The circular economy will revolutionize the trajectory of logistics. Industrial economies are catching on quickly after seeing supply chain bottlenecks, scarce resources, and climate catastrophes with more regularity. Sustainability and environmental regulation are not new ideas, but the laws of the past are not equipped to meet today’s challenges. Recycling cannot be the designated end of a supply chain; it needs to be integrated into a circular supply cycle – reducing material waste and inefficiencies. That change brings an end-to-end transformation of supply chain processes and improved collaboration among supply chain partners. But this is about more than just waste management, the circular economy must be viewed holistically, starting with product design and engineering and encompassing product and material cycles.

Making the switch is not an altruistic decision either, it is an overriding mandate to be viewed with urgency around the world. New rules and regulations, such as the EU’s Corporate Sustainability Due Diligence Directive, focus on consumer rights to return products for repair and recycling. Freight forwarders and transport service providers also fall under the umbrella of entities compelled to act, to adjust their day-to-day operations to reflect environmental, social, and governance criteria (ESG) and meet sustainability, climate, and carbon neutrality requirements. All of these changes exacerbate the growing complexity of logistics planning and implementing industrial supply networks. The path forward requires reimaging the supply chain as the infrastructure of an inevitable and regenerative system, and sophisticated software solutions will be a major enabler of that transition.

Change is coming, what will it look like?

Evolving supply chains toward circularity will induce many changes to logistics, but there are a few broad ideas to understand surrounding the change.

• Product design will be reimagined – it will change how products and their packaging will be developed to account for repair and refurbishment, easily adding them back into the value cycle. This will change production facilities, manufacturing processes, packaging, and logistics concepts, they will likely become more modular with shorter product cycles.
• Complexity and portfolio growth – the responsibility of shippers and logistics service providers will grow beyond only delivering a product to the ability to return it to the manufacturer for repair, refurbishing, or remanufacture. Detailed information on the materials will need to be transparent to meet a growing number of regulations surrounding decarbonization and emissions.
• Ecosystems not, supply chains – making the complexity of circular economies profitable will require movement and flexibility like one would find in a natural ecosystem. Suppliers, manufacturers, and transportation & logistics services will need to adapt to changes effectively and cooperatively to meet sustainability goals.

Digitalization and software are keys to complexity

Optimizing more complex supply networks, providing transparency to material origins, and complying with a growing number of environmental regulations is a major hurdle for many, and trying to achieve these requirements without a comprehensive digital solution will make profitability harder to attain. Instead, there are some key tools to keep in mind while integrating with the circular economies of tomorrow’s industries.

The first, and possibly most foundational, technology to consider in harnessing the complexity of circular economies in logistics is the digital twin. Having data of entire operations readily available and easily understandable for a given role provides space to fine tune planning, implementation, and scaling for logistics services without impacting ongoing operations. Businesses can integrate their real process data with comprehensive simulations to refine processes and retail profitability even with intense industry shifts and new requirements.

Moving logistics into the cloud is important as well, to handle the flood of data that suppliers will need to steer logistics operations – manufacturing processes, recycling stages, usage history, and much more. This wealth of new product data needs to be augmentable and shareable at will, and rapidly to meet the delivery requirements of modern economies. Using a cloud-based logistics platform provides all partners with the same processes, standardized workflows, and access to the data they need to track a product across its entire lifecycle.

The third digital tool for building sustainability and circularity into logistics is the control tower, which provides the monitoring and data acquisition for making the most informed decisions. Transparency of shipments and secondary materials helps integrate shipping status and product status. A digital control tower also enables quick and easy integration of new suppliers, locations, service partners, and product data into the workflows, regardless of the systems used on-site.

The future of circular logistics

While these digital technologies are powerful and available today, making circular economies as sustainable as possible will require continued investment to reap the greatest business benefit. And one facet of that improvement comes through optimizing and automating material flows as more data is collected and new possibilities are made available. Simulating in the digital twin is powerful but applying artificial intelligence can uncover previously missed opportunities or non-intuitive solutions. We have only begun to scratch the surface on how a business might apply to software technologies to achieve profitability in circular economies, but to learn more check out the whitepaper on the subject – The Circular Economy: How digital technology is transforming the supply chain into an ecosystem.

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Siemens Xcelerator, the comprehensive and integrated portfolio of software and services from Siemens Digital Industries Software, helps companies of all sizes create and leverage a comprehensive digital twin that provides organizations with new insights, opportunities and levels of automation to drive innovation.

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