THE OPPORTUNITIES AND CHALLENGES FOR CIRCULAR BUSINESS IN THE LITHIUM-ION BATTERY VALUE CHAIN LappeenrantaLahti University of Technology LUT Masters program in International Marketing Management,Masters Thesis 2022 Laura Torkkeli Examiner(s):Professor,Laura Albareda Doctoral Candidate,Jaan-Pauli Kimpimki(M.Sc.(Econ.)ABSTRACT LappeenrantaLahti University of Technology LUT LUT School of Business and Management/Business Administration Laura Torkkeli The Opportunities and Challenges for Circular Business in the lithium-ion Battery Value Chain Masters thesis 2022 123 pages,20 figures,11 tables and 3 appendices Examiners:Professor,Laura Albareda Doctoral Candidate,Jaan-Pauli Kimpimki(M.Sc.(Econ.)Keywords:Circular Economy,Circular Business Models,Circular Value Chains,lithium-ion batteries,inductive research,challenges,and opportunities in circular economy The UNFCCCs Paris Agreement targets on climate change and the aim to reduce emissions on the energy intensive sectors,transportation,and energy production,creates enormous pressure to electrify mobility and to expand the amount of energy storage solutions.lithium-ion batteries store high-capacity power,and are used on a wide set of application,to drive Electrical Vehicle,consumer electronics,industrial robots,and production equipment,but their usage comes at a heavy environmental and social cost.It also requires adapting these sectors to view lithium as a scarce material,that should be recovered and reused.To tackle the unwanted ripple effects of electrification of the world,circular economy aims to address the depletion of natural resources by slowing,narrowing and closing the resource loops.This study draws on prior literature to illustrate a foundation for circular economy of lithium-ion batteries,explain the development of lithium-ion batteries circular supply chains into circular value chains,and identify circular business model strategies.The empirical purpose of this thesis is to clearly illustrate the structure of the lithium-ion battery value chain in Finland and identify the challenges and opportunities for circular business within the value chain.This study focuses on defining the extent of adoption of circular business models in the rapidly developing lithium-ion battery ecosystem in Finland.The methodology for this thesis is a qualitative research method,the inductive interpretive theory building approach.The research data is collected through 16 semi-structured interviews of different stakeholders throughout the value chain.With the inductive approach,this study was able to summarize the perceptions and experiences of the experts in the field and identify key challenges the actors are facing.The findings also include analysis of the gaps in the value chain and assessment of the opportunities for future circular business.In regard to policymaking,this thesis also contributes to the Finnish National Battery Strategy 2025.TIIVISTELM LappeenrannanLahden teknillinen yliopisto LUT LUT-kauppakorkeakoulu/Kauppatieteet Laura Torkkeli Kiertotalouden liiketoimintamahdollisuudet ja-haasteet litiumioniakkujen arvoketjussa Kauppatieteiden pro gradu-tutkielma 2022 123 sivua,20 kuvaa,11 taulukkoa ja 3 liitett Tarkastajat:Professori,Laura Albareda Tohtoriopiskelija,Jaan-Pauli Kimpimki(M.Sc.(Econ.)Avainsanat:Kiertotalous,kiertotalouden liiketoimintamallit,kiertotalouden arvoketjut,litium-ioni akku,induktiivinen tutkimus,haasteet ja mahdollisuuden kiertotaloudessa EU:n tavoitteet ilmastonmuutoksen hillitsemiseksi ja pstjen vhentmiseksi etenkin energiaintensiivisill aloilla,kuten liikenne ja energian tuotanto,luo paineen liikenteen shkistmiselle sek energianvarastointiratkaisujen etsimiselle.Litiumioniakut ovat tehokas ratkaisu akuuttiin ongelmaan,mutta niiden kyttn sisltyy ympristllisi haittavaikutuksia.Maailman shkistymisest seuraavien ei-toivottujen sivuvaikutusten torjuntaan voidaan soveltaa kiertotalouden periaatteita,joissa materiaalvirtoja hidastamalla,kaventamalla ja sulkemalla voidaan pysytt luonnonvarojen liiallinen kulutus.Tm tutkimus pohjautuu aiempaan tutkmukseen kiertotaloudesta selventessn toimitusketjujen kehittymisen kiertotalouden arvoketjuiksi sek tunnistaessaan kiertotalouden liiketoimintamalleja.Tmn tutkimuksen tarkoituksena on ilmaista selkesti Suomen litiumioniakkujen arvoketjun rakenne sek tunnistaa kiertotalouden haasteet ja mahdollisuudet joita arvoketjuun sisltyy.Tmn tutkimuksen painopiste on ymmrt kiertotalouden liiketoimintamallien omaksumisaste nopeasti muuttuvalla litiumioniakku-alalla Suomessa.Tutkimusmenetelmn kytetn laadullista tutkimusotetta,jossa omaksutaan induktiivinen tulkinnallinen teorian rakennus nkkulma.Tutkittava data koostettiin 16 semi-strukturoidun haastattelun avulla.Haastateltavina olivat eri sidosryhmien jsenet lpi arvoketjun.Induktiivisen tulkinnallisen nkkulman avulla tutkmus onnitui tiivistmn alan johtavien asiantuntijoiden kokemukset ja nkemykset alasta sek kartoittamaan keskeisimmt haasteet,joita alan toimijat kohtaavat.Tutkimustuloksista ky mys ilmi arvoketjun puuttuvat toimijat sek tulevaisuuden kiertotalouden liiketoimintaa mahdollistavat tekijt.ACKNOWLEDGEMENTS First,I would like to thank my supervisors,Laura Albareda and Jaan-Pauli Kimpimki for their encouraging guidance,support,and most of all patience throughout this whole process.This thesis topic was a completely new field of study for me and required taking a deep dive into the unknown.It was definitely worth it,and I am now happy and proud to finally graduate.I was contacted by Professor Laura Albareda in the spring of 2021 about the possibility to write a thesis for LUT Universitys new research platform SCI-MAT(Sustainable Circularity of Inorganic Materials).I was of course extremely interested in opportunity to contribute to research in circularity and I am grateful to have worked as a research assistant at LUT University among other like-minded Trailblazers.I want to thank the members of the SCI-MAT platform for their insightful input to my thesis and their support throughout my grant period.Lets keep in touch for future collaboration in circular economy!I would like to express my gratitude to everyone who participated in the interviews.Thank you for taking time to share your knowledge with me,and hopefully you find the results of this thesis useful.I would also like to thank my family supporting me and pushing me forward in completing my studies.Finally,I would like to thank my husband Olli for always believing in me and supporting me every step of the way.Youre my rock.Heres to a new chapter in life!Helsinki,01.04.2022 Laura Torkkeli ABBREVIATIONS CBM Circular business model CE Circular economy CVC Circular value chain EE Ecological economics EOL End-of-Life EPR Extended Producer Responsibility EV Electric vehicle IE Industrial ecology IS Industrial symbiosis LIB lithium-ion battery PaaS Product-as-a-Service PRO Producer responsibility organization SaaS Software-as-a-Service SCI-MAT Sustainable Circularity of Inorganic Materials 6 Table of Contents Abstract Acknowledgements Abbreviations 1 Introduction.9 1.1 Thesis Background.13 1.2 Research Questions and Objectives.14 1.3 Research Limitations and Boundaries.15 1.4 Theoretical Framework.16 1.5 Structure of the Thesis.16 2 Novel Business Models as Facilitators to a Circular Economy Transition.18 2.1 Conceptualization of Circular Economy.20 2.1.1 Theoretical Development of Circular Economy.21 2.1.2 The Main Dimensions and Definitions for Circular Economy.24 2.1.3 Barriers to Circular Economy.27 2.2 Circularity Perspective on Value and Supply Chains.30 2.2.1 Value Networks Alleviate Transition to Circular Economy.31 2.2.2 Closed-loop or Reverse Supply Chains.33 2.3 Circular Business Models Enabling the Transition Towards Circular Economy.35 2.3.1 Circular Business Model Definitions and Utilization in Practice.35 2.3.2 Circular Business Model Innovations.39 2.3.3 Challenges in Practical Application of Circular Business Models.41 2.3.4 Conceptual Framework for Circular Economy,Circular Value Chains,and Circular Business Models.44 3 Research Methodology.47 3.1 Qualitative Research and Inductive Interpretive Theory Building.47 3.2 Data Sources and Data Collection.48 3.2.1 Sampling Strategies.49 3.2.2 Interview Protocol.51 7 3.2.3 Interviewee Introductions.52 3.3 Data Analysis.55 3.4 Validity and Reliability of the Study.57 4 The Emergence of Lithium-ion Battery Industry based on Circular Economy:from Practitioners Perspective.59 4.1 Characteristics of the Lithium-ion Battery Industry in Finland.59 4.1.1 Material Scarcity Plagues Development of Circular Economy Solutions.59 4.1.2 Geographical Location.60 4.1.3 Changing Legislative Environment.60 4.1.4 Maturity of the Value Chain and the Competitive Landscape.61 4.1.5 Research and Innovation.61 4.2 The Structure of the Lithium-ion Battery Value Chain in Finland.62 4.2.1 Lithium-ion Battery Circular Economy Stages:Holistic View on Existing and Missing Actors.62 4.2.2 Closing the Loop in Recycling.69 4.3 Circular Business Model Viability in the Market.74 4.3.1 Existing Circular Business Models.74 4.3.2 Key Challenges.77 4.3.3 Key Opportunities.84 5 Discussion.89 5.1 Theoretical Contributions and Managerial Implications.98 5.2 Policymaking Implications.101 5.3 Limitations of the Study and Suggestions for Future Research.102 6 Conclusions.103 References.104 Appendices Appendix 1.Example set of interview questions Appendix 2.Detailed list of identified challenges Appendix 3.Detailed list of identified opportunities 8 List of Figures Figure 1.New EU Battery Regulation in relation to the battery value chain.Translated from Finlands National Battery Strategy 2025(Ty-ja Elinkeinoministeri,2021).11 Figure 2.Key actors in the Finnish and European battery market (Adolfsson-Tallqvist et al.,2019).12 Figure 3.Conceptual framework of the thesis.16 Figure 4.Structure of the thesis.17 Figure 5.Structure of the theoretical chapter.18 Figure 6.Development of CE definitions over the past decade(illustration by author).25 Figure 7.Conceptualization of CE(Geissdoerfer et al.,2020).26 Figure 8.Extended SCOR model(Vegter et al.,2020).33 Figure 9.The four CBM strategies(Geissdoerfer et al.,2020).38 Figure 10.Conceptual framework for circular economy,circular value chains,and circular business models.Adapted from(Geissdoerfer et al.,2020;Vegter et al.,2020).45 Figure 11.Sampling strategies and schedule for interviews.50 Figure 12.Data structure of this study.57 Figure 13.LIB CE model with material flows(figure by author).64 Figure 14.Fortums direct influence in the LIB value chain(figure by author).71 Figure 15.Akkusers direct influence in the LIB value chain.