Sustainability is Driving New Business Dynamics – Repurposing and Connected Collaboration Across Supply Chains

Mike Wilson, Executive Vice President Latin America and Global Logistics Manufacturing Services, DSV; Co-Founder, Industry Director and Honorary Visiting Professor of The PARC Institute for Manufacturing, Logistics and Inventory, Cardiff University.

Thanos Goltsos, Lecturer in Management Science and the PARC Assistant Professor of Manufacturing and Logistics, Cardiff University.

De-materialisation

Sustainability has inevitably risen to the top of the agenda when we talk about supply chains. Everywhere, we read and hear about de-carbonisation, carbon neutrality, carbon trade taxes, carbon emissions, carbon footprint and it is all rightly welcomed in the effort to preserve our planet. However, it is part of the story. De-carbonisation is pressing but it will only take us so far, as there are 117 more elements on the periodic table that also need a sustainable treatment. The other part of the story then is de-materialisation. De-materialisation is where a product or its materials are reused, remanufactured, repurposed, repositioned or repaired and is increasingly proven fundamental within the circular economy.

We have lived for decades with an elongated, take-make-dispose, linear supply chain, whereby centralised manufactured finished goods are transported long distances to be stored regionally and distributed to the end-user. But now, we are moving into the era where supply chains become shorter, flexible, localised and circular. Products are being manufactured closer to consumption, with a higher content percentage of locally sourced materials and are being remanufactured for reuse, again within a local market. The circular supply chain is one that is regenerative and keeps products in use preventing them from ending up in landfill or becoming pollutants through incineration. It encourages product design for sustainability, product life-cycle extension and engaging in circularity enhances an organisation’s environmental credibility. However, decades of linearly minded, one-way to the landfill modus operandi has seen trillions of products sitting in warehouses waiting to be sold, on the way to landfill or the oceans.

Repurposing

Repurposing is considered complementary to the remanufacturing elements within the circular supply chain, and it is when a product is used or re-used for a purpose other than what it was originally intended. Contrary to recycling (also referred to as down-cycling), it adds value to to the product (up-cycling). In effect, it describes turning one supply chain’s end-of-life waste into another’s valuable, carbon efficient input. It adds value to waste while reducing carbon emissions across supply chains.

Within PARC we use the term repurposing for complete ‘physical product transformation’, an example being the conversion of clothing, which is beyond economical repair, into building materials (e.g., insulation). When this happens, the product is positioned into a different market or sector that it was not originally intended for. Environmental legislation quite simply puts the onus for after-life or end-of-life products increasingly more towards the producer and makes the them responsible for their own products throughout the whole product life cycle. It follows that a greater number of organisations are not only designing their products to be repaired and remanufactured, but also investigating innovative ways to repurpose their products so that nothing ends up not being reused.

Product design for sustainability will lead to an increase in modularisation of assembled products, so that they can be taken apart, replaced, repaired and upgraded easier – and over time, we will see the demise of built-in obsolescence. But as mentioned, we still have products and materials which will have to be redirected away from landfill and incineration, products that will have to be repurposed for new life. If we just focus on the fashion and clothing industry to get an idea of the scale of the problem we are facing, a US study by Common Objective stated that approximately 35% of textiles that go into fashion clothing is waste before it is sold to the consumer.

Within this we have spoilage, excess stock or stock that has passed its fashion window, we also have the waste from material cutting during the manufacturing process: this is pre-consumer waste. Of the post-consumer waste, of the returns that are beyond economical repair or in general cannot be resold, only 20% get actively reused or recycled, 80% of this waste is disposed of – of this disposed of waste, 20% is incinerated and 80% ends up in landfill. To give some idea of the size, in 2018 in the US alone an estimated 11 million tons of fashion textile waste ended up in landfill while 3 million tons where incinerated (out of 17 million tons generated).

For organisations, the environmental topic and sustainability through de-materialisation will impact in several ways…almost a carrot and stick scenario. Environmental, consumer and legislation pressures will be forcing organisations to look at their position in a new light – which is the stick. The carrot is that when done right, sustainability can be profitable, let alone being very marketable – having a first mover advantage or even being seen to be a leader in sustainability is in line with consumer demands and market trends.

Organisations are looking at products and realising that product life-cycle extension will actually create whole new revenue streams. Historically, the product value add peaked at the end of the final assembly or production line – the point where the product has absorbed maximum product value. Subsequent marketing, transportation and storage to get the product to market are (necessary) costs meaning that products lose value since that peak. The product now has an extended revenue generation capability if it is used in a regenerative way, the carrot that opens up new opportunities, and potential new value peaks.

