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Episode 17: Supply Chain Management for the Circular Economy

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Bob Trebilcock: Welcome to the Rebound, where we'll explore the issues facing supply chain managers as our industry gets back up and running in a post-COVID world. This podcast is hosted by Abe Eshkenazi, CEO of the Association for Supply Chain Management, and Bob Trebilcock, editorial director of Supply Chain Management Review. Remember that Abe and Bob welcome your comments. Now to today's episode.

Bob: Welcome to today's episode of the Rebound, Supply Chain Management for the Circular Economy. I'm Bob Trebilcock.

Abe: I'm Abe Eshkenazi.

Bob: Joining us today is Katie Schindall. Katie is director of the circular economy and supply chain transformation at Cisco. Katie, welcome.

Katie: Thanks for having me.

Bob: You might be familiar with Balancing Green, a book by Yossi Sheffi. A previous guest on the Rebound and a presenter at 2019 conference. Yossi had a provocative and I think controversial take on the value of sustainability initiatives to a business beyond their PR value. His message, "If your customers aren't demanding it, tread lightly before going green." Now, at the same time, we know there are any number of leading organizations that have embraced sustainability, and are making it core to their approach to their business. From the design, through the end of life of their products. Cisco is one of those companies. Katie leads the Cisco circular economy program. Her responsibilities include operations, product design and life cycle management, and the application of technology to help Cisco's customers reach their own circular economy goals. Katie, I'd like to start with what I think is a simple question, probably, not so simple. What is the circular economy and how does it differ from what we use to refer to as sustainability?

Katie: I would characterize it that the circular economy is an economic model and view on resource use that is grounded in sustainability, so the two are integrally tied although, not always quite the same thing. I think the easiest way for people who are not familiar with the circular economy is to think about it in contrast with linear economy, which is the way that people are used to consuming resources in our society for the last several decades.

In a linear economy, a company designs a product, they build it, they ship it to the customer, the customer uses it and they dispose of it. The idea of what happens when that first customer is done using it doesn't enter the design process. It's not part of the discussion. It's designed for a single use. In a circular economy, we think of those resources, that product that goes into the world, as a valuable asset that we want to use time and time again. We want to think about how do we avoid the problem that we're having of a linear economy get past that with that challenge being we are running out of access to natural resources that we'll need, we have significant waste issues, and we're losing the value from those assets as they go out into the world and they're disposed?

What we want to do is we wanted it to start that process and thinking about the use of those products from the very beginning. We want to look at that product at its use, its reuse, its end of use, all of the beginning stage. We want to design up the waste inclusion from the beginning. We want to use the products and materials that we already have longer, and we want to regenerate natural systems. A great thing about this is that not only are we avoiding those risk that I mentioned very briefly earlier, but we're also opening opportunities for innovation, for new ways of thinking about business models, for generating savings, for driving different types of revenue where a business value of a company. There's a lot of positive attributes that a circular economy can drive and be embedded in the business model.

Abe: Katie, one of the things that we often struggle with is the siloed nature of supply chain. As we take a look at your broad responsivity which cuts across the organization. Give us a little insight on how Cisco takes a more holistic approach to the various activities within the organization. Knowing that often times, there is that ownership or that silo mentality within the organization. How do you get that macro perspective on the circular economy and the activities in the organization?

Katie: I think the fact that our strategy is holistic is one of the strains of what we're driving. It helps us to see across the business and make those connections that we might not otherwise make. When we work on different aspects of that strategy, we work with a lot of stakeholders in a lot of different parts of the business. We tie them together in different ways depending on the situation, so they start to see the implications in other areas. Just to give one example. If you look at what's under our strategy in circular design, and under our strategy in circular operations, it's specifically the operations in our supply chain. The design decisions that we make around the products and the packaging impact the greenhouse gas emissions and the waste that our manufacturing partners and suppliers. In the reverse, if we pull the circular mindset into how we work with our suppliers such as how we work on zero waste, we can get new ideas and opportunities that our suppliers may come up with as they're trying to meet different types of goals. In areas that may not otherwise touch as we have this public goals around zero waste and carbon emissions in the supply chain, and we have these goals around design. Because we've created that, it's part of a holistic strategy. We're connecting the dots in how we work with our stakeholders internally, and in our suppliers, and customers, and partners. We get more-- It almost amplifies and accelerates the work because people can see how it fits in that broader context, and how doing something over here can impact something over there, and make it better, and more interesting.

