Sustainability matters to retail shoppers.
A 2021 study found that 60% of consumers rated sustainability as an important purchase factor, and a third said they’d be willing to pay more for eco-conscious items. But sustainability goes beyond the product itself. To keep pace with shifting market trends, companies need to adjust their overall business practices, particularly their supply chains — or risk losing market share.
Retailers and brands should look to the circular economy to advance their business goals while simultaneously creating products and supply chains that are more economical, sustainable and adaptable for a changing world and a warming planet.
The circular economy is an industrial framework that intentionally reduces waste by repurposing, reusing and reconfiguring products and materials. Rather than sending “waste” to a landfill, at a cost to your bottom line and the environment, you move it back up the supply chain.
To transition to the circular economy, your organization will need to revamp its supply chains and reverse logistics management practices, incorporating intelligent planning technologies that allow you to forecast, plan, and shape data with more flexibility.
Supply chain systems are still catching up to consumer demands for sustainability
Consumers’ increased desire for goods that are easier to repair, repurpose or reuse is at odds with the current economy where most products are designed to be thrown away when we’re done with them. Historically, you haven’t needed to think about the lifecycle of your products beyond the point of sale.
But imagine that when your laptop battery died, you could easily replace it yourself with no special skills or tools? Better yet, what if it was easy to return the old battery for refurbishment or recycling — without a trip to the store or service center? You would probably love the fact that you don’t have to buy a whole new laptop and become more loyal to the company as a result of the seamless experience.
What sounds like a simple concept on the surface is a complex reverse logistics challenge behind the scenes: What is the process for sending back the used battery? Does the consumer have to pay? Where will they send the used batteries, and what does repurposing the batteries look like? Is it cost-effective and environmentally friendly? Is there a third party in the mix? And importantly, how do you track the inventory of all the returned batteries and ensure they’re reused as efficiently as possible?
There are many loops of circularity that you need to manage simultaneously, and each of those loops is impacted by global politics, shipping regulations, sanctions, pests, disease or weather events. You cannot accurately forecast, plan or adapt for the circular economy if you are relying on systems and business practices built for the current “make-take-waste” economy.
Three keys to building a supply chain for the circular economy
Supply chain strategy must align with business strategy in the circular economy. If sustainability is part of your value proposition, you need to consider it at every step of the supply chain, from design to fulfillment, returns to reuse. By using your inventory intelligently, you can circumvent the landfill and reduce costs at the same time.
- Redesign products and packaging. For circularity to work, your company needs to design (or encourage your manufacturers to design) products for both future resiliency and reverse logistics — with parts that are easy to replace or upgrade and materials that can eventually be repurposed. Similarly, both product packaging and shipping packaging (for online orders) must be thoughtfully designed for repacking if a customer wants to make a return.
- Run “what-if” scenarios to prepare for future disruption. To minimize disruption in the circular economy, you need an intelligent planning and analytics platform that can model future outcomes based on a host of ever-changing criteria. For instance, the ability to run “what-if” scenarios using up-to-the-minute climate data allows you to spot potential volatility early and make adjustments to your supply chain before problems arise.
Set and track sustainability key performance indicators (KPIs).
Environmental, social and governance (ESG) criteria are still a work in progress. As third-party certification organizations set and refine standards, you will need technology that can monitor sustainability KPIs. Specifically, those tools should show upward or downward trends, highlight potential missed targets and transform data to answer emerging sustainability questions.
For example, you may need to determine the impact of your supply chain on landfills, but most current systems can’t access the granular data required to make the calculation.
Adapting for a constantly changing world
We can’t predict tomorrow’s agenda, but we know it will be different from today’s. You can position your organization for future success and resiliency by designing products and supply chains for the circular economy. To succeed in the circular economy, you’ll need intelligent planning tools that make it possible to strategize for evolving consumer demands, ESG standards and global challenges.