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4 Ways Circular Supply Chains Benefit ROI

4 Ways Circular Supply Chains Benefit ROI

Years ago, we unknowingly practiced circular supply chain principles. Milk was delivered to doorsteps in glass bottles that were collected and reused again; products were delivered in wooden crates that would be repurposed; and beverage companies would collect returnable glass bottles for reuse.

Now, circular supply chains are the future, but many companies are wary of them because they require systematic change from the traditional linear structure of supply chain management. Transitioning to a circular supply chain can be a time-consuming investment, but having a flexible supply chain from the start can make the process much smoother.

Why a Circular Supply Chain?

The circular supply chain minimizes waste through reducing and repurposing recyclable, renewable and biodegradable product materials, making use of continuous product life cycles; and minimizes raw materials usage through development of the packaging design using reusable (non single-use) materials i.e. returnable packaging like glass bottles. As time has progressed and environmental concerns continue to grow, circular supply chains continue to display their environmental, economic and industrial benefits among companies that have taken the time to implement them into their business models.

Since the circular supply chain model is just now starting to gain traction, the full benefits are still coming to light, but there is one defining benefit (aside from the environmental benefit): investing in a circular supply chain can result in a higher return on investment (ROI). See the four ways a circular supply chain can work for you.

1. Supports a circular economy

A circular economy is based on the life cycles we see within the natural world where materials are left in use for as long as physically possible, reaching their maximum value. In the article “The Benefits of a Circular Supply Chain” from TradeReady, a circular economy is defined as, “an economy that is restorative and regenerative by design and aims to keep products, components, and materials at their highest utility and value at all times.” When a product does reach the end of its life cycle, the materials are collected and remanufactured, then sent back into the circular economic process. So essentially, businesses make more with less and the economy becomes a regenerative ecosystem.

How does this benefit ROI?

By investing in a circular supply chain business model, companies contribute to the development of a circular economy. Circular economies haven’t just spiked interest among eco-friendly companies — they’re being considered on a global economic scale because reused products take a fraction of the price to manufacture. As the products circulate within their life cycles, so do the profits, resulting in recovered financial value and reduced company costs.

2. Reduces waste

By transforming waste materials and returned goods into products that can be remanufactured , circular supply chains help slow the filling of landfills by extending product life cycles and lowering waste costs.

How does this benefit ROI?

When switching to a circular supply chain, lower disposal impacts aren’t the only benefit. Countries are now implementing economic incentives and regulations to encourage companies to recycle and repurpose materials. Here are a few examples of these regulations at work around the globe:

  • Japanese recycling laws: Companies in Japan are held accountable for using recycled and recyclable materials.
  • European Union packaging directive: Since 2001, all E.U. countries are required to recycle 50% of their packaging waste or incinerate it to produce energy.
  • U.K. landfill directive: Since 2007, all U.K.-based companies are required to recycle or treat their wasted products, no matter the size or turnover.
  • California recycled content mandate: All manufactured plastics in California are required to be 25% recycled materials.

3. Reduces cost of raw materials

A goal of the circular supply chain is to reduce the amount of raw material used in the production process to minimize use of raw materials and natural resources. Instead of ordering a new stock of raw material to meet demand, a circular supply chain allows companies to reuse materials.

How does this benefit ROI?

Ordering less raw material doesn’t just save money when it comes to inventory, it also has the potential to decrease freight costs and lower emissions. Companies should seek resources that are already within their supply chain.

4. Builds consumer loyalty

As environmental concerns increase, consumers have started to value companies with higher ethical profiles — ones that hold strong environmental and social corporate policies. Green influence is the latest trend, and consumers want to know what kind of conditions their products were produced under, and the environmental impact.

How does this benefit ROI?

Customer satisfaction and loyalty is the goal of most businesses and the modern customer cares about where and how their products are sourced. By investing in a circular supply chain, consumers are more likely to be interested in your responsibly sourced products, resulting in increased customer sales, returning business and social recognition.

Start your transition to a circular supply chain

Moving from linear to circular supply chains requires a process change, a business culture change, and top-down commitment. It’s a result of a strategic decision to be more environmentally and socially responsible. As more companies adjust their priorities to include circular supply chain practices, the more other companies can learn best practices.

If you are interested in how you can manage recycle your reusable packaging assets packaging, check out Alpega’s reusable packaging management solutions.

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