Circular economy: what if an OMS was your secret weapon?
Discover how an Order Management System (OMS) supports sustainability by optimizing reverse logistics, reducing waste and enabling circular economy models.
We are, today, all mostly aware of the environmental challenges posed by traditional “linear” economies which follow the take, make, dispose model. At Kbrw, we are certainly aware of our responsibilities, and recently committed to a sustainability manifesto to ensure that we always prioritize environmental concerns in our business activities.
As a result of this awareness – and often under the watchful eyes of environmentally-aware voters and customers – governments and organizations are increasingly moving towards the concept of the circular economy, which has emerged as a sustainable alternative to linear economies. In a circular economy model, priority is given to:
- designing out waste
- keeping products and materials in use; and
- regenerating natural systems.
For any organization, operating as part of a successful circular economy requires innovative strategies and tools. For many of them, moving towards a circular economy means a whole new business model. For many others, it can simply require additional processes.
However, there may be no need for additional technical solutions (or, if there is a need, the investment required often yields a quick ROI). An Order Management System – which already provides so much value to any retailing or industrial organization – can be your 'secret weapon' in the quest for circular economy benefits. Here’s how.
Facilitating product lifecycle management
Extending the lifecycle of your products is an important commitment in respect of achieving a circular economy. Your OMS can help you optimize your product lifecycle management through:
- effective repair and refurbishment tracking: an OMS can track products sent for repair or refurbishment, ensuring they are processed efficiently and returned to the market promptly. This not only extends the product's life but also reduces the need for new raw materials.
- warranty and maintenance management: an OMS can manage warranties and maintenance schedules, reminding customers to service products and reducing the likelihood of them being discarded or replaced earlier than necessary.
Enabling efficient reverse logistics
Reverse logistics is a critical component of the circular economy, involving the return of products from consumers back to the business for reuse, refurbishment, or recycling. An OMS can be instrumental in managing this complex process smoothly, through:
- a seamless returns process: an OMS simplifies the returns process for customers and streamlines it for you, ensures that returned products are quickly placed on the expected zone in the warehouse, and flagged with the right status (to be refurbished, to be reused, to be recycled, etc.). A high-performance OMS can manage returns at scale without creating bottlenecks.
- enabling product recirculation: the system can identify products that can be recirculated back into the market, either as refurbished goods or as parts for new products. This reduces the demand for new raw materials and promotes the reuse of existing resources.
- provision of tracking and reporting: an OMS can provide detailed analysis and reporting on returned items. This can help businesses understand return patterns and optimise their reverse logistics strategies.
Supporting circular business models
Some business models are circular by design, such as product-as-a-service (PaaS). These require sophisticated management systems to track usage, returns, and refurbishments. An OMS can support such models by providing the necessary infrastructure to manage the product lifecycle from end to end, via:
- subscription management: for subscription-model businesses, an OMS can manage subscriptions, track product usage, and handle renewals or upgrades seamlessly.
- asset tracking: an OMS will track products provided as a service, ensuring they are returned, maintained, and redeployed efficiently.
- data-driven insights: a high-performance OMS provides insights into product usage patterns, helping businesses refine their offer and improve sustainability practices.
Promoting transparency and traceability
Transparency and traceability are essential in a circular economy, providing clear evidence that products are sourced, manufactured, and disposed of responsibly. An OMS enhances transparency across the supply chain, thanks to:
- source tracking: an OMS can track the origins of raw materials and components, ensuring they are sourced sustainably. Share this information with customers to promote transparency and trust: many consumers choose to buy more sustainable products. Well-used, this can be a lever to provide differentiation, improve your brand reputation, improve your conversion rate and increase revenue.
- lifecycle tracking: an OMS will track products throughout their lifecycle, from production to end-of-life, enabling greater understanding of their environmental impact and identifying opportunities for improvement.
- compliance and reporting: by providing accurate data for reporting, a high-performance OMS helps businesses comply with environmental regulations, meet their legal obligations and demonstrate their commitment to sustainability
Enhancing customer engagement
While many consumers/customers support the idea of a circular economy, actual consumer/customer engagement is vital for the success of a circular economy. An OMS can help businesses engage with their customers effectively, promoting sustainable practices and encouraging responsible consumption, by:
- offering incentives for returns: an OMS can manage incentive programs that reward customers for returning products for recycling or refurbishment, helping encourage behaviors that support the circular economy.
- providing feedback mechanisms: an OMS can collect feedback from customers on returned products, providing valuable insights for the business. Use this to feed your continuous feedback loop, ultimately leading to more fine-tuned OMS configurations for an even more optimized supply chain and customer experience.
Waste reduction
A central tenet of the circular economy is the minimization of waste. An OMS can play a crucial role in helping you to achieve this objective, thanks to its inventory optimisation capabilities, which include:
- real-time inventory tracking: a high-performance OMS provides real-time visibility into inventory levels across all locations, enabling managers to maintain optimal stock levels. This helps reduce over/understocking, both of which can lead to waste.
- demand forecasting and dynamic stock offering: the combination of demand forecasting by your ERP solution and dynamic stock calculations by your OMS will ensure all stock, wherever it is located, is made visible to customers and is therefore available to purchase. This helps to maximize stock turnover by ensuring no customer is unable to purchase a product because it appears (incorrectly) to be out of stock. This minimizes the risk of excess stock ending up unsold or, eventually, discarded.
- automated replenishment: your high-performance OMS can automate (up to 100% of) the replenishment process, ordering new stock just in time to meet demand without ever accumulating excess inventory. Reducing the possibility of human error to a minimum in this way lowers the probability of perishable goods going to waste.
The primary reason for investing in a high-performance OMS is, typically, to improve every aspect of order management and processing. However (and not least because of its association with efficiency), achieving this business goal can also transform the way businesses operate in a resource-constrained world. This is an aspect of your brand which is rapidly becoming a critical part of your ability to deliver best-in-class customer experience through transparency.
Case study: Stellantis' circular economy initiative
As part of its circular economy drive, Stellantis Group wanted to improve the management of its supply chain in respect of the return of worn/defective parts, and the corresponding refund of deposits. For this project, Stellantis uses its Kbrw OMS to deliver vital traceability.
Worn parts removed from a vehicle during servicing or repair are transported to a local Stellantis “hub”, which aggregates worn parts as well as providing replacement parts. The aggregated worn parts are transported to a central sorting center, where they are inspected to determine whether the worn part can be refurbished to its original, as-new state, or whether the metal part needs to be fully recycled. Stellantis’s “Power Return” application, built on its Kbrw OMS, means it can track parts throughout every step of their journey, providing source data for insights that enable continuous improvement.
Read the full Stellantis circular economy case study here.