Bob: When we were putting this together, Katie, one of the things you mentioned was at Cisco, there's more than just one supply chain. There's multiple supply chains that you have to take into consideration including the reverse supply chain. Can you walk us through that? What are the different supply chains? How do they work together in this circular economy idea?

Katie: I think talking about supply chain, usually people are talking about the forward flow supply chain. The supply chain that gets things from production out to the customer, and you may a reverse supply chain as well. You probably do for product returns, or service repairs, or things like that. It's not as much the focus. What happens over time, and I don't think Cisco is unique in this, is that you end up with multiple supply chains that are dealing with the back and forth. Then you have the supply chain that gets the things out to the customer. You may have different mechanisms. We work a lot with partners for example, so there's multiple angles there. You have the part that returns the end of use. You also have a product that returns from lease returns, you also have the product that returns for service and warranty replacement.

You also have the forward supply chain of remanufactured product, which we sell through Cisco Refresh. There's all these different supply chains that have emerged in the business, and it's a big business. Trying to keep those all connected and to think about it when business is developed in a linear model, those aren't necessarily connected. You're not thinking about how those need to operate together. Whereas, if you're trying to institute a circular model, they do. They operate on different functions in the company, so it's not that simple just putting them all together.

Abe: You shared a couple of examples on the different activities that are encompassed with life cycle management, the product design, all the way through reverse logistics. Let's get a little concrete for our listeners today. Give me an example of how this all comes together from the design all the way to enablement, reverse logistics, and the various activities that are encompassed within the circular economy. Let's make it real.

Katie: We start with design. One of the things that we've been doing is instituting Cisco circular design principles, and we're putting those into the new product introduction process so that they're part of how we-- We have a goal on this that by FY 25, a 100% of our products will be designed according to our circular design principles. What that means is that, there is a set of guidance. There are principles with guidance across five core areas, and those core areas are designed around the principles of circular economy. How do we reduce the materials or resources that we need that could come in the form of physical materials, that could come in the form of energy, of a resource. How do we design so it's easier to repair, reuse, recycle? We have standardized form factors or modularity so you can upgrade.

That is going into how we evaluate designs that are moving through our process. That means that an engineer or someone in product operations who is in the supply chain, who's working to bring that to reality will have those guiding principles so to speak. They'll be evaluated against them, and we'll be scoring our products against them as we put them out into the market. As we move through, then that product is going to go out into world. It may come back for repair and service. If those design principles are in place, ideally it's more economically viable, it's easier to repair, we can reuse it or upgrade or whatever we need to do. Then when it reaches end of use at that first customer and comes back, again it's going to go back into, "Well, can we remanufacture it? Can we reuse it internally?" If it's at the point where we need to recycle it, even that is driven by economics of recycling so how easy is that to do and to then pull the materials out?

For example, we're doing this with plastic where the plastic that's coming out of our e-waste it's going into actually become post-consumer recycled resin that's going into new products. That's much easier if you've designed to make it easier to separate that plastic from the beginning. That's an example of how it flows all the way through.

What we're really trying to do is think about this not only in how the physical product moves through and then the packaging that goes along with that as well but also in terms of our offers and our business models so that when we're constructing how that product goes out in the world, it's easier to get back and to reuse which is also a challenge just in terms of we're trying to change our own model but circular economy is a system you can't achieve the goals really fully if you don't have everyone acting in the same mindset.

Bob: One of the things I found interesting in the description of your job or Cisco's initiative is that you're helping your customers apply technology to meet their sustainability goals. I'd like to actually make this a two-part question. One is does that also apply to your suppliers because if you're going to be sustainable, you need to get products coming in, going back to tier one or tier two.

Part one is how do you develop solutions to help your customers or your suppliers meet their sustainability goals? Then part two, can you give us any examples? Even if you can't name the company by name, we worked with X company to do the following.

Katie: I think at least to get the element around suppliers, it certainly can include suppliers. I think it's in a way we look at it as an ecosystem. We work with different companies or organizations in different capacities. That very well may be in a customer relationship, but it could also be in a partnership where that's a partner of selling Cisco product, or it could be in a collaborative context where we're the technology partner. We have instances where-- For example, we're part of an initiative that is trying to look at how do you standardize systems for reusable packaging which could become a real challenge.

