Foundational industries including resource and Recycling (R&R), manufacturing, construction, logistics and utilities companies are key to building a circular economy. Their expertise, logistics networks and materials processing capabilities are all significant assets. This expertise will become critical as the economy pivots to re-using secondary resources over more expensive and scarce primary resources. Circular economy processes like recycling, reuse, remanufacturing and more can support R&R companies in meeting sustainability goals while driving performance and profitability improvements.
The World Economic Forum estimates1 the circular economy could generate $4.5 trillion in value across the global economy by 2030, while achieving sustainable development goals.
Digital, cloud-based data analytics, machine learning and connected smart technologies are key to making the transition. Yet, many companies have overlooked the ways their underlying ERP, which was designed for the linear economy, may be holding them back from more dynamic and automated digital processes.
As the circular economy ramps up, R&R companies will need systems designed to make materials sorting, collection, measurement and logistics more agile. Circular economy transactions are broadening beyond standard recycling functions to include:
- materials collection and sorting for more categories
- resource sharing across logistics and supply chain networks
- digital product tracing and materials inventory management
- parts collection and return
- repair for resale
- MRF 4.0 recycling
With these changes, the capabilities of their enterprise resource planning (ERP) software must also shift. A fit-for-purpose enterprise resource planning (ERP) software requires agility, advanced data analytics and connectivity.
The problem is today's ERPs are designed to work with fixed networks, static supplier and purchaser roles, and pre-assigned pricing and material quality configurations. These are insufficient for dealing with the added variability load material quality, forward and reverse logistics, or pricing adjustments that effective materials recovery entails. These limitations also introduce inefficiencies in cost and ROI.
Choosing a purpose-built ERP can lead to cheaper, faster processes and greater ROI linked to circular innovation than a generic ERP solution.
what it takes to speed up materials recovery
To recover more materials at a faster pace, R&R companies have a growing number of data visibility requirements for inventory management, quality, material pricing and adjustments.
Secondary materials loads are often uneven in composition, so automated load identification produces rough estimates of load volume and composition. These estimates can be used to price and sell loads, but may also be adjusted based on the end-user's assessment of the useful content of the load.
Establishing trading and logistics networks for selling and distributing secondary materials also requires more agility. R&R companies can expect more on-demand delivery and pick-ups from a wider range of parties to connect buyers to sellers of secondary materials.
Building out these business networks requires additional data to support flexible assignment of buyers' and sellers' roles, as these may reverse, depending on the direction of traded material flows.
circular ERP features
Five key requirements for a purpose-built ERP enable R&R companies to enhance circularity in their operations. These are: agile logistics, dynamic price automation, quality assessment, inventory management and trading.
Agile Logistics
Agile logistics supports the collection and return of loads to a variety of downstream collection points and upstream drop-off points.
Collections may come from:
- Manufacturers who wish to sell their byproducts
- Municipal waste bins
- Use product drop-off sites
- Used product disassembly plants
- Shared resource depositories
Deliveries may go to:
- Remanufacturers
- Recycling processors
- Refurbishers
- Shared product or packaging users
With a higher number and type of recipients in a circular logistics network, companies need capabilities to deliver and return materials to and from diverse sites with additional load-type specifications.
In addition, on-demand availability supports faster distribution, because availability of secondary material supplies is less predictable. Optimizing for this capability may require resource sharing for storage depots or delivery vehicles to ensure timely, local distribution.
Unlike a traditional ERP, agile logistics in an ERP means the direction of orders and deliveries within a supply chain network is not fixed. The purpose of deliveries and recipient roles can be assigned or reassigned dynamically.
dynamic price automation
Rather than an exception, variability is a norm in circular economy value chains. Dynamic pricing can help accommodate the variability of secondary load quality and shifting demand and supply of secondary materials. This represents a dramatic shift from the fixed pricing models of standard ERPs, which assume a standard price for a specific type of material.
Pricing secondary materials depends on the ability to configure and automate various factors. Prices also generally start as estimates that can be adjusted based on an end-user's assessment later on.
quality assessment
Quality standards for materials are a known barrier to secondary and recycled materials markets. As secondary materials standards develop through collaborations between resource collectors and manufacturers, supply chain inputs will no longer have to meet impossible standards that apply to raw materials. Quality evaluations of loads and inventories will provide essential information to prospective buyers.
R&R companies can quickly assess material loads using automation from services like AMCS Group's Vision AI at collection points. Material quality data supplements data on the quantity of materials. Estimated percentages of load contamination will enable buyers to understand whether the materials will meet their requirements and return them, if needed. Quality estimates can also be adjusted after delivery.
inventory management
Inventory processes for collecting, sorting and storing secondary materials will require more flexibility to accommodate the movement of materials of differing types, qualities and load sizes from a variety of origins. Inventories may adjust depending on how secondary materials loads are combined or configured.
Digital product passports will support the traceability of materials and the inventorying of secondary materials. These passports can contain multiple data points2 to support recovery into the value stream, including details on:
- Usage and maintenance
- Product identification
- Component products and materials
- Guidelines and user manuals
- Supply chain and reverse logistics
- Environmental resource data (i.e., CO2 emissions and water use)
- Compliance with labeling requirements
Circular ERP has data analytics capabilities of processing multiple materials data points in a central location and inventory data sharing within a digital marketplace.
trading
Circular economy transactions encourage greater collaboration, information sharing and multi-directional transactions. Unlike in traditional ERPs where buyers and sellers retain generally fixed roles, apart from returns, circular transactions encourage greater connectivity and flexible trading among:
- Producers and consumers
- R&R companies and third-party logistics firms
- Manufacturers and wholesalers
- Resource owners and renters
- Third-party inventory depots and collection/drop-off points
By accommodating a wider range of negotiated business relationships and transactions to include borrowing and returns, temporary shared storage space rental, flexible returns, and greater demand for secondary products, digital trading platforms designed with circularity in mind have robust customization opportunities.
sustainability by design
Circular ERP must have embedded workflows and automation to operationalize best practices to operationalize sustainable business practices. At a minimum they must support the following:
- Emissions reporting (Scopes 1, 2 & 3)
- Digital resource tracking across the value chain
- Resource efficiency and use including water and energy
- Safety management (training, risk assessments, incident reporting, hazardous material use, etc.)
- Regulatory reporting related to ESG, CSRD, CSDDD, etc.
Sustainability considerations must be integral to business processes and automation. Sustainability must be focused on maximizing value and not regarded as a separate and secondary process to business strategy.
At AMCS, we believe that resource-intensive foundational industries can boost sustainability and profitability with the right digital capabilities. Our purpose-built software solutions are created by industry experts to accelerate circular transformation in these industries.
Our Performance Sustainability suite of solutions covers all aspects of enterprise automation with a strong focus on sustainability, including safety and environmental outcomes. We believe that all resource intensive industries including resources and recycling companies will play a pivotal role in the transition to a circular economy, and we support this shift with digital solutions.
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