Vertical Integration Boosts Circularity in Product Lifecycles
Category: Resource Management · Effect: Strong effect · Year: 2020
Firms that vertically integrate their operations are better positioned to implement robust circular service operations like repair and remanufacturing, leading to more closed-loop systems and improved product design feedback.
Design Takeaway
When designing for circularity, consider how your company can influence or control the post-consumer phase of the product to maximize its lifespan and resource value.
Why It Matters
Understanding how to structure value chains is crucial for designing products with extended lifecycles. This research highlights that the degree of control over the supply chain directly impacts the effectiveness of circular strategies, influencing resource efficiency and waste reduction.
Key Finding
Companies that control more of their supply chain are more successful at keeping products in use longer through repair and reuse, which also helps them improve future product designs.
Key Findings
- Firms pursuing 'slowing' strategies (repair, reuse, remanufacturing) tend to have higher vertical integration than those pursuing 'closing' strategies (recycling).
- Higher vertical integration enables greater loop closure and facilitates better feedback into product design.
- A distinction was made between independent and autonomous third-party loop operators.
Research Evidence
Aim: How do different coordination mechanisms (make, ally, buy, laissez-faire) influence the structure and effectiveness of circular value creation architectures in product lifecycles?
Method: Embedded Case Study
Procedure: The researchers analyzed smartphone industry cases to understand how Original Equipment Manufacturers (OEMs), retailers, and third-party operators coordinate to offer voluntary circular services, developing a typology of Circular Value Creation Architectures (CVCAs).
Context: Circular economy strategies within the smartphone industry.
Design Principle
Maximize product lifecycle value through strategic control of reverse logistics and service operations.
How to Apply
Evaluate your product's potential for repair, reuse, and remanufacturing. Consider how your company's current or future supply chain structure supports these circular activities.
Limitations
The study focused on the smartphone industry, and findings may vary across different product categories and markets.
Student Guide (IB Design Technology)
Simple Explanation: If a company wants to make its products last longer by fixing them or reusing parts, it's usually better if that company controls more of the steps involved, from making the product to taking it back and fixing it.
Why This Matters: This research helps understand how business structures affect sustainability efforts, which is important for designing products that are not only functional but also environmentally responsible.
Critical Thinking: To what extent can a company achieve circularity without significant vertical integration, relying instead on strong partnerships and contractual agreements?
IA-Ready Paragraph: The research by Hansen and Revellio (2020) suggests that a company's level of vertical integration significantly impacts its ability to implement effective circular economy strategies. Specifically, higher control over the value chain, such as through direct management of repair and remanufacturing processes, enables more robust product lifecycle management and greater potential for resource recovery and design feedback, which is a key consideration for developing sustainable design solutions.
Project Tips
- When researching a product, consider who controls its repair and end-of-life processes.
- Think about how a company could gain more control over these processes to make it more circular.
How to Use in IA
- Reference this study when discussing the business models or supply chain strategies that support circular design in your design project.
Examiner Tips
- Demonstrate an understanding of how business strategy influences the feasibility of circular design principles.
Independent Variable: Coordination mechanisms (make, ally, buy, laissez-faire) and degree of vertical integration.
Dependent Variable: Effectiveness of circular service operations, loop closure, feedback into product design.
Controlled Variables: Product type (smartphones), market conditions, regulatory environment.
Strengths
- Provides a clear typology of circular value creation architectures.
- Empirically grounded in a relevant industry case study.
Critical Questions
- What are the trade-offs between vertical integration and the agility offered by partnerships?
- How do different types of third-party operators impact the success of circular loops?
Extended Essay Application
- Investigate the circularity strategies of a specific company and analyze its supply chain structure in relation to its stated sustainability goals.
Source
Circular value creation architectures: Make, ally, buy, or laissez‐faire · Journal of Industrial Ecology · 2020 · 10.1111/jiec.13016