Sustainability has already proven to benefit many aspects of business operations, from improving financial performance to strengthening the loyalty of customers.
Many industries have demonstrated that moving away from an efficiency-centered approach towards a more holistic view can create value.
One domain where such a shift is long due is Logistics is traditionally focused on operational efficiency. That is why this domain takes an extra-long shift to be improved.
The following article explores the implications of the circular economy for supply chain management and highlights the main challenges of adopting the approach on a strategic scale.
Circular Economy and Software for Transport Company
Historically, the purpose of logistics was optimization. As the scope of operations grew on a national and, eventually, global level, the demand for efficient and versatile solutions was the main driver of logistics and supply chain software.
However, as the scale of operations grew, so did the rate of resource depletion, raising the question of sustainability. Consequently, the focus of logistics has shifted away from consumption and towards accountability.
Nowadays, the linear economy approach is being replaced by the circular model. Under this view, efficient operation implies not only minimal expenses but also reduced environmental impact. Aside from being beneficial for the planet, this approach has many economic and non-economic benefits:
- Stimulates the creation of new business models
- Differentiates the market
- Increases customer satisfaction
- Attracts talent
- Drives innovation
- Increases compliance with regulations
- Strengthens corporate social responsibility
In this sense, the digitalization of logistics software is essential both for the supply chain and for the business sector as a whole.
Reverse Logistics and Supply Chain Management Software
One of the key components of sustainable supply chain operation is the concept of reverse logistics. In simple terms, it refers to the extended scope of the products’ life cycle.
In the traditional outlook, the cycle of goods ended with their delivery to the customer. The circular model also takes into account what happens afterward, including the reuse and disposal of materials. In other words, it seeks to create value from products beyond their expiration point.
Understandably, these aspects need to be factored in by logistics ERP software. One example is the sale of the defective product.
Upon arrival, such product will be returned by the customer and will have to travel back through the supply chain network, undergo maintenance or recycling, after which another delivery will have to be arranged.
While it certainly takes only a fraction of the total supply chain operations, the total cost of return deliveries worldwide exceeds $600 billion. In this context, a smart supply chain system will not only help reduce unforeseen expenses but provide other valuable data:
- Condition: Knowledge about the state of the faulty product can improve the QA procedures
- Volume: Identifying large quantities of returned merchandise can help to identify a systemic issue
- Impact on sales: Comparing losses on return shipments with profits made from refurbishing and recycling.
On top of that, a properly integrated logistics software solution can offer insights into other effects of the circular economy, like customer satisfaction and brand loyalty, which are important for long-term growth.
Using Enterprise Fleet Management Software to Track Returnable Packaging
Another crucial aspect of the circular economy is packaging. Historically, packaging was viewed as a necessary evil: it is costly, requires resources for transportation and unloading, and generates lots of waste.
So, optimizing supply chain performance involves the creation of packaging that is, at the very least, convenient to work with, recyclable, and, preferably, attractive.
Taking it one step further, it may be viable to use packaging that is not disposed of after a single-use. In fact, some of the packaging used throughout the industry already works like this – shipping containers are perhaps the most familiar example.
Nevertheless, as sustainability becomes an important aspect of business operations, other forms of packaging also fall under scrutiny.
According to the Reusable Packaging Association, a non-profit organization that promotes sustainable business practices, returnable packaging offers numerous benefits for the supply chain:
- Environmental impact: Reduction of solid waste and lowered carbon footprint
- Cost savings: Efficient packaging occupies less space, requires less labor, and offers better product protection
- Sales growth: Returnable packaging is visually attractive and indicates environmental consciousness
- Safety: Particularly relevant to food and drinks transportation
To be clear, switching to returnable containers does not happen overnight. To enjoy its advantages, one is expected to first allocate some resources on its implementation, from purchasing containers to setting the necessary infrastructure for storage and management.
These parameters can also be accounted for by the supply chain software to estimate the expenses, analyze outcomes, and manage inventory.
Example of Sustainable Logistics Software: Goodpack
Returnable packaging is still in its early phase of development. Nevertheless, some businesses are already embracing the technology. One example is Goodpack – a major logistics provider that specializes in integrated supply chain solutions.
The company uses returnable containers as a part of its end-to-end freight and warehouse management network. The technology has already proven its ability to cut operational costs while improving on-site safety and complying with environmental standards.
As was mentioned above, the path to the circular economy model is not without its challenges. The organization is expected to incorporate the shift into its long-term strategy and undergo a series of steps:
- Formulate the requirements for reverse logistics
- Assess the current state of available options
- Implement improvements and update assets
- Ensure transparency of operations and compliance with regulations
- Evaluate results and make adjustments
In other words, reverse logistics should be in line with the company’s overall strategic approach to yield any benefits.
The circular economy is an attractive concept that aligns well with the modern economic landscape. On the one hand, it provides lucrative financial and operational benefits like reduced costs and optimized performance.
On the other hand, it has a positive impact on corporate social responsibility and the company’s public image.
In this context, reverse logistics is integral to efficient, sustainable, and profitable operations. However, unlocking these benefits requires strategic vision and integration with business processes across the organization, not to mention substantial investment.
Logistics and supply chain management software can now only make this project seamless but also help create the necessary digital ecosystem where all these processes can work together.