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ASCM Insights

Circular Economics

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The economy is changing rapidly, and companies that innovate have a better chance of achieving profitability and success. Last week, Fast Company published “How Netflix-ication Can Deliver A Waste-Free Circular Economy,” which highlights the shift of products to services. Think of CDs to Spotify, DVDs to Netflix, cars to Uber, and computer storage to the cloud.


Author Ben Schiller writes that the “take-make-dispose” product cycle should end—creating opportunities for businesses and better outcomes for the environment. “Companies will retain ownership of their products, maintaining them and remanufacturing them, extending life cycles, and reducing the world’s gargantuan waste pile,” Schiller writes. “On a planet of finite resources, and in an age of increased expectations around experience, services are likely to make increasing sense in category after category.”

Technology, especially digital, is enabling this shift through sensors and GPS, apps, additive manufacturing, and more. Peter Lacy, global managing director for sustainability services at Accenture, is quoted in the article. He suggests that even if the ownership doesn’t change, the management of natural resources throughout the value chain will. Lacy wrote Waste to Wealth with Jakob Rutqvist, a manager in Accenture’s strategy and sustainability practice. Their book describes what a circular economy is and how it can be beneficial to business and the environment.

Lacy and Rutqvist’s research indicates a $4.5 trillion reward for performing circular economy business models by 2030. “It’s about eliminating the very concept of ‘waste’ and recognizing everything has a value,” they write in an executive summary of their research. “It’s about moving from efficiency to effectiveness in the way we manage inputs and outputs. And by forging a much deeper bond with consumers. Going beyond point of sale, to create connections through product returns and customer engagement.”

The Fast Company article offers examples of circular economy businesses. These include companies that offer sustainable equipment such as solar panels, building systems, and municipal street lighting. Solar panels, which originally cost home owners upwards of $20,000 to start, now can be installed by third parties that retain ownership and charge monthly fees.

Another example is SparkFund, which finances businesses’ infrastructure and energy efficiency projects and structures costs into manageable monthly fees. SparkFund’s partners install the equipment, and the monthly charge includes the cost of repairs, monitoring, and service.

Obviously, business operations need to change if there’s a move toward a circular business model. Most existing companies aren’t organized to capitalize in this manner. At the very least, Schiller advises that companies probably will need new maintenance teams and, possibly, an entirely new approach to research and development. Other experts warn that existing companies dramatically moving into service-based solutions could face challenges from their investors and with their stock prices.

Ready for change

As their title Waste to Wealth suggests, Lacy and Rutqvist advise that turning products into services uses fewer resources and generates more income. In fact, supply chains play a pivotal role in this process. In their executive summary, the authors decircular supply chains as follows: “When a company needs resources that are scarce or environmentally destructive, it can either pay more or find alternative resources. The circular supply chain introduces fully renewable, recyclable, or biodegradable materials that can be used in consecutive lifecycles to reduce costs and increase predictability and control.”

Are you ready to implement vast changes into your business or work for a company that already has? APICS offers many resources to help you become a more agile supply chain professional. For example, APICS conferences and seminars enable you to expand your knowledge while also expanding your network. The 10th annual Best of the Best S&OP Conference, which APICS co-sponsors with the Institute of Business Forecasting & Planning, will take place June 15–16 in Chicago. To find out more and register, visit apics.org/best. Of course, stay tuned for more details about APICS 2017, which will take place October 15–17 in San Antonio. To plan ahead for APICS 2017, visit apics.org/conference

About the Author

Abe Eshkenazi, CSCP, CPA, CAE CEO, ASCM

Abe Eshkenazi is chief executive officer of the Association for Supply Chain Management (ASCM), the largest organization for supply chain and the global pacesetter of organizational transformation, talent development and supply chain innovation. During his tenure, ASCM has significantly expanded its services to corporations, individuals and communities. Its revenue has more than doubled, and the association successfully completed three mergers in response to both heightened industry awareness and the vast and ongoing global impact driven by supply chains. Previously, Eshkenazi was the managing director of the Operations Consulting Group of American Express Tax and Business Services. He may be contacted at abe@ascm.org.

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