This document presents a framework for studying supply chain management (SCM) in a circular economy (CE). It provides definitions of a CE and different CE business models. The study aims to create a framework to analyze SCM issues according to different CE business model strategies. Literature on CE business models, SCM in a CE, and closed-loop supply chains is reviewed. A preliminary framework is developed around slowing, closing, and narrowing resource loops. Two case studies of CE businesses are analyzed using this framework. The framework is found to effectively structure SCM issues for the case companies. Expanding the empirical data and further research on SCM in a CE is recommended.

1. VTT TECHNICAL RESEARCH CENTRE OF FINLAND LTD
The supply chain viewpoint to
circular business models
Outi Kettunen
Anna Aminoff
VTT Technical Research Center of Finland

2. 216/08/2017 2
Content
What is circular economy?
Aim of this research
Background literature
A framework to study SCM in a CE
Case implementation
Conclusions and next steps

3. 3316/08/2017
Circular economy in a nutshell
A circular economy is an industrial system that is
restorative or regenerative by intention and design (EMF,
2013; Lieder and Rashid 2016)

4. 416/08/2017 4
New business models are key to transformation into
a circular economy
 There are different architypes for
business models presented so far, e.g.
Bocken et al 2016:
 Access and performance model
 Extending product value
 Classic long-life model
 Encourage sufficiency
 Extending resource value
 Industrial Symbiosis

5. 516/08/2017 5
Our study

6. 616/08/2017 6
Background and objectives
 Supply chains have been identified as a key unit of action in the change towards a CE
 Lock-in to supply chains of today is one of the main barriers of transition towards a
CE.
 New business models that, for instance, rethink ownership, may create new
requirements and challenges for supply chain management
 It would be important to integrate SCM research into a CE, but the research as today
is very limited
The aim of this study is to
1. create a framework to study SCM in a CE
2. to identify SCM issues according to different strategies and types of
CE business models.
This framework provides a basis for understanding of the archetypes into
which CE supply chains fall.

7. 716/08/2017 7
Consumer-driven Business Models in Circular
Economy (2015-2017)
 Main focus
 How can companies create competitive advantage in CE
and what are the novel business opportunities?
 What are the factors influencing consumers’ acceptance
towards circular business models, especially services?
 How to co-create attractive business models with
consumers?
 How can technologies (IoT) enable the change?
 How to evaluate the CE based business models?
 Main method Rapid experiments - Testing new business
models based on CE with AARRE companies
 Partners: 3 research institutes, 6 companies + The
Federation of Finnish Technology Industries and The Chemical
Industry Federation of Finland. Collaboration with University of
Cambridge, University of Manchester.

8. 8
Literature review

9. 9916/08/2017
CE research 1/3: Circular business models
 Roots for research on CE implementation are in industrial ecology.
 Recently CE discourse has started to emphasise the economic aspect, seeing
CE business models as enablers to create a competitive advantage.
 Novel, often distributive business models, developed to reduce the need for
virgin raw materials, are a powerful tool in transformation towards a CE.
 Several classifications of business models exist, e.g.
 Circular supply chain models, recovery and recycling, product life cycle extension
and sharing platforms and products as a service.
 Slowing – closing – narrowing resource loops.
References: Ghisellini et al., 2015; Sauvé et al., 2015, Ellen Macarthur Foundation, 2013, Wijkman and Kristian, 2015, Bocken et al. 2016, Lacy and
Rutqvist 2015, Stahel 2010,McDonough and Braungart, 2002.

10. 1016/08/2017 10
CE research 2/3: SCM in a CE
 Leakage from a system is still high and reverse flows are significantly
influenced by high costs of handling in different phases. This prevents the
implementation of CE business models.
 Product complexity and supply chain length makes closing of the loops
challenging. An SCM approach that balances the forward and reverse supply
chains and ensures the uniform quality of material, is critical to success.
 Tangible outcomes can only be reached through joint action, and the transition
towards a CE can begin once the hinge points are identified and acted upon in
a concerted effort across companies and along the supply chain.
 Cross-industry collaboration is suggested to be essential in a CE.
 Trends, e.g advanced tracking and treatment technologies and governance
stimuli might help here by, for instance, increasing the efficiency of reverse
flow.
References: Ellen Macarthur Foundation, 2014, Lacy and Rutqvist 2015

