Circularity in ICT Supply Chain Management : Assessing material efficiency in inventory management for circularity at Ericsson

University essay from KTH/Skolan för industriell teknik och management (ITM); KTH/Skolan för industriell teknik och management (ITM)

Abstract: In the currently dominating linear economy, there is a strong focus on the forward supply of products, where products and materials are being replaced and wasted at an increasing pace. In addition to this, there are products not even reaching customers, being scrapped as a result of them being excess in inventories. As the increasingly noted circular economy aims to control the flows of materials so that these are circulated and the value of them is kept as high as possible while minimizing waste, it offers a set of tools useful to increase the material efficiency of excess inventories. The purpose of this thesis is to investigate how improved inventory management can increase material efficiency from a circular economy perspective, to improve environmental and economic sustainability performance. A case study was completed at a global company in the ICT manufacturing sector where the current processes for handling excess inventory were studied along with the implications of product modularization. While exploring this topic, the thesis further aims to identify barriers and potentials to improving inventory management from the circular economy perspective. In enabling this, a qualitative study was performed, collecting empirical data through interviews with employees and researchers to use as the base for analysis and discussion. The findings present that although processes for managing products in excess inventory exist at the case company, there is great room for improvement regarding both a wider application of these along with the incentives and efficiency of them. The selection of products to be recirculated is today greatly dominated by economic factors, where typically only high-value products tend to be considered and the environmental aspect is somewhat lost in this consideration. Moreover, modularization is identified as an enabler for increased material efficiency in inventory management, reducing unique components and materials in inventories and thereby the risk of scrapping. However, these positive effects of modularization on the material efficiency are unfortunately not expected to be seen in the nearest time, but rather in the future. Furthermore, several barriers to improved inventory management are identified, also indicating the existing potentials for improvement and capabilities required for this. The most prominent barriers recognized are organizational, technological and economic barriers. The majority of them are internal barriers existing within the organization.

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