(figure by author).73 Figure 16.The material flows in the value chain from the perspective of the two main recycling operators(figure by author).73 Figure 17.Summarization of the data structure in understanding the main challenges of CE for the LIB value chain.77 Figure 18.LIB value chain actors plotted on the map of Finland.90 Figure 19.The structure of Finlands LIB value chain(Adapted from the National Battery Strategy(Ty-ja Elinkeinoministeri,2021).92 Figure 20.Global cobalt reserves(Alves Dias,Blagoeva,Pavel,&Arvanitidis,2018).98 List of Tables Table 1.Summary of the literature review and implication for LIB research.19 Table 2.Barriers to CE in prior literature.27 Table 3.CBM definitions in prior research.36 Table 4.Challenges in implementing CBM throughout literature.43 Table 5.List of interviewees.51 Table 6.List of actors participating in this research.62 Table 7.Fortums process steps for LIBs.71 Table 8.Akkuser process steps for LIBs.72 Table 9.Existing CBMs in Finnish LIB industry.74 Table 10.Identified challenges and their aggregate themes.78 Table 11.Synthesized actionable opportunities,their interviewee descriptions,and aggregate themes.84 9 1 Introduction Over the past decade,in the face of the climate change crisis,the need for storing electricity has increased drastically.In addition to the increased amount of portable electric devices and the fast-paced development of hybrid and full electric vehicles,there has been major interest in electrification of industrial processes as well as shifting the energy production towards sustainable electricity produced from renewable energy sources.These trends have increased the demand for energy storage solutions of different sizes,from small lithium-ion batteries(LIB)to larger electric vehicle cell packs and entire energy systems.Electrification of the world is strongly driven by the strict and tightly monitored sustainability targets set by the Paris Agreement UNFCCC(2015)and adopted on the realm of battery development by different international and national entities,such as the EUs Battery Directive,Chinas New Energy Vehicle(NEV)battery recycling rules and the US ReCell Program(Ali,Khan,&Pecht,2021;Costa et al.,2021).Also,the growing concern over climate change and the popularity of making sustainable choices among consumers,has made it feasible for companies to take steps towards creating more sustainability-oriented business models.However,challenges still exist.While LIBs are technologically the most efficient solution(Ali et al.,2021),their key metals and mineral components(lithium,cobalt,manganese,nickel,and Natural Graphite)are considered scarce and critical materials,and over exploitation of them has caused raw material prices to increase significantly,and create a need for the ability to capture the materials through recycling processes and loop them back into the manufacturing of new batteries(Vranken,2020).LIBs are made of a combination of eight primary materials which are lithium,cobalt,nickel,manganese,aluminium,iron,graphite,and titanium.lithium is the main element in rechargeable LIBs,and it is the key component in cathodes for all LIBs.One of the most popular cathode materials is cobalt,which is the most valuable primary material used in LIBs.Due to its price and the questionable sourcing methods in developing countries,the battery industry has developed new chemistries to reduce the need for cobalt.The next best alternative for cobalt is nickel,which has increased its popularity as a cathode material and has seen prices increase in the past few years(Ali et al.,2021).nickel,cobalt,and lithium typically represent around 10 percent of the weight of a LIB,but due to their high value,they represent 80%of the cost of a LIB.The second most valuable primary materials are copper 10 and graphite.The rise in raw material prices for scarce materials has increased the demand for recycled materials.However,the recycling processes are sub-optimal and currently the focus is on recovering only the most valuable materials,which paradoxically has led to a situation where only the most valuable few materials are collected and others,such as lithium,are treated as waste(Costa et al.,2021).The value chain for LIBs is global.The vast majority of LIBs are manufactured in China(77%),followed by the US(9%).By 2025,the global LIB production environment will shift and become dyadic with China(65%)and Europe(25%)covering almost all of the production(S&P Global Market Intelligence,2021).The demand for LIBs will also skyrocket with transportation LIB demand growing sixfold,stationary LIB tripling,and consumer LIB doubling within the next five years(Statista,2021).The demand will be centred in China,whose monopolistic status in the global market is difficult for other countries to overcome.One of the main challenges is the demand of lithium as a raw material from LIB producing countries.Currently,China relies heavily on African countries for lithium,nickel,and cobalt raw materials,all of which are extremely scarce and rarely profitable to extract.Therefore,China is allocating most of the incoming materials towards production of batteries for various applications.The final products are shipped across the world,so even though China is currently leading in the production of LIBs and consuming the majority of the resources needed,the physical end products are distributed globally and concentrated mostly to Europe and the US(Costa et al.,2021).In the context of remanufacturing,repurposing,and recycling,the outlook for Europe looks bright as its future efforts towards circular economy will not be hindered by the lack of available batteries,especially when taking into consideration that most of the future demand will revolve around electric vehicle(EV)LIBs,which has traditionally been a stronghold industry for Europe.The EU is committed to slowing down climate change and has established ambitious environmental targets based on the Paris 2015 Agreement on Climate Change(Unfccc,2015)with the main goal to limit global warming to below 1.5 degrees Celsius,compared to pre-industrial levels.To achieve the set targets of the Paris Agreement,the EU Green Deal is committed to the transition to circular economy by revising its existing legislation related to battery recycling and LIBs themselves(Fetting,2019).Currently,the EU sets the context for battery recycling in the Batteries Directive(2006/66).The Batteries Directive defines three different types of batteries and their recycling rates:lead batteries(65%),nickel-11 cadmium batteries(75%)and other batteries(50%).Recycling of LIBs is not mentioned separately in the directive and it is currently categorized as“other batteries”with a required recycling rate of 50%(European Commission,2006).LIBs are included in the EUs Waste Framework Directive through the criteria for“end of waste”,which outlines the regulation by which waste is no longer considered waste and can be repurposed.Battery waste is no longer considered a waste after extensive processing and separation of materials(European Commission,2008).The EU has proposed a new batteries regulation that aims to protect,preserve,and improve the quality of the environment by reducing the negative impact of batteries and waste batteries.The new regulation is part of the of the new circular economy action plan that was published in 2020,which outlines the roadmap EU has for the future.The aim is to significantly reduce net emissions,promote circularity,decouple economic growth from resource usage,and to ensure that all member states are part of the green future(European Commission,2020).The European Commissions proposal of new batteries regulation and its impact on battery value chains is illustrated in figure 1 below.Figure 1.New EU Battery Regulation in relation to the battery value chain.Translated from Finlands National Battery Strategy 2025(Ty-ja Elinkeinoministeri,2021)In Finland,battery recycling is regulated by EU and national level legislation.The biggest factors in LIB recycling are the Extended Producer Responsibility(EPR),the Finnish Waste Management Law(646/2011),and The Government Decree on batteries and accumulators 12 (520/2014).According to EPR,producers of batteries and accumulators are responsible for the arrangement of waste management.This can be done by individual companies or through a producer organization,which is a joint effort among several producers.In Finland,EPRs are responsible for the collection of battery waste and for ensuring that the collected batteries are recycled with the best available technologies in Finland(Paristokierrtys,2021).To ensure readiness for the future surge of end-of-life(EOL)LIB,the