Journal of Cleaner Production 241 (2019) 118327

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Journal of Cleaner Production

journal homepage: www.elsevier.com/locate/jclepro

A system dynamics approach to product design and business model

strategies for the circular economy
Maria A. Franco
Department of Engineering and Information Technology, Bern University of Applied Sciences, Quellgasse 21, CH-2501, Biel, Switzerland

a r t i c l e i n f o a b s t r a c t

Article history: By means of a system dynamics computer simulation model, this paper analyzes the systemic effects of
Received 8 June 2018 combining multiple product design and business model strategies for slowing and closing resource loops
Received in revised form in a circular economy. In the model, green (i.e., recycled) and brown (i.e., traditional linear) products, as
3 September 2019
well as products under a PSS model, flow in a closed-loop supply chain. The model structure covers
Accepted 6 September 2019
issues related to product design, product use and replacement, second-hand use, product discard, and
Available online 6 September 2019
finally, collection and processing for product recycling. Results from this research provide insights into
Handling Editor: Prof. Jiri Jaromir Kleme
s the relationship between design considerations at the beginning of a product's life and their implications
for the product's take-back stage when a new manufacturing cycle begins. The main contributions of this
Keywords: paper are the considerations of time delays and reinforcing feedback loops in the design of an effective
Circular economy closed-loop supply chain.
Circular product design © 2019 Elsevier Ltd. All rights reserved.
Circular business models
System dynamics
Simulation

1. Introduction
It is nowadays widely acknowledged that for the circular
economy (CE) to advance at the firm level, corporate strategies
should focus on both product design (PD) and business model (BM)
innovation (Bocken et al., 2014; den Hollander et al., 2017; Lieder
and Rashid, 2016; Rashid et al., 2013; Urbinati et al., 2017). Imple-
menting both types of strategies in conjunction is expected to allow
stakeholders across the value chain to reap all the economic and
environmental outcomes that the CE has promised to deliver. While
eco-design encompasses the principles, strategies, and methods
used to design products with environmental considerations in
mind (e.g., design for longevity, design for maintenance, and design
for recycling) (Bovea and Pe rez-Belis, 2012), sustainable business
models, such as leasing or sharing, concentrate on replacing capital
ownership with the use of services (Boons and Lüdeke-Freund,
2013). Despite the apparent agreement on the need for firms to
incorporate circular design and business model principles into their
strategies, quantitative studies aimed at testing the wider effects
(i.e., benefits, trade-offs, and impacts) of isolated and/or hybrid
strategies for circularity are still not available for academics,
E-mail addresses: maria.francomosquera@bfh.ch, maria.francomosquera@bfh.
ch.
policymakers, and market players alike. In fact, most of the research
related to product design and business model innovation for the
purpose of the CE is, so far, mainly qualitative and often supported
by case studies only (Bocken et al., 2016; Manninen et al., 2018).
This is not a surprise given that qualitative methodologies are well
suited for studying novel phenomena such as the CE, where the
knowledge of relevant actors, strategic processes, and new forms of
network organizing is still limited (van Dijk et al., 2014).
The research question that this study proposes to investigate is:
What interesting dynamics can be observed when testing isolated
and combined applications of various product design and business
model strategies for slowing down and closing resource loops in a
CE? To conceptualize and test various combinations of product
design and business model strategies, a system dynamics computer
simulation model is developed. Simulation models mirror the
operation of real world processes, systems, or events (Law and
Kelton, 2000) and are especially useful when the problem under
study is longitudinal, and nonlinear, or when empirical data are
difficult to obtain (Davis et al., 2007). Rather than looking at the
specific financial, environmental, and social value that is created
through product design and business models for circularity, this
paper looks at the broader picture to understand the general dy-
namics present in a closed-loop value chain where a hypothetical
manufacturing firm commercializes a generic product.

