My newest article is featured in PYXERA global's new publication "Paradigm Shift" a guide on solutions to transition to a circular economy. This article is all about the importance of supply chains and inventory while transitioning to a circular business model.
Watch just three minutes and find out!
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With Nat Schooler
It's hard to think about a circular economy without
thinking about inventory
Supply Chain Secrets
What people get wrong with Inventory
Towards a Circular Supply Chain
Today’s global wealth has been built with the power of a linear economy, which is supported by linear supply chains around the world. These supply chains move materials from extraction to refining and processing operations; to a series of manufacturing plants; through ports, warehouses and cross-docks; and finally to the point of use. Most of this movement happens in a one-way flow.
Economy shifts from linear to circular
A circular economy offers a different strategy to achieve an organization’s goal — through fully exploiting material and resource value and truly squeezing out every bit of value. Instead of materials flowing in a line for one-time use in a linear economy, materials instead loop through many life cycles indefinitely in a circular economy. This is a dramatic shift.
These materials can loop within the same company, among different companies and across multiple industries. These loops produce value for both buyers and sellers. They connect the waste and by-product outputs from the seller’s processes to the buyer’s raw material needs as process inputs, creating a loop.
Imagine: All waste and process by-products in the world will become the raw materials and inputs needed by all the processes in the world. As a result, the maintenance, refurbishment and remanufacturing industries will dramatically increase in size and value. These circular business models will collectively add $4.5 trillion to the global economy by 2030.
Supply chain shifts from linear to circular
To realize this value, effective supply chains across the global economy are required. Supply chain habits used in today’s linear economy will shift in many ways. Some shifts will be small; others will be dramatic. This blog series explores a few of the supply chain habits that will shift as our global economy accelerates the worldwide shift from linear to circular.
The supply chain habits that make up our ways of working have already shifted throughout the four industrial revolutions in the last 250 years, and new economic models have emerged from them. Today’s supply chain habits are captured in the continuously updating Supply Chain Operations Reference (SCOR) model, which has led the global supply chain community since 1996. This resource pulls together a practitioner’s reference model that covers performance, processes, practices and people.
SCOR shifts from linear to circular
The process steps of the SCOR model describe a linear model: flow of information, money and goods up and down a linear supply chain. Imagine if the information, money and goods instead flowed throughout endlessly looping supply networks and industrial ecosystems in an omnidirectional value exchange.
During the transition to a circular economy, supply chains will be impacted and will need to shift their habits and capabilities. These shifts will eventually be reflected in the SCOR model to anchor discussions across the global supply chain community. This series explores a few examples of potential impacts to the SCOR model, including shifts in existing habits and shifts in additional habits.
As resources circulate among networks and ecosystems, supply chains around the world will be challenged to shift their habits to support new business models. This will unlock the next major economic revolution which already is unfolding globally with Industry 4.0. The increased complexity that will be managed by global supply chains will be represented by future SCOR model versions.