Wednesday, September 25, 2013

Circling the Supply Chain

One of the themes of this week’s articles is that, in times of famine, it is necessary to extract every once of value from every possible source.  One novel source of value is waste.  Several of this week’s articles discuss the need for manufacturers to redesign products and processes to reuse their own waste.  McKinsey & Co.’s “Manufacturing Resource Productivity” refers to supply circles rather than supply chains.  The former calls to mind a process whose waste becomes new inputs, returning otherwise discarded resources back into production; the latter calls to mind a linear progression of input to output to consumption to waste. 

This concept is not entirely new.  A New York Times article from 2008* highlights this supply circle mentality.  The article discusses how dumps and landfills have become sources of plastic for the production of liquid fuels.  Highlighted in the article is an estimate that old plastics in British landfills alone could be worth over $100 billion (circa 2008).    This led many British waste management companies to become garbage miners.  One such company stands out in particular: Closed Loop London.  At the time it was only one of six plants worldwide that could process PET plastics (i.e. water bottles).  As its name suggests, Closed Loop London essentially sorts, cleans, and transforms discarded water bottles into different kinds of pellets and flakes**; these pellets and flakes are then sold to manufacturers to made into new bottles.  Instead of venturing into the market for new plastic, bottle manufacturers can purchase Closed Loop’s flakes.  A similar plant opened its doors yesterday.  PlasRecycle’s South London-based plant transforms plastic shopping bags into flakes, allowing manufacturers to make new bags from old plastic***.

In a world of scarcity and high oil prices, it is crucial that manufacturers do more with waste material.   “Circling” the supply chain benefits both firms, who can stay away from the primary market for petroleum-based plastics, and the environment. 

Can anyone think of any other commonly used products that are ripe for this sort of recycling?  When might it be more cost-effective for manufacturers of plastic goods to dive into the primary market for plastic?  Are the incentives in place to steer manufacturers towards green alternatives even if oil prices fall markedly?




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