https://doi.org/10.1016/j.jclepro.2019.118327
0959-6526/© 2019 Elsevier Ltd. All rights reserved.
2 M.A. Franco / Journal of Cleaner Production 241 (2019) 118327
List of abbreviations
BM Business model
CBM Circular business model
CE Circular Economy
DfD Design for disassembly
DI Disassembly index
EOL End-of-life
GIF Green image factor
IE Industrial ecology
M&P Mature and pervasive
MCI Material compatibility index
PSS Product service systems
RI Recyclability index
SD System dynamics
T&E Trendy and emotional
The model's feasibility is tested by using data derived from the
literature and by conducting structure and behavioral tests, as well
as by testing model assumptions for selected product categories.
The main purpose of this article is to provide a holistic and reliable
decision-support tool for industrial stakeholders at the intersection
of product design (and consequently of post-use) and business
model strategies in a CE. All the possible configurations associated
with different strategy bundles bring manufacturing companies to
an uncertain and even risky position because their effects are un-
known. This work is therefore aimed at promoting the systematic
exploration and quantification of different product design, business
models, and post-use strategies, within the context of the
manufacturing industry.
This paper is structured as follows: Section 2 provides a brief
review of the circular economy, circular product design and busi-
ness models for circularity. Sections 3 and 4 introduce the system
dynamics methodology, describe the steps in the model-building
process, and, most importantly, review in detail the body of liter-
ature used to conceptualize the model structure. Section 5 presents
the analysis of the simulation results, while Section 6 discusses the
conclusions of this study, its practical and theoretical implications,
and finally its main limitations and future research avenues.
2. Literature review
2.1. The circular economy (CE)
The CE is perceived as representing the business operationali-
zation of the much-discussed and sometimes blurry concept of
sustainable development, because it offers firms the opportunity to
achieve product differentiation, competitive advantage, and ulti-
mately growth (Ellen MacArthur Foundation, 2013; Kirchherr et al.,
2017; Murray et al., 2017; Saidani et al., 2017). As industries and
economies face the devastating effects of pollution, global warm-
ing, and resource scarcity, legislation in favor of the CE has gained
increased popularity across the globe. In 1996, Germany integrated
a semi-circular directive called the “Closed Substance Cycle and
Waste Management Act” into its national laws, an action that was
later followed by Japan's 2002 “Basic Law for Promoting the Crea-
tion of a Recycling Oriented Society” and China's 2009 “Circular
Economy Promotion Law” (Geissdoerfer et al., 2017; Korhonen
et al., 2018; Lieder and Rashid, 2016).
Although different definitions have been proposed for the CE
(Ghisellini et al., 2016; Lieder and Rashid, 2016; Su et al., 2013), the
description used in this paper is based on the concept of material
flows used in industrial ecology (IE) (Stahel, 2010). According to the
IE tradition, the basic idea in a CE is that the economic and envi-
ronmental utility and value of materials in products are preserved
at their highest level for as long as possible, either by lengthening
products' lifetimes or by looping products’ components back into
the system to be reused and/or recycled (den Hollander et al., 2017;
Saavedra et al., 2018). In other words, in a closed-loop or circular
production and consumption system, waste becomes input for new
processes, thus reducing the need for virgin raw materials in new
production cycles. In contrast to an open-loop model where
products become waste at end-of-life, the CE provides a framework
where resources are kept in loops in order to create more systemic
value and for longer periods (McDonough and Braungart, 2002; Su
et al., 2013).
For circular products to mimic a closed-loop system, material
flows need to remain accounted for, before, during, and after the
products' end of life (den Hollander et al., 2017). It is within this
context that certain guidelines on product design and business
models must be considered by product manufacturers in the
development of truly circular industrial systems. While design
practices focus on maintaining materials at their highest value at
any point in the products’ lifecycles, business models are mainly
concerned with the way products are commercialized and
“consumed.” A summary of the relationship between these two
concepts and the CE is presented next.
2.2. Eco- and circular product design
The idea of eco-design is not new and has been present since the
1970s (De los Rios and Charnley, 2016; Lieder and Rashid, 2016).
Design strategies addressing ecological challenges typically fall
under the umbrella of various concepts, including product stew-
ardship (Hart, 1995), green design (Fullerton and Wu, 1998), design
for the environment (DfE) (Chen, 2001), sustainability-driven
product design (Byggeth et al., 2007; McLennan, 2004), design for
sustainability (DfS) (Arnette et al., 2014), ecological product design
(EPD) (Hartmann and Germain, 2015), eco-design (Deutz et al.,
2013), cradle-to-cradle design (Braungart et al., 2007), and regen-
erative design (Lyle, 1996). Most of these concepts emphasize the
need to promote resource efficiency, the restriction of hazardous or
non-renewable materials in manufacturing, efficiency during the
product's use phase, and component reuse or recycling at the end of
the product's lifetime (Calcott and Walls, 2005; Dyllick and Rost,
2017; Snir, 2001; Wong et al., 2012). In general, the bundle of
product materials and production technologies chosen during the
design stage of a product will determine the pollutants and wastes
it will release during its lifetime, the energy it will consume, and
the ease with which its components will be reutilized in subse-
quent uses and manufacturing cycles (Rashid et al., 2013; Tsoulfas
and Pappis, 2006).
Circular design rests on the notion that products must be
conceived with multiple life cycles in mind, where material quality
is to be maintained and waste is to be avoided. That is, a product is
considered circular when it is engineered to be remain in a state
closer to the original product (i.e., product integrity), ideally
“eliminating environmental costs when performing interventions
to preserve or restore the product's added economic value” (den
Hollander et al., 2017; Lieder and Rashid, 2016). Previous publica-
tions in connection with circular product design have been mostly
conceptual in nature, covering topics such as product design
frameworks for the CE (Bocken et al., 2016), the difference between
circular and eco-design (den Hollander et al., 2017), product life
extension through design (Bakker et al., 2014), the new set of skills
and capabilities required by circular designers (De los Rios and
Charnley, 2016), product design and consumer behavior in a CE
 M.A. Franco / Journal of Cleaner Production 241 (2019) 118327
(Poppelaars et al., 2018), tools for the design of circular products
(Sinclair et al., 2018; Wastling et al., 2018), and the challenges cir-
cular product manufacturers face during the design stage (Franco,
2017). Later sections will provide a more detailed account of
which circular design strategies were included and how they were
quantified in the simulation model featured in this article.
2.3. Circular business models (CBMs)
Transitioning to a CE will require not only changes to the way
products are designed, but also radical changes to how they are
commercialized and consumed. Circular business models lie at the
core of the CE (Lewandowski, 2016) and constitute a prerequisite
for CE diffusion, because they “enable economically viable ways to
continually reuse products and materials” (Bocken et al., 2016).
Furthermore, CBM innovation allows firms to go beyond prevalent
sustainable business model configurations that focus only on effi-
ciency, productivity, and greening the supply chain (Bakker et al.,
2014; Geissdoerfer et al., 2018).
Due to the early character of the CE and the many in-
terpretations that are currently associated with it, a consolidation
and understanding of the concept of circular business models is just
emerging (Lewandowski, 2016; Nubholz, 2017; Pieroni et al., 2019).
All in all, CBM is the label used to describe business models in a CE
that are aimed at achieving resource efficiency by incorporating
strategies that slow and close resource loops (Bocken et al., 2016;
Geissdoerfer et al., 2018; Nubholz, 2017). Because the CE demands
the lifetime maximization of products and materials, CBMs must be
oriented towards designing systems around products that can
generate revenue by creating, delivering, capturing, and main-
taining value over time (Bakker et al., 2014; Boons and Lüdeke-
Freund, 2013; Osterwalder et al., 2005). Extant publications in
relation to CBM have conceptually discussed topics such as the
barriers and enablers to circular business model implementation
(Linder and Williander, 2017; Rizos et al., 2016; Vermunt et al.,
2019), the role of CMBs in sustainability and resource efficiency
(Hofmann, 2019; Manninen et al., 2018; Whalen, 2019) and clas-
sification frameworks for CBMs (Bocken et al., 2014; Rosa et al.,
2019; Urbinati et al., 2017).
As pointed out before, although various typologies for classi-
fying CBMs have been proposed in the literature (see van
Renswoude et al. (2015); Moreno et al. (2016); Bakker et al.
(2014)), most authors agree that the value proposition of a firm
operating in a CE should entail schemes to slow and close resource
loops (Bocken et al., 2016; Nubholz, 2017). On one hand, BMs to
slow loops encourage long product life and reuse and are classified
according to three main models: (i) access and performance (e.g.,
product-service system (PSS) models including sharing and leas-
ing), (ii) extending product value (e.g., exploitation of the product's
residual value through reuse, refurbishing, and remanufacturing),
and (iii) classic long life (linked to design for long life and design for
maintenance). On the other hand, BM for closing loops involve
capturing value from “waste” or “by-products” through schemes
such as industrial symbiosis. The PSS model (coupled with repair
and maintenance services) as well as the reuse model will be the
two main CBMs conceptualized in this article. Section 4.1.2 elabo-
rates more on each of these strategies and on how they were
incorporated to the model structure.
3. Methodology
3.1. System dynamics (SD)
This work draws on the system dynamics methodology to cap-
ture the complex and systemic nature exhibited by production and
3
consumption systems in a circular economy. System dynamics is a
computer simulation methodology that has its roots in the theory
of nonlinear dynamics and feedback control developed in mathe-
matics, physics, and engineering. It is aimed at enhancing the un-
derstanding of complex feedback systems while simultaneously
supporting the policy formulation process for decision makers
(Sterman, 2000). SD asserts that the dynamic complexity in a sys-
tem is derived from the presence of various factors, namely: (i)
accumulation (i.e., the accumulation and depletion of resources),
(ii) non-linearities (i.e., an effect is rarely proportioned to its cause),
(iii) feedback structures (i.e., both balancing and reinforcing), and
(iv) time delays (i.e., adding a time delay to a negative feedback
loop creates oscillations, thus reducing a decision maker's ability to
control for confounding variables and design-appropriate policies).
A system dynamics model consists of an interlocking set of
differential and algebraic equations developed from a broad spec-
trum of relevant data and depicted by means of a simulation soft-
ware (Homer and Hirsch, 2006). SD makes use of stocks, flows, and
parameters to model the complex behaviors of different systems.
Stocks or “state variables” represent the accumulation of the in-
flows minus the outflows and are expressed in whole units (e.g.,
widgets, units, people). Changes in stocks can only result from
“flows” or “rates” (i.e., inflows and outflows), which are always
expressed as a function of a unit of time (e.g., widgets/year, units/
month, people/day). Hence, stock levels increase when the inflows
exceed the outflows, fall when outflows exceed inflows, and remain
in equilibrium when inflows equal outflows. Overall, the stocks will
integrate the difference between the inflows and the outflows,
while the flows will be functions of the stock and other parameters
(Sterman, 2000). Parameters are numerical values that remain
constant throughout the simulation and that affect other variables
and flows in the model.
A systemic approach to the CE has been proposed by various
authors, including Ghisellini et al. (2016), who conceptualize the CE
as “systemic” by highlighting the need to cause simultaneous
changes at a macro (i.e., city, province, region, nation), meso (i.e.,
eco industrial parks), and micro (i.e., single firms) systems-level.
Furthermore, it is widely acknowledged that the circular economy
has the ambition of “optimizing systems rather than components”
(Ellen MacArthur Foundation, 2013) and as such, requires a tool
that is capable of quantitatively modeling the diverse number of
elements, links, and non-linearities that circular value chains
exhibit (Velte and Steinhilper, 2016).
Given its suitability for the analysis of complex industrial and
environmental systems, system dynamics has already been widely
used in applications related to the CE, including sustainable
development (Meadows et al., 1972), closed-loop supply chains
(Georgiadis and Besiou, 2008; Georgiadis et al., 2006; Golroudbary
and Zahraee, 2015; Spengler and Schro € ter, 2003; Vlachos et al.,
2007), recycling and remanufacturing (Wang et al., 2014), sus-
tainable business models (Abdelkafi and Ta €uscher, 2016), product-
service systems (Lee et al., 2012), and the CE itself (Asif et al., 2016).
As a methodology, SD is not free of criticism though. The utility of
SD is often questioned because of the models’ complexity and the
great amount of quality data they demand. In despite of this, their
power to provide useful insights and policy recommendations,
even when confronted with limited data, is undisputable. The
subsections below describe in greater detail the model formulation
process.
3.2. Model building stages
Modeling is an iterative process of scope selection, hypothesis
generation, causal diagramming, quantification, reliability testing,
and scenario analysis (Homer and Hirsch, 2006; Sterman, 2000).
4 M.A. Franco / Journal of Cleaner Production 241 (2019) 118327

