CPSC TERM PROJECT REPORT

INSTRUCTOR: MAJ. RASHID ALEEM SAHAB

STUDENT : SYED ASIM ALI SHAH
CMS ID : 274488

[REVERSE LOGISTICS, CIRCULAR

ECONOMY AND THEIR INTER
RELATIONSHIP]
Logistics
Logistics is explained in many ways, such as business logistics, physical distribution,
material management, distribution engineering, logistics management, and SCM (Johnson et
al.,1999). Comparing the various terms of logistics, the most familiar term is logistics
management (Langley Jr, 1986; Lambert and Stock, 1993).

In attempting to find a logistics management definition, it is necessary to understand logistics

itself. Logistics started to be defined in military use (Lummus et al., 2001). According to the
Dictionary of Modern War (Luttwak, 1971), logistics is defined as follows: “Since in modern
conditions a wide range of equipment and supplies is employed in widely varied “mixes”,
logistics involves a great deal of planning and calculation as well as physical activities. The
aim is to provide each echelon of the armed forces organization with the optimum quantity of
each supply item, in order to minimize both overstocking… and shortages of essential
equipment”.

In the context of business, Cavinato (1982) describes logistics as an integrated process of

inbound/outbound products, where logistics handles some activities on a functional basis, e.g.
purchasing, transportation and storage. Logistics can be applied to pre-production, in-
production, and post-production channels; additionally, physical distribution only applies to
the post-production channel. The Council of Logistics Management (CLM, 1989) defines
logistics as “the process of planning, implementing, and controlling the efficient, effective
flow and storage of goods, services, and related information from the point of origin to the
point of consumption for the purpose of conforming to customer requirements”.

Logistics is also understood in SCM. There are four perspectives to describe the correlations:
traditionalist, which indicates SCM as being a part of logistics; relabelling, which describes
how logistics is the same as SCM; unionist, which means logistics are a part of SCM; inter-
sectionist, which indicates logistics and SCM are intersected (Larson and Halldorsson, 2004).
In the supply chain system, logistics was described by Krumwiede and Sheu (2002), as
consisting of forward and reverse logistics; similarly, Thierry et al. (1995) illustrated the
integrated supply chain as being divided into forward and reverse flows. Forward logistics
was defined as the flow of material in the normal movement from raw material to finished
goods that are eventually received by customers (Krumwiede and Sheu, 2002).
In addition, forward and reverse flows were described to have different activities significantly
one another, even though they can work in synergy manner (Fleischmann et al., 2000).
Tibben-Lembke and Rogers (2002) also compared forward and reverse logistics, and found
that between them, they have a significant difference in terms of information flow.
Furthermore, El-Sayed et al. (2010) illustrated the direction of forward logistics encompasses
suppliers, facilities, distributors, and customers entities, while reverse logistics flow has
disassembly, disposal, redistribution, and second customer entities.

Reverse Logistics (RL)

RL is part of the logistics area, which is a focus of this research. Thus the definition of RL
needs to be mapped well. The understanding of RL itself is robust. Indeed, this research has
identified its definition from several researchers, such as in the 1980s, Murphy (1986),
Lambert and Stock (1987) and Murphy and Poist (1989). They defined RL as a converse
movement flow within a channel distribution. They focused on the flow of movement of
product from the reverse side. However, in the 1990s other researchers (e.g. Stock, 1992,
1998; Kopicki et al., 1993; Carter and Ellram, 1998; Rogers and Tibben-Lembke, 1999) not
only described the reverse side, but also explained the activities within the flow, such as
recycling, reusing, disposing, etc.

Table 2.2 identifies some RL definitions from which it can be concluded that RL theoretically
is discussing the management action, logistics activities/roles (Kopicki et al., 1993; Stock,
1998; Rogers and Tibben-Lembke, 1999), recovery/reuse activities (Stock, 1992; Kopicki et
al., 1993; Carter and Ellram, 1998), distribution channel (Murphy, 1986; Murphy and Poist,
1989), recapturing values (Rogers and Tibben-Lembke, 1999), reverse flow (Murphy, 1986;
Lambert and Stock, 1987; Murphy and Poist, 1989), and also cost (Rogers and Tibben-
Lembke, 1999).
 Table 2.2 – Identification of the definitions of reverse logistics
Reference Definition of
RL
Lambert and Stock “Going the wrong way on a one-way street because the great
(1987) majority of product shipments flow in one direction.”
Murphy (1986); “Movement of goods from a consumer towards a producer in a
Murphy channel of distribution.”
and Poist (1989)
Stock (1992) ‘‘… the term often used to the role of logistics in recycling,
waste disposal and management of hazardous materials; a
broader perspective includes all issues relating to logistics
activities carried out in source reduction, recycling, substitution,
reuse of
materials and disposal.’’
Kopicki et al. (1993) “Reverse logistics is a broad term referring to the logistics
management and disposing of hazardous or non-hazardous waste
from packaging and products. It includes reverse
distribution...which causes goods and information to flow in the
opposite direction of normal logistics activities.”
Stock (1998) “The role of logistics in product returns, source reduction,
recycling, materials substitution, reuse of materials, waste
disposal and refurbishing, repair, and remanufacturing.”
Carter and “The process whereby companies can become more
Ellram (1998) environmentally efficient through recycling, reusing, and
reducing the amount of materials used.”
Rogers and Tibben- “The process of planning, implementing, and controlling the
Lembke (1999) efficient, cost-effective flow of raw materials, in-process
inventory, finished goods, and related information from the point
of consumption to the point of origin for the purpose of
recapturing value or proper disposal.”

