Logistics plays a key role in the success of new business models for the circular economy. At the same time, the required logistics poses a challenge, since it is significantly different from current operating models and logistic structures.
Cost-efficient and ecological supply chain management will be a fundamental requirement of a well-functioning circular economy. According to companies working in the circular economy, the logistics costs of circular economy are, for the most part, too high. The supply chain is missing services and operators. Collaboration between companies and segments is still low. In many cases, these shortcomings form an obstacle for new business in a circular economy or impair its profitability significantly.
No company can become fully circular on its own as it is part of a network of other companies. Like in nature, one needs to think about ecosystems.
What is the role and potential of the logistics sector in the circular economy?
“Take, make, waste” is no longer a viable way of operating in the fast-moving consumer goods industry. Billions of clothing items find their way into landfills every year, plastic bottles are polluting the oceans and electronic waste is harmful. The circular economy is a system that regenerates itself in a closed loop. Products are used, recovered, repaired and used as input to more products and not disposed of as waste.
The principle of a Circular Economy is to keep raw materials within the economic cycle as long as possible while generating the lowest possible amount of waste and emission. To do so, end-of-life products and materials must be kept at the highest possible level of value creation according to their original use. Adapted logistical concepts to coordinate both material and information flows – in addition to innovative business models and new approaches to product design for recycling – are an important cornerstone to making this work and necessary to realise circularity in the economy.
In its basic assumptions, the circular economy concept uses both old and new concepts that promote the mitigation of the adverse environmental impact of products manufactured by companies, and include the following concepts (Oksana Seroka-Stolka et al., 2019):
- From cradle to cradle (C2C).
- 3R (reduce, reuse, and recycle) and 4R (reduce, reuse, recycle and, repair).
- LCA.
- Cleaner manufacturing.
- Industrial ecology.
- Sustainable supply chain management and
- Green supply chain.
The logistics sector plays a crucial role in the circular economy. Production and user processes must be linked in order to create a system without waste. The circular economy offers many opportunities for logistics companies to change their role, innovate and seize opportunities. A number of these opportunities are listed below (Knowledge map: Circular economy, 2021):
- Chain management
The transition to a circular economy offers opportunities for the logistics sector, both in terms of jobs and CO₂ reduction. A major opportunity lies in coordinating cooperation in the value chain. A logistics service provider often has insight into which residual flows come from where and which raw materials are requested from other organisations. Linking supply and demand ensures that cycles are closed. In order to fulfil the role of chain director, logistics service providers must take the initiative to find synergy between the various chain links.
- Collaborative logistics
Cooperation between logistics parties in a circular economy has many advantages in terms of efficiency and sustainability: a shift from product ownership to leasing and access in supply chain relationships; the relevance of structural flexibility and start-ups in regional or local loops; open and closed material loops in technical and biological cycles; closer collaboration within and beyond immediate industry boundaries etc. Sharing loading capacity in trucks, for example, ensures that there are no trucks running below capacity (efficiency) and that fewer trucks are needed, thereby preventing exhaust fumes (CO₂ reduction).
- Synchro modality
Using synchro modality means that you have to design a good system in which you can connect the routes of trucks, trains, boats, bicycles, etc. to each other. If it is possible to change means of transport efficiently, you will have created a multimodal, synchronised logistics chain. Synchro modality is defined as an “evolution of inter-and co-modal transport concepts, where stakeholders of the transport chain actively interact within a cooperative network to flexibly plan transport processes and to be able to switch in real-time between transport modes tailored to available resources. In this case, you create the most sustainable chain possible.
- Data infrastructure
To enable synchro modality and collaborative logistics, an advanced data infrastructure is needed that can provide real-time tracking and overview. In this central digital ‘hub’ all supply chains can be connected. New methods such as blockchain may provide the tools to enable such a network.
- Sharing economics
In a sharing economy, private businesses are expected to share products that are more expensive. Beyond the digital services implemented by sharing platforms, there are also social and physical places where communities are experimenting with the potential of collaborative and innovative solutions: purchasing groups, time banking, social street, co-working spaces. Goods and services access promoted by sharing business models are emerging in the place of older models based on private propriety and a consumerist view of society. Because companies have to be able to deliver on time for their customers, it is a challenge to design an efficient logistics infrastructure for this.
Logistics alone cannot accomplish the transformation towards a Circular Economy in the same way that the transformative potential cannot be tapped without apt logistics solutions. Application-oriented innovations to actually realize circular logistics networks have to be developed under consideration of rebound effects and environmental impacts.
Ripanti, E.F. and Tjahjono, B. (2019), «Unveiling the potentials of circular economy values in logistics and supply chain management», The International Journal of Logistics Management, Vol. 30 No. 3, pp. 723-742. https://doi.org/10.1108/IJLM-04-2018-0109, Knowledge map: Circular economy. (2021) Available at: https://kenniskaarten.hetgroenebrein.nl/en/
Fennemann, Verena; Hohaus, Christian; Kopka, Jan-Philip: Moving in circles: Logistics as a key enabler for a circular economy: Future challenges in logistics and supply chain management; Whitepaper Dortmund: Fraunhofer IML, 2018 Available at: https://circulareconomy.europa.eu/platform/sites/default/files/fennemann_logistics_as_key_enabler_for_ce_2018.pdfOksana Seroka-Stolka, et al.: Green logistics and circular economy, Transportation Research Procedia 39 (2019) 471–479, Available at: https://www.sciencedirect.com/science/article/pii/S2352146519301371.