requires the development of in-processes for dismantling in order to recover raw materials and components that can be reprocessed, reused or reprocessed.
When products are no longer profitable, artificial intelligence (AI) and robotics technology can salvage useful remnants of those products. Using digital technology, manufacturers will be able to evaluate returned products and materials at relatively low cost for remanufacturing, restoration or resale, and by keeping the same materials in circulation longer, they will limit the use of natural resources.
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Recovery of end products for reprocessing
Manufacturers need to increase the likelihood of end product recovery in order to reuse components or reclaim raw materials for new products. To this end, they can offer subscription-based “Product-as-a-Service” mechanisms directly to consumers, which use sensor technology to monitor product consumption and usage until the end of use. The manufacturer can then offer the consumer an automated direct replacement of the product while collecting any vessels, cartridges or containers for reintegration into the manufacturing process. In this scenario, the manufacturer’s reduced consumption fits in with gaining better insight into the consumer’s product experience by understanding the frequency of use in demand / replacement cycles.
Removing middlemen in the supply chain can also add value to the customer. Eliminating the middleman costs less and ensures that new products get right to you when you need them.
Industrial symbiosis is the process by which waste or by-products from one company or industry become raw materials for others. The waste or by-product can either be donated or sold to another company so that the resources can then be monetized and reused. Moving materials and resources between different companies and industries is critical not only to creating a circular economy, but also to making the best possible use of natural resources.
Use technology and realize the circular economy
All of the above scenarios can reduce the consumption of natural resources, increase productivity and life cycles of raw materials, and reduce manufacturing costs. Whether it’s extending the life of mechanical and electronic equipment through remote performance monitoring, delivering products directly to the consumer with a system for recovering unwanted containers and cartridges, or improving the speed of disassembly and raw material recovery for reuse, digital technology plays one Role plays a vital role in realizing this reality.
The origin and flow of components, products and materials through the supply chain through to end-of-use must be transparent. Unique identification technologies such as cryptographic anchors, molecular DNA tags or RFID tags can be applied to the surface of a component or product or embedded in raw materials to collect data on how wasteful a particular supply chain is. The use of these unique identifiers in conjunction with blockchain not only authenticates the origin and origin of components and materials, but also provides location-based information for tracking and tracing product conditions.
Leading organizations are now focusing their efforts on using technology to facilitate the transition to a circular economic model. Technologies such as IoT, predictive and prescriptive analytics, 3D printing, AI and machine learning, blockchain and digital twins play an essential role in this transition.
To further drive the paradigm shift towards a circular economy, we need to change the way we think about product sourcing. The automotive industry offers motorists the opportunity to lease their car with the option to buy it after a certain period of time. This Product-as-a-Service (PaaS) leasing model is now also being adopted by other manufacturers. Instead of buying a washing machine, you can rent one. A consumer can conclude a contract with the manufacturer based on an agreed number of individual wash cycles or times and invoice them monthly. At the end of the contract, the manufacturer picks up the machine and replaces it with a new and a new leasing contract or simply takes the machine with him so that the consumer can consider other competitive leasing options. In any case, the machine is back in the hands of the manufacturer, who can now recycle the machine for reuse.
While the machine is being used by the consumer, the manufacturer can monitor not only its usage but also its integrity. With the help of IoT sensors and predictive analytics, the manufacturer can keep an eye on the condition of the machine and recommend that the user proactively replace a specific component before it breaks.
There are many examples of where PaaS and leasing models are becoming more common with the use of digital technologies to enable provisioning, service and financial agreements. This is just one area where the industry is evolving, but an important one and shows how radically manufacturers can rethink their business models when so motivated. Moving to a more sustainable, less wasteful business model doesn’t have to mean a net loss for companies. If anything, the examples available seem to suggest that such transitions will open unforeseen opportunities for new revenue streams and technological innovation. The conservation of raw materials and resources does not seem to be a zero-sum rate, but can be beneficial for both consumers and manufacturers.