In addition, based on the highlighted key points in the definition above, researchers such as
Govindan et al., 2012; Ravi and Shankar, 2005; Horvath et al., 2005; Tibben-Lembke, 2001;
Ravi and Shankar, 2005; Lu and Bostel, 2007; Du and Evans, 2008; Meade and Sarkis, 2002;
Daugherty et al., 2005; Lambert et al., 2011 respectively supported the management action of
logistics functions, recovery/reuse activities, distribution channel, recapturing values, reverse
flow, and cost.
On the other hand, product return, the common term within RL, needs to be defined clearly to
avoid confusion between them. Returned product, as defined by Guide et al. (2003), is a
product that is returned for refund by a customer, because it has not fulfilled their needs or
standards. The process of product return was described by Blackburn et al. (2004) as starting
from the process of recovering value, until reuse or resale. They stated that there are five
key processes within the return process:
Product acquisition, receiving returned product from customer; reverse logistics, transporting
for assessment; inspection and disposition, assessing and deciding the quality of product;
remanufacturing or refurbishing, recovering the product to its original condition; and
marketing, selling recovered product. Logically, product return is an activity that is started
from when the customer returns the product, new or used, for any reason. The product will be
treated according to the quality of the product; it might be directed to reuse, repair, refurbish,
etc. In addition, Rogers and Tibben-Lembke (1999) and Tibben-Lembke and Rogers (2002)
described the area of RL that covers the processing of returned product for reasons such as
damage, unwanted, etc. Guide and van Wassenhove (2001) also explained the return of used
products as being the basic input to a reuse option, where there are two methods to acquire
used product in a product return – waste stream and market-driven system.

Reverse Logistics Activities

The activities of RL need to be identified, according to the RL definitions so that the process
of identification can be started. As concluded from the RL definitions above, RL focuses on
several points such as reuse, recovery, recycle, and disposal. Based on those points, other
researchers also described RL activities, such as Thierry et al. (1995) who illustrated the
reverse flow in the integrated supply chain, and Krumwiede and Sheu (2002) who depicted
the basic RL activities. The RL activities from both of them are depicted in Figures 1.1 and
1.2. Figure 1.1 shows the reverse flow that has three main parts: direct reuse, product
recovery management (PRM), and waste management (WM). Its process can be started from
users returning their product until the processing as raw material. In addition, Figure 1.2
depicts activities involved in reverse flow. Within reverse flow, there are several activities
involved,
e.g. test, repair, refurbishing, service, disassembly, where the flow is initiated by sending
used product from customers to become raw material. Comparing both figures,
fundamentally, they illustrate similar activities. The detailed RL activities will be described
further based on Figure 1.1, in the following sections.
 Return Flows 2
Forward Flows
Service

Raw Parts Modules Product

Material Distribution Users
Fabrication Assembly Assembly
s
6 5 3 1
7,8

Repair
Refurbishing
Landfilling Recycling
Resale

Figure 1.1 - Integrated supply chain (Thierry et al., 1995)

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Figure 1.2 - Basic flow diagram of reverse logistics activities (Krumwiede and Sheu, 2002)

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A. Direct Reuse
Some researchers have described direct reuse as one of components or activities in RL; for
instance, Kopicki et al. (1993) communicated it as the use of product or component parts
without changing their form and passing through the remanufacturing process. Thierry et al.
(1995) also illustrated it as the first alternative before other activities to recover the return
product, for instance repair, refurbishment, etc. In addition, Fleischmann et al. (1997)
described how the returned product is possible to be reused without a product process as it
might be able to be cleaned or have a small repair. Hazen et al. (2011) explained it as being
an alternative to unused product from the customer who returns the product to the purchasing
outlet or retailer. The product is possible to be inserted into the supply chain.

B. Product Recovery Management (PRM)

PRM was illustrated by Thierry et al. (1995) who described it as the management of used and
discarded products/components/materials where the objectives are to recover economically
and ecologically maximum retained value. Thierry et al. (1995) divided PRM into five
options (Table 2.3): repair, refurbishment, remanufacturing, cannibalisation, and recycling.
Each activity has requirements to describe it. The requirements are level of disassembly,
quality requirement, and resulting product.

