Supply Chain Leaders Open To Eco-Friendly Circular Economy
The circular economy—an economic model that separates the ability to achieve economic growth from the consumption of natural resources and in which business models encourage continuous reuse of materials to minimize waste and the demand for additional natural resource consumption—is finding supporters among supply chain leaders. A survey conducted by research and advisory firm Gartner finds 70 percent of businesses plan to invest in the practice in the next 18 months.
“The circular economy creates an ecosystem of materials,” says Sarah Watt, senior director analyst with the Gartner Supply Chain practice. “What was previously viewed as waste now has value. However, those ecosystems are complex and include many interdependencies and feedback loops. Digital technology has the potential to provide visibility and enable improved decision making when it comes to raw materials and services. Already, 35 percent of companies believe that digital technology will be a key enabler for their circular economy strategies, but very few are leveraging the technology for this purpose yet."
Gartner reports that only 12 percent of those surveyed have linked their digital and circular economy strategies so far.
The survey showed that rather than a single technology enabling the shift to a circular economy, organizations are focusing on four key technologies to advance their activities: advanced analytics, 3D printing, the Internet of Things (IoT) and machine learning (ML).
“It’s interesting to see that only few organizations are currently using blockchain. However, 38 percent of respondents are planning to explore the use of blockchain for the circular economy in the next five years,” Watt adds. “For example, the technology can be used to give materials a single digital identity and to enable trade and pay-per-use, although we are yet to see scaled use cases of blockchain for the circular economy.”
Gartner’s survey found that the top four areas of the supply chain where digital technology is being applied are delivery (46 percent), customer engagement (45 percent), manufacturing and remanufacturing (43 percent), and planning (43 percent). Only 27 percent of respondents are currently using digital technologies to improve reverse logistics, but 39 percent plan to do so within the next two years.
“The difference in emphasis between delivery and reverse logistics is intriguing,” says Watt. “On the one hand, we observe organizations using technology such as analytics and alternative vehicles to optimize their routes and reduce emissions. You can argue that those actions should be considered a sustainable practice rather than one that enables the outcomes of the circular economy.
“On the other hand, reclaiming materials at the end of life requires reverse logistics for pickup and return to either the organization or a third party. Our results show that, in the next two years, reverse logistics will garner the most attention. This indicates that companies are looking at how to take back products for reuse, refurbishment or recycling—an important step on the way to the circular economy.”