However, assuming a product is to be repurposed into a something different, intended for an unrelated market – how does an organisation or producer handle this? In reality, they most probably wouldn’t know what to repurpose it into, let alone how to market it. Let’s just take the textile example – a fashion brand has an established supply chain and channels to market aligned with the product directly to the consumer with the product finishing in high street retail outlets, shopping malls, inside large chain stores or sold direct to consumer with online e-comm. It will have a returns network which will reposition, repair, rebrand or sell into secondary markets – but still within the typical, traditional fashion channels.

Now, the beyond economical repair product that would have been put into landfill is repurposed into floor tiles or insulation bricks – but the fashion brand knows nothing about the market around the built environment. So, what happens in this situation? The fashion brand has several choices, it can move into the building materials market – Prada carpet tiles, anyone? Or it can undertake what we call connected collaboration.

Connected Collaboration

As we transition from the age of consumerism and sole ownership to an economy moving further into the realms of shared use and peer to peer consumption, we have already taken our first steps on the road to connected collaboration. The digital revolution has allowed us to communicate and connect seamlessly and intelligently. An ever-increasing list of technologies such as big data, artificial intelligence, blockchain, cloud and fog computing has enabled us to communicate and share knowledge, data and experiences instantaneously. At a user or consumer level we have adopted shared platforms, social media and auction websites as standard, accepted, even normal behaviour and this has morphed into the physical sharing of collaborative consumption, for example the renting of fashion items, ride or car sharing and Airbnb. But the drive for future sustainability will now take the collaboration from consumers into the business arena.

For many years we have seen the erosion of the elements that differentiated business to consumer and business to business models – the shift from definitive B2C or B2B to a more general B2ME. The newer generations of consumers see logic in greater collaboration if it furthers the sustainability cause – Forbes recently published a survey that highlighted 79% of Millennial employees are loyal to companies that care about their effect on society. We will start to see sustainability as the catalyst to bring greater connected collaboration across supply chains in many ways. If we take the example of clothing to building materials, then the clothing company or brand becomes a supplier to the building materials manufacturer, a waste stream is repurposed into a revenue stream, and both enhance their environmental credibility by repurposing previously waste material.

We can see today and will increasingly continue to see more examples of repurposing leading to connected collaboration as we are constantly witnessing advances in material technology, manufacturing methods and product design – design for sustainability will be equally important as design for manufacture. Repurposing will move up the sustainability agenda, fostering even greater collaboration across supply chains that were once elongated, stand-alone and linear but are now localised, interconnected and circular. But how do we, and who can, join the dots to provide the service to facilitate connected collaboration across supply chains?

The obvious answer is the third-party logistic providers (3PLs). They cut across the spectrum of supply chains and handle the products that serve nearly all the world’s markets. In the previous example they have the customer relationships and handle the products of the clothing companies and the building material companies as well as the builders themselves. The 3PLs already distribute finished products and handle return products from customer to consumer or business to business – and are by definition, or the very definition, of close to market. Some 3PLs, such as DSV, have the capability to manufacture products close to the point of consumption, which will become so much more important as we move towards greater localisation. This not only reduces carbon footprint, but allows for products to be quickly assembled to order as we see greater personalisation through modularisation in sustainable product design. To their advantage, the 3PLs have a global footprint close to the point of consumption – fundamental, even critical, in a circular economy. In short, the 3PLs will be the orchestrators of pulling together and facilitating the future of connected collaboration across supply chains to enable organisations to fulfil their obligations for a sustainable future for all of us.

Cardiff University and DSV

Many 3PLs already recognise their responsibility and the part they haveto play in reducing our overall carbon footprint – DSV have already award-winning carbon reduction programs. DSV also have the well-established collaboration with the PARC Institute at Cardiff University and PARC has already been involved with the DSV carbon reduction program. A recent development is that The PARC Institute has its new Remakerspace housed within the £300m SPARK Innovation Centre in the middle of Cardiff. Remakerspace’s focus is to increase consumer awareness towards the benefits of reuse and repair to extend product life, to provide businesses with skills and equipment to explore opportunities with remanufacturing, and finally to rethink the design of products with an emphasis on repair and after-life. This collaboration and the Remakerspace allows Cardiff University and DSV to focus on the impacts of remanufacturing across supply chains, including repurposing and collective collaboration; data analytics, forecasting and predicting the demands but also critically returns of the circular economy; cutting edge research across the whole field of sustainable supply chains as well as helping organisations move towards product remanufacture and greater sustainability.