11. 1116/08/2017 11
CE research 3/3: Closed loop supply chains, CLSC
 CLSC is a literature stream closely related to a CE and it offers a good basis to study
SCM in a CE.
 The CLSC research interests are moving from minimising costs to creating value.
 CLSCs integrate forward and reverse supply chains.
 A reverse SC (RSC) significantly differs from a forward SC (FSC) with regard to its
operations, management and stakeholders.
 In an integrated CLSC, the forward and reverse chains are managed in a coordinated
way towards maximising value.
 Previous studies have suggested several frameworks that describe the structure of
CLSCs. Ativities of reverse logistics and recovery options are essential in e.g. remanufacturing,
refurbishing or recycling. This can be in the same industry or in a different industry.
 CLSC and business models: The following strategic factors have been found to play a key role in
improving CLSC performance: product design, and the business model and service concepts such
as leasing or service-level agreements.
References: Lieder and Rashid, 2015, Aminoff and Kettunen, 2016, Schenkel, Krikke et al. 2015, Guide and Van Wassenhove, 2009, de la Fuente et
al. 2008, Kleinfdorfer et al. 2009

12. 1216/08/2017 12
Slowing – closing – narrowing resource loops
(Bocken et al. 2016)
Mechanisms by which resources flow through a
system
Related business models
Slowing resource loops. The flow of resources can be
slowed down by extending or intensifying the utilisation
period of products. It can be done through the design of
long-life goods and product-life extension. E.g. repair or
remanufacturing.
Access and performance model
Extending product value
Classic, long-life model
Encourage sufficiency
Closing resource loops. The loop between post-use and
production can be closed through recycling. This results in
a circular flow of resources.
Extending resource value
Industrial Symbiosis
Narrowing resource loops. This aims at using fewer
resources per product. It does not influence the speed of
the flow of products and does not involve any service
loops.

13. 13
Our framework and case data

14. 141416/08/2017
Supply chain strategies in a
CE
Identified key areas of SCM in
a CE
Slowing the loop Closing the loop
Structure of the forward and
reverse supply chain
Actors in the supply chain
Bio/technical materials
Actors in the supply chain
Balancing forward and reverse flow
Bio/technical materials
Internal, within the original SC or to a
secondary forward supply chain, cross industry
Activities Activities in the SCM, including re-use, repair,
remanufacturing, last mile issues
Activities in the SCM, including reverse logistics
and recovery options, such as refurbishing or
recycling
Material flow management E.g., utilising data obtained from the supply
chain, including customer data
Push/ pull
Forecasting
Goals E.g., Efficiency, transparency, customer value E.g., Quality of recycled/reused material,
customer value
Governance models/
collaboration
Veritcal/horizontal/ hybrid governance,
Social/formal governance
New forms of collaboration
Motivation of different value chain partners to
collaborate
Veritcal/horizontal/ hybrid governance,
Social/formal governance
New forms of collaboration
Motivation of different value chain partners to
collaborate
Preliminary framework to study SCM in a CE

15. 151516/08/2017
Case research design
Company
pseudonym
Alpha Beta
Field Construction waste treatment and
production of paving stones out of
secondary raw material.
Start up, crowd-sourced services, last
mile solutions
Business model Closing the loop / Extending resource
value: Profitable processing of mixed
construction site waste into secondary
raw material and manufacturing paving
stones out of waste wood.
B2B and B2C
Manufacturing
Slowing the loop
Access and performance model , Tool
rental:
B2C
Service business
Business model is at a planning stage
Interviewees’
profiles
Managing director, Head of production,
Head of R&D, Quality manager, Head of
Sales, Chairman of board, Logistics
manager
Co-founder, CEO
No of interviews 4 2
No of workshops 2 1
Length of interviews 1-2 hours 1-2 hours

16. 1616/08/2017 16
Empirical findings Closign the loop / Alpha
 SCM is extremely important. This is due to,
e.g., high volumes and low value of transported
material as well as seasonal variation.
 There are various spots in the supply chain
that do not support the CE business model and
should be improved upon or redesigned, e.g.,
storage possibilities of waste and secondary
raw material.
 Partners and other stakeholders are required
to adapt to new business models and to
support it in order to create win-win situations.

17. 1716/08/2017 17
Conclusions and next steps

18. 1816/08/2017 18
Conclusions
 Business models are a good starting point to research supply
chains.
 The real life CE business models stretch both far forward and far
backward in the supply chain and need to be handled as larger
entities.
 The framework developed in this study
 …seems to facilitate structuring the supply chain core issues that the
companies face in CE business models. By structuring the operations
and challenges into our framework, it is possible to point out the critica
points of the business models.
 The focal company often takes on several business models in the
supply chain. The framework allows these to be addressed
simultaneously.
 The framework worked well with our two cases despite of their
significant differences.
 It is possible and beneficial to identify SCM issues according to
different types and strategies of CE business models. It helps to
structure the vast concept of SCM in a CE and to classify the core
SCM issues according to specific business models.

19. 1916/08/2017 19
Next steps
 Expanding the empirical data. After wider case
data, specific characteristics can be identified and
structured attention be drawn to these when
building CE business models in different
archetypes. To get a more nuanced view, it would
be beneficial to collect empirical data from each of
the business model archetypes following the
proposed framework.
 SCM in a CE is a key issue with a lot of
challenges and, all in all, more research is
needed.

20. Thank you!