The Future Economy of Spare Parts Is Circular

In today’s world, where sustainability is becoming increasingly critical, businesses seek ways to reduce waste and minimize their environmental footprint. One practical approach gaining traction is the circular economy. At its core, the circular economy promotes keeping products, materials, and resources in use for as long as possible. This concept not only benefits the environment but also presents significant economic advantages.

Service Parts Management plays a pivotal role in advancing the principles of the circular economy. This blog will explore three key ways Service Parts Management can support and contribute to a more sustainable and circular economy.

Product Design for Sustainability

Service Parts Planning does not operate in isolation; it’s intricately linked to product design and development. A circular economy strongly emphasizes designing products with longevity, repairability, and recyclability in mind. Service Parts Planning supports these principles by providing product designers and engineers with valuable feedback.

Companies can identify design flaws or weak points in their products by analyzing data on spare parts usage, failure rates, and repair processes.

This information can guide product improvements, resulting in more durable and sustainable items. For instance:

  • Durability Enhancement: If a specific part frequently fails or needs replacement, Service Parts Planning data can highlight the need for materials or design changes to enhance durability.
  • Standardization: Standardizing components across different product lines can simplify Service Parts Management and make reusing or recycling parts easier.
  • Modularity: Designing products with modular components that are easy to replace or upgrade promotes a longer product lifespan and reduces overall waste.

Incorporating Service Parts Planning into the product design process helps bridge the gap between product development and sustainability, contributing to the circular economy’s objectives of extending product life and reducing waste.

Reverse Logistics and Repair Optimization

Reverse logistics, the process of moving goods from their final destination back to the manufacturer, recycling, or repair center, is a vital component of the circular economy. Service Parts Planning can significantly enhance the efficiency of reverse logistics operations, making it easier to recover, refurbish, and recycle products and parts.

How Service Parts Management supports reverse logistics optimization:

  • Return Management: By tracking the return of defective or unused parts, Service Parts Planning can streamline the return process. This reduces handling costs and ensures that parts are sent to the appropriate destination for repair, refurbishment, or recycling.
  • Repair Optimization: Accurately forecasting defective part returns allows you to offset new purchases to ensure overall fill-rate goals and first-time fix rates. Leveraging repaired or refurbished parts is often a fraction of the cost of purchasing a new part and reduces overall waste over the course of the product lifecycle.
  • End-of-Life Handling: As products approach the end of their lifecycle, it’s essential to accurately forecast the decline in parts demand and begin tapering off new part purchases where repaired parts can meet the service requirements throughout the end of life.

Incorporating reverse logistics and repair optimization into Service Parts Management contributes to the circular economy’s goal of reducing resource consumption and minimizing the environmental impact of product disposal.

Understanding Product Lifecycles in the Service Supply Chain

A primary source of spare part excess and obsolescence, which has a negative economic impact on companies and can also lead to eventual scrap and disposal, is the inability of planners to accurately predict the lifecycle of the products for which they need to plan parts.

Two critical aspects of the product lifecycle are:

  • New Product Introduction (NPI): When a new product is introduced to the market, service parts must be available to support repair in the unfortunate event of a failure. In the current social media environment, nothing is more damaging to a Company’s brand or a product launch than product failures that cannot be serviced. Which parts do you stock, where, and how deep? A common place to start is using engineering estimates of failure rates of critical components and product sales projections, but these efforts often cause us to overshoot the forecast, leading to excess that we hope to burn off over the remainder of the product lifecycle, or undershoot the forecast, leading to expedited shipments and unhappy customers.
  • End of Life (EOL): As a product is in the decline of its product lifecycle, it’s important to have just enough parts to service the products through the end of life or as contracts warrant without creating obsolescence, leading to scrap and disposal.

Additional considerations become even more critical when we are forced to make Last Time Buy (LTB) decisions when a supplier advises that they’re no longer going to manufacture a part. As a result, planners must purchase a quantity of parts to support the products throughout the remainder of the lifecycle or as contracts warrant. This becomes even more complex as parts exist on multiple product bills of materials (BOM) in different lifecycle stages.

Circular Economy for a More Sustainable Service Supply Chain

Fortunately, advances in Artificial Intelligence (AI) and Machine Learning (ML) allow us to accurately forecast product lifecycles with minimal information to make decisions in the beginning and the end of the product lifecycle, ensuring we have the appropriate parts stocked in the proper quantities to minimize expedited freight (reduce CO2 emissions) and minimize excess and obsolescence to minimize waste (scrap and disposal).

Service Parts Planning is a powerful tool that can advance the principles of the circular economy in various ways. By influencing product design for sustainability, optimizing reverse logistics and repair operations, and accurately predicting product lifecycles, Service Parts Planning helps businesses reduce waste and minimize their environmental footprint. Embracing these strategies aligns with the growing demand for sustainability and leads to cost savings and improved customer satisfaction.

As the world transitions towards a more circular and sustainable economy, Service Parts Management is a key enabler of this transformative journey.

Jeff Nieze baxter planning

Jeff Nieze
VP Solution Strategy

Jeff Nieze has over 25 years of supply chain experience, most of which focused on the Service Supply Chain. While Jeff has held various roles during that timeframe, his primary focus has always been on delivering solutions to customers that drive value and improve end-customer satisfaction. As VP, Solution Strategy at Baxter Planning, Jeff continues his focus on delivering value and customer satisfaction through strategic consulting and serving as a liaison between Sales and Product Management to drive innovation in our BaxterPredict Platform.