Original equipment manufacturers (OEMs) are already creating sustainable business models through remanufacturing, recycling, and more recently car and ride sharing. But a broader view of waste reveals much more potential still to be mined from the circular economy. Along with sharing and recycling, further approaches from product as a service, product life extension and circular supply chain are set to transform the automotive industry’s business models. Moving OEMs, in particular, out of the low-margin manufacturing end of the automotive game.
By driving circular economy principles throughout the value chain, automotive players get a multiplier effect. Combining vehicle design, manufacturing and distribution with product as a service and product life extension business models, provides the potential to lower the cost base by up to fourteen percent, according to Accenture Strategy research.
Take Jaguar Land Rover as one example. The automaker employs Recovery and Recycling and Circular Supply Chains to expand the value potential of circular. The result: Better control of the cost base and less waste. And heightened competitiveness.
Looking across industries to high tech, Cisco launched a pilot, “Cisco Certified,” that entails designing products with circular principles in mind. After launching into the market, these products continue on a near perpetual lifetime as customers take them back to Cisco for easier servicing, refurbishment and ultimately, reuse.
What can OEMs do to increase competitiveness?
Start by mapping out a circular economy strategy. Consider how circular value can be maximized. And which end of the value chain to play in to gain the most value.
Create ecosystems: When automotive players decide to engage in the circular economy, in whatever configuration of models and approaches, it’s likely they’ll need to partner to gain the horsepower to realize circular advantages.
Develop the right capabilities. Shifting to a circular business model will have substantial ripple effects across an organization since it requires major changes in how companies operate.
Accenture Strategy, Sustainability
Senior Managing Director
Accenture Strategy, Automotive, Industrial, Infrastructure & Travel
Accenture Strategy, Products AIIT