How ERP Systems Have a Place in the Circular Economy Model

December, 2021

In the circular economy, products are manufactured and distributed so that businesses can maximise the product itself or its components for long periods.

Products are designed from the beginning of the process so that raw materials and components may be remanufactured within certain procedures, reducing waste and increasing efficiency.

A few objectives of a circular economy is to lower energy consumption in manufacturing and carbon emissions in distribution, ultimately leading to reduced waste in the environment.

With the rise of circular economies, ERP vendors such as SAP are investing more time and effort into sustainability efforts as new regulations may arise.

How ERP systems play a role

Moving to a circular economy is both complex and expensive. Businesses must collect and analyse massive volumes of data to comprehend and follow company objectives.

Since ERP systems are at the core of many manufacturing and distribution processes and procedures, they contribute an essential role in allowing businesses to transition to a circular economy.

As business circumstances continue to change, sustainability and the circular economy become increasingly relevant. This results from the changes in both government laws and customer demand for environmentally friendly goods.

Companies must begin to think more holistically and long-term about manufacturing and distributing things. They will, however, need to invest in additional technology to adopt circular economy ideas.

SAP Responsible Design and Production

SAP, a notable name within the ERP market, provides a range of ERP technologies that allow businesses to measure and evaluate sustainability targets most important to them, such as measuring carbon consumption within corporate activities like manufacturing and distribution.

SAP recently announced SAP Responsible Design and Manufacturing, which focuses on designing goods more sustainably and executing a circular economy production model.

The ERP system can assist businesses in tracking and reporting on data that may support the use of recycled or sustainable materials, which are often more costly than plastics.

Companies, for example, may analyse key performance indicators (KPIs) such as the number of plastics used, sourcing prices, and the amount of possible plastics taxes. In addition, the data received from ERP systems may offer decision-makers a study of the costs and environmental implications.

Circular economy and servitisation

While SAP provides circular economy solutions, businesses are also looking to intertwine the circular economy and servitisation.

For example, manufacturing-focused ERP and field service management (FSM) tools may help firms transition to circular economy models and achieve servitisation objectives, in which items are supplied as a service.

To create a circular economy, companies need to design items for service and for that circular economy,

This will affect how businesses design the product and how you create your service models, asset lifespan predictions, spare parts strategy, refurbishment, and replacement.

All of which fits into your servitisation plan and your circular economy strategy.

The best forward-thinking businesses build goods for the circular economy and servitisation from the outset. Companies produce repaired or replaced items rather than discarded at the end of their useful life under both models.

Rather than concentrating just on the social advantages of sustainability, the motivation for adopting either model must be business-driven as well.

To learn more about ERP systems in circular economies, feel free to reach out to us.