Business

Construction Companies Aim to Reduce Waste by Participating in the Circular Economy

The circular economy is rife with opportunities to create and share value in construction, including profitable new business ecosystems and new revenue streams.
By Jennifer Scholze
September 28, 2019
Topics
Business

One glimpse inside a building site dumpster is all it takes to know that the mainstream construction industry still largely flows linearly, following a traditional “take-make-use-dispose” route that inevitably yields significant amounts of waste. This waste carries a substantial and escalating cost, not only to companies along the supply chain but to their customers and the communities where they do business.

Building materials account for half of the solid waste generated worldwide, according to the World Bank. If we stay the course, global waste is projected to increase 70% over the next 30 years, to 3.4 billion tons of waste generated each year.

Lately, though, more building materials and construction industry companies are seeking to alter that course once and for all. They have determined that the most direct route to sustained profitably isn’t linear at all—it’s circular—and they are structuring their supply chains and their business operations accordingly. They are not alone. Companies around the world, in industries from fashion to food manufacturing, are embracing the circular economy, a business model built around the zero-waste principles of reuse, remanufacture and recycle, having concluded that the traditional linear model is a competitive dead-end.

The circular economy, as the Ellen MacArthur Foundation describes it, is rooted in the principles of “designing out waste and pollution, keeping products and materials in use, and regenerating natural systems.”

We’re a long way to achieving the zero-waste ideal, however. The Circularity Gap Report 2019 finds that the global economy is only 9% circular—that just 9% of the 92.8 billion tons of minerals, fossil fuels, metals and biomass that enter the economy are re-used annually.


Source: SAP

The construction industry companies highlighted below aren’t only working to close that gap, they’re proving that even today, with the right idea and the digital intelligence to execute that idea, the circular economy is rife with opportunities to create and share value, including profitable new business ecosystems and new revenue streams.

The vertically integrated construction company

A Silicon Valley company designs, engineers, sources materials, and constructs affordable housing and other buildings from its manufactured assemblies and components. Its building platforms are designed as full-scale building products for streamlined and repeatable manufacturing and field assembly and, later, for recycling. It also is a materials supplier to the construction industry, sourcing cross-laminated timber, finish materials, and a range of structural components, all designed and fabricated in-house, from trusses to plumbing and lighting fixtures to flooring.

Besides overseeing a factory-to-site supply chain, the company designs the blueprints with its in-house architects and oversees construction. Such a business model wouldn’t work without a digital core that gives it the real-time intelligence to optimize the supply chain: material sourcing, production (incorporating recycled materials wherever possible), inventory management and transportation. Integrated business planning enables the company to map supply and demand to minimize stock and deliver end products just in time, all the way to the building site, where embedded sensors in each hard hat tell onsite managers where every crew member is working and how construction is progressing. The result is a process that reduces waste, time, cost and environmental footprint, without compromising quality.

The aluminum company and the “energy bank”

Few building products are better suited to the circular economy than those containing aluminum, according to a global aluminum company that makes customized rolled and extruded solutions and complete building systems for the construction industry.

The company is relying on end-to-end digital intelligence to engineer, analyze, track, and manage the amount, type, and value of various materials as they flow in and out of its production system. It starts on the product drawing board, where the company can use advanced modeling to design products specifically with recyclability and reuse in mind.

A digital platform gives enterprise-wide supply chain visibility, enabling it to determine how to most efficiently and profitably source, produce, trace, recycle and recirculate materials. More than half the aluminum the company uses in production is recycled, and much of it comes from company’s remelt facilities, where it sorts and remelts used and scrapped aluminum. Now, the company is poised to meet its goal of being carbon-neutral by 2020.

The zero-waste flooring manufacturer

In the span of just a few years, one of the world’s largest flooring companies has remade itself into a zero-waste manufacturer. The plants where it makes carpets, wood flooring, laminate and other products yield zero waste. Instead of using virgin polyester for its carpet products, the company makes them exclusively from the three billion plastic bottles it recycles annually. One hundred percent of each bottle goes into the carpet fibers with no waste whatsoever.

An intelligent digital core has been integral to making the zero-waste manufacturing concept viable. It enables full supply chain integration, from planning and procurement to manufacturing and shipping. That includes full warehouse automation. When a carpet order comes in, it gets processed, inventory gets assigned and the carpet roll gets picked up and loaded on a truck, in 35 minutes.

The digital core also gives the company a firm handle on product quality, enabling it to manage its 56 manufacturing plants around the United States from a central command center, where advanced analytics tools monitor and digest sensor data from each plant in real-time to identify potential issues before they escalate.

These companies and others like them are not only the faces of the circular economy but will soon represent the non-linear mainstream of the construction business.

by Jennifer Scholze
Jennifer Scholze is Global Lead, Mill Products and Mining, SAP Industries marketing and communications. She’s based in Boston, Mass.

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