Reverse Logistics is an Essential Component of a Circular Economy
Climate change is now dominating the news cycle and we are currently witnessing the first tangible consequences of our mistreatment of the planet. The need to address climate change has never been more keenly felt and industry obviously has a large role to play.
The first industrial revolution brought us what is known as the linear economy. This process of take, make, use, dispose, pollute, has been helping us make giant leaps forward in the manufacture of products and the development of exciting technology, but at the expense of the environment.
A circular economy aims to remove the dispose and pollute elements of the linear economy and create a loop of make, use, reuse, remake, recycle, and back to make. While there will obviously still be waste in this system, the circular economy model seeks to minimize this as much as possible.
When it comes to creating a circular economy, reverse logistics has an important role to play.
The role of reverse logistics in a circular economy may seem obvious. After all, receiving back faulty of unwanted products is a clear step in reusing and recycling them. However, there are still a significant number of reverse logistics managers getting it wrong.
There are many situations where managers believe they are using a circular economy model when they are not, and vice-versa. Businesses will often assign products to be recycled instead of trying to keep them in circulation for longer where they have the highest value of utility (compared with recycling at their lowest). Inversely, other companies will use what they believe to be avoidance techniques to reduce product returns - a service to fit accessories and provide product maintenance, for example, which are good examples of a circular economy in action.
"Levi Strauss is a clothing company which is successfully employing circular economy principles," reports SCCG, "finding practical and creative ways to extend the life of jeans, repurpose them, and/or recover and reprocess the fibers into raw material for the next generation of Levi's. Their stores accept old clothes and shoes of any brand, which the company collects and repurposes or recycles. In the electronics sector, Dell has implemented a major circular economy redesign across its entire business and now collects damaged and used products from consumers to reprocess plastics and use them in the manufacture of new products."
What then is the best way to align your reverse logistics operations with a circular economy? Here are six principles to guide you.
#1 Cascades Orientation
This principle is all about keeping materials associated with your product - components, raw materials, biological nutrients, etc. - in circulation for as long as possible and reusing them where you can to create new products.
#2 Waste Elimination
Circular economists must always be looking for new ways to reduce waste down to the absolute minimum possible. This ethos must be put into practice at all stages of production, from returns policy design to the reuse of the packaging on returned goods.
#3 Economic Optimization
Next comes the endeavor to create the production and consumption, service and supply of money. This, in turn, helps create a financially resilient company and one which is less likely to cut corners to save money - usually resulting in more waste and pollution. Enhancing material productivity, introducing time-saving technology, or changing workforce dynamics are all ways to achieve economic optimization.
#4 Maximization of Retained Value
Many products steadily decrease in value over time. This principle aims to keep those products in circulation for longer though maintenance and refurbishment, both of which can help maintain the value of such items for longer.
#5 Environmental Awareness
To create a circular economy, it's not enough to become myopic and only focus on the issues within the four walls of your company. One must look outside and assess how reverse logistics affect the wider environment. A good start is to ensure any generated waste is disposed of properly and to only employ environmentally conscious disposal contractors.
#6 Reduce Leakage
Some elements of products returned are subject to leakage. This includes biological products which decompose over time and technology which will often have components - such as batteries - which also decay. This principle encourages reverse logistics providers to seek ways to minimize leakage and find new ways to restore these kinds of products.
Fashioning a circular economy will help industries create a better world for generations to come. Reverse logistics clearly has a key part to play in this and must be constantly working and innovating to make sure the products returned to them are reused and refurbished as much as possible, with disposal only ever being considered once all other efforts have failed.
"Businesses should evaluate their current returns operations and devise a suitable reverse logistics strategy," concludes SCCG. "Companies wishing to improve their profitability need to give just as much thought to their reverse logistics as they do their forward operations. This includes looking into the product design phase to make sure that products and materials can be reused, remanufactured, recycled, or repaired."
Reverse logistics and the circular economy are set to be hot topics at Consumer Returns Management 2019, being held in October, at the Hyatt Regency Austin, Texas.
Please download the agenda today for more information and insights.