Presentation slides in KES SDM 2016 conference Abstract: In the last few years, the circular economy has attracted increasing attention as a way to overcome the problems of the current production and consumption model based on continuous growth and increasing resource throughput. A circular economy is an industrial system that is restorative or regenerative by intention and design. Although supply chains are the key unit of action in the change towards a circular economy, the academic literature on supply chain management approaches in a circular economy is very much in its infancy. However, two distinct literature streams, namely sustainable supply chain management and product service systems, seem to offer valua-ble insights into the investigation of supply chain management in a circular economy. The aim of this paper is to analyse the main characteristics and challenges of supply chain management in a circular economy and identify how these two literature streams can contribute to researching it.

1. VTT TECHNICAL RESEARCH CENTRE OF FINLAND LTD
Sustainable supply chain
management in a circular
economy – towards supply
circles
Anna Aminoff
Outi Kettunen

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Systemic
innovation
• The concept of CE traces
back to different schools of
thought
• Still mainly rooted on the
industrial ecology, but other
fields are growing rapidly.
Circular economy in a nutshell
A circular economy is an industrial system that
is restorative or regenerative by intention and
design (EMF, 2013; Lieder and Rashid 2016)
New business models are key to
transformation
Circular supply
Resource recovery
Product life cycle extension
Sharing platforms
Product as a service (leasing)
Reverse logistics

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IoT-enabled Consumer-driven Business Models in
Circular Economy (2015-2017)
 Main focus
 Understanding how to create competitive advantage in CE and what are the novel
business opportunities
 Supply chains supporting novel business models
 Understanding of consumers in CE
 Understanding on how technologies (IoT) can enable and accelerate the change
 Holistic evaluation framework for assessing the overall performance of CE based
business models
 Main method: Rapid experiments - Testing new business models based on CE with
AARRE companies
 Company partners: Lassila & Tikanoja, Destamatic, Eurokangas, Kierrätysverkko, Not
Innovated Here, PiggyBaggy, The Federation of Finnish Technology Industries and The
Chemical Industry Federation of Finland
 Research partners: VTT, Finnish Environment Institute, University of Helsinki

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Background and objectives
 Supply chains have been identified as a key unit of action in the
change towards a CE
 It would be important to integrate SCM research into a CE, but
the research as today is very limited
The aim of this preliminary study is to
1. Analyse the main characteristics and challenges of SCM in a
CE
2. Identify how previous literature, two literature streams in
specific (SSCM and PSS), could contribute to SCM research in
a CE
3. Create a basis for a empirical study
4. Create a baseline for a empirical study

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CE research
Future research needs
Top-Down:
 Legislation and policy
 Support infrastructure
 Social awareness
Bottom-Up:
 Collaborative business models
 Product design
 Supply chain
 ICT
Lieder and Ramish, 2016

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Supply Chain Management in a CE
1) New innovative business models involve re-thinking of supply chain models and partners
 For example: distinction between owning a product and having access to it, and between using
materials and consuming them  new SCM models are needed
 How to motivate partners, how to find new best partners, what are the new models needed?
2) New business models for a CE require balancing forward and reverse supply chains to
reach operational efficiency
 The role of the reverse loop will grow. As today reverse flows are significantly influenced by the high
cost of handling and leakage from the system
 Push vs pull supply chains
 Transparency throughout the supply chain and ensuring uniform material quality is critical
3) In a CE, consumers become a central part of the system, not the end of the SCM
 Influences SCM greatly
Supply chains of today are one of the major barriers in transformation towards CE business
models.
• Long and global supply chains are not easy to change
• Cross-industry co-operation is often a prerequisite

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Sustainable SCM (SSCM)
 Closed loop SCM (CLSCM) is the
design, control and operation of a
system to maximize value creation
over the entire life cycle of a product
with dynamic recovery of value from
different types and volumes of
returns over time’ (Guide & Van
Wassenhove, 2009)
 CLSCM offers many useful
frameworks, in specific;
reverse logistics; reducing the
high cost of handling and leakage
from the system.
Product service systems
 ‘PSS consists of a mix of tangible
products and intangible services
designed and combined so that
they jointly are capable of fulfilling
final customer needs’ (Tukker &
Tischner, 2006)
 When focusing on final user needs
or the service a user wants, rather
than the product, it becomes much
easier to design need-fulfilment
systems with radically lower
environmental impacts
 PSS literature is quite limited on
SCM-related issues

