Circular Economy Essay Role of reverse logistics in the circular economy
Aditya Patil Master’s in Design Innovation & Service Design
Contents Introduction 3 Circular Economy
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Reverse Logistics
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Relation Between Circular Economy and Reverse Logistics 4 Framework For Designing Reverse Logistics Based On Circular Economy Principles 5 Case Study On Reverse Logistics Of Electric Vehicle Batteries Fast Fashion Waste
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Reverse Logistics in Food Retail Industry Conclusion 14 Future Scope
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References 15
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Introduction The raw material is a primary material used to produce goods, finished products, energy or intermediate materials that are feedstock for future finished products. They are of two types, viz. Primary and secondary. Primary raw materials are naturally occurring substances that have not been subjected to chemical changes after being recovered. Secondary materials are waste materials that have been recycled and injected back into use as productive material. The concept of bringing the waste material back into the loop to create new products and goods is called a circular model. The Ellen Macarthur Foundation defines a circular model as a systemic approach to economic development designed to benefit businesses, society, and the environment. It entails gradually decoupling economic activity from the consumption of finite resources and designing waste out of the system. Underpinned by a transition to renewable energy sources, the circular model builds economic, natural, and social capital. It is based on three principles: • Design out waste and pollution • Keep products and materials in use • Regenerate natural systems
Circular Economy The circular model does not begin at the end of the loop; it is a process-driven approach that needs to be considered while the product is in the design stage. According to the Ellen Macarthur Foundation - An industrial system that is restorative by intention and design. It replaces the end-of-life concept with restoration, shifts towards renewable energy, eliminates the use of toxic chemicals, impairs reuse, and aims to eliminate waste through the superior design of materials, products, systems, and business models. The circular economy principles need to be integrated within the system to achieve sustainability goals. These principles include: 1. Design out waste - consider the materials which can be reprocessed. 2. Build resilience through diversity - building systems that are resilient to the CE aspects. 3. Work towards using energy from renewable sources - adopting renewable energy resources and reducing the energy usage per unit required to produce one product. 4. Think in the system - creating a breathing system that interacts with one another so that the end product can be brought back into the loop. 5. Think in cascades - maximising the retained value of the product before going back to the loop. These can also be stated in much simpler manner as: 1. Control finite resources
2. Circulate products, components and materials 3. Design out waste. All these principles can be achieved through a closed-loop supply chain (CLSC). According to Can Wassenhove, CLSC can be defined as “the design, control and operation of a system to maximize value creation over the entire life-cycle of a product with the dynamic recovery of value from different types of volumes of returns over time.”[ Getting hold of the circular economy] The CLSC relies on innovative practices, services and technologies which help them achieve the recycling, remanufacturing and refurbishing of the products with the help of an extended supply chain network. This network can include trading partners CE based startups and partner directly with the consumers. Achieving a closed-loop system requires an optimized reverse logistics system.
Reverse Logistics Reverse logistic is a part of closed-loop supply chain management, consisting of both forward and reverse logistics. The crux of the reverse logistic is to enable and facilitate the flow of products back into the loop. They use the different mediums of the supply chain to bring the used products and materials back to the recycling unit, where they can be reused after processing. A great deal of infrastructure is required to bring back a used product into the loop. This can be achieved by setting up collection platforms, innovative recovery methods and using technology to trace the products. According to the article published by the European Journal of operational research, the main gaps in reverse logistics and CLSC sectors are network design and planning, production planning, and inventory management.
Relation Between Circular Economy and Reverse Logistics Reverse logistics and circular economy have similarities in activities. The circular economy is a mix of activities like maintenance, repair, reuse, recycle and refurbishment. Reverse logistics aims at planning, implementing and controlling the flow of materials to bring back the waste into the closed-loop for proper disposal. According to the researchers Xiangru and Wei, Chen and Chen, reverse logistics have an essential role in the circular economy development through implementing the CE principles viz. Reuse, recycle, and reduce, especially in the circular process that can keep the material flow at a low cost. CE principles have to be integrated to design
a reverse logistic system. Reverse logistics focuses on the effectiveness of logistics, reuse/ recovery flow, cost and recapturing of the retained products, while CE focuses on keeping the material in the loop for a more extended period to obtain the highest value of the waste.
