9789144156170

Circular Logistics in the Nordics

L E E N A KO S S I L A

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Art. No 44952 ISBN 978-91-44-15617-0 First edition 1:1

Design: Jesper Sjöstrand/Metamorf Design Group Layout: Catharina Grahn/ProduGrafia Cover design: Jan Pettersson Printed by Eurographic Group, 2022

2E 1660637941813

© The author and Studentlitteratur 2022 studentlitteratur.se Studentlitteratur AB, Lund

Contents

Preface 13

1 Introduction 15 Circular economy, sustainability and supply chain management 16 About the book and the cases 17 About the chapters 18

Part I

Basics for circular logistics: products and business models 2 What is circular logistics? 27 Linear supply chains add value to products 27 Keeping the value of the products 29 Processes for circular supply chains 31 Activities for circular logistics 34

3 Circular principles and strategies 39 Circular principles – a list of Rs 39 Resource loops 40 Biological and technical cycles 43 Circular economy for sustainability 46

4 Preserving the value of computers: Taitonetti 51 Keeping the value of IT products 51 Processes for refurbished laptops 54

5 Circular business models 59 Sustainable or circular business model? 59 Different kinds of material flows 61 Slowing down material flows 63 Organising loops 65 Developing a circular business model 67

6 Shared packaging in the food sector: Svenska Retursystem (SRS) 71 Crates designed to be circulated by the food sector 71 Svenska Retursystem as flow manager 73 Demand management of shared packaging 76

7 Circular design of products and packaging 79 Products with a long lifespan 79 Products with a short lifespan: food packaging 84 Circular product design, marketing and logistics 86

8 Food packaging with a deposit: soft drink bottles 91 The operators in the deposit-refund systems 92 Design of the soft drink bottles 94 Return process of emptied bottles 95 The flow of deposit fees 98

9 Roles and responsibilities, global and local 101 The roles that rule circular material flows 101 Producer responsibility as a driver of circular economy 104 Local and global circular chains 107

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Contents

Part II

Resources and circular material flows

10 Prevention of food waste: Kesko 115 Kesko has a central role in the food chain 115 Prevention of food waste by systematic approaches 118 Remedy and rescue of food that risks being wasted 121

11 Renewable materials and cascading 125 Biobased cycles of circular economy 125 Renewable and biobased materials 127 Biogas 131 Cascading of biobased materials 134

12 Use process: workwear 137 Textilia’s Nordic Swan ecolabelled textile service 138 Digital identification of textiles 141 Workwear for extended use designed by Fristads 144

13 About plastics 147 Plastics that can be recycled 147 Recycling codes used on plastics 150 Bioplastics: biobased or biodegradable? 151 Recycling methods for plastics 153

14 Collection and recycling of textiles: Project SATIN 157 Project SATIN 158 Processes and actors in textile recycling 159 Collection of used textiles 162 Collection systems and the first mile problem 164

Contents

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15 Handling and minimising waste 169 About waste 170 Used products: Waste or not waste? 173 Remnants: By-products or waste? 174 Collaborations for better use of by-products 176

16 Circular certified products: Tarkett 181 Certified and documented products for the building sector 181 Wooden flooring with different kinds of certifications 184 Plastic floors designed for recycling 187

17 Material flows and plastics 191 The time dimension: The lifespan of plastic products 191 The place dimension: Plastics flows 193 The money dimension: Plastics waste in different industry sectors 195 The energy dimension: Plastic waste in the soil and sea 197

Part III Processes of circular supply chain management 18 Support, service and maintenance: Tomra 205 Service and support as a circular business model 206 Support and field-service 208 Uptime 210

19 Recovery process: Recycling and End-of-waste 215 About recycling and source-separation of waste 215 The logic of the recycling production flow 217 Sorting and separation as a part of recycling process 219 End-of-waste 222

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Contents

20 Circular public procurement: The Hoppet preschool project 227 Preparations before the procurement process 228 Procurement and evaluation process 232 The design and construction process 233

21 Using recycled materials when producing new products 237 Source loops for the recycled materials 237 Different products made of recycled material 239 Logistics challenges when using recycled raw materials 241

22 Remanufacturing of spare parts: Valtra 245 Remanufacturing of gearboxes 245 Delivery processes of remanufactured gearboxes 246 Remanufacturing processes 249

23 Planning process: Inventory management 253 Different types of inventories 253 Planning of production and inventory levels 256 Ikea minimises inventory losses 259

24 Lifecycle processes: IFS Cloud 263 An ERP system with roots in maintenance management 263 Lifecycle thinking in IFS Cloud 266

25 The business process of remanufacturing 271 Business processes for remanufacturing 272 Product costing and financial transactions 276

Contents

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26 Collaborations for circular material flows: Kalundborg and Loopfront 281 The Kalundborg industrial symbiosis 282 Loopfront facilitates the reuse of construction material 287

27 How to measure circular flows 291 Dimensions of sustainable circular economy 291 Measuring environmental gain with life cycle assessment (LCA) 294 Measuring economic gain with life cycle costing (LCC) 297 Measuring social gain using Corporate Sustainability Reports (CSR) 298 Measuring material circularity gain with the material flow analysis 300

28 Epilogue 305 29 Further reading 309 Index 317

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Contents

Preface

Given the grand challenges with sustainable development, this book offers both a broad and a detailed view on circular logistics. It brings together different aspects and dimensions of designing and managing circular supply chains. A particular feature is the many interesting and thought-provoking cases that provide practical perspectives. This book makes a great contribution to understanding the complexities in creating and maintaining circular logistics, and is a recommended read for students, researchers, practitioners, and policymakers.

