Shifting ideas: logistics and the circular economy

Creating a circular economy, around which materials and products flow smoothly throughout their lifecycles, will require innovations in the field of logistics. There are two aspects to this: firstly, we will need adequate supply chain management – but this is also true of linear economies. Secondly, and more pertinently, we will need a strong system of reverse logistics.

In general, logistics involves managing the flow of resources between the points of origin and consumption to meet requirements of customers or corporations. This can include not only material handling and transportation but also production, packaging and inventory taking. The resources in question mostly include tangible items such as food, materials, liquids, animals and equipment, but immaterial items such as time and (digital) information may also require logistical management. However, all logistical operations share the minimisation of resources as a common aim, squarely aligning the discipline with circular economy principles.

A moving story

At the very beginning of the logistics process, raw materials such as ores must be collected, transported and converted into usable materials. Later, the manufacture of products usually involves multiple processes with different logistical steps. When products have completed their journey through the manufacturing infrastructure of the producer – and additionally through any subcontracted factories making the components, products or semi-finished products – they are then transported over short or long distances to distributors, trading companies or assemblers. Globalisation has increased the distances involved in this story, making logistical issues more complex by the day.

After products have been used and disposed of, the logistics processes of reuse, recycling and waste management enter the picture. These also require optimisation of collection, distribution and transportation. Designing clear logistical processes that are optimised for capturing end-of-life materials and products poses a tough challenge for both manufacturers and resource managers, the latter of whom have a part to play in informing the technical design of products so that they can be more efficiently collected and treated. So, both supply chain management and reverse logistics come down to operational control and optimising the flow of goods, information and finances within and between successive links in a chain of producers, distributors, retailers and consumers.

It is interesting to note that the material/product and waste/end-of-life product supply chains in general follow inverse paths: the former ultimately disseminates resources, moving from larger to small operations down the supply chain, while the latter aggregates resources, moving from smaller to larger operations.

Breaking the chains

We can break the logistics chain down into the following links:

• Extraction and transformation of primary raw materials.
• Supply of raw materials and components.
• Assembly and production of end products.
• Intermediate storage of parts or finished products.
• Distribution to distribution centres or consumers.
• Ingestion of discarded products, residues and waste.
• Recycling or conversion into energy.
• Final processing of waste streams that are not eligible for any form of reuse.

Wheel of fortune: how value is preserved in a circular economy model. Image: Ad Lansink and Sophie van Kempen.

Afford transit

Reverse logistics also requires keeping an eye on the economic aspects of the supply chain, encompassing both the financial (business oriented) and the fiscal (where business meets government policy). The appropriate instrument for this is an information management system that provides insight into how the relevant waste streams run and which parties are involved. Such a system ensures access to a current source of data on the quantity and nature of materials produced, collected, traded, transported and processed including end destinations, whether these be recycling, reuse or final disposal (e.g. in the case of hazardous substances).

Therefore, a distinction must be drawn between residential, commercial and hazardous waste. Otherwise, producers and distributors are generally not keen to deliver information to public bodies or semi-public organisations. The resistance and criticism seen in response to the EU regulation concerning the Registration, Evaluation, Authorisation and restriction of Chemicals (REACH) is a case in point here, illustrating the reluctance of industry and commerce to share sensitive information. The same applies to information systems used to track the costs of reverse logistics.

Often, reverse logistics are only seen as an expense because the costs involved are less clearly visible and therefore not looked upon as an obvious, necessary outlay of business, and are therefore not seen as a priority. Reusing and recycling can often in fact reduce costs, but because forecasting the inverse flow of products is not that easy – knowing exactly what and how much merchandise will be returned by the customer is a difficult job – the savings can be hard to quantify and so are ignored. Therefore, return flows must be recorded and planned so that they can be estimated and managed effectively, and so that a true picture of the costs and savings involved can be built up.

Collection of ideas

Transport activities illustrate the importance of innovation in and between the various links of the logistics chain. Between collection and end processing there are many opportunities for improvements to the procedure, leading to energy savings on the one hand and greater efficiency on the other.  Developing a smart organisation of the collection and transport of waste and recycled materials is one such way to better optimise the supply chain.  Some of the ways in which this might be done include:

• Storing household waste in ID chipped underground containers, to which only the householder and collection crews have access. This will allow usage to be attributed to specific householders, making pay-as-you-throw type systems easier to implement.
• Optimisation of source separation, including separating plastic packaging by polymer type and using local mini-shredders, producing high-quality mono streams.
• Application of advanced infra-red techniques for the separation of mixed plastic waste streams, producing material that can be used in high-quality products.
• Stimulation of deposit return systems based on sensor technology, which will contribute to optimal material recovery and avoid CO₂-emissions.
• A system of local treatments plants for organic waste, thereby providing local energy while saving on transportation costs and emissions.
• Demolition of buildings using techniques which allow for the recovery of reusable, high quality materials.
• Targeted use of mobile crushers for construction and demolition waste that cannot otherwise be reused, where it is established that the resulting granules can be applied in the immediate vicinity.

Sometimes, a shortage of funds may be an obstacle to logistical innovation. In order to remain competitive both new  and existing companies must often appeal to investors, banks or government to financially support the development of new technologies, perhaps by awarding grants to innovative entrepreneurs. In this way, hybrid forms of private and public funding occur.

Travelling light: transport has an important role in enabling a more circular economy. Photo: Adrián Fernández García (CC BY 2.0), via Flickr.

An instructive example is the development of Knowaste in Arnhem in the Netherlands which started recycling disposable nappies in 1999. The company was funded by Knowaste Europe, the owner of the technology, with the public regional investment company Van Gansewinkel and SITA as minority shareholders, and was further backed by a venture capital company, banks and the Province of Gelderland. After suffering from the stigma attached to its ultimate product (paper fibre), inadequate control of plastics recycling and unexpectedly high energy costs, Knowaste closed its Dutch plant in 2007 – but remains active in the UK and elsewhere. Here, a failure to keep on making technological and logistical innovations meant the facility could not overcome the difficulties it faced.

Obstacle curse

While businesses are often unable to dip into their own or borrowed funds to make essential improvements and innovations, it is not always a shortage of money that hampers them in developing new techniques and processes.  Rather, reticence and inaction on the part of government can create obstacles such as:

• The lack of a long-term perspective, e.g. uncertainty about whether policy will support using instruments like return premiums or disposal charges.
• Shortcomings in the existing legislation, e.g. waste companies building modern fermentation plants would benefit from a tightening of the minimum standards for organic waste.
• Environmental factors of spatial or socio-economic nature, e.g. local authorities and local populations sometimes object to the establishment of a new business out of unfair stigmatisation.

A good business climate is a necessary condition for logistics innovation, and together government and industry should consider how these obstacles can be addressed. Industry and commerce must look to efficient processes that work in harmony with existing logistics flows, while developing cost-effective and environmentally beneficial transport solutions.

Due to variation in product quality, defect rates and maximum life span, reverse logistics are often seen as more complicated and less structured than ‘normal’ forward supply chains. This does not mean organisations should not try to meet the challenge. By creating structured flow pathways for different product scenarios most of the problems can be handled. Furthermore, knowledge of reverse logistics is essential for the successful implementation of any system of circular economy, and therefore to the success of any future business operating within this economic model.

This article is an extract from Ad Lansink’s upcoming book Challenging Changes – Connecting Waste Hierarchy and Circular Economy, which will be published later this year.