What is the generative economy? And how do supply chain virtual twins play a role in this generative economy? Carlijn Goedhart, Sustainability Lead at DELMIA explores these questions in greater detail.

The generative economy is all about the circular economy

According to Ellen MacArthur Foundation, the three principles of a circular economy are the following:

1. Eliminate waste and pollution
2. Circulate products and materials (at their highest value)
3. Regenerate nature

More and more companies pretend to support a circular economy by only focusing on the first and second principle. Although there is arguably a third principle that cannot be left out. In order to emphasize this principle on top of the other two principles of the circular economy, Dassault Systèmes uses the term “(re)generative economy” as part of its mission and We believe that this will be a solution to (over)consumption.

The importance of a circular economy

In our current system, we take materials from the Earth, make products from them, use these products for a while, and throw them away as waste. A take-make-use-waste model focused on consumption is not sustainable because it takes much more from the planet and society than it gives back: it leaves a negative eco-bill. As we continue like this, supplies of materials are running low, waste mountains are growing bigger and bigger, and nature suffers. All of this will affect humanity. Therefore, we have to transform from a linear system to a system that continuously reuses materials: a circular economy.

The main idea of a circular economy is reducing the consumption of natural resources, avoiding materials that become waste and therefore keep products and materials in circulation. It is the successor to the famous “3R waste hierarchy” that everyone knows: reduce, reuse, recycle. In the meantime, this list has evolved into many more Rs. In general, the main goal of the circular economy (and the R-strategies) is to retain the value of materials and products as much as possible.

There are plenty of great examples of this working in practice, for example, one of Dassault Systèmes customers’ in the automotive space made better use of scrapyard materials. They changed their internal processes to use a product for its original purpose. Instead of recycling bumpers from the scrapyard into other, lower-quality plastic parts, the bumpers are now reused. This avoids the energy required to separate, wash, shred, melt and remold plastics for recycling. In addition, there is no longer a need to buy new bumpers made from virgin materials. Furthermore, the value of the bumper material remains much higher than that of the original scrap.

Key opportunities in the circular economy transition

Ellen MacArthur Foundation highlighted a couple of key opportunities in the transition to the circular economy:

1. Improving the design of products and their corresponding production processes, so that products last longer. Elements are easily repaired and reused by designing products and their manufacturing lines for product disassembly,

2. Ensuring the reverse network is in place, including logistic flows of reverse products, to save products from landfills and return them to the manufacturer after use.

3. Creating new value chains and optimizing material flows, so that we maximize the usage of materials by keeping them in the loop.

Virtual twin solutions are key for businesses to imagine, create and deliver circular manufacturing processes. These solutions are able to tackle all of the key opportunities to support a circular economy. The power of combining the virtual twins of the product, manufacturing and supply chain is extremely powerful, but the scope of this blog focuses in on the opportunity with the supply chain, and how the supply chain virtual twin can enable the creation of new value chains, and the optimization of material flows.

Optimizing material flows within supply chains

An example: sustainable sourcing optimization

DELMIA Quintiq Optimized Planning enables companies to set up a virtual twin of their supply chain. A concrete example is the optimization of a sourcing plan. It helps users answer the question: “how much of which product to buy from which supplier in which week?” while taking into account constraints, costs, carbon emissions and supplier ratings. Supplier ratings are non-quantifiable factors, for example supplier compliance with standards and certifications. The choice of KPIs, including circularity metrics, and how much weight these are given, depend on the settings and can be different for each company or situation. It allows a manufacturer to make trade-offs between multiple different scenarios, such as:

1. Cost vs. Sustainability with a focus on Cost: This plan minimizes costs, but sources materials from suppliers that are geographically located far from manufacturing locations, which introduces longer distribution routes.

2. Cost vs. Sustainability with a focus on Sustainability: This plan sources material from local suppliers, close to manufacturing, who offer recycled materials, have sustainable business practices and use EV or rail networks for distribution. The plan involves higher costs and a lower margin than the first scenario, but generates much less indirect scope 3 emissions and ensures a more responsible value chain.

3. Balanced: This plan optimizes against both costs and carbon emissions. It results in a balanced supply plan that involves a higher margin than the second scenario, but generates much less indirect scope 3 emissions than the first scenario. 

Consequently, by rapidly and precisely evaluating potential scenarios in the virtual world, the supply plan design is ready to be applied in the real world and lays a foundation for the overall value chain.

Creating new value chains within and between companies

In a circular economy, waste is the new raw material. Instead of being discarded, the output of one process step becomes the input of another. Therefore, to keep products and materials circulating, circular processes have to be set up.

For example, a Dassault Systèmes customer in the aluminum industry increased the use of scrap aluminum and reduced the use of virgin materials, by changing their internal processes. The quality of the aluminum product depends on its ingredients; the quality of the scrap. Therefore, now the scrap is first carefully sorted into low/high quality “scrap buckets”. The next step is the planning of the aluminum batches, which is very complex because hundreds of properties have to be taken into account (such as quality or strength). Thanks to DELMIA Quintiq, optimal batches are composed with the available supply of scrap material, while respecting their customer’s requirements and delivery dates.

The example above illustrates an improvement of process innovation within the organization. However, circular processes go beyond a single company: complete new circular value chains should be built between different companies. Companies have an unique opportunity to join a large network of different companies in order to keep products and materials in the loop. We see initiatives already emerging within sectors where raw materials are becoming scarce, such as steel and aluminum. Key stakeholders, from metal producers to waste management companies, are exploring how materials can be kept in the cycle for longer.