The following sections describe these steps and how they were
adapted for this research.

3.2.1. 1st stage: Problem identification

The first stage in the modeling process, problem identification
and definition, is concerned with building a model for the purpose
of understanding or analyzing a specific problem rather than
modeling a whole system (Sterman, 2000). The initial character-
ization of the problem in this paper is given by the research
question introduced in Section 1 and the model assumptions out-
lined in Table 1, which analyzes the dynamic implications stem-
ming from different combinations of circular product design and
business model strategies.

3.2.2. 2nd and 3rd stages: System conceptualization and model

formulation
The second modeling step is concerned with the system
conceptualization or the development of what is called a “dynamic
hypothesis.” The dynamic hypothesis tries to explain the
researched problem's dynamics, and it is embedded in a model's
underlying feedback and stock-and-flow structure. The formal
modeling process started by building and testing small model
structures and then building progressively toward complex ones
until the model was developed completely (Martinez-Moyano and
Richardson, 2013). To formulate and test the model, I used the
proprietary system dynamics modeling software Dynaplan® Smia,
developed by Dynaplan AG. Smia allows modelers to make use of
advanced modeling functions along with easy-to-build model in-
Fig. 1. Overview of the model formulation stage. Adapted from Asif et al. (2016).
terfaces and professional output graphs.
For the different iterations of the model structure, information
for the relevant variables was collected by reviewing prominent
literature on the topics of sustainable and circular product design 4. Description of the conceptual model
and business models, as well as on closed-loop or circular supply
chains. The use of qualitative data from published literature is, in The following subsections describe in the detail the theoretical
fact, one of the most popular techniques for building SD models foundations used for the development of the model structure (see
(Luna-Reyes and Andersen, 2003). The coding software ATLAS. ti Table 2).
was used to systematically record, review and code (by means of
open coding) the different concepts that emerged throughout the
literature review. Codes were then grouped according to their place
in the circular value chain and the most prominent ones were used 4.1. Circular product design
to conceptualize the different model subsectors. The literature re-
view by means of concept coding not only facilitated the identifi- To model product design, I adhered to the taxonomy proposed
cation of key themes and concepts (i.e., stocks, flows, and by Bocken et al. (2016), who suggest categorizing product design
parameters), but also of the relationships among them (see Fig. 1). for a CE according to strategies for slowing loops (S) and strategies
From the beginning of the modeling process, dimensional or for closing loops (C). While the first group includes designing for
unit consistency for all model equations was also ensured longevity and designing for ease of maintenance and repair, the
(Martinez-Moyano and Richardson, 2013). Fig. 2 combines causal- second group incorporates designing for disassembly and reas-
loop and stock-and-flow diagrams to present the structure of the sembly as well as designing for a technological cycle (i.e., recycling)
simulation model. (see Table 3).

Table 1
Overview of model assumptions.

The time horizon of the simulation is 40 years in order to witness the delayed and indirect effects of potential policies (2017e2057).

The model is built from the perspective of a single manufacturing firm that sells generic product units.

The product sales rate determines the number of products that are purchased and are in-use, regardless of the firm's manufacturing capacity. This means that the SD
model structure does not account for flows of product ordering or work-in-progress (i.e., raw material conversion to the final product).

The model does not account for any dynamics related to product storage and transportation.

Although certain products exhibit a “baseline” demand in society (i.e., household electronics, bicycles, etc.), the model assumes all product types must be adopted first
by curious consumers by means of the Bass model.

Customer demand for brown and green product purchases, as well as for customers opting for PSS, is exogenous and deterministic.

Return and reusability rates are also exogenous.

The initial number of adopters or customers is 1000 people, with each person buying 1 product unit.
 M.A. Franco / Journal of Cleaner Production 241 (2019) 118327 5

Fig. 2. Overview of the SD model structure.

Table 2
Design and business model strategies included in the SD model.

Design strategies
Business model strategies
For slowing resource flows (S) 1. Design for long-life
2. Design for ease of maintenance and repair
For closing resource flows (C) 1. Design for dis- and reassembly
2. Design for a technological cycle/recycling
For slowing resource flows (S) 1. Access and performance (PSS and maintenance)
2. Extending product value (Reuse)

Table 3
Product design strategies for slowing (S) and closing loops (C) and their corresponding relevant model variables.