Jan Olhager, Professor, Supply Chain & Operations Strategy Lund University/Faculty of Engineering, LTH, Sweden

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Chapter 1

Introduction

When the economy and the material flows become circular, logistics and supply chain management have a central role in making this possible. ­Circular economy is about managing resources so that they will neither become waste, nor lose their value. Instead, resources are recovered, so that they will be productive for as long as possible. Supply chain management and logistics are about organising and planning material flows while using resources in the best possible way. Circular supply chain management (CSCM) and circular logistics are consequently about supply chain management and logistics which support circular material flows and a better use of resources.

When a company wants to sell products online, they need more than a new website – it is essential to create routines for delivery and return of items. Similarly, when a company starts to work according to a circular economy, it is not enough to develop new techniques, products or business models. The company also has to evaluate their supply chain management processes, such as choice of suppliers, stock keeping of used products, production planning when remanufacturing, or delivering products in reusable packages. Supply chain management is thus one of the tools which enable a more circular economy.

The goal of this book is to inspire and to give insights into circular supply chain management by discussing practical cases from Nordic companies. The focus is on discussing the principles and challenges of circular

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logistics by looking at material, money and information flows for some common products in different industries.

Today, there are agendas for a circular economy both on EU level and in the Nordic countries. These agendas point out a wide range of changes that are needed – such as new business models, techniques and product designs – in order to minimise waste and use of resources, and to maximise the use and lifespan of products. These agendas say that consumers, public administrations and private companies must be involved in the transition to a more circular economy. The linear take-make-use-lose flow of materials and products must be replaced by circular flows, as illustrated in Figure 1.1.

Base production Virgin raw material

Component

Assembly

Finished product Distribution

Production

Maintenance och repair

Reuse

Recycled raw material

Remanufacturing

Reconditioning

User

Refinement of waste fraction Sorted waste fractions

Collection and sorting

Sorted waste

Waste sorting

Landfill

Figure 1.1 An outline of how products and materials can circulate, as alternatives to “take-make-waste” -based material flows. The smaller the circles, the better; reuse is a better solution than, say, recycling, if fewer new materials and other resources are used. Often, there are many actors involved in one circular material flow, so every box in Figure 1.1 might represent a separate company.

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Chapter 1 Introduction

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Circular economy, sustainability and supply chain management

A circular economy can be seen as one of the ways to achieve a more sustainable community and business – but not all circular solutions are necessarily sustainable. A successful circular economy should therefore contribute to all three dimensions of sustainability:1

© THE AU THOR AND S T UDENTLIT TER AT UR

1 environmental 2 social and 3 economical.

Circular economy is a concept under development, and has mainly been created by practitioners, including companies, business consultants and policy makers. The idea of using the value of resources more efficiently makes common sense, as well as perfect business sense. Circular supply chain management is consequently a new domain for industry, as well as for science. This means, among other things, that best practices, tested routines and science-based theories might be missing from a certain domain. But not all companies which apply circular principles in their business are new – rather, laundries, car services and metal recyclers have existed for a long time. Today, these companies may find that their well-established businesses can also be described as circular.

About the book and the cases This book wants to present circular economy as a method for sustainable development, and circular supply chain management as an important enabler in realising that. There is, however, no ambition to make a distinction between sustainable and circular, since in many cases these definitions belong together. For example, the sustainability reporting of a company often also includes metrics associated with circularity.

In selecting the cases for the book, it was important that different types of products and industries in the Nordic countries were covered. Another aim was to find examples of the key product value chains pinpointed by the EU in the Circular Economy Action Plan: electronics, vehicles, packaging, plastics, textiles, construction materials, food and nutrients. This book was written during the covid-19 pandemic, when travelling was not easy, on-site 1 Korhonen, Honkasalo & Seppälä 2018, pp. 39–41.

Chapter 1 Introduction

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About the chapters This book can be read from beginning to end, or only by studying certain chapters. Chapters 2 and 3 give an introduction to circular supply chain management, while the other chapters are in a relatively free order. The chapters alternate between presenting a case and a more theory-based discussion with short examples. The book is divided into three parts based on the main themes of the chapters.

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Chapter 1 Introduction

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visits to companies were not wanted, and many companies had a shortage of employees and time. The collection of cases and examples is therefore also based on such practical aspects as whether the company was in a position to contribute to the book, whether useful information about the company was available, and what the author knew about the company. Some of the companies have been described in the author’s earlier books, and in this book a slightly different point of view is used. This is also why the majority of cases and examples come from Sweden.