Finnish Government has published Finlands National Battery Strategy 2025,which aims to support the innovative environment of Finlands battery industry,enhance sustainable economic growth,and enable reduction of emissions in transportation(Ty-ja Elinkeinoministeri,2021).The strategy work focuses on LIB technologies as they are the main battery technology of the future.Finlands battery landscape is unique due to the long history in mining and refining industries,high level of education and innovation,and the high adoption of renewable energy across industries(Ty-ja Elinkeinoministeri,2021).Finland is also known for its heavy machinery and marine industries,which provide an advantageous environment for innovation in LIB applications and reuse.Finlands long tradition in sustainable forestry and innovations in biochemistry enables a radical approach to developing battery technologies.The key actors in the Finnish battery sector according to the National Battery Strategy 2025 are illustrated below in figure 2.Figure 2.Key actors in the Finnish and European battery market (Adolfsson-Tallqvist et al.,2019).13 While the illustration accurately identifies most of the relevant actors in the LIB industry,it can easily be interpreted incorrectly,as it seems like Finland has actors in all value chain activities.In reality,the value chain is much more complex involving different stages of manufacturing(components,semi-products,and products),separate actors for collection and recycling,and maintenance.The Finnish actors in the LIB value chain are introduced in more detail in chapter 3.2.3 and the value chain is discussed further in chapter 4.2.1.1 Thesis Background Literature reviews form the foundation for academic research(Snyder,2019;Xiao&Watson,2019).For this study a literature review is conducted to help create a solid foundation of the phenomena and context under investigation and to identify research gaps from prior research.While there is extensive prior research on the LIB industry itself,much of it is limited to studies focusing on the optimization of different industrial recycling processes for scarce material recovery(Abdelbaky et al.,2021;Chen et al.,2019;Gaines,2018;Makuza,Tian,Guo,Chattopadhyay,&Yu,2021;Sommerville et al.,2021;Velzquez Martnez et al.,2019).Many studies also focus on creating recycling technologies for LIB,that are more sustainable for the environment(Pagliaro&Meneguzzo,2019;Yu,Tan,&Li,2020)or assessing the environmental impacts of different recycling technologies with LCA(Ellingsen,Hung,&Strmman,2017).Sustainable sourcing of battery metals such as lithium(Alessia,Alessandro,Maria,Carlos,&Francesca,2021;Prior,Wger,Stamp,Widmer,&Giurco,2013)and cobalt are also studied(Mancini,Eslava,Traverso,&Mathieux,2021).Prior research on LIB value chains focuses on material flow optimization and the focus is on developing linear value chains instead of circular ones(Mayyas,Steward,&Mann,2019;Olivetti,Ceder,Gaustad,&Fu,2017;Weimer,Braun,&Hemdt,2019).Closing the loop is discussed in relation to recycling processes(Atia,Elia,Hahn,Altimari,&Pagnanelli,2019)as well as through focusing on recycling at the design phase,to achieve optimal material recovery for further use(Quinteros-Condoretty,Golroudbary,Albareda,Barbiellini,&Soyer,2021).14 Although the LIB industrys popularity in research is on the rise,there are still very few studies in the challenges and opportunities of circular business models in LIB value chains.Wrlsen et al.(2021)study stakeholders,barriers,and drivers for CBMs for LIBs,focusing on mostly an institutional point of view.Studies in circularity of LIBs have a main focus on EV LIBs(Albertsen,Richter,Peck,Dalhammar,&Plepys,2021;Garrido-Hidalgo,Ramirez,Olivares,&Roda-Sanchez,2020)and circular business models for EV LIBs have been studied on an EU level(Albertsen et al.,2021).In Finlands LIB industry context,Levnen et al.(2018)study enablers and voids between circular economy business models and institutional actors.There is a research gap in identifying managerial challenges and opportunities of circular business models in the Finnish LIB industry context.There is an additional research gap in providing detailed descriptions of industry practitioners experiences and opinions of the LIB industry.In this thesis I aim to address these two research gaps.1.2 Research Questions and Objectives In this study I intend to provide insight on the theoretical background on circular economy and to promote the concept of circular value chains.Additionally,I summarize prior findings of challenges related to LIB circular business model implementation and based on these findings,derive what type of opportunities exist for promotion of circular business.The goal of this study is to identify the challenges and opportunities for circular business in the lithium-ion battery industry in Finland by gaining understanding on the existing value chain and business models and merging them with the concepts of circularity.To achieve this goal,I propose the following main research question:What are the opportunities and challenges for the development of circular business models in the context of lithium-ion battery industry?To help answer the main research question,I further define three sub-questions(SQ).With SQ1 I identify the actors in the current LIB industry in Finland and illustrate how the actors are interconnected.SQ1:How is the value chain of lithium-ion battery recycling structured?15 Once the key actors in the LIB industry identified,I depict the perception that the actors have of their position and significance in the current market with the help of SQ2.The key is to uncover how each actor views the rapid development of the LIB industry and how well they are capable of adapting to the changes.SQ2:How do the actors in the LIB value chain perceive the current market?Lastly with SQ3 I uncover existing business models and assess their circularity.The key is to map out all business models in the market and objectively inspect their level of circularity.RQ3:What type of circular business models exist in the lithium-ion battery industry?1.3 Research Limitations and Boundaries The study focuses on the Finnish LIB industry,on the challenges the actors face in implementation of CBMs and the opportunities for circular business in the market.As circular economys theoretical foundation is not definite,this study aims to bring clarity on the definitions for key concepts such as circular economy,circular value chains,and circular business models.The goal of this study is to map out the actors participating in the LIB value chain and to analyze the key challenges and opportunities in the market.There are a few clear delimitations to this approach.First,due to this study holistic point of view,the analysis of the value chain actors,their relationships,and the challenges and opportunities are done with no consideration of the actual business process for each actor.This study focuses on the experiences and perceptions of the actors participating in the value chain,rather than their actual activities.Due to this,a major limitation to this study is conceptual nature of the results.For example,expressions of material scarcity are considered as is,without any actual validation of the claim or quantification against comparable units of analysis.Another limitation is the empirical context.The study is limited to Finnish actors in the LIB value chain and therefore the generalization of results should only be done with caution.Even though the legislative context on a high level remains the same across the European Union,there are various country specific differences in regulation.Also,due to the unique 16 characteristics of the Finnish market,the opportunities and challenges may vary significantly in other EU countries.1.4 Theoretical Framework This study is constructed on the theories of circular economy(CE),circular value chains(CVC),and circular business models(CBM).The conceptual framework illustrates the development of CE and CVC theories,as well as their connection through CBM.CBMs represent the practical application of circular economy strategies,and to be eligible CBMs need to be applied in CVCs.The theoretical foundation of CBMs is rooted in the intersection of CE and CVC concepts.Based on the research questions of this study,the CBMs are studied with the help of CE and CVC theories.The conceptual framework is presented in figure 3 below.Figure 3.Conceptual framework of the thesis 1.5 Structure of the Thesis This study contains six chapters.Each chapters input and output is presented in figure 4 below.The first chapter introduces the topic of research and identifies the research gap.Also,the research questions and objectives are presented,and the delimitations and conceptual 17 framework for the study are introduced.The second chapter acts as the theoretical foundation for this study.It focuses on explaining the development of CE theory and drills down to the practical implementation of CBMs.Also,an investigation into supply chains development into CVCs is made and finally a new conceptualization for CVCs and CBMs is presented.In the third chapter,an overview of how the study was conducted is made,including justification of the chosen method,description of the analytical process,and assessment of reliability and validity.The fourth chapter represents the results of the study.A thorough illustration of Finlands LIB landscape,CBMs and key challenges and opportunities is presented.In the fifth chapter the results assessed and answers to research questions are provided.Also,the theoretical and managerial implications,as well as the suggestions for