Logistics in the Circular Economy: Challenges and Opportunities

Circular economy (CE) is a concept that has gained considerable attention in recent years, particularly in the domain of Industrial Ecology. CE requires products to be easily repaired, refurbished, remanufactured, and eventually recycled. The transition to a CE creates distinct material flows that have to be managed in an efficient and sustainable manner. Existing studies on CE tend to focus on product design, material use, and the market potential of CE products with little attention paid to the logistics challenges associated with such developments. From a logistics perspective, CE can be seen as the integrated management of forward and reverse flows of products in a supply chain. In the operations and supply chain management literature, a large body of knowledge on how to operationalize closed-loop supply chains (CLSCs) already exists and is a starting point for understanding logistics in the CE context. As with traditional forward supply chain network design, CLSC and CE supply chains also require decisions on the role of facilities, their location, their capacity allocation, and their demand and supply allocation. The CE concept does however introduce new challenges especially as circular business innovations converge to increased servitization and to more collaborative and open business models. The transition towards circular business models requires businesses to position themselves according to three key strategic decision-making problems, namely, (1) the extent to which the logistics network is centralized, (2) the extent to which the product is servitized, and (3) the extent to which logistics services are coordinated. This chapter presents a theoretical overview of the three trade-offs and what their potential implications are.