Design strategy Quantitative operationalization in the SD model Source Relevant model variables

1. Design for long-life (S) Shape of the distribution using the Bass model (short- and Georgiadis et al.
Adoption fraction
long-life products) (2006)
Contact rate
Sterman (2000)
Product lifetime

Residence time

Fraction of products-in-use being replaced

Fraction of discarded units being replaced
2. Design for ease of maintenance A higher breakdown rate diverts man-hours to solve Sterman (2000)
Breakdown rate
and repair (S) unplanned repair tasks first
Disassembly index

Man-hours available for repair tasks

Man-hours available for scheduled maintenance
3. Design for dis- and reassembly (C) Disassembly Index (DI) ranging from 1 to 4 de Aguiar et al. 1: easiest to disassemble
(2017) 4: most difficult to disassemble
4. Design for the technological cycle Material Compatibility Index (MCI) ranging from 1 to 4 de Aguiar et al. 1: parts are made only of one material
(C) (2017) 4: parts and modules are composed of fully
incompatible materials

4.1.1. Design strategies for slowing loops durable products that do not to break down easily (Bocken et al.,
2016). Central to the idea of product longevity is the well-known
4.1.1.1. Design for long-life and the demand distribution. Design for four-stage process of a product's life cycle, consisting of an
durability, longevity, or long life is concerned with developing
6 M.A. Franco / Journal of Cleaner Production 241 (2019) 118327
introduction, growth, maturity, and decline stage. Similar to the SD
formulation proposed by Georgiadis et al. (2006), the concept of
short and long product lifecycles is used to emulate products
designed for short and long lifetimes, respectively. While products
purposely built for obsolescence (i.e., short lifecycle) display a
narrow-spread distribution with a high peak, products designed for
longer lifetimes display a wider-spread distribution with a lower
peak (Briano et al., 2010; Georgiadis et al., 2006). In the model,
lifetime distributions determine the product demand distribution,
and consequently the shape of the new product adoption flow.
To mirror the distributions for short and long product lifecycles,
the model uses the Bass diffusion model in which word of mouth
and advertising move customers from a stock of potential adopters
to a stock of adopters. The Bass model, however, is often described
as a first-purchase model, since it does not capture situations
where the product is consumed and discarded, a situation that
would naturally lead to repeat purchases (Sterman, 2000). As a
result, first-time and repeat purchases are modeled separately. The
purchase rate then consists of the sum of two flows: the repeat
purchase flow and the new product adoption flow. The model
formulation for product replacement by means of repeat purchases
is described next.
4.1.1.1.1. Product replacement rate. The product replacement
rate will depend on the product's lifetime and on the residence
time. A product's lifetime, or physical time, is the average time
during which a product is operational before it experiences a
functional failure that is beyond recovery (den Hollander et al.,
2017). On the other hand, the residence time, or use time, refers
to the amount of time the product is kept by the user, before it
becomes unwanted and is discarded or replaced (Murakami et al.,
2010).
Past research suggests product replacement can be determined
by: (i) mechanical, physical, or performance obsolescence (i.e., end
of the product's lifetime), (ii) fashion or technological motives that
induce the consumer towards the replacement of well-functioning
products (i.e., products have become outmoded) (Bakker et al.,
2014; Guiltinan, 2009; van Nes and Cramer, 2005), or (iii) a com-
bination of both wear-and-tear and new desires (van Nes and
Cramer, 2005). The model assumes that more than half of the
short life cycle products which are in use and are still in good
condition are replaced due to fashion trends or impulse purchases.
These products stop being used or are discarded, not because they
have broken down or are worn out, but because customers perceive
them as being outdated. In contrast, I assume that long life cycle
products are mostly discarded, and replaced, because they have
broken down (Cox et al., 2013). In contrast to short life cycle
products, the fraction of buyers who replace long-life products
prematurely because of fads is relatively low. Note also that some
products may be discarded after a certain period of use, even
though they are still fully functional or in good working order. This
group of products is represented in the model by the outflow
“discard rate of functional products.”
4.1.1.2. Design for ease of maintenance and repair. Design for ease of
maintenance and repair is the second major strategy for slowing
resource loops (S). Accordingly, the model displays structures for
both reactive (repair) and scheduled (proactive) maintenance. A
static fraction determines the proportion of product units that
move from being available to being in the stock of unplanned or
reactive maintenance. When the ratio of “damaged units to total
units” (i.e., the breakdown rate) surpasses a threshold, priority is
given to resolve reactive maintenance tasks. That is, the total
number of man-hours available, given the number of available
mechanics, is split between scheduled and reactive maintenance
jobs, with the latter receiving priority depending on the breakdown
rate.
After repair, units become available again and the stock of units
under reactive maintenance is reduced. The remaining number of
man-hours, discounting those being used for repair, are assigned to
scheduled maintenance tasks. Finally, it is also assumed that the
disassembly index (explained below) affects the number of man-
hours required by planned and reactive maintenance jobs. Thus,
when products are difficult to disassemble, both reactive and
scheduled maintenance tasks take longer.
4.1.2. Design strategies for closing loops
4.1.2.1. Design for disassembly (DfD) and the disassembly index (DI).
Design for disassembly is a key element for transitioning to the CE
(Andrews, 2015). A product designed to be easily disassembled
brings about various benefits throughout the product's lifecycle,
including efficiencies in manufacturing and assembly, maintenance
or servicing, and recovery at end-of-life both through remanu-
facturing and recycling (Gu and Sosale, 1999; Vanegas et al., 2017).
Although many analytical models have been developed that eval-
uate the degree of a product's disassembly capacity (see, for
instance, Desai and Mital (2003)), the model uses the disassembly
measures proposed by de Aguiar et al. (2017). The authors compile
published research to estimate 4 disassembly indexes that range
from 1 to 4, where 1 is an ideal state (i.e., easiest to disassemble),
and 4, an undesired state (i.e., almost impossible to disassemble).
The disassembly index score influences three variables in the
model, namely: (i) the recycling delay, (ii) the fraction of recyclable
materials in products, and (iii) the man-hours required for sched-
uled and reactive maintenance tasks. First, the less a product has
been designed for disassembly, the more the time a recycling party
will need to sort, clean, and process its parts. I assume that when
the disassembly index equals 1, the recycling time can be cut by a
maximum of 50% (e.g., see Vanegas et al. (2017), where disassembly
time is cut by approximately 40% when DfD guidelines are intro-
duced in the design stage). The 50% ceiling assumes that the
recycling delay is not only affected by disassembly, but also by other
activities.
The disassembly index also affects the fraction of recyclable
materials in a product. Hence, when a product has not been
designed for disassembly, component parts cannot be efficiently
separated and reused, thus reducing the product's fraction of
recyclable materials. The same is assumed with the number of
man-hours assigned to scheduled and reactive maintenance tasks.
When the disassembly index equals 1 (i.e., the most desirable
state), the number of man-hours allotted for unplanned and
scheduled maintenance will remain unchanged, and when it equals
4 (i.e., undesired state), the time for both types of maintenance
tasks will double.
4.1.2.2. Design for the technological cycle and the recyclability index
(RI). A product designed for the technological cycle is a product
whose technical component parts (e.g., metals, and plastic) can be
recycled into high-quality raw materials to be looped back into the
industrial system. The degree of material recycling is primarily
affected by the number of materials used in a product and their
mutual compatibility. Overall, the fewer the materials in a product,
the easier the recycling, since less separation work is involved
(Franco, 2017; van Schaik and Reuter, 2007). This principle has
proved to be true in products ranging from textiles to common
household electronics.
Although various possible levels of detail can be defined when
conceptualizing the degree of material recycling (see, for example,
van Schaik and Reuter (2010)), the model uses the Material
Compatibility Index (MCI) suggested by de Aguiar et al. (2017). The
authors propose a MCI that ranges from 1 to 4, where 1 refers to a
 M.A. Franco / Journal of Cleaner Production 241 (2019) 118327
situation in which parts are made only of one material, and 4 refers
to a situation in which parts and modules are composed of fully
incompatible materials. To operationalize the MCI in the model, it is
assumed that when the MCI equals 1, 100% of the product's mate-
rials can be recycled. Similarly, at an MCI value of 2, 70% of the
materials are recyclable, at a value of 3, 30%, and at a value of 4, only
5% of the materials are recyclable. The MCI or recyclability index
partially affects a product's net recyclability fraction and de-
termines the number of units flowing from the “collected for
recycling” stock to the “recycled product inventory” stock.
4.1.2.3. Closing the technological cycle through recycling. At end-of-
lifetime (EOL), only a fraction of all sold products will be collected
for post-processing, with the remaining fraction flowing through
the “uncontrollable disposal rate,” whereby products end up in a
landfill or being incinerated. Upon collection, I assume that some of
the materials in products will be suitable for recycling according to
the recyclability index described in the previous section, and that
the remaining non-recyclable materials will constitute post-
consumer waste.
The net fraction of recyclable materials in a product is then
defined as the percentage of recyclable materials (defined by both
the disassembly and the recyclability indexes) multiplied by a
measure, ranging from 0 to 1, that reflects the efficiency of the
recycling process. Finally, the flow of recycled products is regulated
by a recycling delay that mirrors the time that processing parties
take to sort, clean, disassemble, and process products’ component
parts (see Table 3).
Table 4 displays some of the variables that were used to test
extreme case scenarios. Note that scenarios 1.1 and 1.2 show the
parameter values of key model variables for short-lifetime prod-
ucts, while scenarios 2.1 and 2.2. Show the parameter values for
long-lifetime products. Results from this exercise are presented in
Section 5.
4.2. Circular business models
4.2.1. Product service systems (PSS)
The concept of PSS has now been discussed for more than a
decade in connection with its role in sustainability (Annarelli et al.,
2016; Beuren et al., 2013; Reim et al., 2015), and more recently in