future research are outlined.In the sixth chapter,the key findings are concluded.Figure 4.Structure of the thesis 18 2 Novel Business Models as Facilitators to a Circular Economy Transition Circular economys(CE)importance to controlling climate change and limiting global temperature rise to 1.5 degrees Celsius is undeniable,and the EU has defined it as one of the key concepts for making the green transition1 possible(Unfccc,2015).However,changing the traditional linear business models is not easy and to accommodate the transition,the operating environment needs to be suitable for the newly developed circular business models(CBMs),and the overall motivation for the transition needs to be shared throughout various levels in CE.The goal of this chapter is to provide clear definitions for the various concepts related to CE,and to make detailed descriptions on how the transition to circularity can be managed at company-level.Figure 5 below illustrates the structure of the theoretical chapter of this study.Figure 5.Structure of the theoretical chapter The chapter is organized in three main subsections that synthetize the literature on circular economy.On the first subsection,I explore the conceptualization of CE.I study 1)the theoretical development and definition of CE in the literature,and 2)the main barriers to the development of CE.On the second subsection,I have identified the importance of circularity perspective in the value chain and supply chains literature.It includes two subsections:1)the analysis value networks and the transition to CE,and 2)the closed-loop or reverse supply chains.The third subsection studies the growing literature on CBMs enabling the transition towards CE.This includes four main lines of research:1)the analysis of CBM definition and utilization in practice,2)CBM innovation,3)the challenges in implementing CBMs,1 Green transition refers to European Unions strategic goal of making the energy intensive sectors more sustainable by electrifying the mobility and transforming the energy sectors towards renewable energy sources.This transition will result in exponential growth of EVs and energy storage solutions.19 and 4)conceptualization of CBM strategies.The summary of the literature review is presented in table 1.Table 1.Summary of the literature review and implication for LIB research Main aggregated topic on the literature Sub-topic of research Main insights and implication for LIB research 1.Conceptualization of circular economy Theoretical development and definition of CE Industrial ecology(IE)and ecological economics(EE)influence on CE IE:integration of industrial systems with natural ecosystems EE:interactions of economy,society and the environment(Bruel,Kronenberg,Troussier,&Guillaume,2019;Hanaek,Roy,Avila,&Kallis,2020;Kish&Farley,2021;Saavedra,Iritani,Pavan,&Ometto,2018)CE micro,meso-and macro-levels(Ghisellini,Cialani,&Ulgiati,2016)Micro:Companies improve operational efficiency,eco-design,product life cycle Meso:companies in extensive and complex interplays of resource exchange that require stakeholder value co-creation and engagement for symbiotic behavior(e.g.,industrial symbiosis,waste management).Macro:redesign of industrial systems Definitions for CE(Ellen MacArthur Foundation,2014a;Geissdoerfer,Pieroni,Pigosso,&Soufani,2020;Prieto-Sandoval,Jaca,&Ormazabal,2018)and the conceptualization of CE(Geissdoerfer et al.,2020)Main barriers to the development of CE Market and strategic related barriers(Kirchherr et al.,2018;Korhonen,Honkasalo,&Seppl,2018)Cultural and behavioral related barriers(Grafstrm&Aasma,2021;Kirchherr et al.,2018;Korhonen et al.,2018)Institutional related barriers(de Jesus&Mendona,2018;Ranta,Aarikka-Stenroos,Ritala,&Mkinen,2018)Environmental related barriers(Berkhout,Muskens,&W.Velthuijsen,2000;Korhonen et al.,2018)2.Circularity perspective on the value and supply chains Value networks and the transition to CE Transforming value networks to CE:1)improving performance and profitability of their operations considering the environmental and social impacts,2)globalization of competition,efficient operations,3)increase company collaboration to ensure sufficient skills and knowledge to meet the customer expectations,4)servitisation of offerings,5)flexibility and agility.(Fearne,Garcia Martinez,&Dent,2012;Ricciotti,2019)Closed-loop or reverse supply chains Designing-in the circularity to the supply chain helps create revenue opportunities.Circular supply chains need the following characteristics:1)prioritization of use phase extension,2)intensification and dematerialization,3)20 achieve highest retainment of value,4)slowing down the cycle time,5)minimizing the amount of waste generated throughout product life cycle,and 6)maximizing reduced,reused,recycled and recovered materials(Geissdoerfer et al.,2020;Yang,Smart,Kumar,Jolly,&Evans,2018)Vegter et al.(2020)suggest a practical approach where the supply chain assessment tool,the SCOR model:return,use and recover phases that enable circular business models.3.Circular business models enabling the transition towards circular economy Circular business models definition and utilization in practice 1)Categories of CBM:Regenerate,Share,Optimize,Loop,Virtualize,and Exchange(Ellen MacArthur Foundation,2015)2)Slowing:Access and performance model,extending product value,Classic long-life model,and Encourage sufficiency Closing:Extending resource value,and Industrial symbiosis(Bocken,de Pauw,Bakker,&van der Grinten,2016)3)Four generic strategies:Cycling,Extending,Intensifying,and Dematerializing(Geissdoerfer et al.,2020)4)Three strategies:Retain product ownership,product life extension,and Design for recycling(Atasu,Dumas,&Wassenhove,2021)Circular business models innovation Five type of innovations Kiefer et al(2021):Systemic innovations Radical and tech-push innovations Externally driven innovations Continuous improvement innovations Eco-efficient innovations Challenges of implementing circular business models in practice Complexity and challenges to implement CBM in practice Context specific challenges:1)Economic 2)Knowledge and technology 3)Organizational 4)Supply chain(Guldmann&Huulgaard,2020;Kirchherr et al.,2018;Tura et al.,2019;van Keulen&Kirchherr,2021;Vermunt,Negro,Verweij,Kuppens,&Hekkert,2019;Wrlsen et al.,2021)Conceptualization of circular business model strategies 1)plan,2)source,3)make,4)deliver,5)use,6)return and 7)recover 8)enable(Vegter et al.,2020)Cycling,Extending,Intensifying&Dematerializing CBM strategies(Geissdoerfer et al.,2020)2.1 Conceptualization of Circular Economy Understanding the theoretical background for CE is important to understand prior research advances and possible shortcomings.As the CE is mainly developed on top of industrial ecology(IE)(Ehrenfeld,2000;Erkman,1997)and ecological economics(EE)(Bruel et al.,2019)it is natural that the circularity aspects only highlight the environmental and economic 21 aspects,and the solutions to circularity issues revolve around practical implementations.This sub-chapter aims to give a simple description of the theorical advancement of CE as well as highlight the main barriers existing in prior literature.This chapter sheds light on managerial and institutional implications of real-life CE case examples and provides insight from observations of stakeholders participating in CE structures.Finally,the various definitions for CE are analyzed to generate a new definition to append to the existing taxonomy.2.1.1 Theoretical Development of Circular Economy The current iteration of the concept for CE is strongly influenced by the work of the Ellen MacArthur Foundation in the early 2010s.The roots of CE however are deeply connected to Bouldings(1966)theorization on the Earths limited carrying capacity,which has later morphed into the EE perspective,and the work of Stahel(1984),who introduced looping process outputs to minimize impact on the environment.This would later evolve into the concept of IE and provide a key foundation for most of the real-life applications of circularity today.The two schools of thought have co-existed for decades and throughout the years molded the conceptualization of circular economy.IE is a field of study that integrates industrial systems with natural ecosystems(Ehrenfeld,2000;Erkman,1997;Saavedra et al.,2018).IE considers industrial systems as sub-systems dependent on the surrounding biosphere and its resources,which means that the industrial design of products and processes needs to consider the environment by closing the material and energy loops(Bruel et al.,2019).To study the flows of matter,energy,and information,several tools,such as life cycle assessment(LCA)and eco-design,have been developed(Bruel et al.,2019;Saavedra et al.,2018).In prior literature(Bruel et al.,2019;Hanaek et al.,2020;Kish&Farley,2021),EE is defined as the interactions of economy,society,and the environment.EE has a broad spectrum of fields of study,majority of which focus on emission and waste prevention,and on preventing environmental degradation(Kish&Farley,2021).According to EE,economic planning needs to consider a broad ecosystem management perspective,where the efficiency of production goes hand-in-hand with sufficiency in consumption.This can be achieved by moving from a throughput-based open-ended system to a circular one.Many tools for EE are described throughout literature,all of 22 which have similar objectives of efficiently utilizing input resources and reducing environmentally harmful output to secure the earths carrying capacity(Bruel et al.,2019).The key logic is to decouple the environmental impact from economic growth(Bruel et al.,2019;Geissdoerfer,Morioka,de Carvalho,&Evans,2018;Ghisellini et al.,2016).IE and EE share many traits and have the same end goal,but there are also a few evident differences.EE promotes a holistic approach,where the environmental resources are viewed as a finite regenerative stock of resources,whereas IE is a more practical approach that focuses on selective issues,and considers the natural system as a model(Bruel et al.,2019).While the historic weight for the definition of CE is on the analysis of industrial systems,Bruel et al.