Top 5 Circular Economy Best Practices for OEMs

Waste, pollution, and unnecessary energy consumption characterize the traditional linear economic model. This “take, make, dispose” approach is not only environmentally damaging, but increasingly costly for the OEMs still using it.

Closing the loop and transitioning to a holistic, circular economy model is now an operational imperative for manufacturers. It offers unignorable opportunities to make savings, drive innovation, create jobs, achieve compliance, and develop crucial new markets.

Making the jump will require strategic decision-making, and a re-evaluation of traditional investments and priorities. By understanding the five fundamental best practices of the circular economy, OEMs will know the key areas where significant CapEx and OpEx savings can be made, while doubling down on sustainability.

1.??? Reverse Logistics and Returns Management

Getting these factors right is foundational to circular economy success. They encompass the processes that handle returned products that are unused or damaged, increasing the efficiency of key steps like inspection and refurbishment. With the right strategy and solutions in place, value recovery can be maximized and accelerated, while reducing waste by reusing and repurposing components.

2.??? Spare Parts Management

Managing spare parts in an innovative way directly minimizes the need for product replacements. Effective management ensures that high-quality parts are available for maintenance and repair activities, simultaneously enhancing cost, time and waste efficiency. Modularity and parts standardization can take these efficiencies to the next level, creating more opportunities for part reuse and increasing the timeliness of repairs.

3.??? Parts Refurbishment & Remanufacturing

Not only can the meticulous restoration of parts significantly reduce the need to manufacture entirely new components, but it diversifies product options for customers. By offering customers refurbished parts at reduced prices, OEMs can fulfill sustainability goals while tapping into a new revenue source. At the same time, customers can also demonstrate sustainable activity while being cost-conscious.

4.??? Depot Repair

New production needs can be further reduced by sending products requiring refurbishment to a centralized site, where dedicated repair services can be carried out. This offers OEMs the dual benefit of reducing their overall environmental impact, and bringing down CapEx and OpEx linked to manufacturing new products. Defect identification, diagnostics, repair, and quality assurance can be handled at depots if OEMs have the right strategy in place.

5.??? Dynamic Pricing

The value recovered from refurbished or returned products can be enhanced further by implementing data-driven pricing. A dynamic pricing model combines these capabilities with flexible pricing structures and the continuous optimization of the process. Ultimately, this equips an OEM to optimize the balance between sales volumes and profit margins, and to rapidly adapt to market fluctuations.

Software Solutions and Circular Economy Success

To unlock the overlapping benefits of circular economy principles, the right technology is mission critical. It enables organizations to intelligently transform their management of resources, in a way that lowers environmental impact, lowers operational costs, and increases profitability.

Data consolidation is one core technology category OEMs looking to embrace the circular economy must explore. These solutions collate and assemble inventory data, service agreements, orders and more in a single view, turning complex data into a strategic advantage.

Data-driven analytics is the next, which leveraging AI and machine learning (ML) to discover important patterns in data sets and pinpoint opportunities for optimization. All the while, these capabilities dynamically adjust pricing to support revenues, competitiveness, and customer satisfaction.

Automated workflows form the third category, which includes automating the sending of parts, scheduling maintenance, organizing engineer or mechanic availability, and dynamically reviewing service agreements and pricing.

Navigating the Transition

Embedding service and automation into equipment lifecycles will be essential in the circular economy future. This will require a collaborative, committed outlook from those that intend to lead the way, and an appetite for innovation at all organizational levels.

Syncron is partnering with OEMs to help them embrace the circular economy, and our Connected Service Experience (CSX) platform is transforming planning, pricing and servicing efforts end-to-end. In a case involving a leading American manufacturer of commercial trucks, Syncron deployed the CSX platform to standardize all returns processes.

As a result of working with Syncron, PACCAR can now create configurable return policies based on dealer SLAs, and track service content and document revisions from all devices. Backlogs have been reduced by predictable monthly and quarterly return projections, and IT system and administration expenditure has been reduced significantly.

Adopt the five fundamental circular economy practices and transform your aftermarket profitability, your customer loyalty, and become a sustainability champion. If you'd like to dive deeper into adopting Circular Economy best practices download our latest white paper "How to Adopt Circular Economy Practices (and Why It Matters)." Or Speak to our experts to find out more.