Rethinking value chains and business models to supercharge circular economic growth

On the European continent, which is not rich in raw materials, there is a great need for new earning models for circular companies. Dr. Matthias Olthaar, a professor at NHL Stenden University of Applied Sciences, conducts practice-based research into the optimization of goods flow with more than 100 companies, mainly coming from the TopDutch region.

The TopDutch region has a focus on developing the logistics operating system of the future. This doesn’t just mean brand-new tech and sustainable fuels, but also means minimizing waste and maximizing value creation; and the production of new goods by, for example, re-using raw materials – the so-called urban mining – is only economically interesting if the revenue model changes.

Olthaar gives an example: ‘Take smartphones. Some of their parts are made in the TopDutch region. The raw material cost of a smartphone is about €5- while the selling price is one hundred times that. If you would recycle the device after depreciation and reclaim raw materials from it, the added value would be very limited. However, if you, as a manufacturer, could refurbish the product after depreciation, you could market your device a second time, including a margin.’

This presents challenges for manufacturing companies, Olthaar explains. ‘At the moment 9% of the Dutch economy is circular. The Dutch government is aiming for 50% by 2030 and 100% by 2050. That’s why Olthaar, together with a variety of firms, conducts research in how to lead the way. Several manufacturing companies from the TopDutch region are already circular and have a view on their complete supply chain. That’s necessary, says Olthaar: ‘In order to be able to refurbish, you need permanent access to your own products. There has to be a closed-loop supply chain and that’s challenging to realize. A common solution to this is that the producer remains the owner of the product, and the user leases the product. Thus the product must become a service. However there are alternative methods that can achieve the same thing, but are less complex to implement’.

For the producer, this requires virtual stock management of all products. Olthaar continues, ‘That’s where it often goes wrong. After all, where is all that virtual stock? And what’s the condition of each of the products after years of use? And when and how do they return?’ A closed-loop supply chain requires companies to be as flexible as possible. And the manufacturing industry needs logistic service providers that can support them in all these logistics processes. ‘There are enormous opportunities available for distribution logistics enterprises,’ claims Olthaar. ‘They can manage and absorb fluctuations in quantity and quality of return flows, and thus monitor where all products are.’

It’s one of Olthaar’s missions to solve this puzzle. He sees the TopDutch region as the hotspot for this challenge. ‘The region has an excellent business climate for circular businesses. The work ethic is high, the educational background of the local workforce is suitable for refurbishing products.’ 

And with the consumer market of Europe, there’s great access to the returns market of the future, he stresses. ‘Whereas an iPhone is made with materials from around the world, and assembled in China, it is likely to be refurbished for a second life in Europe. In the TopDutch region.’