relation to its contribution to the CE (Lewandowski, 2016; Lieder
and Rashid, 2016; Linder and Williander, 2017; Tukker, 2015). The
PSS model shifts the focus from selling products (complemented by
services), to selling services that substitute products, thereby
contributing to dematerialization and offering the opportunity to
decouple economic gain from material consumption. An example
Table 4
Parameter values for selected extreme-case scenarios.
Key model variable Short-lifetime products
Scenario 1.1
Potential adopters 1000 people
Adoption fraction 0.05
Advertising effectiveness 0.01/yr
Contact rate 100/yr
Initial sales per adopter 1 unit/people
Perceived functional risk 0.5
Average residence time 2 yrs
Fraction of products in-use being replaced 0.7
Average product lifespan 3 yrs
Fraction of discarded units being replaced 0.1
Fraction of products collected for recycling 0 0.5
Disassembly index 4 1
Recyclability index 4 1
7
of a PSS is Rolls Royce “Power by the Hour” scheme, which allows
airlines to purchase the use of aircraft engines instead of having to
buy them (Baines et al., 2007; Ellen MacArthur Foundation, 2016).
Although not evident in the model structure, it can be assumed that
the manufacturing firm, the PSS provider, and the reverse logistics
party are all different stakeholders interacting in the same simu-
lated industrial ecosystem.
Research literature on PSS has investigated some of the factors
that contribute to the low levels of PSS adoption among customers,
including: the low level of PSS maturity and lack of enthusiasm, PSS
acquisition costs and risks (Gesing et al., 2014), hygiene and safety
concerns (Catulli, 2012; Catulli and Reed, 2017), the physical as-
pects of ownerless consumption (Manzini et al., 2001; Mont, 2002),
and the insecurity of consumers with regard to what they are
getting (Rexfelt and Hiort af Orn€
as, 2009). Instead of accounting for
each adoption factor discretely, the model sets an exogenous frac-
tion of customers who opt for services instead of acquiring the
physical product. The remaining fraction (1-PSS fraction) is then
split between customers who buy green (recycled) products and
those who buy brown (conventional) products. Note that
throughout this paper, green products will refer to sustainable
goods that contain a fraction of recycled materials, whereas brown
products will refer to conventional products that have been man-
ufactured for a linear economy. In fields such as marketing and
energy management, these labels have been extensively used to
distinguish between products that are clean, benign or resourceful
(i.e., “green”) and polluting or toxic (“brown”) (Champagne and
Matharu, 2016; Garrett-Peltier, 2017; Yenipazarli and Vakharia,
2015).
4.2.1.1. Product lifetime and discards under a PSS model. The model
assumes a product under the PSS model can reach end-of-life either
because the product's lifetime has ended or because excessive use
has shortened it. The first scenario is straightforward and accounts
for the product's lifetime to determine the flow of product discards.
The second scenario accounts for the intensity of use, which is
linked to the decisions taken by the final consumer while using the
product (Ellen MacArthur Foundation, 2015; Iraldo et al., 2017).
Previous research has highlighted the link between user behavior
and product durability by suggesting that improper use and over-
use lead to shorter product lifetimes (Bobba et al., 2016).
The intensity of use is expressed through a measure of “func-
tional units,” which reflects the extent to which a product is used to
its full capacity (e.g., a kilometer for a car or a wash cycle for a
washing machine). I have included this measure, because, accord-
ing to past research, the level of a product's intensity of use depends
on whether the product is purchased or used as a service. Hence,
Long-lifetime products
Scenario 1.2 Scenario 2.1 Scenario 2.2
1000 people 1000 people 1000 people
0.05 0.02 0.02
0.01/yr 0.01/yr 0.01/yr
100/yr 60/yr 60/yr
1 unit/people 1 unit/people 1 unit/people
0.5 0.5 0.5
2 yrs 5 yrs 5 yrs
0.7 0.1 0.1
3 yrs 6 yrs 6 yrs
0.1 0.7 0.7
0 0.5
4 1
4 1
8 M.A. Franco / Journal of Cleaner Production 241 (2019) 118327
customers under an ownership scenario are more careful with the
products, thus leading to less wear and tear. In contrast, when
customers utilize but do not own the asset, overuse often occurs
(Velamuri et al., 2013).
Product use is thus modeled as the number of functional units
accumulated during the product's use phase, divided by the
average number of functional units which the product is assumed
to have according to industry standards. The outflow of products at
EOL will, again, be the maximum between the flow of products that
have been disposed of because their lifetimes have ended (as
dictated by design choices), and the flow of disposal as dictated by
product overuse (as reflected by the functional unit ratio).
4.2.1.2. Product lifetime and scheduled maintenance. In a PSS model,
service and maintenance tasks are taken over by the manufacturer
or the retailer in order to lengthen the asset's lifetime (Bocken et al.,
2016). Hence, the model assumes that, besides design characteris-
tics and patterns of use, the lifetime of a product is also affected by
its level of scheduled or preventive maintenance (e.g., substitution
of components and cleaning of the product parts) (Bobba et al.,
2016). The effect of preventive maintenance is incorporated in the
model as the delayed ratio of the number of product units under
preventive maintenance divided by the total number of units under
both preventive and reactive maintenance. When this ratio equals
or is close to 1, a product's average lifetime remains the same.
However, when the ratio starts falling below 1, because little or no
preventive maintenance has been performed, so does the value for
product lifetime. Finally, it is also assumed that regardless of the
level of scheduled maintenance, product lifetime can never fall
below 50%.
4.2.2. Product reuse
Product reuse is the second CBM portrayed in the model. It is
incorporated as a ratio that diverts a portion of the product
intended to be discarded to a stock of products that are intended for
second-hand use. This decision rule delays the number of products
flowing to recycling or the landfill. I have included a structure for
reuse in the model because it is widely acknowledged that many
products are discarded even though they are still in perfect working
order (Bayus, 1991) and because looping products through reuse is
a major CE strategy.
4.3. Other relevant model structures
4.3.1. Functional risk and the green image factor
The fraction of customers opting for green products versus the
fraction of customers opting for brown products is determined by
the product's degree of functional risk and the green image factor.
Functional risk refers to the perceived risk that customers attach to
a product, which can be psychological, financial, performance-
related, physical, and social. A repaired tire, for instance, may be
perceived as embodying a high functional risk, in that it poses a
high risk of accidents, while clothing produced with recycled fibers
is perceived as presenting a low functional risk. Hamzaoui-Essoussi
and Linton (2010) found that perceived functional risk appears to
have a statistically significant impact on consumer purchase de-
cisions, so that when functional risk in recycled products is
perceived as high, customers’ willingness to purchase (WTP) is low,
and vice versa.
The measure of functional risk is determined by a lookup
function of the form Y ¼ f(X) ranging from 0 (low) to 1 (high), such
that at zero functional risk, an estimated maximum of 80% of cus-
tomers will choose recycled products (this is because even at zero
perceived risk there will still be some customers who will prefer to
buy new products) (Michaud and Llerena, 2011). On the other hand,
when functional risk reaches its highest value (1), only true green
consumers will buy the recycled product. Prior research has esti-
mated this last measure to be approximately 10% (Rex and
Baumann, 2007). In addition to the functional risk, the perceived
green image factor (GIF) also affects the fraction of customers
opting for green products. The GIF is a delayed or smoothed vari-
able modeled as the ratio of the “recycling rate” to the “product
collection rate for recycling.” This ratio reflects the delayed market
awareness that a producer cares about remanufacturing or recy-
cling (Vlachos et al., 2007).
4.4. Assessment of selected product groups
One important question related to this modeling exercise is
whether simulation results are different when the model is popu-
lated with parameter values corresponding to a specific product
group (e.g., household appliances, clothing, cars, etc.) rather than a
“generic product.” To answer this question, I searched the literature
for key parameter values, and in the absence of suitable informa-
tion, assigned certain variables values based on common sense. In
Tables 5 and I have used the label “T&E” (i.e., trendy and emotional)
to denote products which are fashion-affected (i.e., models are
more important than functionality), and “M&P” (i.e., mature and
pervasive) to refer to mature products, with established design
cycles, that are not affected by fashion fads. While the latter co-
incides with the description of products designed for a long-life, the
former matches the definition of short-lived products. Results from
this exercise are discussed in Section 5.2.
5. Results and discussion
5.1. Extreme-case scenarios
Results from the extreme-case scenario test (Table 4) demon-
strate how product longevity affects disposal and replacement rates
in such a way that products designed for a short-lifespan exhibit
higher and faster disposal and replacement rates than long-lasting
products (Cooper, 2005; Franklin-Johnson et al., 2016). Addition-
ally, these results show the extent to which different lifecycle
lengths and residence times partially determine the shape and
number of discarded products as well as the number of products
intended to be remanufactured or recycled. The following sections
present the results of selected model scenarios.
5.2. Short-life products with a poor disassembly index
A disassembly index (DI) of 4 in scenario B means that a prod-
uct's component parts are extremely difficult to separate, thus
complicating service, remanufacturing, and recycling tasks for the
relevant parties. In scenario B, not only are there fewer products
flowing into recycling (i.e., recycling rate), but there is also evidence
of higher amounts of recycling waste as a result of the poor disas-
sembly performance of the products. Additionally, because a DI of 4
translates into a smaller fraction of recyclable materials contained
in products, a much smaller amount of the “products collected for
recycling” becomes converted into the “recycled products in-
ventory.” In contrast, top scores for disassembly and recyclability in
scenario A ensure that the collected products flow smoothly into
the stock of “recycled products inventory.” Although the level of
green product demand is the same in both scenarios, the “recycled
products inventory” stock in scenario A grows significantly more
than it does scenario B. This is because there are many more units
that are in a suitable condition to be recycled in scenario A, and thus
the inventory accumulates more and does not deplete quickly.
Overall, in the case of short-life products, a combination of
 M.A. Franco / Journal of Cleaner Production 241 (2019) 118327 9

