Closed Supply Loops
A Closed Supply Loop recovers and reuses all the materials that are involved in a production process, including the final product itself along with its packaging. Steps toward achieving that state involve reducing material flows, thereby reducing and limiting carbon footprint, CO2 emissions and waste.
To manage a closed-loop supply chain optimally, three things are vital. First, match the type of return with the appropriate supply chain. Second, adopt modular reuse, to recover maximum value. Third, the value of re-use data may in some cases be higher than the value of the returns. (Source: Wikipedia Harold Krikke)
Closed Supply Loop Management & SAP, Waste & Recycling One Summary
- There is a shortage of raw materials that is having an impact on economic productivity
- Companies are adopting circular principles to become more sustainable, reduce waste, reduce carbon footprint, save money and provide a better service
- SAP, Waste & Recycling One can be utilised to manage a closed supply loop and complex subcontractor logistics, customer charging, costs, compliance and legislation
- WR1 is designed to be cost effective and is a fraction of the cost of larger SAP implementations suiting private and public waste logistics and recycling materials operations, globally
- WR1’s comprehensive set of tools also allow for complex materials traceability, batch materials and serial number asset lifecycle management to track reuse of resources through the closed and/or extended supply loop
Reverse Logistics, Closed Supply Loops & Sustainability Loops
The following diagram shows an example of the basic flow of resources through several actors in a range of different reverse, closed and sustainability loops. SAP, Waste & Recycling One can manage these different types of models from comprehensive standalone business entities to the simple online notification of instruction and order to partners in the loops to carry out the specific recycling work while tracing the materials and assets to be recycled.
Why Adopt a Closed Supply Loop?
Raw materials are becoming scarce; the use of resources worldwide is not sustainable and cannot be maintained. It is estimated that three planets worth of materials are required to maintain the current rate of consumption in the western world. It is widely accepted that the extraction, manufacture and disposal of raw materials in a linear ‘take, make and dispose’ model towards the degradation of natural capital is affecting the productivity of economies and is detrimental to the environment.
There are many practices in circular principles that have a positive impact on the environment -Multiple value creation mechanisms that do not rely on raw materials; consumption happens only in effective bio-cycles, elsewhere, use replaces consumption; preserve and enhance natural capital by controlling finite stocks and balancing renewable resource flows; optimise resource yields by circulating products, components and materials at the highest utility at all times in biological and technical cycles.
Products should be restorative and regenerative by design, not only recovering materials and products at the end of use but at design by choice of materials and ease of disassembly. Facilitating product reuse and recycling, using advance skills, information, material selection, standard components, easy end-of-life sorting, separation and useful application of by-products and waste.
New business models which move from payment to performance are intrinsic in designing products for reuse and attractive value propositions. To create value from materials and products after use they need to be collected and returned. Reverse logistics can manage this process along with sorting, warehousing, risk, power generation and production. These principles of circularity help reduce cost of manufacture, costs of disposing of waste, impact on the environment and creation of value throughout the closed supply loop.
Why Move to a Controlled Closed Supply Loop?
A large company involved in any type of production can generate a lot of waste. In fact some may argue any company using a raw material that doesn’t input a recycled material back into its production process is completely reliant on natural capital and if none of what is manufactured is recycled, then it is all waste.
However, all companies, including retail and wholesale, like consumers, generate waste materials, like food ingredients or packaging that can be reused through symbiotic supply loops, reverse logistics and/or the closed supply loop.
Traditionally, companies use waste brokers, or go direct to external waste management company or have an internal department that oversees the external recycling and disposal of ‘waste’ materials.
Companies rely on external waste brokers and waste management companies to take their ‘waste’ materials and recycle them. Some materials are recycled nearby or in other parts of the country. Other materials are exported for reuse, recycling or used in remanufacture from reprocessing activities where infrastructure allows and is present. Some materials are used in waste to energy or sent to landfill. The broker or waste management company then reports to the producer of the waste on what material percentages have been recycled from their ‘waste’.
The large multinational relies on the external waste management or waste services broker to recycle or dispose of their waste materials. However, if sending elsewhere, either for recycling, disposal or reuse, the country or company of destination utilises the value of those materials, so it is fast becoming practice that to adopt circular principles is a better way to lock in value by the creation of a circular supply loop and gain the benefits from the control of reusing materials or refurbishing assets both within the company and country of operation – or the closed supply loop of operation, which could in fact cross many borders if necessary.
By utilising the value created in the circular supply loop the company additionally gets to control their waste materials and provide intelligence on waste types and costs, eventually understanding how to reduce that waste and redesign products with materials and parts to eradicate waste from operations altogether, in short, less waste is equivalent to a reduction in cost. It also gives an insight into operations, allowing understanding of work centres that create waste and how to design processes within these centres to ensure greater efficiency and reduction of waste. And so, the closed supply loop takes form, can be managed internally, taking control back of ‘waste’ resources to great effect while adhering to CSR objectives.
So, by starting to implement the closed supply loop could aid in controlling costs by controlling all materials and activities in the production process. The question exists, how to manage the complex process of take back, reverse logistics, ‘disposal’ into a symbiotic loop (internal or external) recycling into closed loop supply within and existing business and how to make the transition to circular principles and nurture a circular supply loop for increased value?