If you have a lot of different companies or organizations trying to create their own standards in that instance where a technology partner, because trying to institute those types of models requires technology to think about how does your data transfer? How do you track the assets? How do you think about managing that system? You can't just put a thing out in the world and hope that it comes back, or I guess you could, but it's going to be a lot harder. It needs that technology side of it, the analytics, the sensors, whatever that looks like. It could look like a lot of different things and we'll do that same type of thing with our customers as well.

We have a customer who wants to institute a circular model, high-end retailer who wants to institute a circular model for the products they sell. They want to put them out in the world, they want to retain a relationship with their customer, they want to get those products back when that customer's done using it and be able to resell that in some capacity. Same thing we want for ourselves, but we can help others to achieve those types of goals.

We also see instances where customers are trying to achieve I'd say more classic sustainable. The first piece of the circular economy is to reduce our use of natural resources effectively. In that instance, there's a lot of things you can do with technology to make your operation more efficient, your system more efficient, make waste-- As one example, make waste collection more efficient in a city is an example, it's getting at the first element of this, how do we do this better before it gets at how do we reduce the assets, but that's still really important and it requires a lot of technology.

Those are all different places where we can come to the table as having the ability to sit down and say, "Okay, what are you trying to achieve and how do we think through the systems and the infrastructure because the tagline is connecting the unconnected. I really think it's true. If you want to achieve a circular economy, you have to connect the unconnected."

How do we use our technology to help our customers, our partners, our, our peers, our suppliers. It really doesn't matter who, but how do we help to enable that? and by doing that, expand the impact of what we can do much bigger than our own operations.

Bob: Katie, last question. A lot of listeners who are going to be looking at this or listening to this and saying, "Cisco's got all these resources, they've got this great talent and they're able to do it." From your perspective, for those individuals that are considering this, what do you identify as a starting point for them obviously knowing that the board of directors and its strategy side has to be there for the organization to embrace this, but where's a good place to start for a lot of the individuals considering sustainability and circular economy?

Katie: I think the most important thing is to show how achieving the goals of a circular economy support and enable the core business goals of the organization. Whether that's alignment with the strategic direction that the business is trying to go or cost reductions or revenue opportunity, customer demand, future regulatory requirements. I could keep going. I think people are very excited and passionate, a lot of them. We see this consistently at Cisco. They want to be able to contribute to a circular economy. They really get excited about it, but they also have to be able to prioritize it. If they're really going to do something more than just give it lip service or be able to help out with a small thing here or there. That means that we have to get the attention of leadership and we have to connect it to their goals and be every day.

I think what's nice with circular economy is that it is an economic model. It is a business model and it applies to every business in some way. It's about how do you connect the dots there. The other thing I would just want to highlight is that I think having case studies is really helpful to make it concrete. Maybe that the starting place is actually a handful of people or a specific function or department that can then see the vision, can see the connection and it can work with whomever it is who's trying to drive this to make those ideas a reality, in a small way.

We've seen this consistently where someone, for example, heard what we were talking about in circular economy. They're like, "How do I apply this to my own product?" In this case, a design change to remove pain. The example that I'm thinking of. That was his idea based on our inspiration in doing that project demonstrated cost savings, which then makes it easier to sell to leadership. "Hey, this actually is meaningful. It has a demonstrable impact toward the business metrics that we're tracking."

It's not always that clean, but I think it helps to get the momentum moving to the point where people at the top can see the business case and then we can leverage that toward also cross-functional engagement, which we use tremendously. We have to get people's interests to a point where they see it as a priority which means that we have to establish how it helps them out and to really drive an impact for the business which is something that we use quite extensively in what we're doing.

Abe: It's really interesting what you're describing is both it can be effective in a bottom-up and it can be effective in a top-down strategy. We shouldn't be necessarily thinking that there's one way to implement this.

Katie: Yes, exactly. It depends on the organization, but I think it's most effective if you can do both because one feeds the other and you have to work them both in tandem depending on what you're trying to do at that given point and where you are in the maturity.

Abe: Really interesting, Katie. This is all the time that we have for a special thanks to our guest Katie Schindall. Thank you for our listeners for joining us today. We hope you'll be back for our next episode and for the Rebound. I'm Abe Eshkenazi.

Bob: I'm Bob Trebilcock.

Abe: Be safe and be well. Thank you.

Bob: The Rebound is a joint production of the association for supply chain management and supply chain management review. For more information, be sure to visit ascm.org and scmr.com. We hope you'll join us again.

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