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70% of Supply Chain Leaders Plan to Invest in the Circular Economy

February 28, 2020

Only a Minority Link Their Digital and Circular Economy Strategies

Seventy percent of supply chain leaders are planning to invest in the circular economy in the next 18 months, according to a recent survey by Gartner, Inc. However, only 12% of those have linked their digital and circular economy strategies so far.

Gartner defines the circular economy as an economic model that separates the ability to achieve economic growth from the consumption of natural resources. Those business models encourage continuous reuse of materials to minimize waste and the demand for additional natural resource consumption. The circular economy starts with good design, with end of life and raw material reuse in mind.

“The circular economy creates an ecosystem of materials,” said Sarah Watt, senior director analyst with the Gartner Supply Chain practice. “What was previously viewed as waste now has value. However, those ecosystems are complex and include many interdependencies and feedback loops. Digital technology has the potential to provide visibility and enable improved decision making when it comes to raw materials and services. Already, 35% of companies believe that digital technology will be a key enabler for their circular economy strategies, but very few are leveraging the technology for this purpose yet."

Gartner’s Future of Supply Chain Survey gathered data from 1,374 respondents responsible for supply chain and related function across a broad range of industries including high-tech, healthcare, retail and logistics.

Digital Technology in the Supply Chain

There is not a single technology that will enable organizations to move toward the circular economy. Rather, several combinations can lead to this outcome. The survey results show that organizations focus on four key technologies to advance their circular economy activities: advanced analytics, 3D printing, the Internet of Things (IoT) and machine learning (ML) (see Figure 1).

Figure 1: Digital Technologies Used to Enable Circular Economy Activities

“It’s interesting to see that only few organizations are currently using blockchain. However, 38% of respondents are planning to explore the use of blockchain for the circular economy in the next five years,” Ms. Watt continued. “For example, the technology canbe used to give materials a single digital identity and to enable trade and pay-per-use. Although we are yet to see scaled use cases of blockchain for the circular economy.”

Applying Technology to Enable a Circular Economy

The top four areas of the supply chain where digital technology is being applied are: delivery (46%), customer engagement (45%), manufacturing and remanufacturing (43%) and planning (43%). Only 27% of respondents are currently using digital technologies to improve reverse logistics, but 39% plan to do so within the next two years.

“The difference in emphasis between delivery and reverse logistics is intriguing,” Ms. Watt said. “On the one hand, we observe organizations using technology such as analytics and alternative vehicles to optimize their routes and reduce emissions. You can argue that those actions should be considered a sustainable practice rather than one that enables the outcomes of the circular economy.”

“On the other hand, reclaiming materials at the end of life requires reverse logistics for pickup and return to either the organization or a third party. Our results show that, in the next two years, reverse logistics will garner the most attention. This indicates that companies are looking at how to take back products for reuse, refurbishment or recycling – an important step on the way to the circular economy.”

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