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.”
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.
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