Companies need to “redesign” the management of materials to improve supply chain resilience, with a focus on a circular economy approach, according to Gartner.
In a report Gartner said a survey showed over half (51%) of supply chain professionals believed there would be increased adoption of circular economy in the next two years, due to benefits to raw material security.
The report, Close the Loop to Create Future-Fit Raw Material Strategies, found the increased focus had been triggered by the pandemic as disruptions have exposed how lack of access or availability of raw materials can weaken global supply chains.
Gartner conducted a global survey of 528 supply chain professionals across several industries between May and June.
But more than two-fifths (44%) of respondents said it was “too soon to assess the impact from Covid-19 on circular economy strategies”.
Sarah Watt, senior director analyst at the Gartner Supply Chain Practice, said: “The Covid-19 pandemic has shown that the strengths of globalised supply chains can become a weakness when raw material availability and access plummet during a crisis.
“For chief supply chain officers, the circular economy is a great opportunity to improve raw material resilience and decouple material consumption from financial growth.”
The report emphasised the need to “design a future-fit raw materials management approach”.
It added: “As supply chains are working with finite materials, low availability will drive up price and decrease access. A one-direction flow of materials, from cradle to grave, is an inefficient and ineffective approach to raw materials management.”
The survey highlighted four barriers to access and reprocess end-of-life products: issues over ownership of end-of-life materials, collecting large quantities of materials, the price of raw materials, and complexity of reprocessing products through a circular economy system.
It said one of the key challenges was how to collect and centralise end-of-life products for processing, with increasing use of product collection strategies and third-party vendors.
Organisations are creating strategies to increase access and recover materials, with two-fifths (40%) using leasing or subscription business models such as the Loop packaging deposit scheme.
A third (36%) gain access from consumers returning products through upgrade initiatives, 35% use consumer goodwill product return schemes, and 33% used future purchase incentives. Companies such as GlaxoSmithKline, Nokia, and Ikea collect products for recycling.
Collaboration is seen as key for providing enough end-of-life products at the right price to enable a circular economy.
The survey found 57% of organisations work with waste management firms, 36% use reverse logistics firms, and 33% rely on raw material suppliers.
The food and drink and consumer packaged goods (CPG) industries were found to work most often with waste collection and recycling firms to provide raw materials, according to 82% of respondents in the food and drinks industry, and 72% in the CPG sector. Meanwhile, 59% of high-tech organisations prefer to purchase circular business models.
Recycling products to get the primary materials is one of easiest ways to overcome product complexity, however some products need to be designed with circular economy in mind to make this possible.
Watt said: “Product design is crucial to end-of-life management. Poorly designed products with toxic materials can be incredibly difficult and costly to process and put back into the market.”
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