Building a Circular Supply Chain

The circular economy is built on the premise that the planet’s materials are not endless. Perhaps no one knows better than the supply chain professional about the ebbs and flows of material availability and the resulting effects on cost and downstream impacts on shortage or surplus.?

At its simplest, supply chains exist to meet demand. In doing so, supply chains use resources like advanced math and developed partnerships to predict and shape that demand, then predict and shape the complementary supply. Although, as we in supply chain know, the activity does not always happen in that order: demand, and then supply. More and more, supply chains leverage Sales & Operations Planning, Integrated Business Planning, and other processes to influence and shape demand based on the available supply and capabilities of the wider value chain.?

And while the cleverest solutions I’ve ever seen have come from supply chain professionals put in “impossible” situations, even the best-prepared teams with the strongest partnerships and advanced systems can only do so much against a dwindling supply of natural resources. But not all constraints are placed on us by mother nature. Sometimes, they come from geopolitical strife, labor strikes, unforecasted events or from good old-fashioned competition among supply chains. Regardless of the cause, the result is a material one – literally.?

When disruption hits, the result is almost always seen in inventory: either too much or too little. When we have too much, we work to liquidate and reclaim some working capital. And when we have too little, we work to avoid becoming the constraint along the chain.?

In this dance between demand and supply, we have used many frameworks, problem-solving tools, and sophisticated math. And yet, I hear from teams across countries and industries that problems persistent, and they are constantly seeking innovations and new ideas.?

Circular supply chains offer a strategy and toolset to teams looking for new ways to improve the reliability of supply. Material security and risk management have not always been the topic du jour, but they are at the top of many boardroom discussions these days, and I predict they will stick around for a while.?

Applying circular economy thinking to supply chains and operations means seeking inputs not from upstream, as usual – but from downstream from the channel, “sidestream” from other supply chains, and from new material innovators. And in doing so, this means every supply chain becomes the source of raw materials for another supply chain. This opens up new channels and new customers – and the process requirements that come along with them. Circular operations can rebalance supply chains from a cost center into becoming an additional revenue stream.

Building a Circular Supply Chain is a collaboration between the Ellen MacArthur Foundation and the Circular Supply Chain Network to articulate themes from supply chain leaders around the world who are exploring circular operations – finding both successes and learnings. Together, we lay out a foundational guide for supply chain leaders to use in their own explorations into circular operations, which includes the basic principles and approaches of a circular economy, the benefits of a circular economy to supply chains, and likely challenges leaders will encounter along the way.?

The purpose of this document is to bring supply chain communities together around a common understanding of what circular economy means for supply chains, and vice versa, and provide practical examples. By doing so, supply chain leaders can accelerate the transition to a circular economy.

Read the white paper Building a Circular Supply Chain.

Learn more about circular supply chains at CSCN.

Check out the new circular supply chain standards OE13 at ASCM.

Ellen MacArthur Foundation Network members can explore more on the community platform.

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