By Michael Ouissi
THE manufacturing industry faces what is likely to be the most fundamental shift ever in its business model.
Since the beginning of the industrial age, manufacturers have sourced raw materials, added value to them through design and transformation and sold them, creating more wealth than any other time in history. But now they are being pushed towards a circular economy from all directions.
There is a growing move towards a circular economy in Africa – and South Africa. Initiatives like the Switch Africa Green Programme, for example, promote biogas technology, E-waste management, organic agriculture, green manufacturing and eco-industrial parks, among others.
Partner countries include South Africa, Burkina Faso, Ethiopia, Ghana, Kenya, Mauritius, and Uganda aim to create an enabling environment for green business development, particularly in agriculture, integrated waste management, manufacturing and tourism.
Since its inception in 2014, 74% of the organisations involved recorded a positive social impact, and 63% recorded an increase in their production through the adoption of Sustainable Consumption & Production practices.
South Africa was also a founding member of the African Circular Economy Alliance (ACEA), which was launched in 2017 when the United Nations Environment Programme (UNEP), South Africa, Rwanda and Nigeria agreed to take the outcomes of the African Ministerial Conference on Environment (AMCEN) forward in partnership with the World Economic Forum (WEF).
The goal is to spur Africa’s transformation to a circular economy with a focus on economic growth, jobs and environmental sustainability.
ACEA released a report in April 2021 about the five sectors that have the greatest potential to drive the circular economy: food systems, the built environment, fashion and textile, electronics, and packaging. Packaging, and plastic recycling in particular, has the power to improve energy consumption and create jobs. The report shows that implementing better recycling infrastructure can reduce energy consumption in manufacturing by 75%.
Progress is being made, particularly in plastic recycling. The South African Plastics Recycling Survey for 2019, published in September 2020, showed that the country’s packaging industry accounted for 49% of the plastic sector – and that South Africa recycled 352 500 tons of plastics back into raw materials in 2019. This was out of a total of 1.8million tons of plastic produced in the country that year, and of 503 600 tons collected for recycling.
These efforts are backed up by South Africa’s National Waste Management Strategy 2020, which is also aimed at promoting the waste hierarchy and circular economy principles to achieve socio-economic benefits and reduce negative environmental impacts.
It builds on the successes of the 2011 strategy and promotes new approaches to design and packaging that reduce waste or encourage reuse, repair and preparation for recycling, as well as addressing job creation and skills development in the circular economy – especially of the informal sector.
Gartner says that by 2029, linear economies will be completely replaced by a circular one. But last year, the non-profit Circle Economy found only 8.6% of the world economy was circular, down from 9.1% in 2018.
Run far and fast
Manufacturers must run far and fast, adopting net new business processes and supporting business systems – particularly for reverse logistics and environmental footprint management.
Reverse logistics as a business discipline started with the customer-driven, reactive return of goods from consumers or from another business through a return materials authorisation. While ease of returns is important to customer experience, once a product is returned there is a complex series of routings regarding disposition of the returned product—return to vendor, recycle, resell and other outcomes.
Reverse logistics software must also deal with contractual obligations and complex processes around what happens to the products and what has been promised to the customer.
Software for reverse logistics must manage complexities like placing a residual value on an item that requires rework or repair. It must also track the location, ownership, and status of components under repair, including those that may have gone to third-party manufacturers or service providers. It is this software that will contain business rules regarding impact of repairing an item versus replacement.
As manufacturers push more of the revenue and cost for what they sell after the sale, they will need systems that tie accurate lifecycle cost data back to design and quality so circular productivity is comparable to existing linear processes, while increasing margins.
This requires a united suite for enterprise resource planning (ERP), enterprise asset management and field service management, likely bolstered by artificial intelligence (AI) to manage the complexity of this value stream.
According to IFS Manufacturing Industries Vice President Colin Elkins, the goal will be to engineer maintenance out where possible.
“Waste is the result of poor design,” Elkins said during the MindFuel event. “We need to be able to start redesigning our products.”
There can be little doubt that manufacturers will need to evolve – but the ones that do, mastering challenging new business and logistical disciplines, will not only survive, they will thrive.
Michael Ouissi is Chief Customer Officer at IFS
