Circular Economy in Logistics: CIRCULAR SERVICE DESIGN FOR LOGISTICS PROVIDER: AN ARVATO CASE STUDY

July 28th, 2022, was Global Earth Overshoot Day.
Earth overshoot day means we use more resources
than the Earth’s biosphere can produce in a year.
The use of Earth’s resources at a rate faster than
they can be regenerated leads to severe effects on
people, the planet, and industry for current and future
generations, such as increasing competition over a
fixed resource base, rising prices of resources, and a
decrease in the quality of life.
Companies have made themselves dependent on
increasingly scarce natural resources; meaning they
will lose their flexibility to produce any number of
products and therefore bear higher production costs.
Lastly, the effect on Earth is climate change e.g.
extreme weather, global flooding and heat waves,
mass desertification and wildlife loss. These natural
phenomena, exacerbated by humans, are having an
impact on our and future generations’ quality of life
and pose a threat to businesses’ flexibility and supply
chains. To counteract these effects, the framework of
sustainable development was introduced in 1987.
The concept of ’sustainability‘ consists of three pillars:
people, profit and planet (the 3 P’s), which have to
remain in balance for a system to be sustainable.
With current resources depleting faster and faster,
the concept of ‘Circular Economy (CE)' has been
introduced. The basic idea of this model is to ‘close
the loop’: avoid the use of virgin raw materials, and if
not possible, extend the life cycle of a product.
To further examine the role of a logistic provider,
especially Arvato, in the short- and long-term,
interviews with Arvato’s customers and project
managers were conducted. The results show that
most technology clients have a sustainability strategy
but it is mostly limited to carbon neutrality and is not
focused enough on the core of circularity: no waste generation and circular products. If we want circularity
to be regarded in projects and decision-making, it
must become a strategic goal/aspect, including key
performance indicators and reward schemes.
Circularity as a concept stresses the importance of
collaboration. To succeed, companies must cooperate
up and downstream in their value chain. Logistic
providers can strategically leverage and design the
supply chain network to support life-cycle extension
and product recycling. In the long term, this enables
the logistics providers to become the consultants and
facilitators of CE activities. Rethink is the key in all
stages. We fundamentally need to rethink how our
value chains are organised and proactively engage
with suppliers, and customers in a partnership. A
logistics provider should use its existing network to
engage and enable its partners in open discussions.
However, companies must also overcome 4 challenges
(Laws & Regulations, People & (Company) Culture,
Costs & Economy, and Product Design & Innovation),
if they want to engage in CE. To do so, products
need to be designed modularly and people need
to be trained. Companies need to understand the
new generation’s priorities and rethink their value
proposition. They must understand the true cost of
their current and CE practices. For example, they can
evaluate their goods and services based on Flexibility,
Ethics & Environment, Brand image, Risk management,
and Cost saving & Efficiency.
However we do it, our clients, as well as internal
stakeholders, agree that now is the time to take
action.