Furthermore, Klausner et al. (1998) expressed that the strategic PR activities encompass
repair, refurbishment, remanufacturing, reusing, recycling, and disposal. Those activities are
similar to those of Thierry et al. (1995) illustrated above. Fleischmann et al. (2000) described
some processes in the PR chain where there are two directions (forward and reverse flow).
The process is started from supply, production, and distribution in which a product can be
used, and the reverse flow process can be started from a used product that can be collected,
selected, reprocessed, redistributed until the product can be reused, or the choice is made to
dispose of it. Guide et al. (2003) emphasized that PR refers to the parts and materials in the
returned product that possibly can be recovered.

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 Table 2.3 – Comparison of product recovery options (Thierry et al., 1995)
PRM Activity Level of Quality Requirement Resulting Product
Disassembly
Repair To product level Restore product to Some parts fixed or
working order. replaced by spares.
Refurbishment To module level Inspect all critical Some modules
modules and upgrade to repaired, replaced;
specified potential upgrade.
quality level.
Remanufacturing To part level Inspect all modules and Used and new
parts and upgrade to ‘as modules/parts
new’ quality. combined into new
product; potential
upgrade.
Cannibalisation Selective Depends on process in Some parts reused;
retrieval of parts which parts are reused. remaining product
recycled/disposed.
Recycling To material level High for production Materials reused to
of original parts; less produce new parts.
for
other parts.

The detailed activities of PR can be divided into the following:

1. Repair
The repair activity was discussed by some researchers, such as Blumberg (1999) who
described the reverse logistics and repair service (RLRS) market. The explaination is the
functions within the RL and repair process as being storage and warehousing, collection and
sorting, substitution, transportation and distribution, disposal, depot repair and
remanufacturing, and recertification. Blumberg (1999) also illustrated the repair activity,
where the process could be started from end users that recover their EoL product, and how
the recovery process depends on the quality of EoL product, whether the product needs
repair, refurbish, or disposal. Guide et al. (2003) described some considerations when
undertaking repairs, such as cost, lifetime, and warranty. Similarly to Guide et al. (2003),
King et al. (2006) explained that repairing is a minor correction when the product is still
under warranty.
2. Refurbish
Some researchers who focused their research on refurbishment gave its definition and
requirement. Thierry et al. (1995) illustrated refurbishing as a recovery level where some
modules are possible to repair and replace, and also to have a potential upgrade. White and
Naghibi (1998) explained that the requirements of a refurbishment product are when the

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product can fulfil the manufacturing standard; this is in line with Vorasayan and Ryan (2006)
who described refurbishment as a product that has been undertaken and verified by the
manufacturer, and can function as a new product.

Research this area also were conducted by for instance Piplani et al. (2007), they focused on
optimizing the repair and refurbish network, where the purpose of the research was to decide
facility locations and product flow to support a repair network for faulty products and
refurbishing network for commercial returns. Zikopoulos and Tagaras (2007) conducted a
research that concerned the impact of the uncertain quality refurbishment of used product
returns.

3. Remanufacturing
Remanufacturing was identified as the process of restoring used products to become new
products using several steps, e.g. refurbish and clean to obtain the same as, or better quality,
i.e. up to a new product standard (Lund, 1983). Furthermore, the type of remanufacturers
were then identified to provide a clear process within manufacturing, i.e. they are the original
equipment manufacturer/remanufacturer, where the remanufacturing process will be done by
the company that produces their own product; contracted remanufacturer, a company that has
a contract to remanufacture a certain product on behalf of a company; independent
remanufacturer, the remanufacturing process is performed with a limited or without a
contract with the original equipment manufacturer (OEM) (Lund, 1983; Jacobsson, 2000;
Sundin and Bras, 2005; ERN, 2016).

Steinhilper (1999) explained that the remanufacturing process depends on the type and
functionality of the product. He divided the process into five steps for mechanical systems:
disassembling, including sorting the parts that cannot be reused or remanufactured; cleaning,
degreasing, deoiling and derusting; classifying according to the ability to be remanufactured
or reconditioned (reusable without reconditioning, reusable after reconditioning, not
reusable/to be exchanged); reconditioning or exchanging worn parts; reassembling.
Freiberger (2007) illustrated the remanufacturing process for mechatronic and electronic
products which has six steps: diagnosis, disassembly, cleaning, inspection and sorting,
reconditioning

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and/or replenishment, and reassembly. In addition, ERN (2016) depicted the general
remanufacturing process as documentation, collection, inspection, disassembly,
component remediation, replacement, reassembly, testing, and warranty.

Östlin et al. (2008) and ERN (2016) identify the types of used product in
remanufacturing. They are ownership-based: where the product is operated by the
customer, even if the owner is the manufacturer; service contract-based: the relationship
is based on a contract between manufacturer and customer; direct- order-based: the
customer can possibly return the used product for remanufacture and can take the same
product back; deposit-based: the customer can return a similar used product; credit-
based: the customer can receive a discount when they are buying a remanufactured
product when they return a used product; buy-back- based: the remanufacturer buys the
wanted used product from a supplier; and voluntary-based: the supplier provides a used
product to the remanufacturer.

