ML Journal

Product design, processes and partnerships optimize circularity to close the supply chain and manufacturing loop.  

 

TAKEAWAYS:
● Consumers are demanding more circularity, so leading manufacturers are using circular models to reduce risk, unlock new revenue and build more resilient supply chains.
● Circular product design and digital twins are helping manufacturing optimize every lifecycle phase, from sourcing to end-of-life recovery.
● Collaboration across ecosystems is essential to scale circular operations and shared innovation.  

 

What is a “Circular Economy” and why is it important now?

For more than 15 years, the Ellen McArthur Foundation has been working globally with businesses, academia, policymakers and institutions to accelerate the shift away from the traditional linear economy. As a global leader in this space, their definition of the core principles behind a circular economy are solid:

1. Eliminate waste and pollution
2. Circulate products and materials (at their highest value)
3. Regenerate nature

All three are important, with the first two probably resonating the most with supply chain and manufacturing stakeholders. However, consumers are putting more pressure on organizations to focus equally on all three. This is part of why the circular economy today is an increasingly important topic; regardless of changing policy and regulation, the general global sentiment continues to drive buying behavior to brands and products that are focused on environmental stewardship.

Of course, pure operational issues are just as important, and that is what most of this article will focus on. Natural resources are being depleted at unsustainable rates, and governmental regulation (such as the EU’s Circular Economy Action Plan) are mandates that cannot be ignored. The circular economy has become a strategic imperative to compel manufacturers to rethink product design, operational models and value chain collaboration to maximize material value, reduce waste and regenerate natural systems.

Business case

Happily, implementing these core principles can unlock both economic advantage and sustainability leadership in increasingly resource-constrained (and competitive) markets.

Our previous linear model of “make-take-use-waste” was simple and efficient to follow, allowing for rapid industrialization and introduction of new products at low cost—a compelling list of benefits for manufacturers. However, while there are some additional costs in upfront investment in circular methods, many of the same benefits can still be realized while also achieving new sustainability and resiliency goals. For example:

Although the results are similar, the drivers and (more importantly) the sustainability of the benefits are quite different. The linear model tends to focus on short-term benefit and is completely consumption-driven, compared to the longer-term benefit of the circular model, which is regenerative and systems-oriented.

In the last decade, there are many examples of companies, in all sorts of industries, developing new business models based upon this, such as HP’s closed-loop ink cartridge recycling, Caterpillar’s “Cat Reman” parts refurbishment, and Philips’ “lighting as a service” program.

Even disregarding mandates for change, the circular economy protects profitability and continuity by reducing dependency on volatile raw materials and turning waste into value. In short, it is not just good for the planet, it is a smart and resilient way to do business.

Key levers of change

There are many areas where manufacturers can start to transform operations from linear to circular. Each has pros and cons relative to the investment and outcomes, and many require collaboration across organizational departments and executive level commitment to change. However, they all represent areas where companies are already taking steps in leading the way to more sustainable operations.

1.  Circular Product & Process Design

For most industries, this is the most important step to focus on. The vast majority of a product’s lifetime environmental footprint is “locked-in” during the design phase, long before the start of manufacturing.

Leading companies are focusing design efforts on durability and modularity during the “in-use” life of the product, and then disassembly and material separation at end-of-life. This has the potential to increase the cost and time attributed to design and engineering and might also increase manufacturing costs due to retooling. But there are also potential upsides for “long-tail” revenue related to spares or upgrade kits and, of course, the increasing brand equity with savvy consumers.

2.  Responsible Material Sourcing & Substitution

The automotive Industry is a good example of historically straightforward supply chains becoming increasingly complex and dependent on rare-earth materials now that cars are becoming more electrified and electronic. Regulation on “responsible supply” is forcing manufacturers to put more focus on traceability of source and virgin raw materials.

Using supplier scorecards, manufacturers can see the impact of their sourcing decisions by the weighting of recycled content, renewable energy used in supply, and ethical and social responsibility of suppliers. Additionally, using AI to optimize supply based upon these criteria, manufacturers can lower exposure to supply volatility while also achieving higher gains in sustainability.

3.  Zero-Waste, Resource-Efficient Operations

In metals and other heavy-industry segments, energy and materials represent a majority of the manufacturing costs of finished goods. Every kilogram of scrap is lost margin and an unnecessary increased environmental footprint.