Framework For Designing Reverse Logistics Based On Circular Economy Principles Reverse logistic is more complex to manage when compared to forwarding logistics. Hence, a proper framework is required to design a reverse logistic system. The reasons we need an RL framework based on the CE principles are: 1. To increase the efficiency and effectiveness of the RL operations. 2. Currently, CE principles are not considered while designing an RL system. 3. Having a CE based framework can help to embed the process more efficiently. Before understanding the reverse logistic system, we need to understand how the logistics operation works. A logistic system comprises of: 1. Manufacturing 2. Warehouse 3. Distribution 4. Retailer 5. Inventory 6. Secondary market 7. Waste management The flow is as mentioned in the diagram: To bring a product back into the loop, it goes through different processes: a mixture of reverse and forward logistics. The product goes through processes like repair, refurbish, remanufacture, cannibalise, recycling, and disposal based on the quality of the returned product. At the end of life (EoL), a product is collected 1. If a product can be directly reused, it goes through repairing or refurbishing and inventory. 2. Some of the refurbished products needs to be remanufactured 3. Some of the products spare parts are sent to the suppliers. This process is called cannibalisation.
4. The products which cannot be recycled or reused are disposed off. The RL consists of different processes, which are used based on the quality of the product. I have explained the processes with some examples. Repair In this process, the product is repaired after close inspection for reuse. The detailed repair process is arranged; here, the product is an aerospace product, and the type of remanufacturer is an independent remanufacturer. It has three components: customer/aircraft operator, remanufacturer, and manufacturer/OEM. The process will be started from when the aircraft operator sends the product collected from the manufacturer for repair purposes. There are three conditions; C1 (cycle 1), the engine is stripped down, cleaned, and assessed; C2 (cycle 2), the repairable engine will be having a non-destructive testing process to diagnose the repairing point and then the components will be repaired using chemical electroplating, welding etc.; C3 (cycle 3), the repaired component will be reintroduced back to the main engine (reassembly) before the series of tests (embedded, engine, performance indicator tests) are proceeded with in order to meet OEM performance requirements. Refurbishment The product refurbishment process is represented by an electronic product (computer), and the type of re-manufacturer is an independent re-manufacturer. The process consists of four components: supplier/customer, provider, customer/other customers, and recycling centre. The process starts from the supplier sending the collected product, where the supplier has a function to collect the used product from the customer. Re-manufacturing The type of product is a forklift truck, and the type of remanufacturer is an original equipment remanufacturer (OER). The process engages entities such as market/ rental and original equipment manufacturer (OEM). The process is started from when the market/rental sends the product to the OEM. The OEM receives the product for inspection, which is done to determine the class of used product; several activities are needed, such as cleaning, repairing, repainting, including changing parts if required. Testing the product is needed after doing all of the above processes. Cannibalisation The cannibalisation process is started from some conditions, where it only can be done if the designated asset is available. The process is also taken from the aerospace industry. The cannibalisation process in this industry can be done for various reasons, such as if the number in stock is zero, which exceeds the operational schedule. When requesting cannibalisation, the specific requirements of the company need to be followed. The manufacturer/re-manufacturer will receive the request if the designated asset is available. Several processes will be undertaken if all of the requirements are fulfilled: inspection, remove the component, install, and the last process refers to the notification procedure before sending to the customer/ inventory. Based on this study, the researchers designed a framework for designing the RL based on the CE principles.
The framework can be used to decide what process to follow based on the quality of the product. The process is as follows: 1. Select the type of RL operations viz. Repair, refurbishment, remanufacturing, cannibalisation 2. Analyse the type of activities required for the recovery options. 3. Consider and review the CE values 4. Map recovery option activities based on the CE values 5. Identify parameters of product recovery activities 6. Analyse parameters and decisions in the mathematical formulation
Case Study On Reverse Logistics Of Electric Vehicle Batteries The following research paper, ‘Modelling reverse supply chain through system dynamics for realizing towards the circular economy: a case study on electric vehicle batteries presents a model to represent a complex system of reverse logistics to recover post used products at their end-of-life stage. The findings show the importance of a shared understanding to transition towards a resource-efficient and circular economy model successfully. Also, the reuse strategies such as re-manufacturing and re-purposing present a massive potential for the recovery of electric vehicles batteries in the future.
Interplay among the building blocks of CE According to the research, by 2030, the EU hopes that there will be 30 million electric cars on European roads. Currently, only 5% of the lithium-ion batteries are recycled. In order to meet the performance and safety of electric vehicles, batteries are replaced as their capacity reaches 80%. However, it can still be used for further applications. Electric vehicle batteries can be can be recycled by applying CE principles like reusing, remanufacturing, repurposing and recycling. Reuse If a vehicle meets with an accident than the battery in the vehicle is reused in other vehicle of the same brand. However, the relaiability and compatibility is a main concern for reuse applications. Repurposing The repurpose strategy uses the electric battery that is recovered after the End-of-Life (EoL). It is used for other application rather than using it in the vehicles again. A repurposed battery from an electric vehicle can store energy from renewable sources like solar & wind, electric storage for heaters and distribution grids.