(2019)emphasize the need to expand beyond merely examining the physical flow of resources and energy,to include the impact considerations of these flows,and to take a more holistic approach and expand its focus to include the limitations of the carrying capacity of the Earth.One of the major changes in defining CE is the application of decision-making levels which describe the scope and impact of interactions.Ghisellini et al.(2016)describe the implementation of CE on micro-,meso-,and macro-levels where each have their own characteristic strategies and motives for circularity.At a micro-level,companies have different strategies to optimize their operational efficiency while also taking circularity into account.Eco-design,design for environment and cleaner productions are the main approaches to enhancing environmental performance throughout product lifecycle without sacrificing high-quality standards and product performance.Cleaner production has solidified its position as a best practice in many countries and it has proven its effectiveness for example in China,where it was even promoted to a law in 2002.In addition to legislation,an effective measure to promote circularity at micro-level has been the introduction of“green criteria”in public procurement,which lifts the importance of environmental impacts to same level as the ability to produce goods and services cost efficiently.Also,the heightened awareness of sustainability has increased the popularity of specific information and labelling systems covering consumer goods(Ghisellini et al.,2016).At the meso-level,companies engage in extensive and often complex interplays of resource exchange where traditionally separate actors begin viewing their overlapping or succeeding processes holistically to identify opportunities for symbiotic behavior.These industrial symbiosis structures help companies take full advantage of each others by-products,while 23 reducing their residual products or having better waste management.Majority of the well-known industrial symbiosis“parks”have heavy utilization of by-product exchange,while other types of symbiosis,such as water or energy exchange,are less utilized.Understanding the behavioral and social interactions between economic entities enables adoption of micro foundation perspective for CE(Bruel et al.,2019;Ghisellini et al.,2016).At the macro-level the strategies for inducing circularity involve the redesign of industrial system,infrastructure system,cultural framework,and the social system.Therefore,these types of efforts are often government-led initiatives,such as eco-cities and zero-waste programs.Implementing systemic change at governmental level is an efficient measure to implement circular economy and for example in Finland the zero-waste initiatives enforced in the EU has led to an end in landfilling waste(Ghisellini et al.,2016).Improving the effectiveness of macro-level strategies requires CE to develop indicators for business and policy makers on economic aspects such as costs,profits,market distortion,and human behavior.These indicators help decision makers in developing effective policies around CE(Ghisellini et al.,2016).There is a need for harmonization of the language and terminology used for CE to become better aligned with the traditional economic indicators and intertwined in macro-level strategies.(Bruel et al.,2019).Another significant change is the emphasis on the need for CE to detach radically from the previous literature and aim for completely changing the perspective on economic growth.Up until now,economic growth has been considered sustainable if it does not cause net negative impacts on the natural ecosystem.However,CE should focus on decoupling economic growth from sustainability all together and emphasize economic de-growth through increased efficiency of production and consumption by appropriate utilization,reuse,and exchange of resources,i.e.,doing more with less(Bruel et al.,2019;Geissdoerfer et al.,2018;Ghisellini et al.,2016).Geissdoerfer et al.(2017)provide an additional perspective to the assessment of circular economy by addressing the relationship between sustainability and CE.They define CE as a condition for sustainability and identify three groups of relationships:conditional,beneficial,and trade-offs.Conditional relationships describe closed-loop systems as a required component for achieving sustainability.The beneficial relationships are similar to conditional ones,except closed-loop systems are viewed as enablers of sustainability,without dependency.Beneficial relationships define closed-loop systems merely as one of the multiple solutions to sustainability.Trade-off 24 relationships focus on both sides of the coin.Closed-loop systems cannot exist on their own as forming these systems always has consequences and costs,which may lead to negative outcomes.These findings highlight that although it is tempting to draw conclusions that circularity is always the most sustainable approach,it is important to note that there could be drawbacks,which is why it is necessary to expand the perspective from the narrow IE solutions to a holistic approach.2.1.2 The Main Dimensions and Definitions for Circular Economy The definition of CE has evolved throughout the past decade.Initially,the definitions originated mostly from industrial ecology with a heavy focus on narrowing and closing the loops of industrial systems and emphasizing the practical level of circularity.One of the most acknowledged definitions for CE is the one of the Ellen MacArthur Foundation from 2013,which underlined the industrial process inputs and outputs as problems for circularity that can be addressed through superior design for products and production processes first,and then business models.Over time the concept for CE started to gain interest from scholars in the field of IE and EE,which led to advancing the knowledge on CE utilizing various approaches.As a result,CE has been studied from the perspective of CBM,taxonomy of reduce,reuse,and recycle(3R),and through examining value creation for stakeholders throughout a supply chain which has led to a vast number of definitions and conceptualizations of CE.These conceptualizations were reviewed and summarized by Prieto-Sandoval,Jaca and Ormazabal(2018)into a new comprehensive definition for CE,which followed the footsteps of Ghisellini et al.(2016)to expand the unit of analysis for CE to micro,meso and macro levels as well as changed the perspective from an industrial gains and losses approach to a more holistic point of view,where societies are interconnected to their surrounding environment and therefore their actions should be considerate of the impact they cause.While the definition by Prieto-Sandoval et al.(2018)is broad and considers both schools of thought:IE and EE,it fails to provide a practical description of CE.Thus,to better understand and to create categorizations within CE,an additional definition is needed to cover the practical implications for individual units of analysis.For this purpose,the work of Geissdoerfer et al.(2020)is well suited.They base their definition on the work of Kircherr et al.(2017)who conducted an exhaustive review of the existing CE 25 definitions.Geissdoerfer et al.(2020)analyzed these findings and suggested a definition that includes all the aspects of CE studied in literature on a practical level:“An economic system in which resource input and waste,emission,and energy leakages are minimized by cycling,extending,intensifying,and dematerializing material and energy loops.This can be achieved through digitalization,servitization,sharing solutions,long-lasting product design,maintenance,repair,reuse,remanufacturing,refurbishing,and recycling.”(Geissdoerfer et al.,2020)The development of the definitions of CE over the past decade are illustrated in figure 6 below.Figure 6.Development of CE definitions over the past decade(illustration by author)The chosen definition is easy to understand,and it defines circularity strategies and preferred outcomes.To better illustrate how these strategies can be utilized throughout a supply chain,Geissdoerfer et al.(2020)provide a conceptualization for the definition of CE,which is presented in figure 7 below.26 Figure 7.Conceptualization of CE(Geissdoerfer et al.,2020)The conceptualization outlines the loopbacks from each supply chain phase and is based on the well-known Butterfly figure2 by the Ellen MacArthur Foundation(2015).The conceptualization is a holistic view on CE,where looping products and waste back into supply chain helps minimize energy and material input as well as reduce the amount of waste and emissions leaked to the environment.CE is considered to have levels which represent different circular strategies and retainable value.The innermost cycle represents the extension of the use phase,which maximizes the generated value of a final product.As the extension requires the least energy and additional processing,it is the most profitable circular strategy.The middle cycles of reuse,remanufacturing,and refurbishing require to some extent modifications to the original product and therefore are less profitable.However,it is possible to retain significant value from them.The outermost cycle represents waste utilization through recycling,and it is typically energy intensive as the product is transformed to a raw material state.These processes are often optimized for only a few key 2 The Butterfly figure illustrates a hierarchical structure for CE through biological cycles and technical cycles.The biological nutrient cycles represent flow of natural materials and nutrients,while the technical nutrient cycle represents the flow of components and products.The hierarchical structure is built on different levels of CE,the higher the level of circularity,the further inside the diagram the loops are,the more profitable it is.The inner circles of the model consist of reuse,refurbishment,and remanufacturing,which require less energy and resources and are more profitable than the outer loop,recycling as raw materials(Ellen MacArthur Foundation,2014b)27 outputs,which makes retaining value challenging.