Table 5
Decision rules and parameter values for selected product groups.

Product types Household appliances Industrial products (e.g., Cars IT personal products (e.g., Clothing Furniture
(e.g., refrigerators, forklift trucks, soil small IT accessories, (e.g.,
washing machines) compactors, excavators) mobile phones) pushchairs)

Lifecycle as dictated by current design Long [a] Long [b] Long [c] Short [a] Short [d] Short [e]
Product type M&P M&P M&P T&E [f] T&E [d] T&E [g]
Suitable for remanufacturing (RM) or recycling RM RM RM RM/RC RC RM/RC
(RC)
Suitable for PSS Yes Yes [b][h] Yes No No [i] No [g]
Average residence time in years 9 [author] 5 [j] 8 [author] 1.5 [j] 0.5 [author] 2 [author]
Median lifespan in years 11 [k] 10 [j] 10 [c] 4 [f][k] 2 [f] 5 [e]
Willingness to purchase (WTP) recycled/ Low (high functional High (high functional risk High (low Low (high functional risk) Low (hygiene High
refurbished products as determined by risk) [l] but familiarity) [l] functional [m] and safety (functional
functional (safety) or hygiene risk risk) [m] risks) [n] risk) [o]

Sources: [a] Huisman et al. (2012), [b] Sundin et al. (2009), [c] Kagawa et al. (2006), [d] Birtwistle and Moore (2007), [e] Costa et al. (2015), [f] Cox et al. (2013), [g] Besch (2005),
[h] Dongmin et al. (2012), [i] Armstrong et al. (2015), [j] Georgiadis et al. (2006), [k] Wang et al. (2013) found in Bakker et al. (2014), [l] Hamzaoui-Essoussi and Linton (2014),
[m] Hamzaoui-Essoussi and Linton (2010), [n] Catulli (2012), [o] Catulli and Reed (2017).