Remanufacture In remanufacturing, the used product is restored to its original form. These remanufactured batteries can again be used in the vehicles for a more extended period. Remanufacturing involves an industrial process. Remanufacturing of EVB involves partial disassembly, replacement of substandard cells and reassembly of battery. Cost-benefit analysis shows that remanufacturing of batteries is economically feasible, saving up to 40% over new battery use. Recycling Recycling is a method where discarded materials are processed and used to produce new materials or products. Recycling electric vehicle batteries is a popular strategy to recover rare earth materials like lithium and cobalt. Reverse Supply Chain An efficient supply chain is required for the adoption of circular economy principles. An effective supply chain will help the system to collect the electric vehicle batteries (EVB) after EoL with less impact on the environment and at a low cost. This can be achieved by integrating advanced technologies in the supply chain and using a reverse logistic framework to design the supply chain ecosystem.
Fast Fashion Waste The desire to accumulate material wealth is so entrenched in our modern society that to distinguish ourselves from our consumption is nearly impossible. However, our overconsumption/production is killing us and the planet, causing massive material waste, toxic emissions, and human exploitation– all of which poses a real existential threat. The effects of fashion waste • Over consumption of resources: Water consumed by the fashion industry in 2017 was nearly 79 billion cubic meters, enough to fill 32 million Olympic-size swimming pools. • Waste: 85% of fashion waste goes to landfills. • Social Injustice: Exploitation of workers in the 3rd world countries - uncontrolled work environment. Approach The fashion waste problem can be solved by designing closed-loop systems to bring the fashion waste back into the loop. This can be achieved by integrating an extended circular loop into the system. The strategies of an extended circular loop are: 1. Recirculating used fashion garments. 2. Designing for long term use of clothes: This strategy is concerned with extending the use period of clothes by introducing service loops. 3. By promoting long term thinking behaviour in the fashion consumption of the people. 4. Promoting circularity of trends and clothing care using repair strategy and by increasing the efficiency of the system. All these strategies are closely interlinked with the B2C supply chain within the fashion industry. It can feel impossible to affect real change to the complex megalith that is the fashion industry – change is slow. By observing and engaging directly with consumers of all ages and backgrounds we were able to understand that people want to make ‘good choices’ but factors of convenience, price, and visual identity outweigh collective conscience. But should those factors be met while providing sustainable and ethical offerings then consumers are likely to make better choices. Research During this project, with did extensive research. We carried out historical research on the topic, which gave us ideas about preservation, restoration, and inheritance. Later, we interviewed the consumers, and we learned that consumers do not have access to services through which they can send their used clothes back into the loop. Using the engagement tool, we learned that when buying clothes, consumers care about the environmental impact.
Solution We designed a circular fashion subscription box. It leverages the accessibility of online shopping with the novelty of customisation and seasonal subscriptions to keep consumers hooked on a cycle. However, Instead of blindly consuming, they are also feeding the source through an incentivisation loop. By donating your clothing to the website, you get a credit on your subscription; the more users, the more robust the supply chain ecosystem. The website was developed with two functions: 1. Shoppers to customise their profiles and shop for items. 2. The other for donations that feed into the inventory. The two participants are equally important because, without the donations, the “biodiversity” of the shopping experience is limited. We thought of partnering with retailers to recirculate their deadstock that would otherwise be sent to landfill or be incinerated to supplement inventory. The sorting warehouse sorts garments into categories, for sale, for recycling, for waste. They work with leading innovators in material recycling to ensure as little goes to waste as possible. The selectors also use pit-to-pit measure on each garment and create a local standard for fit and size. Then each garment is tagged with a label that talks about the unique qualities, the materials, and proper care for it. Each box is made of biodegradable materials, including ink, which is soil based. It also contains a note describing the environmental savings of slow and secondhand fashion. The mystery item increases the intrigue and excitement of the unboxing experience. Once all items have been tried out, any unwanted items can be placed back in the box with the included return shipping label and sent back. Your card on file is only charged for the items you keep. The box also leaves space for extra items to be donated. In this way, the consumer enters into the circular system as a donator and buyer. Donations and returned items sent back to the selection warehouse are cleaned and sorted, and entered into the circular model. Circular economics is proven to work within nature, as organisms share resources and produce less waste. Humans have built consumerism into their lives, so to change their behaviour is too great a challenge. The industry has the opportunity to change its models for more circular and sustainable methods that continue to serve the consumer demands for new and exciting shopping experiences.