In addition, Kim et al. (2006) proposed a general framework and a mathematical model
for a remanufacturing system in an RL environment. They illustrated the
remanufacturing system, describing the process from when the customer sends the
returned product to the collection site. The collection site is like a pool of returned
products that are then sent to a disassembly site or remanufacturing subcontractor. In the
disassembly site, the product is assessed and considered before going to a refurbishing
site to be refurbished to become a new part and sent to a new part inventory. The other
result of the process in disassembly sites is possibly waste that must be sent to a disposal
site. Also, the product will become new parts after the process at the remanufacturing
subcontractor, and sent to inventory. By adding several parts from external suppliers, all
parts are sent to manufacturers. Demirel and Gökçen (2008) discussed the optimal values
of the production and transportation of quantities of manufactured and remanufactured
products, and Kizilboga et al. (2013) developed a remanufacturing process in an RL
network.

4. Cannibalisation
Thierry et al. (1995) explained the process of product cannibalisation where they
indicated it is a simple process in which less than 10% can be cannibalised in used
product. Cannibalisation was defined by some researchers such as Copulsky (1976) as
“the extent to which one product’s customers are gained at the expense of customers of
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other products offered by the same firm”; and Heskett (1976) explained it as “the process
by which a new product gains sales by diverting them from an existing product”.
Furthermore, Lomax et al. (1996) described the measurement of cannibalisation with
three methods: gains loss analysis; duplication of purchase tables; and deviations from
expected share movements. Cravens et al. (2002) also illustrated a framework for a
proactive cannibalisation that responds to changing customer value in the process of
building appropriate innovation strategies for the new competitive and technological
environment. Those cannibalisation researches above are used in the marketing context,
except for Thierry et al. (1995), who were concerned with PRM.

5. Recycling
Recycling was defined by Wiard and Sopko (1989) as the series of processes that
involves collecting, sorting, decontaminating and returning waste material as a
commodity. Recycling also can be seen as a process which is disassembling, shredding,
incineration and landfilling (Gerner et al., 2005). In addition, Pohlen and Farris (1992)
identified a number of municipal solid wastes where the identification focused on
plastics recycling. They also illustrated the diversity of the recyclable material path from
producer to end user. Several possibilities involved within recycling entities are:
customer/industrial producer, material recovery facility, municipal pick up, broker,
intermediate processor, and end user. Kroon and Vrijens (1995) conveyed a burden to the
environment from one way packaging material, where they focused on returnable
containers.

C. Waste Management
Thierry et al. (1995) divided WM in RL into two activities: incineration and landfilling.
WM’s purpose is to conserve natural resources, and protect the environment using a
sustainable development approach (El-Haggar, 2007). To achieve this purpose, suitable
techniques, technologies, and a management programme need to be used
(Tchobanoglous et al., 2002). Incineration is translated as a thermal treatment process of
solid/liquid waste (El-Haggar, 2007), and landfilling is described as the physical
facilities used for the disposal of solid waste and solid waste residuals into the surface
soils of the earth (O’Leary and Tchobanoglous, 2002).

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 Its core defining element is the “restorative use” of resources. Raw materials shall not
become discarded waste. “While great strides have been made in improving resource
efficiency, any system based on consumption, rather than on the restorative use of
resources, entails significant losses along the value chain” (Ellen MacArthur Foundation,
2015).
The CE is not the only concept proposing circular ideas for economic activities. Many
other concepts exist without, thus far, a clear differentiation. A comparison of concepts will
not only provide an overview but also enable the identification of potential improvements
to the current definition of the CE.
During the past years, the term circular economy has gained increasing attention (Lieder &
Rashid, 2016). Because of the perceived urgency for better resource efficiency, academic
articles and practical propositions around the concept of the CE have increased
significantly. Scholars agree that the CE stands in contrast to the linear economy based on
a “take-make-dispose” sequence. However, the propositions mirror different
understandings of what a CE entails (Ghisellini, Cialani, & Ulgiati, 2016).
CE to include sustainability in a broader sense (Finkbeiner, Inaba, Tan, Christiansen, &
Klüppel, 2006), others perceive it as an optimization of waste management only (Ghisellini
et al., 2016).
The Ellen MacArthur Foundation, a nonprofit organization that strives to develop the
framework of the CE, is one of its main advocates. The foundation encourages including
aspects of other concepts with a circular approach, such as the blue economy (Pauli, 2010),
cradle-to-cradle (McDonough & Braungart, 2002), closed-loop supply chains
(Bhattacharjee & Cruz, 2015), industrial ecology, reverse logistics (Agrawal, Singh, &
Murtaza, 2015), resource efficiency (Schandl &West, 2010), low waste production,
biomimicry (Benyus, 1997) and sustainability (Finkbeiner et al., 2006). some scholars even
claim that the CE stands on “shaky ground”
2.1 | The circular economy

The roots of a concept for circular material flows reach back many decades.
It was proposed by Boulding (1966) in his book, The Economics of the Coming Spaceship
Earth. Boulding claimed that circular systems within the global economy are unavoidable in
order to guarantee human life on Earth in the long run. Relying on Boulding’s ideas, other
pioneers include Pearce and Turner (1989). They agreed that the traditional linear economy
without recycling elements cannot be sustainable and consequently must be replaced by a

25
circular system. Focusing on the waste management policy aspect of the CE, its roots in
Europe can be traced back to Germany where, in 1972, a waste disposal act was established
(BGBI I S. 873). Germany also developed the concept of extended producer responsibility.
These policies are considered first steps to promote the implementation of the CE (Andersen,
2007).
One of the currently most recognized definitions of the CE is offered by the Ellen MacArthur
Foundation (2016): “A circular economy is one that is restorative and regenerative by design
and aims to keep products, components, and materials at their highest utility and value at all
times, distinguishing between technical and biological cycles.”