conscious design for recycling and disassembly produces a higher
amount of recycled product units at an earlier time. It is important
to highlight that the conclusions outlined in this section do not
significantly change when the scenario that is opposite to scenario
B is tested (i.e., short-life products designed with a good disas-
sembly index and with a poor recyclability index).
5.3. Long-life products with a poor disassembly index
Compared to short-life products, the stock of “products
collected for recycling” for long-life products in scenario B (Fig. 4)
exhibits a more constant and steady shape than scenario B in Fig. 3.
The number of products waiting to be recycled is both lower and
more constant in scenario B of this test, not only because products
are designed for a longer life, but also because replacement pur-
chases caused by technical failure occur primarily at the products’
end-of-life (see second hump in the “products collected for recy-
cling” stock). Also, compared to scenario A, where products flow
directly to the recycled products inventory because of excellent
scores for disassembly and recyclability, a poor DI in scenario B
reduces and delays the number of product units flowing into the
recycled products inventory. Similar to the test in the previous
section, there is no significant difference between long-life prod-
ucts that are designed with a poor disassembly index and with a
good recyclability index and the scenario where the opposite holds
(see Fig. 5).
5.4. Short-life products with average indexes for disassembly and
recyclability
In this test, I compare two scenarios with different disassembly
and recyclability scores under the assumption that neither is
optimal. Although for both scenarios the product collection rate is
the same, scenario A accumulates fewer units in the “recycled
products inventory” stock when compared to scenario B (see Fig. 5).
In contrast, an average index of 2 for both disassembly and recy-
clability indexes in scenario B allows for a greater amount of
product materials to be recovered and therefore, enables more

Fig. 3. Short-life products with an optimal and a poor disassembly index.

10 M.A. Franco / Journal of Cleaner Production 241 (2019) 118327

Fig. 4. Long-life products with an optimal and a poor disassembly index.

Fig. 5. Short-life products with average indexes for disassembly and recyclability.

products to be recycled and pile up in the recycled products in-
ventory (the recycled product inventory stock grows considerably
because demand cannot keep up with the raising inflow of prod-
ucts). This test showed that better results are achieved, in terms of
the recycled product inventory, when indexes for both disassembly
and recyclability are only “good enough.” Model runs involving the
same comparison for long-life products yielded the similar results
(see Fig. 6). Finally, in both scenarios almost the same amount of
waste (resulting from non-recyclable materials) was generated.
5.5. Variation in the functional risk
After a product is manufactured, it must flow within the con-
sumer system during a certain amount of time before users dispose
of it and recycling parties can recover and recycle it. Overall, tests
involving changes in the degree of functional risk indicated that
producers must carefully plan the alignment of: (i) production
volumes with the desired inventories of recycled products, and (ii)
the forecasted inventories of recycled products with the forecasted
demand for such products.
 M.A. Franco / Journal of Cleaner Production 241 (2019) 118327
Fig. 6. Long-life products with average indexes for disassembly and recyclability.
In scenarios B and D (see Fig. 7), when the degree of functional
risk is low, and consequently the demand for green products is
higher than the demand for brown products, the scant number of
units in the recycled product inventory stock at the beginning of the
simulation generates low sales levels for both green and brown
products (the sales rate for green products is set to be the minimum
between the demand and supply rates). With low sales levels for
both product categories, fewer than the desired number of product
units are sold, used, collected, recycled, and subsequently stored in
the inventory of recycled units. That is, an initially low inventory of
recycled goods combined with high levels of green demand leads to
a reinforcing feedback loop, whereby initial low inventories of
green products cause sales of both green and brown goods to be
low, in turn leading to low future levels of collected, recycled, and,
again, stored recycled goods.
In contrast, when the demand for brown products is higher than
the demand for green products, as is the case in scenarios A and D
(because of a high functional risk), the stocks for sold, disposed of,
and recycled products successfully build up. Paradoxically in this
case, the recycled products inventory can cope with the demand for
green products. Furthermore, it is only at this point where a vari-
ation in the functional risk, like the one introduced in scenarios B
and D, can generate the desired effects.
5.6. Variation in the PSS fraction for short- and long-life products
With the introduction of PSS demand, fewer products are pur-
chased and go directly into use and disposal flows. That is, products
which might have been used by only one customer can now be used
by many. Results of this test show that, compared to short-life
products, long-life products exhibit a lower stock of recycled
products. Contrary to the rather logical belief that a combination of
long-life design (i.e., the first of the two design strategies for
slowing loops) and a PSS model (i.e., the most common demateri-
alization strategy) would be ideal in a CE, results show that for
long-life products, product returns are fewer in quantity because
they are distributed over a longer time period. These findings are
relevant to manufacturers, as well as to collection and processing
11
parties who rely on substantial volumes of product returns to
sustain their continuity in a CE.
5.7. The PSS model versus the purchase-only model: a quick test
To elucidate some of the differences between a PSS and a
purchase-only model, two simple model structures were built.
Results from this test showed that more units need to be purchased
at time zero under the PSS model, than is necessary under the
product purchase scenario, to satisfy the same level of hypothetical
customer demand. This is so because under a PSS model each unit is
kept by the user for a certain amount of time, and, only after this
time has elapsed will the product unit be returned to the stock of
“PSS units available.” Also, although the initial investment required
by a PSS model is much higher for the sponsoring firm, at EOL the
number of discarded units (regardless of whether they are land-
filled, remanufactured or recycled) proved to be the same under
both the purchase-only model and the PSS model. Finally, because
the difference between these two models resides in how many
units are in operation throughout the product's useful life (with
their corresponding environmental impact), it can be concluded
that PS is not a panacea unless product units under this model are
also designed with circular design guidelines in mind and their use
is regulated somehow (see Fig. 7).
5.8. Testing the model for different product types
Fig. 8 shows that the simulated behavior for the different model
variables is strikingly similar among products in the long-life
category (see red, blue and black curves), as well as those in the
short-life category (see green, pink, and orange curves). This is so,
because residence times and lifetimes for all items in each of the
product groups coincide to a great extent. Products designed for a
short-life are landfilled, collected, and recycled in bigger amounts,
compared to the products in the long-life category. Also, given that
all long-life products in Table 5 are suitable for PSS, a fixed number
of these products are distributed among the purchases of brown
and green products, as well as among products under a PSS model.
12 M.A. Franco / Journal of Cleaner Production 241 (2019) 118327

Fig. 7. Average scores for disassembly and recyclability with variations in the functional risk for short- and long-life products.

