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Business

October 20, 2016

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Companies opt for circular economy to increase efficiency

Companies opt for circular economy to increase efficiency

LAHORE: The realisation that three billion of the new middle class would drive global economy by 2030 has forced companies to opt for circular economy.

Companies reassess waste prevalent in their value chain to get more from the resources and material they use. Businesses the world over have increased their efficiencies in designing, production, marketing and after sales services.

However, the product, even after completing its life cycle contains lot of value. One way is to recycle the product that will destroy the leftover value. The other option is to retrieve reusable parts and components before sending it for recycling.

Recycling is part of circular economy as it provides the industry with basic raw materials that are becoming scarce. However, it is the least value capturing loop in the circular economy. Companies can recover much higher value by refurbishing the product or harvest the usable parts from the product. This is easier said than done. For this, companies have to change their culture.

Currently, they manufacture a product, sell it in the market, provide after sales service and then buy the new inputs to make more units of the same product. This is resulting in price volatility that was never witnessed in most commodities.

Companies should realise that the consumers are also changing, preferring more access rather than ownership. People now prefer accessing a service as opposed to owning a product. We are witnessing increased utilisation of resources at the consumer level as well.

They realise that some of their most valued assets are underutilised. Improved utilisation of these assets would result in capturing high value during the useful life of that asset. The utilisation of cars for instance is five-eight percent.  One drives a family car for two-three hours per day. This is the reason that ride sharing companies are doing booming business these days.

Industrial-machine manufacturers now make efforts to get back very expensive engine cores of their machines at the end of its life. They then refurbish it and sell in low cost markets at competitive price and normal guarantees that they give for new machines.

We all realise that the moveable parts of a machine or engine suffer from wear and tear. Most stationary parts like casings do not deteriorate even after prolonged use. These parts can be reused in manufacturing similar products.

Recycling has made roots in Pakistan, but our entrepreneurs have not yet made their mark in reuse of parts and components. We recycle steel products, plastic and even convert cotton product wastage into cotton fibre. The casings of washing machines, deep freezers, are not reused by original manufacturers.

 

 

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