Circular supply chains with robust partner relationships are more sustainable and cost effective.
As businesses increasingly shift toward more sustainable packaging and strive for zero waste, the importance of fully aligned and synchronized supply chain partners has become mission critical. Traditional supply chains were originally designed and optimized for linearity and efficiency, often overlooking circularity at the end of the supply chain. In response to a variety of market drivers, supply chains are evolving, and we are witnessing a dramatic transformational shift toward circular supply chain practices.
In the rapidly evolving circular economy, surplus packaging (pallets, corrugated boxes, corner guards, shrink wrap, etc….) and food waste are now being diverted through new channels and partners to ensure zero waste to landfill. With volumes growing and distribution center space shrinking, collaboration and supply chain excellence is the only way forward.
Effective partner relationship management is crucial for a thriving supply chain, especially in the context of the emerging circular economy. By nurturing strong partner relations, organizations can efficiently manage all areas of the circular supply chain such as surplus packaging, reusable container assets, and food waste donation/diversion, while minimizing delays, asset downtime, excess inventory, and rework. Strong partner relations also yield favorable economic improvements and enhance service performance. Moreover, businesses that maintain robust partner relationships position themselves to navigate market fluctuations, drive collaborative innovation, and swiftly respond to dynamic market forces.
Cultivating and nurturing supply chain partnerships is not just about transactional benefits; it is about transparency, integrity, and reliability that can drive long-term success. However, effectively managing supply chain partners presents its fair share of challenges.
Primary obstacles you may encounter include:
- Ownership & Accountability: In many retail and distribution companies, this activity is structured around a waste disposal paradigm, where it is considered essential but non-core. Unfortunately, there is often no internal “owner” who is fully responsible and accountable for end-to-end outcomes. Partners frequently navigate a complex landscape of functional leaders, each with their own objectives, which can lead to confusion, conflict, and overall inefficiency.
- Lack of Standards: Despite the existence of recycling, reuse, and diversion practices for decades, there are still limited industry standards related to asset valuation, operating procedures, and performance metrics. This lack of clarity can result in a lack of transparency, distrust, and system-wide inefficiencies.
- Communication Barriers: Collaborating with supply chain partners—such as recyclers, reusable asset owners, carriers, brokers, and others (including food banks and composters)—can be challenging. Informal, reactive communication methods using outdated systems may cause delays, errors, and misunderstandings that impact overall operations.
- Motives and Incentives: Consider the example of surplus pallets. Distribution center (DC) managers’ objectives often clash with those of their supply chain partner (the recycler). As the asset owner, the DC manager seeks maximum value for every unit leaving the building. Conversely, the recycling partner aims to minimize costs and maximize profit, offering the lowest value only for units they deem to have residual worth. The absence of standards and transparency can foster mistrust, leading to conflict and further inefficiencies.
- Disparate Systems: Currently, most supply chains do not utilize purpose-built systems to manage their recyclables, reusables, donations, and waste. For this reason, transaction records usually reside on spreadsheets and paper. Unfortunately, this approach severely limits visibility, control, analytics, and reporting capabilities that modern supply chains require. As we move towards the future, volumes and complexity will increase, and this limitation will become even more pronounced.
- Supplier Performance and Reliability: Staying on top of multiple suppliers, across multiple facilities to ensure they meet your expectations can be challenging. While complex, utilizing the right technology to manage and access the reliability and performance of each partner is critical to your organization. Not implementing such oversite can cause services issues to multiple locations that can severely hamper your DCs core duties.
- Regulatory Compliance: In today’s era of Environmental, Social, and Governance (ESG) awareness, ensuring regulatory compliance is a multifaceted task—especially when operating across different sites and regulatory districts. Legacy programs sometimes underestimate the actual count of recovered commodities, which conflicts with sustainability reporting that measures success in units and pounds. Strong partner relationships play a vital role in aligning your preferred disposition channels (such as reuse, upcycling, or recycling) with actual downstream activities and will limit the potential of violations that can harm your brand.
- Partner Concentration: All recyclables are commodities and as such, supply and demand are highly dynamic. Relying heavily on a single supplier poses significant risks, especially during volatile market conditions. If a supplier (e.g., pallet recycling) encounters a notable reduction in demand, storage capacity at their facility becomes limited. This can lead to disruptions to your distribution center (DC) operations and the entire supply chain. To mitigate this risk, consider diversifying your partner portfolio by adding secondary and, where necessary, tertiary partners. This approach provides peace of mind and enhances overall resilience. Such practices also minimize the possibility of pricing deterioration.
How Can Technology Help?
Tech platforms are no silver bullet, but they can offer a wide range of benefits for businesses seeking to improve their partner relations and overall supply chain results. Here are just a few of the key advantages of purpose-built tech platforms:
Single Point of Truth: Tech platforms provide a centralized communication channel for all partners in the supply chain, where requests and decisions are executed and recorded in one place. Having a centralized digital platform eliminates side channels and allows timely information sharing, greater transparency and better collaboration while minimizing the risk of miscommunication. It also significantly cuts down on the time spent calling and emailing your partners and retracing steps.
Automated Workflow & Standard Operating Procedures: Tech platforms with automation features help you streamline your processes and free your employees from daunting, inefficient tasks. Teams that still rely on the manual creation and communication of documents are faced with the unmanageable task of trawling through data, and are burdened by complex, time-consuming processes. When you automate your processes you improve efficiency, reduce errors, and free up your employees for more strategic and inspiring projects.
Performance and Value: Centralized platforms can also help you assess your supply chain partner’s performance along key metrics such as count accuracy, trailer dwell time, timing, etc.…making it easier for you to have honest and constructive relationships with your partners as well as ensuring that you are aligned with businesses that share the same goals and mission that you do. Real-time scorecards that include historical realized value/compensation, key performance indicators (KPIs) and service level agreement (SLA) data can generate actionable insights and improved decisions relating to supply chain processes, labor reduction, fair market compensation and improved overall service levels – while building trust.
Analytics & Reporting: In addition to the supply chain performance reporting mentioned earlier, technology platforms offer more than just data insights. They provide a single, standardized data set and reporting functionality, enabling both scheduled and on-demand reporting for a wide range of metrics and milestones. Knowledge is power. Comprehensive understanding of your data allows you to make data-driven decisions to positively affect your supply chain and partner relationships.
Mitigating Risks: As the shift from recyclable to reusable materials accelerates and volumes increase, so does complexity. However, the availability of floor space, dock doors, and yard space remains insufficient for the task. Forward-thinking companies are leveraging technology to speed up communications and enhance visibility, control, and efficiency while minimizing risks and maximizing throughput.
Flexibility and Adaptability: Modern supply chain platforms are no longer monolithic, they are modular. This allows users to quickly access a diverse array of modules tailored for applications and outcomes crafted specifically to their needs. This flexibility ensures that organizations can adapt swiftly to modern supply chain challenges, changes in market and regulatory expectations and ensures optimized operations.
Going Forward
Technology has emerged as a powerful tool for enhancing supply chain partner relations. It fosters trust, reliability, and enduring partnerships that drive long-term success in the ever-evolving landscape of supply chain management. Embracing these digital solutions is not merely a strategic move; it is a necessity in the circular economy.
Managing partner relations in the circular economy is a complex yet critical aspect of a well-managed supply chain. The challenges can be significant, and as the pressure for sustainability mounts, complexity and volumes will continue to grow. However, purpose-built technology serves as a key enabler—it drives behavior, supports relationships, and allows companies to coordinate and collaborate across locations and partners.