(Geissdoerfer et al.,2020;Kiefer et al.,2021:1532)2.1.3 Barriers to Circular Economy The main goal of this thesis is to understand the barriers related to CE of LIB.As CE is disruptive by nature,requiring companies to re-assess their traditional linear supply chains and business models,it faces various barriers.Prior studies on CE have studied the barriers in the transition towards circularity (Berkhout et al.,2000;de Jesus&Mendona,2018;Grafstrm&Aasma,2021;Kirchherr et al.,2018;Korhonen et al.,2018;Ranta et al.,2018)and the most discussed barrier types are summarized below in table 2:Table 2.Barriers to CE in prior literature Barrier type Barrier Author Market and strategic related barriers Challenges to adapt the new circular economy market,including strategic issues,such as low cost of virgin raw material,high upfront investment cost for recycling technology,path dependency,and technological lock-in(Kirchherr et al.,2018;Korhonen et al.,2018)Cultural and behavioral related barriers Barriers based on consumer adaptation and cultural issues,such as lack of consumer interest in circularity and the definitions of waste,which makes measurement and assessment of CE efforts difficult(Grafstrm&Aasma,2021;Kirchherr et al.,2018;Korhonen et al.,2018)Institutional related barriers Challenges based on lack of institution,policy-making and regulation,such as focusing mostly on recycling over other efforts like reuse and remanufacturing,and legislation lock-in(de Jesus&Mendona,2018;Ranta et al.,2018)Environmental related barriers Issues based on environmental impact and environmental geographical boundaries,such as the thermodynamics of CE efforts(I.e.global net environmental impact),geographical boundaries of CE efforts,temporality of CE efforts(long-term vs.short-term effects),and rebound effect(Berkhout et al.,2000;Korhonen et al.,2018)The most impactful barriers relate to the market and strategic related and cultural and behavioral related barriers.28 Market and strategic related barriers are commonly identified by operators in the CE as low cost of virgin materials and relatively high investment costs of recycling technologies are easy to observe and have a direct impact on the profitability of the business model(Kirchherr et al.,2018).As the current global market is dominated by large corporations operating across continents,it is difficult for small businesses to penetrate the market with their circular economy innovations.Path dependency and lock-in can be described as a phenomenon of survival of the first.While the business models and products of these new CE businesses may be more environmentally friendly,the larger established organizations often manage to remain the more popular alternative(Korhonen et al.,2018).Any new CE innovation has to overcome the obstacles set by the existing cultures,routines,and management models as well as the competition of alternative CE solutions.In addition to the conditions on the market,products and services are also a focal point in barrier descriptions.Focusing on durability in product design and usage is important but equally important are the environmental impacts throughout a products extended lifecycle(Ellen MacArthur Foundation,2014a).As a products long-term environmental impact can never be fully assessed,a products durability may also hamper circular economy efforts if it simultaneously causes harm to the environment(Korhonen et al.,2018).Our current global business environment,where innovation is constant and short product life cycles are common,may in some cases be better for the environment than the circular environment where products lifecycles are extended through reuse and repurposing.In most cases however,the current focus on innovating products with longer lifecycles and considering reuse and recycling already at the design phase,is more beneficial(Ellen MacArthur Foundation,2014a;Korhonen et al.,2018).Regarding cultural and behavioral related barriers,according to Kirchherr et al.(2018),the lack of consumer interest and awareness are the most impactful cultural barriers in CE.The underlying reasons are the change in product ownership and the consumerism culture where products represent need fulfilment and status instead of core needs for survival(Grafstrm&Aasma,2021).Another significant cultural barriers in CE are consumers constant needs and preferences to purchase new products(Ranta et al.,2018).In addition to consumer behavior,the common perception of what is valuable in a society can induce barriers for CE.The definition of waste and especially changes to the definition play a critical role.Traditionally waste is viewed as the output of a process where everything useful and valuable has been extracted from an object.In CE,all side streams and outputs of a process 29 have value and retaining that value as much as possible is considered a success.Currently the major barrier for CE is the lack of consensus for the definition of waste,which results in the lack of systematic monitoring and reporting of waste streams(Korhonen et al.,2018).These statistics are the prerequisite for regulatory changes which can alleviate institutional barriers.From an organizational perspective intra-organizational culture plays a significant role in the transition from a linear business model to a circular one.Hesitancy in company cultures and operating in a linear system are among the most impactful cultural barriers within companies,which indicates that there is a gap between what can be done towards CE from technological perspective,and what businesses are willing to do(Kirchherr et al.,2018).There is also a significant difference in the importance of circular economy between companies and institutional stakeholders,such as governments and public agencies,which suggests that circular economy is still an extra-curricular activity for companies,instead of a core value,and that there is interest for developing circularity at the highest level.Hesitancy in a company can present itself on three levels:managerial resistance,CE initiatives performed in isolation,and low engagement in management strategies.Especially in large companies,CE initiatives can be actively incorporated into marketing divisions but completely separate from sales and finance divisions(Kirchherr et al.,2018;Grafstrm and Aasma,2021).Successful CE strategies are managed on both an intra-organizational and inter-organizational level.Regarding institutional related barriers,governments and public organizations at local,national and international level,represent the main drivers and main barriers for CE as they have the power to impact market conditions,policy-making but also control legislation,which is for the most part created for optimizing linear supply chains(de Jesus&Mendona,2018).The lack of emphasis on reuse and sole emphasis on recycling hampers the creation of a holistic legislative context,where all strategies for CE are viable(Ranta et al.,2018).Also,as many policymakers are invested in and familiar with traditional linear supply chains,their views of the market and its future may be distorted(de Jesus&Mendona,2018).Globally the lack of standardization for products that would benefit most from CE practices and the lack of government support for funding CE solutions are significant institutional barriers.Also controlling the flow of products and materials across geographical boundaries is difficult.Reducing environmental impacts in one part of the supply chain often leads to 30 increases in other parts.This is why many companies that are successful in their CE efforts are localized,and their most significant environmental impacts are in the import and export phases of their supply chain(Korhonen et al.,2018).Environmental related barriers refer to the barriers set by the surrounding environment and their conceptual basis is rooted in industrial ecology(IE)and the notion of the Earths limited carrying capacity.Thermodynamic barriers limit economics and decision-making based on the flow of physical matter,energy,and money(Bruel et al.,2019;Korhonen et al.,2018).According the Second Law of Thermodynamics all CE efforts should be evaluated by their global net environmental contribution,meaning all CE efforts should undergo a case-by-case analysis to fully define their contribution and impacts to the environment(Korhonen et al.,2018).Product lifecycles should be extended through reuse and remanufacturing,instead of recycling solely for their raw material value(Geissdoerfer et al.,2020).Economic growth also poses limitations to CE as it leads to an increase in products produced and consumed.This is supported by a phenomenon called the