Does The Success Of The Circular Economy Rest On The Evolution Of Supply Chains?

More informed and demanding than ever, consumers are now imposing new iron-clad expectations on brands in the form of environmental and sustainability credentials. With the boom in ecommerce and subsequent product returns challenges, the transition to a circular economy is becoming even more important. The final delivery of this utopian, sustainable model however, is largely based on the efficiency and innovation of supply chain networks.

Responsible consumption versus traditional models

It is widely recognised that the consumer-centric society we inherited following the industrial revolution has been largely responsible for the climate challenges we are facing today. This system must now give way to a more sustainable model, organised around the concept and transition from a linear, to a circular economy.

This transition is governed by one key word: responsibility. Over the last century, but particularly since the turn of the millennium and the advent of the World Wide Web, consumer appetite has become a meaningful, almost aggressive act, thanks in large part to the unprecedented power conferred by the digitalization of commerce and the ability of consumers to interact directly with brands.

Brands can no longer be satisfied with just selling a product; they must provide information that goes beyond simply the price of the item, because it is on the basis of this information that 21^st century consumers increasingly makes their choices. They think less and less; "Can I afford it?" rather, "does this brand align with my own individual values as a human being?”

Responsible consumption therefore begins with an informed and reasoned decision that is not only guided by the desire to acquire the product, but also shared brand-consumer values. And, increasingly those values are aligned around the sensitive, ‘hot button’ topics of environment and sustainability.

Creating new experiences beyond simply product

This transformation is reflected in a greater sensitivity to the various aspects of a product’s life, and increasingly to the potential for a second life too. This can be seen in the dynamism of the second-hand market, with the success of websites such as Vinted and a renewed interest in the reparability and reuse of products.

So, what does this mean for brands? There is now a pressing need to inform consumers about the environmental impact of a product and its delivery. Increasingly however, there is also an important need to innovate and create new scenarios that guarantee a brand’s eco-responsibility without eroding already squeezed margins.

Major ecommerce platforms are also innovating to reduce the economic and ecologic impact of returns. Veepee, for example, has created a new customer-to-customer return service (called Re-turn). Instead of sending the product back to the platform to be put back on sale, the customer offers it directly to other customers, while Amazon is considering offering customers the ability to return products at the same time new ones arrive (to drivers)  as a step-change in its reverse logistics process.

Supply chain is the common denominator

Managing an entire and extended lifecycle of a product means managing its physical reinjection into a circular (rather than linear) economic model. Whether we are talking about repairing a product, putting it back into circulation in the second-hand market or returning it after an online purchase, at its essence we are talking about supply chain processes and networks.

In order to fully embrace these new developments that underpin the circular economy, it is therefore necessary to put in place logistics processes and solutions that are themselves innovative, increasingly efficient and therefore by nature, more sustainable.

These solutions should not only reduce the carbon footprint of the upstream (the part that customers don’t see, between suppliers and the warehouse) and the downstream parts (delivery) of the supply chain, but also offer more options to customers first-hand, in the process, fundamentally promoting more sustainable, environmentally aware action on their part, as well as on behalf of the actual brand.

However, innovative solutions in themselves can often create new challenges; they often lead to much more dispersed networks than that which brands are used to dealing with; not to mention the multiplication of collection points, the unpredictability of delivery orders and the increase in unit order flows; all of which make it more challenging to control costs, while managing supply chains in an environmentally responsible way.

There is therefore, a risk to the circular economy that in offering more sustainable options, it actually results in the opposite effect to that which it was created to solve. Risk however, must not be a reason to simply abandon this vital important cause and to avoid failing the goal of a more sustainable, greener, circular economy, we need to act now.

Supply chains are pivotal to the success of this idea and the need for more dynamic, data-driven, smarter, end-to-end supply chain networks, capable of maximizing consolidation opportunities; using greener means of transportation; promoting collaborating between vendors, 3PLs and new industry disruptors, all the while offering agile, scalable and innovative ‘always on’ solutions is a must.

To offer consumers a truly circular economy, first and foremost we need to transform the way our supply chains are perceived, built and managed.