Did you know that the term “circular economy” has been in use since the 1950s? Around this time, oil became cheap worldwide, reducing the production costs of other commodities and transport. Suddenly, it became easier and cheaper to make new products and transport them to markets, rather than reuse or recycle existing products.
Prior to the 1950s, history and archaeology makes it clear that humans had always tended to reuse, recycle or repair whatever they had. Outright replacement was often either difficult, dangerous, or expensive. In fact, the last 70 years - the decades of disposable products - have actually been a historical anomaly rather than the norm.
Now, and for an abundance of reasons, the concept of the circular economy is very much back in vogue. Companies and even governments are keen to engage with the concept, whether for environmental, financial or political reasons. But moving towards a circular economy means a whole new business model, innovative strategies, new tools, and the adoption of new ‘best practices’. Here are some of those best practices needed to create a circular economy.
Businesses prioritising circular economy operations must collaborate with suppliers and manufacturers to ensure products are designed for durability, repairability, and recyclability. Items that last longer and are easier to repair or refurbish encourage customers to view them as investments rather than disposable commodities. This may mean any or both of:
Take-back programs allow customers to return used products for refurbishment, resale or recycling. By nature, these programs help reduce waste and ensure the re-use of scarce and/or valuable materials. Such programs benefit from:
Businesses that can effectively transition from traditional supply chains to circular supply chains minimize waste at every stage and maximize the reuse of materials. This strategic transformation requires:
Digital tools are essential for tracking inventory, managing returns, and providing transparency throughout the product life cycle. Technologies like blockchain, RFID, and IoT can provide insights into product origin, materials, and disposal methods. Consider:
The sharing economy represents something of a cultural shift, and aligns closely with circular principles by promoting access over ownership. This concept can be adapted by organizations to both enhance customer experiences and reduce consumption. Mechanisms for fostering a sharing economy include:
The previous point hints that customer participation in aspects of circular economies requires a change of mindset – effectively, a cultural shift. This is also true for “internal” customers (for instance, garages, in the case of an automotive brand). Consider educating them about the benefits of sustainable practices and how they can contribute:
As a strategic initiative, it’s essential to establish key performance indicators (KPIs) before embarking on the transformation to a circular economy. Accordingly:
Circularity cannot be achieved in isolation; collaboration with suppliers, manufacturers, perhaps NGOs and even government bodies is essential. Consider:
There is clearly plenty to think about when considering transforming your organisation so it aligns with circular economy principles. We have mentioned, for example, complex processes such including managing returns, refurbishing products, and tracking materials. The good news is that flexible technologies supporting end-to-end supply chain visibility through inventory management and/or order orchestration - like an Order Management System (OMS) - make it easier for these practices and processes to be integrated seamlessly into your operations. Here’s how.
Take-back programs and product returns are two cornerstones of circular economy practices. An OMS simplifies these processes by providing centralized control and visibility over return logistics. Use your OMS for efficient reverse logistics (for example, to your nearest facility) and to implement customer friendly processes (for example, self-service portals).
Note that this requires a different mindset from your organisation, because it goes substantially beyond the ‘standard’ returns policies that apply if, for example, an item of clothing doesn’t fit. Accepting end-of-life equipment for recycling, or broken items for stripping for parts, requires - and demonstrates to customers - genuine commitment from your organisation.
Circular practices require detailed tracking of products throughout their life cycle. An OMS can track barcodes or even serial numbers, but also integrate with technologies like RFID and IoT to monitor product movement, condition, and ownership history. Store, manage and be transparent about product information, and identify opportunities for extending product life spans.
Repair and refurbishment are key to circularity, but managing these operations can be challenging. An OMS simplifies the complex workflows associated with repair and refurbishment. Use your OMS to track parts and materials needed for repairs (ensuring availability and reducing downtime), and to prioritize refurbishment orders based on demand or product condition.
An OMS is perfectly suited to handle the recurring orders, returns, and maintenance services associated with rental or subscription services. Your OMS can be configured to manage (without manual intervention) rental durations, maintenance schedules, and subscription renewals, and to ensure products are available for the next rental cycle by monitoring their status and location.
With customer engagement crucial for the success of circular initiatives, your OMS enables personalized, transparent, and convenient customer experiences. It enables you to empower customers to initiate returns or repairs through their preferred channel, and will deliver automated notifications that keep customers informed about the status of repairs, refurbishments, or rewards for returned products.
Circular economy transformation is not a fire-and-forget initiative. Insights generated by your OMS empower both the refinement of your circular strategies and the measurement of progress against sustainability goals. Use sales and return data to minimize overproduction and waste, while tracking metrics like product return rates, refurbishment success rates, and material recovery rates.
Your OMS acts as a central hub, connecting you with your suppliers, logistics partners, and recycling facilities. APIs and integrations enable real-time data sharing across the supply chain, improving collaboration and efficiency, and simultaneously will provide stakeholders with access to reports and updates on circular initiatives.
By adopting best practices for the circular economy, organizations can significantly reduce waste and create a more sustainable business model. Doing so is a strategic decision and initiative that needs to be thoroughly thought though. Thankfully, there are many ways to start implementing a circular economy strategy.
An Order Management System, like Kbrw’s, is a powerful enabler of circular economy practices: it provides many of the tools needed to streamline operations, enhance customer experiences, and track progress. As such – whether you already have an OMS or are considering one – enabling the transition to a circular economy is a great way in which your OMS delivers (or will deliver) value, increasing the return on your investment.
Find out more about the other benefits of the Kbrw OMS here.