Circular Economy and Logistics
The term “circular economy” appeared as an opposite to the linear “take, make, dispose” economic model. Now, product life cycles are becoming shorter and shorter due to the development of technologies and faster distribution cycles.
Fast fashion and electronics serve as a good example. We as customers are encouraged to consume more, since our purchased products quickly become obsolete. This makes us face an important environmental problem of product waste.
What is the main principle of a circular economy? The European Commission defines it as follows: “Waste and resource use are minimized, and when a product reaches the end of its life, it is used again to create further value1”.
Mobile phones are another example. Usually, after 1 or 2 years of use, people want to get a new model. However, the phone that is of no use to them anymore may be of interest to someone else. So it will be refurbished and resold; and once it does stop functioning, its components will be reused for manufacturing.
Figure 1 depicts a product life cycle represented by two circles: “make-consume-enrich” for biological materials and “make-use-return” for technical materials2 (source: Ellen MacArthur Foundation).
The circular economy therefore helps to keep products in circulation for as long as possible and then to recover their parts and materials at the end of product life.
An increasing number of companies are now adapting the circular economy approach due to a growing variety of environmental challenges (waste, pollution, shortage of resources) and regulatory constraints. In many countries, for example, manufacturers of electronic products are obliged to take care of them at the end of life. In Europe, this is regulated by the Waste Electrical and Electronic Equipment (WEEE) directive (2012/19/EU), which obliges manufacturers to collect, recycle, and recover all types of electrical goods.
Organizing the reverse logistics of goods has become an obligation for consumer electronics manufacturers. At the same time, it enables them to generate extra revenue and create a positive brand image in terms of CSR.
The switch towards a circular economy therefore creates new business opportunities for reverse logistics companies. GEODIS has implemented an asset recovery center in Germany that gives a second life to high tech equipment.
The GEODIS Asset Recovery Centre in Nieder-Olm, Germany
GEODIS has numerous reverse logistics centers all over the world, including a key site in Nieder-Olm, Germany. In a facility of more than 23,000 sqm (2017 figures), electronic devices are being reworked to give them a new life.
GEODIS fulfills all kinds of activities to prepare unwanted, damaged or end-of-lease goods to be used again, getting the maximum value out of them and their components.
Sometimes, mid-life products just need to be inspected, cleaned and refurbished for resale. While treating IT equipment, GEODIS conducts asset verification testing using special operability and configuration software. This guarantees the wipe-out of the previous user’s personal data.
We also fulfill repair operations, reducing the number of products with minor problems that need to go through the recycling/disposal stage, thereby extending product life.
Once an item is recovered, repaired and the software is installed, we conduct remarketing activities. We define an appropriate price for the product based on data analysis, and then put it on sale in the channel of greatest value – whether that be e-commerce, broker sales or other channels.
We may not realize the value hidden in consumer electronics waste. Even if the item is non-repairable, it can contain considerable value in its spare parts and materials.
In GEODIS reverse logistics centers, end-of-life products are dismantled to pieces so that their spare parts can be reused in a manufacturing process or repair services. Some materials (such as gold, aluminum, copper, etc.) can be sold to specialized markets. This process is called urban mining – getting elements from waste, used products and buildings.
We make sure to fulfill our recycling operations and proper disposal activities in accordance with The Waste Electrical and Electronic Equipment Directive, with a special focus on safety while treating dangerous goods.
GEODIS therefore plays a real environmental role here, as products are recycled through appropriate channels and landfill waste is kept to minimum (less than 1%).
Circular economy principles can be implemented in logistics, as evidenced by electronic devices.
At the same time, reverse activities are quite developed for high tech and automotive items, and can also be applied to other types of products, such as fast-moving consumer goods (clothes, food, beverages, etc.).
The collection and processing of mid-life and end-of-life products all require specialized expertise. Entrusting these operations to a 3PL provider can provide both environmental and financial benefits.