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Supply chain

Take the circular route to curbing over-production

IbyIMD+ Published 21 March 2022 in Supply chain • 6 min read • Audio availableAudio available

Cutting lead times, incentivizing local production and repurposing excess stock would have a huge positive impact on the environment, explain Ralf W Seifert, Yara Kayyali Elalem and Işik Biçer.

There is growing recognition that we need to move away from the take-make-waste model of production and consumption towards a more circular economy where we stop waste from being produced in the first place. Much attention has been focused on how companies can prolong the lifespan of products, by making it easier for consumers to reuse, repair, and recycle goods. IKEA has rolled out a buyback program for lightly used products, adidas has designed shoes that can be ground down to be remade into another pair once they are worn out, and outdoor gear brand Patagonia has launched a repair guide for its clothing. Yet firms would do well to take a closer look at how they can re-design supply chains to reduce the amount of production-related waste that occurs when supply exceeds demand.

Take for example a broken smartphone: the device can be repaired, sold to secondary markets if outdated or donated to other consumers for reuse. If none of these options is possible, the manufacturer could produce a new smartphone from some of the old parts. If remanufacturing is not an option, smartphones should be recycled. Only once all the above possibilities have been exhausted should the smartphone be sent to landfills. Many countries have passed legislation to support increased recycling efforts. For example, the Minnesota Electronics Recycling Act imposes strict collection and recycling objectives on producers as a percentage of their total sales. Companies have also adopted measures to make their products last longer. Fairphone is designing smartphones that are made from recycled materials and can easily be repaired. The company also recovers e-waste in the EU where it is based and partners with organizations that collect e-waste in African countries that lack recycling infrastructure.

In contrast, there is a lack of business models for reusing and recycling the waste produced when supply exceeds demand due to a lack of planning or a sudden decrease in demand. Excess inventory is instead destroyed, before reaching consumers.

Fair phone
Fairphone is designing easily repairable mobiles made from recycled materials

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