Generally, by defining the CE we are referring to a “closedloop economy” that “does not
generate excessive waste and whereby any waste becomes a resource” (Wysoki_nska, 2016,
p. 1). Another prominent definition stems from the EU Action Plan for the Circular
Economy: “In a circular economy the value of products and materials is maintained for as
long as possible; waste and resource use are minimised, and resources are kept within the
economy when a product has reached the end of its life, to be used again and again to create
further value” (European Commission, 2015). “waste” deviate from the common
understanding where it represents residuals that are dumped or treated, while in a CE “waste”
may only exist in a form that is able to be reused. The call for its limitation would then
correspond only to a request for more efficiency.
The CE is often interpreted as a new business model for a sustainable economy and healthy
society. In such concepts, the CE incorporates aspects of sustainable development, such as
social or economic sustainability (Ghisellini et al., 2016). Through its principles, the idea of
CE encourages all agents of an economy to contribute to a more environmentally friendly use

26
of resources (Planing, 2015). As Ghisellini et al. (2016) state, the CE is often misinterpreted
as only “an approach to more appropriate waste management” (p. 2).
This perception is enhanced through prominent principles like the 3Rs (reduce, reuse, and
recycle), often quoted to summarize the core approach of the CE. For the recovery of
materials, a reclassification into technical and nutrient materials is proposed: manmade
technical ingredients that should be recoverable through industrial recycling mechanisms and
biological nutrients that can be reintroduced into the natural system.
However, this waste-oriented view of the 3Rs is far too limited. Their contribution within a
CE goes beyond the treatment of waste. It encompasses, for example, a different design of
products or improved consumption processes in order to reduce the waste resulting from it.

The first R, “reduction,” thus represents the endeavor of eco-efficiency in production

(DeSimone & Popoff, 2000) and consumption. Eco-efficiency is understood as a business
framework and goal at the same time, aiming at “creating value while decreasing
environmental impact” (Huppes & Ishikawa, 2005, p. 1). Thus, two kinds of motivations are
important for the CE: economic and environmental improvements. The social dimension is
not referred to explicitly within the goal of eco-efficiency. However, resource-efficient
production saves resources for other purposes or for use in future generations. Resource
efficiency thus indirectly increases social wellbeing (Ness, 2008).
The second R, “reuse,” also implies a better design of products and business models for a
cyclical “disassembly and reuse” sequence (Ghisellini et al., 2016, p. 6). Stahel (2013) further
argues that anything related to the principle of reuse, such as remanufacturing or repairing,
should best be conducted regionally, thus reducing transportation and packaging. However,
the reuse principle can be implemented successfully only if consumers are willing to buy

27
reusable and remanufactured goods. This requires additional marketing from the companies
(Watson, 2008), further education of people by public institutions, and a shared responsibility
between producers and consumers to collect products after the first cycle of use (Lenzen,
Murray, Sack, & Wiedmann, 2007).
The third R, “recycle,” refers to “any recovery operation by which waste materials are
reprocessed into products, materials or substances, whether for the original or other purposes.
It includes the reprocessing of organic material but does not include energy recovery and the
reprocessing into materials that are to be used as fuels or for backfilling operations”
(European Union, 2008, p. 8).
To summarize the principles of the CE, scholars agree that the CE needs to be a
regenerative system. However, most work focuses on waste management as represented
by a narrow interpretation of the 3Rs principles, although the principles propose more
far-reaching options.
Activities during life cycle stages: By identifying and grouping all relevant activities during a
product’s life cycle while also including its development and the core surrounding activity of
transportation at different stages of its life cycle, we analyzed which of these stages explicitly
require a circular design according to the different concepts: product development raw
material sourcing, the production processes, the consumption-linked stages of use, customer
management, and end-of-life disposal, all surrounded by logistics and packaging in
transportation.

