Circular Economy in Logistics and Production: How Software Contributes to the Avoidance of Waste and Wastefulness

In our 90 percent linear economy, resources are extracted from the earth, processed into goods, used and ultimately disposed of. It has been known for some time that we humans live in excess and regularly use up the Earth’s renewable resources as early as summer (this year we reached Earth Overload Day on July 29). Therefore, the establishment of the circular economy aims to extend product life cycles, recycle more, and avoid waste in order to conserve our Earth’s resources. The latter goal is already supported by intelligent IT systems in logistics and industry. 

Identifying waste in the supply chain 

To prevent waste, the first step is to identify it. In lean manufacturing, eight types of waste are differentiated: 

On the way to a circular economy, companies should first take a close look at their own internal supply chain to identify waste. Measures to subsequently reduce or even avoid this waste can be implemented with the help of digitization. 

Intelligent IT systems ensure greater “cleanliness” in supply chains by accessing existing data and optimizing processes. For example, they analyze the demand situation and available resources, support planning processes, optimize workflows, and thus not only bring companies economic advantages, but also make a significant contribution to conserving resources. The following examples illustrate how this effect can be achieved: 

1. Predictive maintenance in mechanical engineering

The modern, data-driven maintenance strategy of predictive maintenance is finding its way more and more into mechanical engineering. It helps to maximize the lifetime of machines and components by planning maintenance and servicing measures in advance through the collection, analysis and evaluation of plant-specific data. This prevents unnecessary replacement of components that are still working, reduces the number of service calls and business trips, and thus contributes to conserving resources and reducing CO2 emissions. 

2. Better forecasts for food sales

22 percent of all waste in the food sector is already generated in processing and retail. Often, more is produced than customers actually demand. Although precise demand planning is possible, it is very complex: factors such as holidays, promotions, seasonality and even the weather have to be taken into account when planning. Self-learning algorithms that take such influences on sales in food retailing into account can increase the accuracy of sales forecasts by up to 50 percent. Supply and demand thus move closer together, reducing waste and stabilizing the supply chain all the way to agriculture or fisheries. 

3. More reliable replenishment lead times

Waste also occurs when suppliers deliver their goods too early or too late. A new machine learning approach calculates a forecast of the actual delivery time of goods up to 70 percent more accurately. This gain in certainty reduces overstocks in the event of early delivery or last-minute reorders, which are often delivered by air freight with a high carbon footprint. This actively shapes the circular economy while contributing to the fight against climate change. 

4. Reusable transport containers

In the food or automotive industry, reusable transport packaging (RTP) made of plastic, wood or metal are important for the supply chain. Compared to single-use transport packaging, they not only enable cost savings but also reduce waste. For a real sustainability effect, however, they should remain in the cycle for as long as possible and always be used in the right place at the right time. After all, the production of RTPs also causes CO2 emissions. Intelligent planning software helps to allocate the RTPs correctly by precisely calculating how many containers are needed at what time and in which place. 

Outlook 

We cannot save our climate without practicing circular economy. In our heavily industrialized world, it is a major lever for greater sustainability. The practical successes shown here are only small steps on our way to a circular economy. However, since companies simultaneously achieve financial benefits by avoiding waste, there is no need to overcome a conflict between profit and sustainability: On the contrary, sustainable action increases profitability. It is time to include the sustainability focus of the circular economy as an integral part of every corporate strategy. Companies can achieve quick, measurable success with software systems for planning and optimizing their logistics and thus improve their own, ecological footprint in the long term. 

About the Author

Dr. Dorothea Ernst, Sustainability Catalyst at INFORM

Dorothea Ernst has been working as Sustainability Catalyst at INFORM since 2019. She stands for sustainability as an innovative force. She captured her more than 15 years of practical experience with this topic in several books.