Innovation in lean and digital manufacturing, and the use of next-generation manufacturing operation management systems, can have a dramatic impact on production quality and efficiency. Also, optimal scheduling of energy-intensive processes (heat treatment, ovens, etc.) can increase OEE while still maintaining customer service levels. These methods will likely require new investment in process controls and technology but deliver immediate cost reduction and sustainability benefits when in place.

4.  Remanufacturing & Refurbishment Loops

There is still heavy debate about exactly how “green” EVs are. It should be noted, however, that this is a good industry to highlight the potential of remanufacturing. Tesla had a vision of old cars driving into one side of a factory and being refurbished into new cars driving out the other. While not quite a reality, most of the materials inside battery cells are recycled and repurposed, and restoring other types of industrial equipment can preserve up to 85% of the embedded material and energy, while also reducing new manufacturing costs and enabling potentially high-margin aftermarket business.

By implementing reverse flows of core material, building dedicated tear-down lines and requalification processes, manufacturers could see up to 65% cost savings in material. Additionally, while recycled inventory might be more uncertain, the benefit of near-zero lead times for supply could be substantial.

5.  Reverse Logistics & Take-Back Infrastructure

The circular economy requires a circular logistics flow, and manufacturers need reliable ways to retrieve the products and materials at their end-of-life stage. For consumer products, there is the opportunity to provide drop-off kiosks or stage repair hubs at strategic locations. Alternatively, partnerships with existing carriers and 3PLs might provide easy ways for the return of salvageable items. It is also possible for manufacturers that own distribution to find ways to fill truck space without adding new logistics capacity.

Even with “coincidental” logistics capacity, there will be an increase in collection and handling costs, but also an opportunity to provide additional material feeds and stock via remanufacturing and refurbishment lines. This is also another highly visible area of operations that helps boost brand loyalty with consumers.

There are other, more transformational areas, such as new business models (product-as-a-service and sharing models) where manufacturers retain ownership of their assets. These methods are self-reinforcing because the profit incentive shifts from selling more units to maximizing asset life and recovery. This therefore drives further investment in better product and process design.

The other thing to consider is the dependency and symbiotic value of these areas. For example, better product design greatly improves the efficiency of remanufacturing. Similarly, better manufacturing operations can help with history and traceability of component materials for end-of-life reuse and refurbishment. Manufacturers should look at these as a total playbook that works together instead of as isolated initiatives.

Digital twins

Technology advances have greatly aided the circular economy’s scope and reality. In particular, the digital twin has become pivotal in developing digital models of products, production systems and supply chains.

The circular economy (like any new process) takes time and experimentation by manufacturers to turn ideas into reality. Digital twins have become the virtual universe where manufacturers can rapidly explore the art of the possible for new circular design, manufacturing and supply chain models.

Referring back to the previous example of circular product design, the digital twin of the product provides engineers unlimited ability to design products not only in the context of efficient manufacturing but also for efficient supply, re-manufacturing and disassembly. Manufacturers can compare dozens of different designs, integrated with the impact on sustainability, supply and production facilities, in hours instead of months. No previous generation of CAD/CAE has been able to orchestrate the processes that exist across the entire product lifecycle.

Because the digital twin represents the product and materials in precise detail, it is possible to experiment with modular design architecture and simulate how easily components can be removed and replaced. It is also possible to experiment with different materials that are recycled, using simulation to determine if the product strength and specs can still be achieved without using virgin-materials. Many manufacturers are already using digital twins for the “virtual build” process to validate manufacturability, so why not use the same process for “virtual disassembly” to ensure the material value can be reclaimed effectively at end-of-life?

The other significant capability of the digital twin is that it digitally documents the lifecycle of the product, using real-world data to help support circular methods and processes:

• Bill of Materials: to enable accurate sorting, recycling and reverse logistics
• Material Metadata: to highlight hazardous content, carbon footprint and compliance data
• Design Intent: to support virtual disassembly and remanufacturing
• Work Instructions: for both assembly and disassembly efficiency and safety
• In-Service Data: guides refurbishment and resale valuation
• Serial-Level Data: to support warranty management, digital passports and second-life usage

Besides the digital twin of the product, the digital twin of the production systems also contributes to the circular economy—especially in the area of waste and energy.