The emergent role of digital technologies in the Circular Economy: A

Review
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Digital technologies have enabled the formulation of multiple Product Service-Systems (PSS)
with considerable economic, environmental and societal benefits. One of the most promising
paradigms, which is inspired by business models and value propositions that have already
been described in the PSS literature, is the concept of Circular Economy. Circular Economy
is characterized as an economy that is restorative and regenerative by design and is attracting
significant attention from researchers and policy makers alike.
Currently, manufacturing companies are driven by a search for enhanced revenue based on
sales volume and cost reduction in supply chains, factories and operations. In the current
linear economy, based on a “take-make-dispose” philosophy, products are increasingly
becoming commodities, and resource scarcity is becoming a reality for a large variety of
materials. In order to remain competitive in this economic
context, companies are increasingly looking for alternative ways to achieve sustainable
growth and enhanced resource efficiency. Over the last years, various consumption practices
that challenge the established growth paradigm, based on a linear economy, have been
proposed.
One of the most promising paradigms to appear in recent years is the Circular Economy.
According to the Ellen MacArthur Foundation, the Circular Economy is characterized as an
economy that is restorative and regenerative by design and which aims to keep products,
components and materials at their highest utility and value at all times, distinguishing
between technical and biological cycles [1]. In a Circular Economy, companies concentrate
on rethinking products and services from the bottom up to “future proof” their operations and
prepare for inevitable resource constraints – all the way through to the customer value
proposition [2].
Improvement in business through PSS (Product service system). In many cases, the
implementation of Circular Economy in manufacturing companies requires changes in their
business models, which can be achieved by means of Product/Service- Systems (PSS). PSS is
one particular value proposition that has attracted considerable attention over the past few
decades as a way to decouple economic growth from resource consumption. PSS promote a
focus shift from selling just products to selling the utility, through a mix of products and
services while fulfilling the same client demands with less environmental impact [3].
Multiple products SS by the concept of Circular economy, which fulfill the client demand
with less environmental impact.

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Sustainable supply chain management and the transition towards a circular economy:
Evidence and some applications

In the last decades, green and sustainable supply chain management practices have been
developed, trying to integrate environmental concerns into organizations by reducing
unintended negative consequences on the environment of production and consumption
processes. In parallel to this, the circular economy discourse has been propagated in the
industrial ecology literature and practice. Circular economy pushes the frontiers of
environmental sustainability by emphasizing the idea of transforming products in such a way
that there are workable relationships between ecological systems and economic growth.
Therefore, circular economy is not just concerned with the reduction of the use of the
environment as a sink for residuals but rather with the creation of self-sustaining production
systems in which materials are used over and over again. The paper asserts that an integration
of circular economy principles within sustainable supply chain management can provide clear
advantages from an environmental point view.

Introduction:

Circular economy represents a theoretical concept which aims at creating an industrial system
that is restorative by intention [75,69]; in recent times, business have become more aware
about such a concept, seeing it as a mechanism that can be used to create competitive
advantage.

Infact, sustainable supply chain management seeks to integrate environmental concerns

into organisations by minimizing materials’ flows or by reducing unintended negative
consequences of production and consumption processes. On the otherhand, as described
by Mc Donough etal., circular economy pushes the frontiers of environmental
sustainability by emphasizing the idea of transforming products in such away the at
there are workable relationships between ecological systems and economic growth. It is
implied that circular economy is not just concerned with the reduction of the use of the
environment as in for residuals or with the delay of cradle-to-grave material flows( as
sustainable supply chain management suggests) but rather with the creation of
metabolisms that allow for methods of production that are self-sustaining, true to
nature and in which materials are used over and over again. This context the concept of
Reverse Supply Chain Management has been developed as an adaptation of circular economy
principles to supply chain management. Indeed, a reverse supply chain includes activities

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dealing with product design, operations and end of life management in order to maximize
value creation over the entire lifecycle through value recovery of after use products either by
the original product manufacturer or by a third party.

Reverse supply chains are either open-loop or closed-loop. Basically, open-loop supply
chains involve materials recovered by parties other than the original producers who are
capable of reusing these materials or products. On the other hand, closed loop supply chains
deal with the practice of taking back products from customers and returning them to the
original manufacturer for the recovery of added value by reusing the whole product or part of
it [32]. Because of the benefits of reverses supply chains, it is unsurprising that
manufacturing industries have been placing, recently, a lot more emphasis on achieving
sustainable production by shifting from end-of-pipe solutions to a focus on whole lifecycle
assessments and integrated environmental strategies and management systems.

The CE offers a new and different perspective on the organizational and operational systems
of production and consumption, one which is focused on restoring the value of used
resources. The CE proposes that a circular approach to energy and materials can provide
economic, environmental, and social benefits (Geissdoerfer et al. 2017) to organizations
when they replace the traditional perspective of ‘take, make, use and dispose’—also known
as the linear economy—with the CE.
2.1 The circular economy: concepts, principles, and business models
In the context of sustainable production and consumption (Fahimnia et al. 2017), the Circular
Economy is an emerging approach aimed at the sustainable use of natural resources
(McDowall et al. 2017). The CE focuses on maximizing the circularity of resources and
energy within production systems, based on the fact that natural resources are scarce, and that
waste at the end of its life may retain some value (Ghisellini et al. 2016). The CE is based on
two key cycles: one biological and one technical (MacArthur et al.
2015). The biological cycle regenerates ecosystems by reducing excessive extraction of
natural resources, using renewable materials and reusing energy and organic waste by means
of anaerobic digestion. The technical cycle emphasises the extension of a product’s lifespan
through a hierarchy of circularity strategies, which include reuse, repair, refurbishment,
remanufacturing (Zhao and Zhu 2015) and recycling; technical cycles seek to turn what is
regarded as waste into resources for other production systems (Bocken et al. 2017; Murray et
al. 2017).

