The circular supply chain is growing in popularity, not only as a measure towards sustainability, but also as an economic model that takes better advantage of the resources within the chain. The digital technologies that enable supply chain circularity are becoming more and more popular, too. Supply chain managers who want to keep up with the latest best practices are familiarizing themselves with all of the options for digital and physical tools to unlock new possibilities for circularity.
We're going to take a deep dive into how digital technologies unlock new possibilities for tighter circular supply chains. We'll also look at how these practices can boost economic and environmental performance.
Defining Circular Supply Chain Systems
First, we'll start by defining what we mean by a circular supply chain. While this is a simple term on the face of things, it's also a relatively new one within the industry, so we think it's worth pausing to get on the same page.
A circular supply chain is best understood in contrast to a linear supply chain. In a linear supply chain, there is a beginning, a middle, and an end; once a product is used, it leaves the supply chain. Supply chain managers operating in a linear model plan around this beginning, middle, and end cycle. The data that is collected and tracked is all organized around this structure.
In contrast, a circular supply chain does not have a definitive end or exit. The supply chain organizes itself around the idea that the products and/or materials will continue to be used for an indefinite period of time.
It's all about efficiency. Circular supply chains use the best data possible to get the most possible benefit out of every resource. That includes the materials and goods themselves, as well as the energy and resources expended in manufacturing and transportation.
Circular supply chains are a key element of circular economy practices, which aim to get the most use possible out of every resource. Materials and products stay in the supply system and continue adding value, rather than becoming waste.
Digital technologies make circular supply chains possible
Digital technologies are an essential component of the circular supply chain. Many circular supply chains cannot exist on a large scale without the help of existing and emerging technology. That’s because the information associated with the materials must flow with the product through every step of the process.
If the people down the supply chain don’t have the necessary information, they can’t properly re-use, recycle, or repurpose the product. That's especially true within the global supply chain, where language and regulatory barriers can obscure supply and demand opportunities. Digital technologies make collecting, tracking, and sharing product information easier across borders and languages.
How digital technologies enable compliance
Having accurate and complete information is especially important for compliance. As regulations become more and more complex, the ability to find whether or not a product is compliant for a certain use out at the push of a button (or with the tap of a screen) makes it much easier to sell.
Compliance in future applications can also help inform product design from the outset. We’ll talk more about designing for compliance in the next article in this series, but it's worth mentioning here how these systems are beneficial across the lifespan of the product, beginning even before production.
Compliance-oriented software allows products and materials to be easily tagged and filtered for a wide range of industries, regions, and applications.
The role of digital technologies in predicting demand in supply chains
The popular business saying that you can’t improve what you can’t measure is definitely the driving philosophy behind digital data creation and collection here. We would also add that you can’t sell what buyers don’t know you have.
Digital tools created for supply chain use are designed to not only measure your materials and logistics, but also to help communicate the availability of your products by connected buyers and sellers. An automated marketplace can match supply and demand quickly and efficiently.
In order for the circular economy to work at scale, digital solutions must efficiently match buyers and sellers to keep goods moving through the supply chain. Digital systems help suppliers understand where demand is, then connect with the right customers.
Measuring economic and environmental performance with digital technology
Finally, digital technology measures the impact of the circular supply chain, allowing companies to quantify the financial benefits and efficiencies they gain. Companies can ensure that their efforts towards circularity are not only benefiting ESC goals, but also their bottom line.
Supply chain managers working towards creating sustainable supply chains must collect and analyze data that accurate measures resources used and saved. Otherwise, they will waste time and resources on solutions that may seem sustainable, but do not actually represent resources saved.
3 Best Practices for Using Technology in the Circular Supply Chain
Identify the product
Having technology that can reliably ID the product and travel with it is half of the battle. If you start with good, robust data, you'll grease the wheels for the rest of the circular supply chain to run smoothly.
Consider not only the data, regulation, and compliance needed for the next step of the supply chain, but also information that may be needed in order for the product to be used in additional applications, different regions, or different industries. Capture product details needed now, as well as those that might be needed later.
All of that great information needs to be processed and stored in ways that make it easy to access and analyze. A supplier can have the best data in the world, but if they don’t have systems in place to easily see what they have on hand and analyze for opportunities and efficiencies, it doesn’t do them much good.
AI and automated processes can help companies process product info and monitor the data to spot areas that are currently inefficient. These patterns and trends can be hard to spot in a spreadsheet or buried in reports, but AI helps translate the information into actionable data.
Share product data
The data must be able to move with the product, following it along the supply chain. (This is the idea behind Toxnot’s digital product passports.) As the product travels, more information will be added to its digital profile: what applications it has been used for, where it has traveled, and where it’s currently located. This information can help buyers find nearby product, quantify emissions that have been generated, and more.
Sharing data also requires a solid common language and a universal framework for communicating with other companies. Supplies need to be aware of the language being used in their industry.
Data management in circular supply chains
Data management is hugely important within the circular supply chain. It helps identify opportunities for circular use, allows for the quantification of emissions, helps businesses track waste created, and provides numbers that showcase efficiencies gained.
To lay the groundwork for circularity, companies will want to focus on two areas for growth: data standardization, and use of common language.
Data standardization is proactive, rather than reactive. Rather than collecting only the data required for the next step in the supply chain, it creates a standard set of data that should be included for each product or material, taking into account uses further down the supply chain (or further around in the cycle, to move away from linear vocabulary).
Using a common language
Meanwhile, using a common language and clearly defined terms will help make communication and collaboration go more smoothly, both internally and externally. For example, Toxnot’s digital product passports are designed to work across industries and regions; this makes automated supplier reach-out possible.
Digital technologies, physical trackers, and digital tools used in circular supply chain
The circular supply chain depends on information being passed along throughout the chain. This is where digital tools, AI and automation, and the “Internet of Things” come into play — they help streamline the process of creating, receiving, and sharing information.
Physical and digital technologies
Some tools used for circular supply chain applications include:
- RFID tags
These tools help track and manage inventory. When they are linked with digital tools, they allow companies to closely follow the journey of the product through the supply chain.
This is important for a variety of reasons, including communicating with potential buyers about products that are nearby to fill a need. Integrated systems can help streamline this process as suppliers and buyers use technology to automatically match supply and demand.
These physical tools, which capture how a product travels, also make it possible to track emissions from transportation of products and materials. Emissions from transport make up a huge portion of a product’s impact on sustainability, so optimizing this can create huge gains.
What about blockchain?
Some suppliers are using blockchain technology to create a “digital twin” for the product. Because blockchain allows for the creation of unique tokens that cannot be duplicated, it can be mapped 1:1 with a physical product. Blockchain is designed for security and resistance to tampering.
However, these built-in protections also create additional complexities that may not be necessary if there is trust between parties, good security, and solid data management. There may also be difficulties scaling blockchain up because it in and of itself consumes resources to a much greater extent than other digital technologies.
Supply chain managers will need to carefully weigh the pros and cons of blockchain, especially compared to other digital technologies for tracking products.
The bottom line on digital tech for circular supply chains
Supply chain circularity offers twin benefits: increased sustainability, as well as a more efficient use of resources with real financial benefits. Digital tech helps efficiently allocate products and resources where they’re needed. It helps businesses scale up their processes and find opportunities more quickly than relying on human observation alone.
Businesses can embrace the circular supply chain in a few different ways: implementing it completely, expanding upon it in current practices, or future-proofing their businesses for it.
The next step: Integrating the circular economy practices from the outset
Next in this series, we’ll talk about designing for the circular supply chain.
The Core of Your Circular Supply Chain Tech: Exchange by 3E
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