Presenting at a recent G7 Summit policy workshop, Panalpina highlighted the need – both financial and environmental – to transition to more sustainable ‘circular supply chains’. This would free trillions of dollars of inventory trapped in current linear supply chains and help avoid the hidden environmental cost of the ‘take-make-dispose’ model the global logistics and forwarding giant said. By Donald Urquhart.
“Product life cycles are getting shorter and consumers demand that products be delivered faster, but you can’t keep up if you need to manufacture and ship the product from the other side of the world,” said Dimitri Brink, Panalpina country head of marketing and sales in Canada.
Sticking to these long supply chains will only result in an unsustainable increase of inventories, he said. He went on to say that trillions of dollars of inventory are trapped in supply chains and very high rates of scrapping are the hidden cost of today’s ‘take-make-dispose’ model. And the cost is not just financial, but also environmental.
But things are starting to change, Brink said pointing to technology such as 3D printing, which makes local production of ‘make-on-demand’ and ‘personalised products’ more likely.
And from a re-manufacturing perspective, it is now becoming easier for people to get access to spare parts and repair products, rather than just junking them.
“We are seeing a shift from linear manufacturing to distributed manufacturing, and from linear supply chains to circular supply chains. The large batch units made in Asia-Pacific are now becoming modular products that are personalised and assembled close to customer demand,” added Brink.
This means that logistics providers are going beyond just moving products and are now increasingly taking responsibility for manufacturing and repair, as well as the local sourcing and procurement of products. It does take some scale, he acknowledges, pointing to the global facility networks of the large logistics providers who are well placed to help customers to distribute and ‘re-localise’ their new manufacturing techniques.
Panalpina’s warehouses in Dubai, Brazil, Panama, and the Czech Republic have been transformed into manufacturing facilities and gone from simply storing inventories of products made overseas to manufacturing them in or closer to the country of demand.
“We also 3D-print parts in our facility in London, and specifically to extend the life of a product, we recently completed a project with our research team at Cardiff University, where a watch repair company wanted to fix a watch but was unable to do so as they couldn’t source the parts,” continued Brink.
“We helped them print them using our spare parts on demand 3D printing and the issue was resolved. The product went from labelled for scrapping to having an extended life cycle.”
While many factors influence this emerging trend, including macroeconomic and sociopolitical changes, Brink observed that the single biggest driver of change is the consumer. Particularly so with the younger generation of consumers who are buying differently from older generations.
On the one hand this younger group expects things immediately when they buy online, and on the other hand they are more environmentally conscious and also open to the shared economy.
For companies that move products all over the world the transition to shorter and circular supply chains is a great opportunity, says Brink. And not just a commercial opportunity, but also one to combine economic advantages with wider environmental gains.
“Panalpina and the entire industry can play a major part in changing supply chains from the elongated take-make-dispose supply model of today to sustainable, circular supply chains,” Brink says.
“We want to drive this change. It is better for business, it is better for us as a society, and it is better for the wider environment as less raw materials are tied up in obsolete inventories. There are challenges, but this is the first step in addressing the challenges,” he concluded.