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Three principles govern the CE cycles, namely: (1) conservation of natural capital, which
means creating an equilibrium of consumption between renewable and non-renewable
resources; (2) increasing the lifespan of resources through both biological and technical
cycles, i.e. enhancing the circularity of resources and energy; and (3) reduction of the
negative effects of production systems (MacArthur et al. 2015).
TheEllen MacArthur Foundation, a leading global charity in establishing the CE’s position on
the agenda of decision-makers across business, government and academia (MacArthur 2015),
has proposed the following six business actions—the ReSOLVE framework—to guide
organizations through implementing the principles of the CE:
• Regenerate This is based on a shift to renewable energy and materials. Biological cycles are
used to enable the circulation of energy and materials, and to convert organic waste into
sources of energy and raw material for other chains.
• Share This is embedded in a shared economy perspective, in which goods and assets are
shared between individuals; ownership thus loses importance. As a consequence, products
should be designed to last longer, and maintenance should be available to allow re-use and
extension of product life.
• Optimise A technology-centred strategy. This model requires that organisations use digital
manufacturing technologies, such as sensors, automation, radio-frequency identification
(RFID), big data, and remote steering to reduce waste in production systems across supply
chains. Organisations will benefit from increased performance; for instance, a predictive
maintenance scheme can be planned based on real-time data reporting the conditions of
machines (MacArthur and Waughray 2016).
• Loop This is based on biological and technical cycles. Biological cycles, for example
anaerobic digestion, are important to recapture the value of organic waste; technical cycles
can restore the value of post-consumption products and packaging by means of repair, reuse,
remanufacture, and recycling. Operations research approaches have been used to study these
options (e.g. Loomba and Nakashima 2012).
• Virtualise A service-focused strategy which replaces physical with virtual and
dematerialized products.
• Exchange This involves substituting old and non-renewable goods for advanced and
renewable ones. Keilhacker and Minner (2017) show, by means of a system dynamics model,
that substitution has significant potential to mitigate supply chain unavailability caused by
rare earth elements.

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In 2013 the European Monetary Fund suggested over US$1 trillion a year could be generated
by 2025 for the global economy and 100,000 new jobs created during the next five years if
companies focused on encouraging the build-up of circular supply chains to increase the rate
of recycling, reuse and remanufacture.
Interrelationship:
1. 55 Baker street:
55 Baker Street represents the radical reinvention of a 1950s office building that transforms
the site into an important new urban centre that includes living, leisure and retail spaces along
with an abundance of high-spec open plan office units.
The project progressed from an initial walk-through to an occupied building in less than three
years. This rapid redevelopment was only possible thanks to the engineering-led decision to
re-use 70% of the original building structure. Targeted demolition was carried out to remove
only the most constraining parts of the old building and replace them with new modern
structures sympathetically inserted amongst the original, increasing the total floor area of the
property by 30% to 56,000 m2.
The Baker Street frontage received a face-lift courtesy of the new glazed masks enclosing
new atria within the old courtyards and, on arrival in reception, building users are greeted by
the stunning entrance transfer structures – a pair of steel sculptures that replace 12 original
concrete columns at ground floor supporting seven storeys overhead.
A row of 23 homes along the rear of the new development includes affordable housing units
and was built using modern ‘twin-wall’ precast construction techniques with masonry facades
to compliment the existing mews streetscape.
Re-using so much of the original building helped to minimize the environmental impact of
the scheme, particularly in terms of reduced demolition waste and use of new construction
materials. It is largely for this reason that the development achieved a BREEAM rating of
‘Excellent’.
Economic value from circularity:
Time cost waste disrubtion emission carbon
Old Oak and Park Royal Development Corporation
The The Old Oak and Park Royal Development Corporation (OPDC) was established by the
Mayor of London.[1] Approval was granted by the Secretary of State for Communities and
Local Government, Eric Pickles in January 2015.
The corporation is responsible for regenerating 650 hectares including the common land area
of Old Oak Common and the industrial Park Royal site in West London. Plans are in place

33
for the construction of 24,000 homes in Old Oak, consisting of a mixture of house types and
tenures, along with opportunities for a minimum of 1,500 new homes to be built in non-
industrial areas in Park Royal. In addition to this, the creation of 65,000 new jobs will stem
from the development of the Old Oak Common station and the attraction of new businesses
to Park Royal, joined by those who relocate from Old Oak. The aforementioned, along with
the addition of a new HS2 and Crossrail station makes Old Oak and Park Royal one of the
largest regeneration projects in Europe.
Old Oak Common is a large area of common land situated in the London boroughs
of Hammersmith and Fulham, Brent and Ealing. The corporation assumes various statutory
powers related to planning, infrastructure, and regeneration and land acquisitions.

