An Introduction to Creating a Closed-Loop Supply Chain

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It’s easy to be wasteful when your resources are unlimited, but we’re beginning to see that our Earth simply can’t sustain constant consumption. Sustainable initiatives are the new norm, and that’s a good thing—it means we’ve come far enough to know that we need to step up and reduce our impact on the planet. Consumerism (especially in personal electronics) has been a huge part of the sustainability problem for years, flooding landfills with harmful waste. This is why retailers are now looking at the supply chain in a new way. Instead of only focusing on the life cycle of a product until it is delivered to the consumer’s hands, many retailers are working toward creating a “closed-loop” supply chain that maximizes the value of resources and produces less waste. Let’s take a look at what that entails.

What is a Closed-Loop Supply Chain?

A closed-loop supply chain essentially combines the traditional supply chain (forward logistics) with reverse logistics, considering the item after it’s served its original purpose. Once the item has been manufactured, shipped, and distributed through a reseller, the manufacturer works to encourage the item’s return once it’s no longer functional or needed. Reverse logistics then kick in, and the items can either be repaired and resold, or they can be broken down for reuse in future products. The “closed-loop” term refers to the fact that the chain is intended to maintain and recover value from unused products, while helping to create as little waste as possible.

How Does it Work?

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Annually, American companies alone are responsible for approximately 7.6 billion tons of solid waste. Closed-loop supply chains can substantially help cut back on these wastes. For example, most products require raw materials to make, but some recycled material is useable for creating new consumer products. Even if raw materials are used, the goal of the closed-loop supply chain is to reduce the number of raw materials needed, through reclaiming and reusing post-consumer materials.

Once the original product is made, it is sent along the supply chain as usual, going to a distributor and retailer, eventually reaching the customer. But that’s where new reverse logistics come in—the product must be recyclable or manufacturers must offer take-back programs and returns to close the supply chain.

Customers who find that their product doesn’t work properly, or simply doesn’t meet their needs return items all the time. The manufacturer then has to determine if the item can be fixed and resold, or if it should continue on to another step in the reverse logistics path. If it does, the item might be recycled—along with the products that other consumers submit to the manufacturer via take-back programs. These programs allow customers to recycle potentially hazardous items like electronics, whether they’re broken or out-of-date, so they can be disposed of and recycled in an environmentally friendly way.

Once these products have been recycled, they might be found in the next new generation of products. Dell was among the first manufacturers to implement this practice back in 2014, using at least 10% post-consumer recycled plastic in a line of their computers. This was a revolutionary step, and Dell continues to offer take-back programs to help feed their closed-loop supply chain and support the environment.

Business and Environmental Benefits

Why has the closed-loop supply chain become such an important part of consumer electronics manufacturing? Because landfills around the world are bursting with plastic, heavy metals, and other non-biodegradable materials. Aside from being a threat to public health and safety, especially in developing countries where it is often dumped, this “e-waste” and other waste from consumer products can be a valuable source of materials for creating new products. In our culture of planned obsolescence, more and more silver, gold, and plastic is being mined for new products. By recycling some of those materials, we reduce the impact on our planet in two ways: by reducing the items heading to the landfill, and by reducing the impact of mining new natural resources for manufacturing.

Businesses benefit from more than the social boon of sustainability, however. Businesses can save money by reselling products that might need nothing more from a quick repair. They can save even more by using recycled materials that can be cheaper than raw materials.

A Win-Win

It’s a win-win when sustainable initiatives can actually save a business money, and a closed-loop supply chain can do just that when managed properly. Companies that create products of any kind should tune into this new trend—and see if a closed-loop supply chain could save money and gain the public’s goodwill. It’s our responsibility to preserve our natural resources—and businesses need to be leading that fight.

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