Note that the approach of this book is not to cover all theory about circular economy or logistics; neither are the cases and examples in the book measured or evaluated to see if they are “perfectly circular” or how they could become “more circular”. Rather, the examples are chosen with the intention of showing different kinds of questions that arise in the area of supply chain management when circular economy is developed, as well as to show solutions that companies have already implemented. Several examples concern packaging, because it is through the packages that the products often interact with the logistics, and also because there are already circular material flows for different kinds of packages.

The field of circular economy and supply chain management is still developing; hence, every chapter contains suggestions for further reading.

When scientific articles are used as a source, this is in order to ensure that the book describes the challenges of circular logistics in an accurate way, rather than to evaluate or present the results of the research.

Each chapter contains questions to be discussed. These questions are intended to be discussed briefly in the classroom and also to inspire deeper studies.

Part 1: Basics of circular logistics – products and business models The first part of the book is about the basic principles of circular economy and logistics, including the role of product design and business models.

Figure 1.2 illustrates how this part of the book is connected to how the value of the products is built up and maintained. Chapters 2–9 are included in this part, with the following practical cases:

© THE AU THOR AND S T UDENTLIT TER AT UR

• Chapter 4: Taitonetti, about remanufacturing laptops and how the design of the devices makes this possible • Chapter 6: Svenska Retursystem (SRS), about reusable food packaging and how the demand for SRS crates from the food sector is managed • Chapter 8: How soft drink bottles are circulated and controlled by Nordic deposit-refund system operators Maintenance och repair

5. Circular business models

3. Circular principles and strategies

User 7. Circular design of products 2. What is circular logistics?

Reuse

Distribution 6. Shared packages: Svenska Retursystem

Reconditioning

Assembly

Remanufacturing

4. Preserving the value of computers: Taitonetti

Manufacturing

9. Roles and responsibilities

Recycling Base production

8. Food packaging: soft drink bottles Before use

Use

After use

Figure 1.2 Part 1 is about the circular principles and building up and keeping the value of the products. Chapter 2 and Chapter 3 give an introduction to circular logistics and circular principles, Chapter 5 is about circular business models and Chapters 4, 6 and 8 are practical cases.

Chapter 1 Introduction

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Part 2: Resources and circular material flows In Part 2, the focus is on different types of resources and material flows, such as food, wood, plastics and textiles. Figure 1.3 illustrates how the chapters in Part 2 can be connected to the biobased and technical circles of a circular economy. Chapters 10–17 are included here, with the following practical cases:

• Chapter 10: Kesko, about how a grocery chain works to minimise food waste

• Chapter 12: Textilia and Fristads, about two companies in the textile sector that handle workwear

systems for used textiles • Chapter 16: Tarkett, about the production of circular certified construction materials

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Chapter 1 Introduction

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• Chapter 14: Project Satin, about the development of collection

Biobased cycles/ renewables flow management

Technical cycles/ stock management Renewables and finite materials

11. Renewable materials and cascading

Design

Parts manufacturer

Regeneration by biosphere

Product manufacturer

Biochemical feedstock

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10. Prevention of food waste: Kesko

Service provider

Cascading

Anaerobic digestion Extraction of biochemical feedstock

13. About plastics

16. Circular certified products: Tarkett

Farming/ collection

Biogas

Recycle

Consumer/user

Collection

14. Collection of textiles: Project SATIN

Refurbish/ remanufacture

17. Material flows and plastics

12. Use process: workwear Reuse/ redistribute Share Maintain/ prolong

15. Handling and minimising waste

Minimize leakage and negative externatilities

Figure 1.3 Part 2 is mainly about circular material flows as well as resources which are important in a circular economy. Chapter 11 is about renewable materials, Chapter 13 about different types of plastics and Chapter 17 about the flows of plastics.

Chapter 1 Introduction

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Leena Kossila is a business system consultant in production and supply chain management with experience from many industrial companies in Nordics. She is entrepreneur, master of agriculture and forestry, teacher at Logistikföreningen Plan and author of two books about circular material flows and logistics.

Circular Logistics in the Nordics Supply chain management for a circular economy What are the implications for supply chain management when society and companies make moves towards a circular economy?

How can logistics aid in the adaption to circular material flows?

Circular logistics in the Nordics discusses these questions using real cases from Nordic companies. Circular economy is one of the new strategies towards a sustainable society, and at the same time, there are already solutions for how to take better care of the resources. Circular supply chain management (CSCM) integrates the circular economy philosophy with planning and executing logistics activities. This book gives a broad introduction to CSCM by looking at prerequisites, processes, and challenges – in actual cases as well as in theory. The book gives examples of how packages can circulate, the inventory routines needed when remanufacturing products and much more.

Circular logistics in the Nordics is written for those who study supply chain management, and for everybody how is interested in logistics or in circular economy.

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