Why You Should Aim For A Closed-loop Supply Chain

Aiming for no waste should be the target for every company


Sustainability is now a priority for supply chain managers. Growing concern for the depletion of our natural resources has helped provoke an increasingly environmentally conscious consumer base and driven more government regulation around emissions and ethical sourcing. Organizations operating in all industries have introduced zero waste goals, including giants such as Unilever, Subaru, and Toyota. Sustainable initiatives are now the status quo, and that’s a good thing.

In the US, you need to divert at least 90% of your waste away from the environment, landfills and incinerators to officially be called a zero waste company, and very few manage it. Reaching absolute zero is an extremely challenging goal and unlikely to be achievable in all industries, however, more and more companies are getting there. This is thanks largely to a shift towards closed-loop supply chains.

A closed-loop supply chain is designed and managed in such a way as to combine both forward and reverse supply chains. A forward supply chain is all processes involved in the creation of new products from raw materials through to their distribution to consumers. A reverse supply chain, on the other hand, is everything included in the collection, testing, and retrieval of returned products, parts, and materials and their reintroduction into the supply chain through recycling. So, once an item has been manufactured and distributed, a closed-loop manufacturer will attempt to encourage the item’s return when it’s no longer being used by offering take-back programs and other incentives. They will then either return it to its previous condition ready for resale, or use it for parts that can be used in future products.

Closed loop supply chain management has a number of benefits. It enables greater profits through cheaper resourcing because you are not paying for new raw materials, allowing companies to cut their prices while achieving higher margins. It further means that consumption of raw materials is less, less energy is used and the waste does not end up in a landfill, all of which is better for the planet and therefore your public image. It also creates significantly more jobs than waste processing and landfill.

A number of companies are in the process of implementing closed-loop supply chains. P&G, for one, is hoping to build on the zero-waste-to-landfill status at 56% of its production sites and make its entire manufacturing operations closed-loop, This means that they will eliminate or re-use roughly 650,000 metric tonnes of waste that would have gone to a landfill. Fetzer Vineyards, one of California’s largest wineries, has also successfully introduced closed-loop supply chain. It is the largest wine company in the world to receive B Corp certification and the first winery in California to operate on 100% renewable energy, thanks to its decision to install the closed-loop biological wastewater treatment system, BioFiltro BIDA® System, at its Mendocino winery. The system is powered by billions of earthworms working with beneficial microbes, and should lead to energy savings of as much as 85% compared to current wastewater treatment technologies and optimizing water conservation measures. According to Josh Prigge, sustainability manager at Fetzer Vineyards, ‘This achievement reinforces that companies can work to create a closed loop system that is both profitable and sustainable.’

Dell is another company looking to introduce the process. Dell has long led the way in supply chain management, and its decision to increase recycling throughout the chain has helped keep millions of pounds of plastic and carbon fiber material away from landfill. The company already recycles plastic components from over 30 flat panel-monitor models and three models of its desktop computers. In order to do this, Dell has partnered with the SABIC, a petrochemicals and plastics company based in the Middle East. Carbon fiber has become increasingly popular with Dell and its competitors as it reduces the weight of laptops, but it is not the easiest material to recycle. Dell’s introduction of the OptiPlex 3030 All-in-One desktop - which had a chassis that uses a minimum of 10% closed-loop, post-consumer recycled plastics - earned UL Environment’s first certification for manufacturing with closed-loop recycled plastics.

There are many challenges to introducing closed-loop supply chains, and in some industries it may simply not be possible. There are also high start up costs to consider. However, the opportunity to get ahead of the curve is too great, and even if you cannot achieve a fully closed loop, it is worth at least trying to get as close as possible.

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