Conclusion The business model of the circular fashion box can be inculcated to reuse the waste clothes using a subscription-based model. Here the logistic has been taken care of by the existing supply chain infrastructure. Creating a medium through which the consumers can send the waste clothes back into the loop is essential. With design innovation, we were able to solve the problem of reverse logistic in the system. Here is the representation of the circular model. Using a reverse logistics framework to design a circular business model can help the business to create optimized and efficient supply chains. Which can help the business to reach towards its sustainable goals.
Reverse Logistics in Food Retail Industry Reverse logistics is necessary in food retail industry to supply goods to the consumers in a safe manner without damaging the environment. The Food industry faces challenges like food returns, recycling, reuse and disposal. A reverse logistic framework is required because of the shorter product lifecycles due to product expiry and potential product damage during the supply chain logistics. Also, due to shorter lifespan retailers tend to return the low quality food products like meat and dairy products that are vulnerable to spoilage. There are three important areas in food industry where RL is essential: decreasing food waste, packaging and material waste. The 2030 Agenda for sustainable Development indicates that sustainable Development goals calls for a reduction of one half per capita of global food waste at retail and consumer levels by 2030. From research it is found that 7.6% of the retailers did not have product take-back policy while 43.6% of the respondents have an annual consumer food returns rate between 6-10%. The highest return rate between 26-30% was seen in case of 3.4% of the respondents Retailers explained expiration of food products (80.5%) and damage to product (53.0%) as major reasons behind food product return by consumers. Beverages (79.7%), dairy products (73.3%) followed by packed foods (50.0%) were among the most returned food products by consumers. Most of the returned items were either returned to suppliers (79.2%) or dumped in landfills (61.0%).1 The author has established a relationship between CO2 emissions and food waste. He claims that 10% of green house gases (GHG) arise because of the food waste. Here is the reverse and forward logistics process model of a food retail industry.2 The solid lines represent
forward logistics, and the dotted lines represent reverse logistics. The process diagram helps determine the potential emissions where the greenhouse gases (GHG) emissions occur during the logistics. This case study shows why we need a reverse logistic framework based on CE principles. If a reverse logistics process is designed using a CE principles-based framework, the problems like greenhouse gases (GHG) emissions, material waste, packaging and food waste can be minimized. It can also help to increase the efficiency of the process leading towards sustainable goals.
Conclusion After researching circular economy and reverse logistics, I discovered that the consumption of raw materials would increase over the period. Human beings will not stop the consumption of basic needs like food and clothing. The overconsumption will lead to a shortage of raw materials. In such a scenario, practising Circular Economic principles within the organisations, government bodies, and businesses is necessary. One of the problems faced by all the industries is Reverse Logistics. Reverse Logistics is an essential part of the circular economy because the main principles: recycling, refurbish, reuse, and remanufacture, require the waste product to comes back in the loop. This can be attained by designing efficient reverse supply chain models which consider all the circular economy principles. The supply chain management in the circular economy is at an immature stage. High operations and handling costs in different stages of the supply chain is restricting the circular business. Also, consumers do not have proper access to reverse logistics services, which leads to waste not coming back to the loop. The existing supply chain management systems have not been designed to keep the Circular Economy principles in context because of the complex process. Also, the industries do not have a standard Reverse Logistics framework based on Circular Economy principles. Hence, designing a standard framework, which all industries can use is essential.
Future Scope In the future, I would like to research more about how a logistics framework is designed. There is a considerable scope to design different Reverse Logistics framework with Circular Economic principles for different industrial sectors. Also, I see a huge scope for co-creating circular business models and logistics frameworks involving key actors who know the business upside down.
References 1 Vijayan, G., 2014. Sustainability in Food Retail Industry through Reverse Logistics. Research Gate, Vol. 3, No. 2,]. 2 Kazancoglu, Y., Ekinci, E., Mangla, S., Sezer, M. and Kayikci, Y., 2020. Performance evaluation of reverse logistics in food supply chains in a circular economy using system dynamics. Business Strategy and the Environment, 30(1), pp.71-91. 3 Alamerew, Y. and Brissaud, D., 2020. Modelling reverse supply chain through system dynamics for realizing the transition towards the circular economy: A case study on electric vehicle batteries. Journal of Cleaner Production, 254, p.120025. 4 Eva Faja Ripanti, 2016. A Framework to Design Reverse Logistics Operations based on Circular Economy Values. 5 Ellenmacarthur.com. 2021. Ellen MacArthur - Official Website. [online] Available at: <https://ellenmacarthur.com/> [Accessed 30 April 2021]. 6 The state of fashion 2020 - McKinsey & Company