rebound effect3.Identifying the consequences of rebound effects is difficult as they are not limited to the economic equilibrium,but also consist of phenomena such as technological and behavioral spill-over as well as other ripple effects on the environment(Berkhout et al.,2000;Hertwich,2005;Siderius&Poldner,2021).2.2 Circularity Perspective on Value and Supply Chains In this section,I explore how circular economy(CE)has been studied in prior value chain and supply chain research.The literature emphasizes two main dimensions:value networks and closed-loop or reverse supply chains.The concept of different stakeholders creating value in the supply chain has evolved significantly since its first depiction in mid-1980s.Initially the focus of the concept was on the linear supply chain and how value is being generated by different actors in it.Gradually,3 Rebound effect refers to unintentional ripple effects caused by an action.For example,when the use of electric cars grows,the prices of electric cars are likely to increase.This will cause a surge in the usage of electric cars,indirectly electricity as well.This in turn will also increase the maintenance of electric cars and other services as well,and thus measuring the extent of each rebound effect is difficult.31 due to major shifts in business environment,such as globalization and digitalization,the concept of value creation needed to take into consideration aspects such as global competition,digital solutions and increasing worry over the environmental impact of industrialization.In order to tackle these challenges,companies formed partnerships and shifted their focus of operations and supply chains.It became obvious that in order to survive companies had to establish collaborative networks,which have three core characteristics:superior customer value,core competencies and relationships.Hence,some of the key characteristics for managing these networks are the continuous effort of aligning strategies,structures,and processes between network participants to achieve shared vision,building trust and open communication,and focusing on creating value throughout the supply chain,which is built on deep understanding of customer needs(Fearne et al.,2012:576;Ricciotti,2019).The broad theme of value creation,which is the value chain thinking inside a value network,can be described as a transition from a singular point of view into the point of view of multiple actors,who together solve the problems any part of the network is facing.Also,value chain thinking enables companies to plan in longer time periods and with more flexibility,it encourages learning within the network and helps secure benefits,it aims to be forwards-looking and helps establish cyclical processes,and it offers means to improve sustainability and profitability in tandem(Ricciotti,2019:204205).To accommodate CE,the scope of value chain thinking expands beyond the stakeholders directly involved in the supply chain.The meaning of value and how it is generated are revised as the focus is not solely on generating value for the end customer but rather on how well the value chain can retain the value of the materials and energy that are put into it and how much waste and emissions exit the value chain(Mizanur Rahman,Kim,Lerondel,Bouzidi,&Clerget,2019;Okorie,Charnley,Russell,Tiwari,&Moreno,2021).2.2.1 Value Networks Alleviate Transition to Circular Economy”The most obvious evolution is therefore the transition from the concept of Value Chain to the concept of Value Network;in fact because of digitalization and dematerialization,the competition has changed,as today individual firms do not compete,but networks of companies do,so to survive it is necessary to be part of a network.”(Ricciotti,2019)32 Ricciotti(2019)describes the evolution of supply chain strategies from value chains into value networks and identified six major trends driving the change.These trends exist due to the new characteristics of the global competitive environment digitalization and dematerialization.The first trend is the sustainability movement,which has enforced companies to not only focus on improving performance and profitability of their operations but to also consider the environmental and social impacts of their business,the so-called triple bottom line:Minimize costs and maximize revenues and profitability;minimize resource depletion,carbon footprint,toxicity and pollution;and maximize employment,maximize occupational safety and health,minimize excessive working hours,minimize extreme poverty and child labor,and maximize social equity,life expectancy and education(Fehrer&Wieland,2021;Ricciotti,2019;Vegter et al.,2020).The second trend is globalization of competition,which requires efficient operations from a company in order not to be overtaken by a global competitor in the market.These efficiencies are typically easier to gain in a network of actors than sub-optimized closed supply chains(Fearne et al.,2012:577;Ricciotti,2019).The third trend is the increase in collaboration between companies to ensure sufficient skills and knowledge to meet the customer expectations.The fourth trend is the servitisation of offerings,where the value generated and exchanged by companies are in increasing amount intangible,which means that for an individual company the capability to maximize the utility of their intangible assets is crucial.The fifth and sixth trends are the requirements of flexibility and agility,which define the ability of a company to react and deal with complex and highly divergent problems in a timely manner.This kind of capability requires high-level skills and knowledge,which are easier to obtain through collaboration with companys network than acquiring in-house talent.(Ricciotti,2019:207208)Value networks support transition towards circularity well,as they help overcome the market and sustainability related barriers by dividing risks related to investments or specific market areas or by increasing the knowledge and skills among stakeholders.Active participation of NGOs,local communities and government officials in the value network also helps transform or mitigate any cultural or institutional barriers for CE.33 2.2.2 Closed-loop or Reverse Supply Chains To tackle environmental issues related to the traditional take-make-dispose linear supply chain,companies use reverse supply chains to retrieve used products from customers and then either reuse or recycle them by themselves or send them out to be further processed.These kinds of forward and reverse supply chains are referred to as closed-loop supply chains(Nasir,Genovese,Acquaye,Koh,&Yamoah,2017;Yang et al.,2018).Closed-loop supply chains help achieve circularity through extension on use phase,remanufacturing,or refurbishing products,and by recycling waste(Geissdoerfer et al.,2020).It is important to note however that while a closed-loop supply chains for scarce materials are desired,they may not always be environmentally sustainable as adding reverse flows to a supply chain can cause additional impacts to environment through new sub-processes,such as reverse logistics and disassembly(Saidani,Yannou,Leroy,Cluzel,&Kim,2021;Vegter et al.,2020)Yang et al.(Yang et al.,2018:499)emphasize the need for a shift from linear to a closed-loop supply chain in achieving CE.Designing-in the circularity to the supply chain helps create revenue opportunities whilst conserving the nature.To be successful circular supply chains need the following characteristics:prioritization of use phase extension,intensification and dematerialization,to achieve highest retainment of value,slowing down the cycle time,minimizing the amount of waste generated throughout product life cycle,and maximizing reduced,reused,recycled and recovered materials(Geissdoerfer et al.,2020;Yang et al.,2018).Vegter et al.(2020)suggest a practical approach where the supply chain assessment tool,the SCOR model4,is expanded to also include return,use and recover phases that enable circular business models.This is illustrated in figure 8 below.Figure 8.Extended SCOR model(Vegter et al.,2020)4The SCOR model refers to the Supply Chain Operations Reference Model,which depicts the core phases of a traditional linear supply chain:plan,source,make,deliver,and enable(Association for Supply Chain Management,2021)34 Addition of return accommodates for the reverse flow of products that exists both in closed-and open-looped supply chains.The processes of use and recover are unique for the circular supply chain,and they emphasize the extension of use phase and the value to be retained also in the end of the life for a product.With the expanded definition of the SCOR model,they identify performance objectives for circular supply chains that enable strategic,tactical,and operational level actions for companies:Minimize the use of materials,water,and energy Minimize inventory Maximize the efficient use of Supply Chain Assets(trucks,warehouses,machines&equipment)Minimize waste Maximize the availability of the product Maximize the number of recovery flows These become the main challenges or steps in implementing circularity in the value chain.Finally,investigation into the cross-organizational workflows and circular economy also emphasizes that enabling the gathering and sharing of information across different actors in the supply chain is needed(Patala,Albareda,&Halme,2022).Actors in a circular supply chains are not identical to traditional supply chains(Vegter et al.,2020).There is a need to include new capabilities to the network,and with the addition of use process,consumers also become stakeholders(Ricciotti,2019).Information exchange between all the