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Characteristics Literature stream
Closing the loop – open or closed
loop supply chains, also cross
sectional
SSCM/CLSM/Reverse supply chains.
However, the literature focuses on the
manufacturing sector, and contributions in
other contexts are limited.
Distinction between using and
owning, i.e. business models
that promote the use of
‘functional service’
PSS. However, the literature focuses on the
manufacturing sector, and contributions in
other contexts are limited. The knowledge
about SCM is also very limited.
The new active role of the
consumer, the consumer
becoming a user
PSS. However, the literature focuses on the
manufacturing sector, and contributions
involving consumers are very limited
Transparency throughout the
supply chain
SCM
Challenges
Lock in to today’s supply chains, building new
supply chains is challenging
Social aspects of SCM, value
network (not included in this
investigation)
Motivation of different value chain partners to
commit to the implementation of business models
Social aspects of SCM, value
network, governance models
(not included in this
investigation)
Co-operation between SC partners, including
cross-industry co-operation
SCM, value network
Warehousing, collection and handling SSCM/CLSCM/Reverse supply
chain
Distribution on reverse side, especially when
involving users
SSCM/CLSCM/Reverse supply
chain
Balancing the forward and reverse loops and
ensures uniform material quality
SSCM/CLSCM/Reverse supply
chain

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Preliminary empirical
study
 Focus group discussion
 8 industry representatives + 3
researchers,
 2 hours
 All companies have at least
some experience from CE
business models, and are
interested in developing the
CE models
 9 semistructured interviews;
 19 informants
 1-1.5 hours per interview
Focus group participants
Waste Management Company (Director)
Retail (Development manager)
Logistics croudsourcing (Owner)
Social recycling enterprise (CEO)
Producer of recycled-material based goods
(CEO)
2 industry federation representatives
Interviews
Above mentioned companies
Shopping malls

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Manufacturing Retail Consumer
Construction sites
Remanufacturing
2nd hand c2c2nd hand retail
Warehousing
Factors affecting the supply circle: Digitalization – Value chain practices and cooperation
– Companie’s attitude – Consumer’s role – Consumer’s practices – Consumer’s attitude
Deliveries
Transportation
Transportation
Reverse
logistics
Reverse
logistics
Reverse
logistics
Deliveries
Empirical data context

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Empirical findings (1/2)
 SCM in a CE is at an immature stage
 High operations and handling costs in different stages of supply
chain is restricting circular business
 Missing services and actors. A need for e.g. new kinds of
logistics services:
 Facilities and services for sharing economy models
 Delivery services for C2C & C2B trade
 Ideas for new solutions:
 Intelligent mobile warehouses,
 Crowdsourcing in delivery of products between c2b, c2c, b2c and
b2b.
 A need for deeper value chain as well as cross-sectoral
cooperation
 Cross-sectoral co-operation in deliveries (e.g. online stores and
public sector).

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Circular economy in a nutshell
Systemicinnovation
• The concept of CE traces
back to different schools of
thought
• Still mainly rooted on the
industrial ecology, but
other fields are growing
rapidly.
A circular economy is an industrial system that is
restorative or regenerative by intention and design
(EMF, 2013; Lieder and Rashid 2016)
New business models are key to transformation

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Empirical findings (2/2)
 Digitalization could improve all phases of the supply chain,
including reverse logistics.
 Consumer’s new role was seen as an opportunity, but also as a
challenge
 C2C trade: What business opportunities does it offer for (logistics)
companies?
 How can the warehousing and transportation be organized
efficiently?
 A need to influence consumers by offering them easy and cost
efficient possibilities &services to participate in circular economy
activities, many of these are related to logistics.

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Conclusions
 SCM is in an immature state
 New services, actors, new collaboration modes and implementation of technologies
are needed, but also capabilities and understanding of it importance
 Both SSCM and PSS give many relevant insights. However…
 Publications focusing on the supply chain model for a PSS are still scant
 Both SSCM and PSSs focus on the manufacturing industry
 The changing role of consumers, i.e. becoming users and offering information
to the system, and the implications for SCM seem to be almost non-existent in
today’s literature.
 Companies would be able to get more information about use of the products, which
they can apply in the management of the supply chain and collaboration with other
partners
 Only a limited contribution relate to cross-sectional (reverse) supply chain
collaboration.
 Both SSCM and PSSs focus on quite traditional business models, and the
supply chain as an enabler for disruptive innovation is an interesting avenue for
future research.

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Next steps
 In-depth exploration of SCM in different CE business models:
 Circular supply
 Resource recovery
 Product life cycle extension
 Sharing platforms
 Product as a service (leasing)
 Reverse logistics
 A learning café workshop for invited participants
 A multiple case study:
 Rapid experiments will be part of the case studies

16. Thank youPlace for a photo
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