How Sustainability is the Key to Solving Supply Chain IssuesAvoid Supply Chain Disruptions Through Circularity
In a post-pandemic economy, one constant issue that has affected businesses all over the world continues to be supply chain shortages. Even the earliest shutdowns in 2020 have sent world-wide ripples through the global supply chain that are just now being felt. As supply quickly fell short of demand, the world economy is left looking for solutions to a problem that has always been looming: the fallibility of the linear economic model.
As businesses struggle to recover, new light is being shone on the emerging concepts of circularity. Although the circular economic model is a new one, it’s not as common a practice as the linear economic model, by far. In detailing the “why’s” and “how’s” of the current supply chain issues, it’s easy to see why circularity makes so much sense when finding ways to avoid future supply chain disruptions.
What is Driving Supply Chain Issues
Back in 2020, when the COVID-19 outbreak first began, the countries that supply many of the world economy’s base components (China, Korea, Japan) were the first to shut down their economies. As supplies dwindled, demand only increased. As factories came back online, the new issue became transportation. For instance, computers that are manufactured in China relied on parts from Taiwan. Even if the parts were available, there was not enough shipping capacity available to get them there. Like a bottleneck in a traffic jam, goods are now left sitting in ports without any foreseeable solution to get them where they need to go. If the COVID-19 outbreak taught us anything, it was the delicate balance that exists in a linear economy used to the “make, use, dispose” business model. A perfect example of the delicacy is happening right now in Vietnam, a country that was originally hailed as a COVID success story.
Because of the Delta variant causing new shutdowns – factories in other countries that are running at near full-capacity are left waiting for components from Vietnam, where new shutdowns are once again halting production. Anytime a link in the supply chain breaks, the entire process comes to a stop, which causes a massive imbalance in the supply/demand for manufactured goods. The exact goods that US consumers who have been trapped in their homes throughout the quarantine period are spending the most money on. “The result of that imbalance between supply and demand eliminated all the inventory and eliminated all the grease that allows the wheels of commerce to work smoothly,” said Steve Ricchiuto, chief U.S. economist at Mizuho Securities.
To complicate issues here in America, there are staggering labor shortages. According to the US labor department, a record 4.3 million people quit their jobs, leaving approximately 490,000 job openings at warehouses across the country. As far back as 2019, the American Trucking Association knew that it would be short approximately 60,000 truck drivers, and the pandemic only made that number go higher. “There is a shortage of drivers, and it is one of several issues contributing to problems in the overall supply chain,” said Sean McNally, an ATA spokesman. “However, it is a reflection of the strong demand for goods – and everything consumers buy is delivered in a truck.”
According to Moody’s Analytics, problems “Will likely get worse before they get better. As the global economic recovery continues to gather steam, what is increasingly apparent is how it will be stymied by supply-chain disruptions that are now showing up at every corner.”
So, with the issues with the current supply chain defined, how can businesses implement long-term changes to correct future disruptions?
Sustainability through Circularity
It is no secret that the circular economic model is far more sustainable than the current “normal” or linear economic model. There are countless examples of how circularity has increased sustainability in different industries across the globe, but the concept remains the same: when you make the most out of base materials, you waste less, and therefore are less reliant on raw materials. Take the UK’s circular approach to aluminum cans: almost 75% of the UK’s aluminum cans are recycled and reproduced due to an aggressive recycling initiative. Used cans are collected, sorted, cleaned, and then re-worked with minimal amounts of “fresh” aluminum to produce new cans. This closed-loop reduces the country’s reliance of virgin aluminum, and instead makes better use of the materials already in production.
That same concept can be applied to most resources in the supply chain – even when it comes to manufactured products. Retailers can set up return channels for their used merchandise to be repaired and re-sold, extending the life of a product and the raw materials used to make them. In either case, by making better use of materials in the current production cycle, businesses become less reliant on far-reaching, global supply chains that are prone to disruptions.
Move into Circularity with 1GNITE
Sustainability is at the heart of everything that 1GNITE does, including moving companies forward into the circular economy. We have designed and implemented programs across the country for a wide selection of businesses that have not only made improvements to their bottom line, but they have also made those companies less reliant of a stressed global supply chain . For instance, we helped Duraserve, a manufacturer of industrial doors and loading dock equipment, make use of one of their largest customer’s waste streams – by recycling that waste into raw material used to make the internal panels of new doors for their loading docks.This closed-loop solution makes the best of all resources, and is completely self-sustaining.
Contact 1GNITe today and see how we can free your business from the failing supply chain cycle and move you forward into the circular economy.
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