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Stamford, Conn., September 22, 2020

Gartner Survey Finds More Than Half of Supply Chain Professionals Expect a Greater Focus on Circular Economy Strategies over the Next 2 Years

Accessing End-of-Life Materials Proves Biggest Challenge

Fifty-one percent of supply chain professionals expect that the focus on their circular economy strategies will increase over the next two years, according to a survey by Gartner, Inc.

In May and June 2020, Gartner surveyed 528 supply chain professionals and found that there are two main drivers for the increase: first, consumers may not be willing to make big purchases, resulting in product as a service (PaaS) models becoming more attractive. Secondly, a circular economy has the potential to improve raw material security from end of life products. Chief supply chain officers (CSCOs) can use circular economy strategies to increase their organization’s raw material security in times of disruption.  

“The COVID-19 pandemic has shown that the strengths of globalized supply chains can become a weakness when raw material availability and access plummet during a crisis,” said Sarah Watt, senior director analyst with the Gartner Supply Chain Practice. “For CSCOs, the circular economy is a great opportunity to improve raw material resilience and decouple material consumption from financial growth.”

However, organizations still struggle to access and reprocess end-of-life products. Supply chain leaders face a web of complexities that consist of four specific challenges (see Figure 1). 

Figure 1: Nexus of Challenges for End-of-Life Materials

Source: Gartner (September 2020)

Ownership of End-of-Life Materials

Most supply chain organizations lose control of products and raw materials at their respective point of sale. This means that they must re-gain access from the consumer at the end of a product’s life. High-tech organizations favor leasing and subscription models because the product will automatically return to them.

“Organizations must engage with customers in new ways to gain access to end-of-life materials. Many supply chains rely on new business models or incentives, however 35% rely on customer goodwill,” Ms. Watt added.

Quantity of Materials

One of the key challenges is to collect and centralize end-of-life products for processing in an economical fashion. Most supply chain organizations collaborate with waste vendors, raw material suppliers and reverse logistics providers to gain access to material.

Value of Raw Materials

A circular economy still needs to operate within economic boundaries. Products with low residual value are less likely to be processed. While there may be differences in environmental impacts between materials, most of the organization’s decision-making will be based on economics and risk.

“There are a couple of reasons why it can be worthwhile to reclaim end-of-life materials with low residual value,” Ms. Watt said. “Reclaiming those assets can act as a hedge against price volatility and increase an organization’s raw material security. Customer sentiment towards certain forms of materials such as single-use plastics has also changed, presenting a reputational risk, which has been a catalyst for action.”

Product Complexity

The less complex a product, the easier and cheaper the reprocessing. One of the easier methods to overcome complexity is by recycling to reclaim primary materials. However, recycling leads to loss of value, as the manufactured product is being extinguished in the process.

Only 24% of survey respondents stated that their organization is involved in refurbishment activities. Refurbishment provides more value than recycling as it typically reduces environmental impact and allows the organization to achieve a quick second sale.

“Product design is crucial to end-of-life management. Poorly designed products with toxic materials can be incredibly difficult and costly to process and put back into the market,” Ms. Watt concluded.

Methodology

Between May and June 2020, Gartner’s Opportunity After Crisis Survey gathered data from 528 respondents, responsible for supply chain and related functions across a broad range of industries, including high-tech, industrial and food & beverage. Respondents were located in North & South America and the EMEA and APAC regions.

Gartner clients can learn more in the Supply Chain Executive Report “Close the Loop to Create Future-Fit Raw Material Strategies.”

 

About the Gartner Supply Chain Practice

The Gartner Supply Chain Practice brings together the most relevant analysis, peer-based best practices, metrics and data across Gartner and offers supply chain leaders a platform to make the choices that will drive their business forward. Additional information is available at https://www.gartner.com/en/supply-chain. Follow news and update from the Gartner Supply Chain Practice on Twitter and LinkedIn using #GartnerSC.

About Gartner Supply Chain Symposium/Xpo

Gartner Supply Chain Symposium/Xpo is the most important gathering of CSCOs and supply chain executives. Supply chain leaders will gain a strategic view of the trends disrupting their business and the insights and frameworks they can use to build agility and robustness into systems, processes and decision making.

Upcoming dates for the virtual Gartner Supply Chain Symposium/Xpo include:

October 5-8: EMEA

November 3-5: Americas

About Gartner

Gartner, Inc. (NYSE: IT) is the world’s leading research and advisory company and a member of the S&P 500. We equip business leaders with indispensable insights, advice and tools to achieve their mission-critical priorities today and build the successful organizations of tomorrow.

Our unmatched combination of expert-led, practitioner-sourced and data-driven research steers clients toward the right decisions on the issues that matter most. We are a trusted advisor and an objective resource for more than 14,000 enterprises in more than 100 countries — across all major functions, in every industry and enterprise size.

To learn more about how we help decision makers fuel the future of business, visit gartner.com.

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