To evaluate new manufacturing methods that might be needed for different product designs or for recovery and disassembly, manufacturers can precisely simulate machinery, lines or entire facilities using precision virtual models to mitigate the risks involved in change. The level of detail in these models can include potential energy requirements, predictive maintenance that could reduce scrap and rework, and manufacturing process simulation to optimize the build and remanufacturing processes.

Without digital twins, true circular optimization across the entire product lifecycle would be impossible. The twin turns circular design from “best guess” to data-driven decision-making.

Making the circle bigger

Most of the previous examples are written in the context of what a manufacturer, alone, could consider or implement in its own business, but as manufacturers start to develop their own strategies, it is possible to see how new ecosystems could be formed, and provide benefits in different areas.

Shared Investment

Part of the circular ecosystems’ benefit is that some of the investment can be shared. Processes like reverse logistics can be particularly costly, and developing partnerships with shared infrastructure reduces per-unit costs and emissions and also improves route optimization and asset utilization.

For common materials, the cost of recycling processes can also be shared by manufacturers to reduce the need for individual capital investment.

Shared Resiliency

Circular networks are inherently less dependent on linear flows that are vulnerable to disruption (especially in global supply chains). Having nearby material flows enables manufacturers to operate more locally and develop better agility against change. That is also true for local disruption—for example, collaborative reverse logistics ensure material flow even if one node of the network is disrupted.

Generally, keeping materials “in-network” reduces the reliance on volatile global markets and enhances self-sufficiency. By collaborating and pooling within the network, all members benefit from a more resilient supply chain.

Shared Innovation

Remember the saying: “One person’s trash is another person’s treasure”? Cross-industry material flows are already a key part of the circular economy with many examples:

• Sugar cane waste -> bio-polyethylene for soda bottles
• Spent brewery grain -> livestock feed and skincare additives
• Recycled textiles -> natural fibers in car interiors

But shared innovation goes beyond making use of the known, it enables manufacturers to partner with different types of external businesses to collaborate on the design of products specifically developed for new circular economies. Shared innovation also leverages shared platforms that manage remanufacturing and resale and can share data tracking to help with regulatory compliance across industries.

Together, organizations can truly help to shape new business models and set standards on material tracking, digital passports and other innovation that helps everyone in the industry, while also promoting a company and its brand as a global leader.

Conclusion

There is a lot that manufacturers can do. Unlike innovation in digital manufacturing, where ROI has been documented and proven for a decade, circular economy initiatives can be more uncertain. The ROI can be a little “softer,” and moving from traditional linear models means tough changes in culture, process, systems, manufacturing and supply chains.

Manufacturers are not yet forced to move from the linear model, but the growing call for sustainable industrial operations is making it compelling for many, with increasing regulation and sentiment making it an urgent priority for some.

For those that are innovating, the benefits can be significant. Industry examples are helping to make the ROI more tangible and credible, and more companies innovating means more opportunities for collaborative ecosystems of circular economies.

As a key enabler, digital twin technology provides the tools for manufacturers to simulate and optimize every scenario and opportunity in the circular model. Many manufacturers embarking on the journey are facing new decisions and trade-offs between traditional operational metrics and sustainability metrics that they have likely not tracked before. The digital twin is the universe where unlimited questions can be asked and precise, rapid answers are given.

Finally, it is important to remove one’s business hat for a moment and focus purely on the third core principle of “regenerating nature.” After all, this is where the circular economy originated. It is much easier to be wasteful and consumptive, but there should be concern about the future generations that will inherit the results of decisions that are made today. The natural world faces increasing strain on land, air and oceans. Circular practices not only reduce harm, they aim to do more good. By regenerating soils, protecting biodiversity and enabling companies to operate in harmony with natural systems, conditions are created where business, humanity and the planet can all thrive.

To hear more on creating new value chains and optimizing material flows, listen to a brief “ask the expert” video from Dassault Systèmes, or even experience an interactive workflow that shows how optimized supply planning can enable sustainable operations. M

 

About the author:

 

Adrian Wood is strategic business development and marketing director for Dassault Systèmes.