Towards Circular Economy Implementation in Manufacturing Systems Using A Multi-Method Simulation Approach to Link Design and Business Strategy

The recent circular economy movement has raised awareness and interest about untapped environmental and economic potential in the manufacturing industry. One of the crucial aspects in the implementation of circular or closedloop manufacturing approach is the design of circular products. While it is obvious that three post-use strategies, i.e., reuse, remanufacturing, and recycling, are highly relevant to achieve loop closure, it is enormously challenging to choose “the right” strategy (if at all) during the early design stage and especially at the single component level. One reason is that economic and environmental impacts of adapting these strategies are not explicit as they vary depending on the chosen business model and associated supply chains. In this scenario, decision support is essential to motivate adaptation of regenerative design strategies. The main purpose of this paper is to provide reliable decision support at the intersection of multiple lifecycle design and business models in the circular economy context to identify effects on cost and CO2 emissions. The development of this work consists of a systematic method to quantify design effort for different circular design options through a multi-method simulation approach. The simulation model combines an agent-based product architecture and a discrete event closed-loop supply chain model. Feasibility of the model is tested using a case of a washing machine provided by Gorenje d.d. Firstly, design efforts for reuse, remanufacturing, and recycling are quantified. Secondly, cost and emissions of different design options are explored with different business model configurations. Finally, an optimization experiment is run to identify the most cost-effective combination of reused, remanufactured, and recycled components for a business model chosen on the basis of the explorative study results.

The recent circular economy (CE) movement has raised awareness as well as interest about untapped environmental and economic potential in manufacturing industry. In this context, the design of closed-loop manufacturing systems capable of closing the loop by intention rather than by chance has received increasing attention. However, to the largest extent so far, CE research has been carried out from the perspectives of end-of-life (EoL) waste, resource use, and environmental impact while leaving business and economic perspectives rather unexplored. From industrial perspective, a transition from a linear (take-make-dispose) to a closedloop or circular system requires a move from the conventional model of selling physical products to selling access to functionality or service. In such service-based business models, including leasing or pay-per-use, the manufacturers retain ownership of their products and take them back after use for the purpose of value recovery and redistribution. As a consequence, post-use design strategies like reuse, remanufacturing, and recycling become highly relevant for the CE implementation process as they practically enable loop closure and influence cost and emissions of operational value recovery. These circumstances bring manufacturing companies to an uncertain position when it comes to CE approaches since the potentials of their product design in combination with new (circular) business models are not known.

There are sophisticated tools available for designers which provide decision support during the design process in terms of cost estimates, lifecycle assessment, and material criticality. However, most of these tools are limited to the scope of linear production, i.e., used by one user for one life neglecting recovery activities. At this point, it becomes enormously challenging for designers and decision-makers to estimate economic and environmental benefits of design options in an expanded and unexplored CE view. One approach to promote an industrially driven CE consists of simultaneous consideration of product design, business models, and supply chains. Based on this systemic perspective, Fig. 1 illustrates explorative and optimization approaches. The explorative approach assumes that there is not any preknowledge available. Starting point is therefore the designer who allocates different end-of-life strategies to components. As a next step, the additional design effort in terms of cost or CO2 emissions to realize the chosen design needs to be specified. Finally, the business model through which the product is going to be delivered is decided. By going through these steps multiple times with different constellations allows for systematic exploration of design and business potentials. The other way around, the best fitting design strategy for one particular circular business model can be supported by optimization approaches. If the relevant business model has been chosen and the maximum additional design effort (e.g., budget) decided, it is possible to obtain the best fitting (e.g., cost-minimum) allocation of EoL strategies on component level. Both approaches connect design as well as business strategy and treat supply chain as implicit but central part. To date, tools are missing which provide an objective approach to guide decisionmaking from this comprehensive and systemic perspective in a quantifiable manner. In the given context, the objective of this research is to develop a multi-method simulation tool to assist the CE paradigm and enable assessments of circular design strategies on component level considering various CE business models. There are three elements on which the tool has been based on:

  • method to systematically quantify design efforts for different circular design options;
  • multi-method model (MMM) development using agent-based (AB) and discrete event (DE) approaches;
  • computer simulation to demonstrate combined effects of design options and CE business models.

The applicability of the tool is demonstrated through an illustrative case scenario using a washing machine example from the company Gorenje d.d. which has provided the product data for this study. The case tests different circular design strategies including reuse/remanufacturing/recycling at component level in a buy-back, leasing, and pay-per-use supply chain setting. The resulting MMM is supposed to provide insights on cost effects and environmental impact (CO2 emissions) and therewith facilitate decision-making for industrial organizations shifting from linear to circular systems.

Explorative approach and optimization approach to connect design and business strategy in a circular economy

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