This, in turn, influences the number of product units accumulated
in the stock of “products collected for recycling,” which, as previ-
ously stated, is smaller for long-life than for short-life products.
Last, the results from this test evidence that even though it is
critical to look at different product groups separately to study their
behavior in a CE over time, the decision to use a “generic product”
for this simulation model is justified.
6. Conclusions
Important conclusions from this exercise are plentiful, both
theoretically and practically. First, comparisons between scenarios
covering design for longevity (i.e., short and long life) showed that
short-lived products, compared to long-lived ones, generated a
higher amount of disposed of and collected product units earlier in
time, not only because their lifetimes were shorter, but also because
their replacement times were faster. Here, the readiness of
manufacturing and processing parties to deal with product returns,
and the preparedness of customers in different markets to buy
them, will have to be assessed. Also, tests measuring whether it is
better to design a product that excels in one of the design frame-
works (e.g., DI ¼ 1) and not in the other (e.g., RI ¼ 4), or to design a
product with good-enough indexes for both disassembly and
recyclability (e.g., DI ¼ 2 and RI ¼ 2), revealed the second scenario
produced better outcomes since the inventory of recycled goods
increased by a higher amount. Naturally, it did so earlier for the
 M.A. Franco / Journal of Cleaner Production 241 (2019) 118327
Fig. 8. Model output variables for different product groups.
short-lived products than for its long-lived counterparts. This
conclusion speaks particularly to firms wanting to redesign their
product offering according to CE principles or to start-ups wanting
to achieve the best circular results from the outset.
Tests examining variations in the functional risk also produced
somewhat counterintuitive results, especially when considering
the units that accumulate in the inventory of recycled goods. Hence,
when a low value is given to the functional risk and therefore green
products are preferred over brown products, one would expect
sales and inventories of recycled green products to soar. Counter-
intuitively, CE implementation is sabotaged. One must remember
that the simulation starts with a low inventory of recycled goods (at
time 0 the first product purchases are being made and conse-
quently, there is nothing yet to regenerate), and that the flow of
green product sales is set as the minimum between green product
supply and green product demand. Although the demand for re-
generated products in this scenario is high (due to a low functional
risk), only a few products can be offered for purchase and, conse-
quently the number of product units to regenerate and sell back to
the market is low.
This situation can be seen as a reinforcing feedback loop of
scarcity such that in the presence of an initially low production
and sales level of green products, only a few units (designed and
manufactured with sustainable guidelines in mind) can be
13
regenerated and resold, despite the high green product demand.
In contrast, when the availability of green products is ensured
beforehand (e.g., through government incentives, for instance),
the existing high demand for green products can be satisfied,
enough products can accumulate for reprocessing, and in-
ventories of green products can pile up (see similar results in
Franco (2017)).
Model results also showed than when the PSS model is intro-
duced to the simulation, there is a need for firms to align their
future supply and demand recycling flows. This is because, due to
longer and more intermittent use patterns, PSS units accumulating
in the recycled products inventory are distributed over a longer
period of time. Although it is believed that a combination of a PSS
model and products designed for a long life is highly desirable in a
CE, it is important that either recycling or remanufacturing firms
consider the flow of products to be regenerated under a PSS model
for their planning activities. Finally, this model building exercise
evidenced the extent to which many contextual conditions beyond
the manufacturers’ control (e.g., product purchase and replace-
ment behaviors, product reuse and return rates, volume, timing,
and quantity of returns, as well as unexpected or postponed
product disposal) need to be satisfied for a circular model to
properly function and be accurately assessed.
14 M.A. Franco / Journal of Cleaner Production 241 (2019) 118327
6.1. Practical and theoretical implications
Because there are no official indicators, methods, or tools
available for supporting and measuring businesses’ transition from
a linear to a circular industrial system (Ellen Mac Arthur
Foundation, 2015), this system dynamics model might be particu-
larly useful to manufacturers, service providers, and collection
parties seeking to test or evaluate the performance of CE strategies
and the viability of self- or third-party imposed collection targets.
Each of these players could use the model to assess how different
assumptions in different parts of the value chain affect CE imple-
mentation at the macro and micro level (Kalmykova et al., 2018).
These findings also support policy making and academic
research on EPR (extended producer responsibility), because to
make EOL management more efficient, legislation and industry
should take into consideration the delayed effects and complex
dynamics of combined strategies for design, business models, and
collection schemes. Future model versions could also help
governmental and non-governmental institutions test the wider
network economic effects of a broad range of CE interventions at
the firm or micro level. For academics, the development of the
proposed model fills the gap in the literature of a systemic, inte-
grated, interdisciplinary, and visual tool to support the under-
standing and performance management of circular production
systems, from product design and manufacturing up business
models and product return and reprocessing.
Finally, this modeling exercise reveals the paradox of the circular
economy, which seems to require ever increasing volumes of pro-
duction and consumption to make the closing of material loops
economically profitable for recycling parties. In fact, in the presence
of no link between end-of-life and primary production flows, a CE
could encourage even more production, partially offsetting the
resource efficiencies gained in the first place (especially when
secondary goods are not equivalent replacements for primary
goods).
6.2. Limitations and future research
Populating model parameters with data derived from literary
sources, rather than a real case study, is arguably the most salient
limitation of this work. There are some reasons why data was not
readily available or difficult to obtain (Ameli et al., 2019; Asif et al.,
2016; Lieder et al., 2017). First, while some firms have focused
either on circular design, business models, or on product take back
and reprocessing schemes, hardly any firm has implemented all
three sets of strategies simultaneously (see, for instance, the case
studies presented by Franco (2017)). Second, long time delays in
product use and returns have prevented those scant number of
firms that have incorporated any sort of circular strategy to be
endowed with detailed, reliable and longitudinal data on the
quantity and quality of material flows in their circular value chains
(Gupta et al., 2018; Kirchherr et al., 2018; Whalen et al., 2018).
Because of all this, retrieving fragmented data from previous pub-
lications became imperative for this study. Furthermore, although
an attempt to test the model structure for different product groups
was made in Section 5.2, future research could assess the applica-
bility and reliability of this generic tool for a real firm. By param-
eterizing the model to fit a specific industrial case, one could check
whether the conclusions from this modeling exercise vary and
whether recommendations for the future would be different.
Additionally, the present SD model is not meant to be final and
comprehensive. Instead, it must be developed further to grasp all
the missing details that could be relevant to manufacturers, service
providers, refurbishing, remanufacturing or recycling parties, and
policy makers. Modeling varying product adoption mechanisms
and demand profiles for different business models, or environ-
mental (e.g., CO2 production), organizational (e.g., marketing ini-
tiatives and policies), and economic variables (e.g., costs of
recovered materials and investments for reverse logistics and re-
covery infrastructure) could, as examples, increase the utility of the
model. One could also think about endogenizing the model struc-
ture for manufacturing so that, in some cases, primary production is
decreased (with its associated costs) when secondary/recycled
products are considered suitable replacements for primary/virgin
goods. Finally, to ease the use of this tool for managers and other
relevant parties, the development of a user interface is
recommended.
Acknowledgements
I thank all the reviewers who, throughout the various rounds of
revision, contributed to make this manuscript more accurate and
insightful.
Appendix A. Supplementary data
Supplementary data to this article can be found online at
https://doi.org/10.1016/j.jclepro.2019.118327.
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