The necessity of reverse systems in a circular economy

Reverse systems are an essential part of existing and new circular economy systems. The
Ellen McArthur Foundation agrees, citing reverse cycles as a key building block in a circular
economy. Specifically, they highlight the need for systems that capture and segment products
at end-of-life with the intention of keeping salvageable materials and products in the circular
system, allowing a higher level of material recovery and use.7

Reverse logistics done well directly addresses two of the three key principles laid out by the
Ellen McArthur Foundation – design out waste and keep products and materials in use. In the
illustration above, it is clear that reverse systems are a necessary component of any circular
economy systems and are already helping achieve the first element identified in the “Circular
Consumer Electronics” white paper – electronic devices are loved for longer, by one user or
many.

As a sector, the reverse logistics industry has a unique opportunity to help inform and support
a circular economy. To help meet the principle of designing out waste, reverse logistics
provides feedback on product quality – including common failure modes – which can be
critical in helping manufacturers lower product return rates by improving quality and
performance in the development stage. Product designers start out looking to create a product
that produces a certain outcome or meets certain specifications. An engineer analyzing
product performance from failed products has an entirely different perspective – this
forensics examination of the product can reveal systemic/design issues that regularly lead to
failures and thus produce waste. By empowering the critical product functionality feedback

34
loop, reverse logistics can help improve product performance, reduce waste, decrease returns
and improve customer satisfaction. All leading to a healthier bottom line and stronger brand
loyalty.

Additionally, reverse logistics help keep products and materials in use by working to
maximize the number of products recovered, restored and re-used. Furthermore, reverse
logistics companies have advanced material recovery systems for products that are not able to
be recovered and re-sold for their original use. By providing efficient, effective “catch
basins” for unwanted, damaged or returned products, the reverse logistics industry works to
ensure that existing products and their component parts achieve the longest, most
economically valuable life possible.
A closer examination of the circular economy illustration reveals that “collection” is the
lynch-pin for multiple steps in the system, specifically Share; Maintain/Prolong,
Reuse/Redistribute, Refurbish/Remanufacture and Recycle. While different reverse logistics
firms have different capacities and capabilities, a look across the industry reveals that every
reverse logistics firm contributes to one or more of these activities. In fact, this illustration
neatly captures what the reverse logistics industry is already doing while highlighting the
implicit challenge of continuing to grow these systems.

Finally, in looking at the four requirements for a circular consumer electronics system,
reverse logistics will be necessary for products to be loved “by more than one user” and to
ensure that “products and components are cascaded.”

While individuals can and do sell used consumer electronics, its not reasonable to expect this
to be the primary way the goal is achieved. Rather, as demonstrated by multiple consumer
electronics OEMs, such as Acer, Dell and HP, developing reverse systems that capture
product and provide it a second (or third) life as a refurbished or remanufactured product is
not only possible, but profitable.

However, to assure that products and components are cascaded – that is, they go from high-
end new or lower-end used to recover and recycled – reverse systems are critical to ensure
proper collection and redistribution at every level to maximize the life of the product.

35
Relationship between Circular Economy and Reverse Logistics

CE considers activities such as collect, maintain, reuse/redistribute, refurbish/remanufacture,

and recycle (see Figure 1). Each circle also deliberates leakage points to minimize the
leakage itself. Ellen
MacArthur Foundation (2013) illustrated CE with those activities, split into two types of
material: biological and technical. Basically the activities are similar but because the original
biological material can be returned to biosphere safely, specific treatments, e.g. extraction of
biochemical, compositing, are needed.
RL activities, according to Thierry et al. (1995) and Srivastava (2008), consist of direct
reuse/resale, repair, refurbishment, remanufacturing, recycle, incineration, and landfilling.
These activities are also similar to the definition of RL by Rogers and Tibben-Lembke
(1999). CE and RL have similar focus, for instance, both of them concern on economic and
ecological aspects (e.g. Carter and Ellram (1998),
Rogers and Tibben-Lemke (1999); Ellen MacArthur Foundation, 2013), used product, waste
management and product recovery management aspects (Thierry et al. (1995); Ellen
MacArthur Foundation (2013)).

Figure 1: Circular economy (Adapted from Ellen MacArthur Foundation, 2013))

The relationship between CE and RL can be seen from the similar activities, general
purposes, and other several aspects. However, the CE concept is broader than RL as it is not
only covering the reverse sides but also the forward sides with several unique characteristics,
for instance, dividing the type of materials with specific treatment, leakage minimisation, etc.

36
RL and CE concepts have been known to have a strong link. However, the implementation of
each concept has been conducted unconnectedly, as they were understood separately. In
implementing the CE principles in RL, the potential parameters surrounding CE principles
can be used as a potential indicator to identify and develop a better RL.

37
References:

Alwood, J. M., Ashby, M. F., Gutowski, T. G. & Worrell, E. (2011) Material efficiency:
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Amini, M., Retzlaff-Roberts, D., & Bienstock, C. (2005) Designing a reverse logistics
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Andersen, M. S. (2007) An Introductory Note on the Environmental Economics of the
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