By Max Moriarity, Consultant, Supply Chain Operations Practice
Wednesday, August 22, 2012
A few weeks ago there was a great study released by McKinsey exploring the idea of circular economies and supply circles. After reviewing McKinsey’s extensive research and analyses, it led me to start thinking about how manufacturing companies can leverage advanced reverse logistics practices to their advantage.
As McKinsey noted, volatility in the commodity market and increases in global consumption have significantly contributed to raw material prices reaching all time highs. In fact, McKinsey states, “with supplies of many raw materials becoming harder to secure, commodity price volatility may not be a temporary phenomenon.” This volatile environment has necessitated the need for manufacturing companies to think well outside of the proverbial box to lower the cost of inputs to create one output. It is this need that has led to the concept of supply circles, where manufacturers not only create products but utilize reverse logistics to obtain materials from recycled or returned products.
Manufacturers who understand the value of a strong reverse logistics operation will benefit from creating a new source to procure valuable materials and components from recovered or recycled products. Additionally, manufacturers will be able to further refine their product designs to fully take advantage of these recycled materials as well as improve how their products are produced.
Instead of just seeing reverse logistics as a way to deal with mistakes, companies who approach reverse logistics strategically can gain a significant competitive advantage over their competitors. The list of companies who failed to innovate and adapt includes many well-known companies like Circuit City, Blockbuster and Kodak. In order to remain viable in today’s competitive economy, I will remind everyone that it was H.G. Wells who said, “adapt or perish, now as ever, is nature’s inexorable imperative.”