Closed Loop Supply Chains Create Profits from Waste

What is broken in supply chain management practices?

In an article by IHS Markit, Author Tom Holmes stated that traditional business methods are inefficient and wasteful. Thus, several companies have added a reverse logistics leg to the product cycle, closing the supply loop. Holmes defines this as “the reverse leg collects and processes returned goods, parts or materials, or items no longer considered fit for purpose.”

Kyle Ritchie, the coauthor of Circular Economy for Dummies, affirms that a circular, regenerative economy keeps materials in circulation and delays the end-of-life for resources. It is the missing part of sustainability programs.

Why do we need a closed loop supply chain?

Under the closed loop supply chain models , equipment or materials are repurposed, repaired, or resold. These new practices maximize the value of a product across its service life and minimize waste generation. Result: Businesses become more resilient, and waste is now a resource.

Startups and SMEs can easily incorporate closed-loop practices as they grow and leverage their agility and ability to scale to partner with larger companies. CLSC methods provide massive potential for any sized business.

In addition, CLSC provides transparency of value chains and knowledge of the company’s carbon footprint. As organizations take a more significant position on sustainability models, environmental policies must provide a strong business case.

Procurement plays a role in sustainability goals

Sourcing materials is evolving through digital technologies. In a recent article, Vincenzo Nici, Director of Platform Management of Requis, stated that supply-chain professionals have more drivers to consider than just supplier relationship, product, cost, and certainty.

They must address circularity, project overruns, and missed deadlines due to lack of materials. Supply-chain managers can make information-based decisions and improve capital utilization with complete and digital information for available assets.

Where and how to close the loop

Closed-loop systems describe what an organization does, says Holmes. However, from the procurement perspective, CLSC methods provide opportunities to reduce risks and strengthen the organization’s resiliency.

According to Holmes, circular economy models can yield significant and profitable changes and be a positive disruptor for companies.

More businesses realize that investing in sustainability yields significant rewards, including profits. For instance, the global ethical fashion market is expected to grow from $4.67 billion in 2020 to $5.84 billion in 2021.

The benefits include cost savings, lower risks, supply-chain security, and access to new markets

CLSC will change where and how companies divert excess and waste materials. According to Alan Dunning, Principle Supply Chain Manager, WorleyParsons, procurement teams must be open to new sources for refurbished, used, excess equipment and materials instead of purchasing solely new.

If you change the why, how, and where to buy, you materially address sustainability issues. Keeping used and excess materials out of landfills is central to the circular economy.

Get Requis supply chain management software

Requis streamlines and digitalizes procurement processes and empowers procurement professionals, according to Dunning.

Requis’ online commerce platform and marketplace brings new life to surplus, used, and obsolete assets while connecting with buyers and sellers for procurement and disposition. Assets come from all over the world, and sales methods include auctions, purchasing at the seller’s posted price, or making another offer.

Ask for a demo to see how Requis provides an intuitive supply chain management solution. Request a Demo Here