The Application for SAP, Waste & Recycling One for the Closed Supply Loop
The main diagram above illustrates a (very) rudimentary business process of a typical larger company using SAP ERP components. Attached to the core production business process’ is the smaller closed supply loop functionality provided by SAP, Waste & Recycling One. In turn, facilitating the larger, now full closed loop by ensuring and tracking materials reuse or recycling in the business process. (In reality, there would be another loop where technical materials that couldn’t be used were sent on in another symbiotic loop, an open loop, this onward loop can still be managed and materials traced in WR1).
SAP Business One (SBO) was initially designed to provide larger, multi-national companies that had branches and subsidiaries spread across several geographies a SAP vendor tiered architecture. That could manage material, distribution and/or manufacturing processes in a cost effective, easy to deploy small to midsize company Enterprise Resource Planning (ERP) solution. Preconfigured and preintegrated, delivering key business processes such as purchase and sales ordering, accounting, inter-company consolidation and master data synchronisation.
Waste & Recycling One (WR1) has been developed by ISB Global (an SBO VAR and certified global Application Development Partner) in the software development kit of SAP Business One, SAP’s small to midsize Enterprise Resource Planning (ERP) software solution. SAP Business One is a global product available in over 45 locations around the world. ISB Global is licensed and certified to implement and support WR1 globally.
ISB Global has extended the functionality of SAP Business One to manage waste logistics and recycling operations. The solution is live, operational and has been deployed in several countries in several material sub-sectors, covering all ‘waste’ materials. Additionally, ISB Global has implemented the solution in closed loop recycling companies reprocessing plastics on behalf of very large brands that manufacture plastic packaging for food and FMCG products.
Managing the Closed Supply Loop Processes in SAP, Waste & Recycling One
Waste & Recycling One (WR1) has a Work Order (WO) object – a comprehensive order instruction is dispatched detailing what type of material or asset, where it is to be collected from and where it is to go, and to who the instruction is sent. This detail is tracked and published online as it completes certain stages of the logistics process – collection, movement, transfer, recycling and disposal. The material or asset can be tracked at batch or serial detail into plant or depot for reprocessing, recycling, refurbishing or further still, to end of life disposal point… And reprocessing again if necessary, depending on the nature of the material reprocessing requirements!
WR1 can track the order from collection to transport, weight confirmation, inventory, recycling, reprocessing, refurbishing and re-dispatch for reuse (or ‘disposal’) back to the multinational’s operations base as a raw material for re-use or as or to be a refurbished asset in part of the assets lifecycle. Receipting the goods into inventory to continue a production process or directly ready for re-sale onto a business partner to further the loop.
Importantly and uniquely WR1 is preintegrated to accounting and finance and along with the work order instruction there are comprehensive master data price tables for customer charging and supplier, subcontractor and disposal point payments. This allows for both line level profitability to be displayed and material weight confirmations to be paid and charged by preintegrated sales and purchase order and in turn, to invoice and subsequently post accounting and banking transactions (if necessary). The accounting transactions can be handed off at any point to larger SAP components or maintained within the SAP Waste & Recycling One closed supply loop managing entity, posting to its own chart of accounts, as a separate entity, then consolidated with incoming and outgoing banking payments as part of the complete ‘cradle to cradle’ business process.
Extending the Closed Supply Loop to Partners Online and Gathering Intelligence
Waste & Recycling One’s work order instruction (WO), charging (SO/AR) and payment (PO/AP) information can be passed onto additional partners in the closed supply loop. These predetermined partners can focus on numerous activities within the closed supply loop – transport, bulking up and transfer, depot, recycling, reprocessing or refurbishing specialists. They do not have to use SAP Waste & Recycling One, they can log onto the supplier portal, pick up the instruction, collect the sales and purchase order information accordingly and confirm waste transfer and/or consignment details. The Resource Information Data Exchange (RiDx) portal can be linked to the partners existing ERP through open API’s in the RiDx platform if so wished. If required an online payment instruction can be set up to facilitate automated payments via existing e-commerce facilities.
In addition to the instruction, charge and payment detail, the online transaction would track the material flow from partner to partner in the loop, giving traceability of material, data and analytics of the material or asset on its journey to ‘recycling’. Although as the loop increases with partners, complexity and size, care must be taken with data, waste transfer documents with the original batch must be transferred. (Integration and automation is recommended vs. manual entry!)
Published for Country-Wide Material Flow & Infrastructure Intelligence
By choosing to ‘publish’ data to the information portal (Resource Information Data Exchange – RiDx) can help provide information on what has been recycled where. Invaluable information on material flows and critical information like materials throughput within the closed loop partners. In turn, this information could help pinpoint where effort and infrastructure is required to increase recycling potential and opportunity.
A Standalone or Integrated Closed Supply Loop Business Entity
A closed loop supply implementation can be delivered cost effectively to manage cradle to cradle operations using SAP, Waste & Recycling One. The closed supply loop management toolset can be integrated into the SAP landscape using standard SAP tools supplied with the SAP architecture so that master data synchronisation, warehouse, inventory and payments, for example, can be administered from a centralised SAP function. Alternatively this can be managed at a standalone level from the comprehensive SAP, Waste & Recycling One functionality.
If necessary the closed loop supply company can be standalone and not integrated to a central function at all, using its own accounting, payments and Chart of Accounts, localised to the country and language of operation, deployment is completely flexible depending on the business model. There are also options for multiple country deployments using the same database, optimising connection via RiDx to connect, collaborate, disrupt and report across the extended closed supply loop.
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