Circular Economy: the Future of Manufacturing

January 29, 2019 Doug Hunter

recycle_of_manufacturing_circular_economyOn a recent business trip to Cape Town, I had the pleasure of visiting a retail outlet that is operating completely plastic-free. This got me thinking about the concept of a circular economy.

Visualize taking a straight line and bending it inwards on itself until the endpoints meet to form a circle. This depicts the evolution from the existing linear economy to an insular one in which materials, energy, and resources are fed back into the loop – a circular economy.

The aim of a circular economy is to increase the reuse of resources and decrease waste.  Each product at end-of-life becomes a new resource rather than merely being discarded. It recognizes the value of waste items, repurposing them as alternative resources that can be used again and again in a circular goods cycle.

This is in contrast to traditional economies where socio-economic processes work as a linear flow of goods and resources, i.e. resources are extracted to produce energy and goods, which ultimately end up in a landfill.

In a circular economy, companies prioritize reuse and manufacture products designed to keep resources in use for as long as possible. Imagine a scenario: when your iPhone 7 eventually gives up the ghost, instead of dumping it, you simply return it to Apple who repurposes its components for use in their latest model.

Industrial Symbiosis

However this doesn’t necessarily need to be a closed loop within each organization – the waste produced by one company can also become the raw material used in a different company’s manufacturing, a process called industrial symbiosis.

Besides being more efficient and eco-friendly, this way of doing business will soon become a necessity for survival, as Millennials and Generation Zs are fast refusing to support products and brands that aren’t adopting this way of doing business.

Reducing Waste and Creating Jobs

The EU is pioneering this way of living and working. They have committed to reducing total waste to landfill down to an impressive 5% by 2030, which means that the remaining 95% of their waste will be recycled. But that’s not all, they also estimate two million jobs will be created in the process, and greenhouse-gas emissions reduced by up to 4%.

How Can ERP Assist?

These developments are, of course, impacting the world of ERP. Organizations across all industries need to address all the changes needed to meet new regulation and compliance requirements which will inevitably come into effect. And this needs to be done end-to-end throughout the supply chain – which is where ERP comes in.

An effective ERP solution caters for every aspect of the supply chain. For example, plastics manufacturers will face the challenge of identifying and reporting on how much-recycled content is used in each packaging unit they sell. ERP allows for multiple inputs into the production process (both recycled and new resins) and keeps track of all raw material that makes up a finished item which is shipped to the customer. As a result, packaging manufacturers can easily trace and report on the percentage of recycled raw material that makes up the final item that is sold.

Manufacturers will also be looking to innovate and develop new products that will allow them to incorporate recycled material into their production processes without compromising on quality, tensile strength, the aesthetic look of the final product (recycled colored plastic ends up grey which marketers are reluctant to use), cost and so on. It’s clear that managing new product development while continuing production will be important. Again, ERP can support this need with strong Bill of Materials functionality.

So where is South Africa in this process? Currently, 90% of our waste is dumped in landfills, which is a major challenge to overcome requiring a massive mindset shift. However, with the upside of job creation as a spin-off, we should be compelled to adopt this system as quickly as possible.

The bottom line is that plastic pollution has become a global crisis, and it will only improve when recycling is beneficial to everyone in the supply chain. There’s no doubt that plastic is a highly useful, versatile material, but we need to keep the value in the economy rather than disposing of it so that it ultimately ends up in landfills or the ocean.

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