Circularity in the Supply Chain

Criticality of raw materials, geopolitical developments, and continuously changing ESG regulations are putting supply chains under pressure everywhere. For European companies, there is only one direction that can be successful: a significant, sustainable step forward. Companies need a fundamental strategic shift regarding their supply chain and the partners they work with. The big question for companies: how do you do this without jeopardizing your business model?

There are three major drivers that play a role in changing the supply chain. The first is the previously mentioned criticality of raw materials, which is clear but hard to navigate. We need to become less dependent on dubious suppliers or countries and find ways to keep access to these raw materials with high volatile prices and environmental or social impacts. The second is the new legislation that either already applies or is coming soon. For example: in the foreseeable future, companies must source at least 20% of their critical raw materials from the EU, and as much as 65% must be processed within the EU. The third is preparing for climate change. Long, complex supply chains are vulnerable to increasingly common disasters such as droughts, fires, floods, or storms. For example, a well-known car manufacturer recently had to halt production for three weeks due to flooding at one of its suppliers, resulting in significant (reputation) damage.

In addition to these main drivers, other factors also play a role: sustainability is becoming increasingly important to consumers, scarce talent in the market is increasingly choosing jobs that offer a sense of purpose, and sustainable business practices are becoming more and more a prerequisite for finding capital. All these reasons ensure that future supply chains will look completely different from now.

A sustainable supply chain stands or falls with data insight. You need insight into all aspects (raw materials, goods, steps taken, etc.) to know what it is, where it comes from, and how it is processed. Only then can you make informed choices. Changes are also needed in the business itself. Product design must be more aligned with circular economy principles so that goods can be easily disassembled, repaired, or recycled. A shift must occur towards using a larger portion – or even entirely – of recycled raw materials, especially when it comes to critical materials. For this, 'reverse logistics' is also needed, a system to retrieve goods for recycling or reuse. This also offers opportunities for new business models such as product-as-a-service or platforms that offer such services.

• Complete insight into the supply chain
• More opportunities for optimization and procurement
• Better access to critical materials
• Enabling closed loop circular business models
• Shorter lead times
• More autonomy
• Reduced carbon footprint, mainly in scope 3
• Flexibility regarding suppliers, market developments, and regulations
• Less dependency on certain suppliers or countries
• Clear insight into costs and emissions
• Compliance with (European and international) regulations

• Ensure the importance of the topic is recognized at all levels within the organization
• Detail the current supply chain to see what needs to change
• Initially focus on where you can make the most significant difference and look for quick wins
• Work out potential scenarios, for example, using digital twins or design sprints and technology shifts
• Ensure clear responsibilities, rules, and processes in your target operating model
• Set clear KPIs at all levels to make it actionable
• Review and revise your data strategy