Circular economy has been around for a few years now. For the uninitiated, circular economy is defined as “(a) model that focuses on careful management of material flows through product design, reverse logistics, business model innovation and cross-sector collaboration.” According to an Accenture report on the same topic, Circular Economy (CE) has encouraged companies to focus on on 5Rs – Recycle, Remanufacture, Resell, Refurbish and Repair. The report states “growth is decoupled from the use of scarce resources through disruptive technology and business models based on longevity, renewability, reuse, repair, upgrade, refurbishment, capacity sharing, and dematerialization.”
This all seems fine on paper. But how are companies actually embracing the 5Rs approach to positively impact their top line margins and revenues while reducing focus on producing volumes? Or is the end result higher customer satisfaction and loyalty by committing to a more environmentally friendly business? For now, most companies have included CE as a part of their sustainability /corporate responsibility agenda. Large manufacturers are working with partners and joint ventures to explore new business models that facilitate a circular economic model while other new businesses are developing (new) remanufactured/reused products and business models to form the basis of their new ventures.
A few interesting examples :
- PSA Group: Promote re-used parts, remanufactured part sales through a joint venture.
The group along with their partner, Indra Automobile Recycling, have launched a platform for their dealer network in France to be able to order re-used spare parts as well as provides traceability of parts. These reused and remanufactured spare parts are cheaper for the end consumer while at the same time, making the business a lot more environmentally friendly.
2. KoneCranes: Extending products’ lifecycles, reutilization of used eqipment and predictive maintenace:
3. Valtra Reman: remanufactured tractor gearboxes
AGCO Power, a sister company, had been remanufacturing tractor engines for years. This led to the idea of a modified approach to gearboxes – not to refurbish the customers’ original gearbox, but to instead send them a previously used and refurbished one. Through this entire process, the development engineers have been receiving closed loop feedback in order to develop more durable products
4. Gorenje gospodinjski aparati d.d: Implementing a Service Based Business Model (Pay per use model)
The white goods manufacturer is working with research organizations and IT solution providers to implement an innovative circular pay-per-wash scheme for washing machines in 4 European countries. The following innovations are expected:
- Business model: Multiple life cycle business models focused on remanufacturing to capture circular value and a pay per use model to investigate viability, consumer traction and environmental impact improvement
- Value chain: Reverse logistics associated with new remanufacturing propositions and customer segmentation and Circular network design and optimization methods for multi-reverse flows and re-distribution
- Technology: IoT based monitoring platform as well as condition-based monitoring methods using machine-learning algorithms
5. Nike: Closed loop model to manufacture footware and zero waste supply chain
“Nike claims 71% of its footwear is made with materials recycled from its own manufacturing process.” The global apparel and sports accessories giant are using recycled materials derived from old shoes , plastic bottles, scraps from its manufacturing process to produce new shoes. The company’s aim, amongst others, is to decrease their manufacturing BOM by re-imagining waste streams as value streams.
6. Battery Intelligence: extend the lifespan of batteries:
Glossary of key terms:
- Remanufactruing: Remanufacturing is the process of recovering, disassembling, repairing and sanitizing components for resale at “new product” performance, quality and specifications
- Recycle: The collection, sorting and processing of disposed materials for use in another manufacturing process.
- Reuse: reutilizastion of a particular resource for another purpose.
- Resell: Resale of goods and products instead of discarding them.
- Refurbish: Repairing, refinishing and sanitizing discarded products or materials in order to serve their original purpose.