stakeholders is crucial for the success of circular business models.Forward and reverse communication in the supply chain improves predictability of products in various life cycle phases and helps forecast the availability of secondary materials(Scheller et al.,2021).As the majority of closed-loop supply chains are based on existing linear supply chains,loopbacks are not necessarily targeted to the originating stakeholder.Value networks help companies define efficient reverse supply chains that enable retaining value in the value chain.Forward and reverse communication within the value network makes it possible for stakeholders to optimize their own processes and create strategies that promote extended use phase,reuse,remanufacturing,and recycling(Scheller,Schmidt,Herrmann,&Spengler,2020).35 2.3 Circular Business Models Enabling the Transition Towards Circular Economy Finally,the third main dimension studied in literature is the growing number of circular business models(CBMs).Circular economy(CE)drives companies to transition from traditional linear business models to CBMs.Together with business model innovation,these novel business models are the foundation for the change to a new way for companies to operate in a more circular fashion,where environmentally and socially sustainable innovations are as important as the operational efficiency and profitability of a company(de Jesus&Mendona,2018;Fehrer&Wieland,2021;Kiefer et al.,2021).CBMs help dissect the various supply chain processes and interconnections between actors and bring practicality to circularity in the form of concrete and actionable objectives.CBMs differ from their neo-classical counterparts significantly as the unit of analysis expands beyond organizational and even national borders,and an effective transformation requires some form of innovation.Also,actors applying CBMs nearly always operate in a network of actors with similar goals and aspirations,and the networks value logic aims to evolve beyond one-way value creation to retaining value within the network.This sub-chapters reviews the different categorizations for CBMs,to identify key aspects of novel business models.To better understand how CBMs are created and implemented in practice,the sub-chapter examines different types of CBM innovations.In the last sections,the most typical strategies for CBM are discussed and the transformation of value creation logic is closely examined to display the differences against traditional business models.2.3.1 Circular Business Model Definitions and Utilization in Practice To gain understanding on how prior research has approached CBMs and what the most typical categorizations for these novel business models are,an investigation to recent studies is made.The findings are presented in table 3 below,after which they are discussed in more detail.36 Table 3.CBM definitions in prior research Author Name of publication Contributions to theory Output(Ellen MacArthur Foundation,2015)Growth within:A Circular Economy Vision for a Competitive Europe ReSOLVE categorization for CBM Six categories:Regenerate,Share,Optimize,Loop,Virtualize,and Exchange(Bocken et al.,2016)Product Design and Business Model Strategies for a Circular Economy Definition of six CBM(4 for slowing and 2 for closing the resource loops)Slowing:Access and performance model,extending product value,Classic long-life model,and Encourage sufficiency Closing:Extending resource value,and Industrial symbiosis(Geissdoerfer et al.,2020)Circular Business Models:A review Categorization of CBMs Four generic strategies:Cycling,Extending,Intensifying,and Dematerializing(Atasu et al.,2021)The Circular Business Model Categorization of CBMs Three strategies:Retain product ownership,product life extension,and Design for recycling The Ellen MacArthur Foundations(2015)study on CE is considered one of the benchmark publications on the definition and practice of how companies should approach circularity,and how they can align their strategic and tactical approach to accompany the sustainability goals they entail.From the perspective of business models,they suggest a ReSOLVE framework to help identify actionable items in a companys operations across six categories:Regenerate,Share,Optimize,Loop,Virtualize,and Exchange.Regenerate by shifting to renewable energy and by returning back to biosphere the materials that has been consumed to produce products(Ellen MacArthur Foundation,2015).This is closely related to the IE principles and helps tackle environmental barriers described earlier in chapter 2.1.3(Bruel et al.,2019;Korhonen et al.,2018).Share suggests reducing the loop speed of products and maximizing utilization rate through sharing economies,reusing throughout technical lifetime,and prolonging life by maintenance(Ellen MacArthur Foundation,2015).Bocken et al.(2016)describe a similar strategy for slowing the resource loop.In the access and performance model strategy users are offered solutions to fulfil their needs without the ownership of actual products.For example,solutions sparked by the sharing economy,such as car sharing services,and platform-based solutions such as cloud-based document management systems.Atasu et al(2021)also describe this as the retaining product ownership strategy.Optimization refers to the improvements in production and supply chain by means of lean approach,utilization of big data,automation and remote sensing,and steering(Ellen 37 MacArthur Foundation,2015).Bocken et al.(2016)approach supply chain optimization through industrial symbiosis,where a cluster of actors operating in close geographical proximity benefit from each others process waste streams,and close the resource loop.Similar to optimizing the supply chain,Bocken et al.(2016)suggest optimizing also the product life-cycle,through focusing on designing long-lasting and durable products starting at very early stages of product design.This type of slowing strategy is called the classic long-life model.Design for recycling is a similar strategy that focuses on creating products that are easy to recycle(Atasu et al.,2021).Looping is the act of keeping materials in a closed supply chain and utilizing remanufacturing for products where raw materials are scarce.The last resort should be the recycling of products,output of which should be also looped back to the production process.Bocken et al.(2016)refer to a strategy called extending product value to describe reutilization of returned products as input to production.For example,the fast fashion giant Hennes et Mauritz,known as H&M,organizes clothing collection of used clothes at their shops,and loops part of their materials back into the production process for new clothing(H&M Website,2022).Similarly to extending product value,Bocken et al.(2016)suggest a strategy for closing the resource loop by extending resource value.This effectively means completely looping back the waste streams into production.For example,the Orthex Group,a Finnish company that manufactures plastic products,produces household plastic items from recycled plastic waste collected and recycled by consumers(Orthex Group,2022).A key characteristic for closing the material-technical loop is communication between stakeholders to ensure all participants in the value chain have necessary information(Fehrer&Wieland,2021).Virtualize refers to modifying the offering to be able to deliver value virtually(Ellen MacArthur Foundation,2015).Many modern sharing strategies consist of service offerings made available through virtual platforms(Bocken et al.,2016;Geissdoerfer et al.,2020).Effective product-service loops describe the transition from product ownership to access to products and services.The focus of fulfilling customer needs through services instead of physical product enables more efficient material usage(Fehrer&Wieland,2021).Exchange is the total overhaul of companys offering by applying novel technologies and replacing old materials with advanced non-renewable ones.Especially the last two,have 38 been estimated to have high impact on future business offerings.(Ellen MacArthur Foundation,2015)Bocken et al.(2016)also describe a slowing strategy with the ultimate goal of reducing consumer consumption through creating durable products and offering repair,warrantees,and maintenance services for these products.Companies using the encourage efficiency strategy often sell their products through a less consumerist matter,and for example do not offer sales commission.The product life extension strategy by Atasu et al.(2021)is very similar as it focuses on creating durable products already at the product design phase,thus resulting in reduced consumption.Fehrer and Wieland(2021)also suggest social-collaborative loops where competition is replaced with collaboration to ensure that sustainable practices are performed effectively.Through collaboration,participants in a value chain have access to underutilized resources and they gain an improved outlook on opportunities within the value chain.Customers are transitioned from a passive recipient to active members of value chain.Geissdoerfer et al.(2020)combine the findings in prior research and reorganize them into four CBM strategies:cycling,extending,intensifying,and dematerializing.Brief descriptions of these strategies are presented in figure 9 below.Figure 9.The four CBM strategies(Geissdoerfer et al.,2020)Cycling is a combination of sharing and looping strategies where the aim is to cycle energy and resources within the system through reuse,remanufacturing,refurbishing,and recycling.39 Extending refers to increasing the use-phase of a product by initially in the design phase of a product,focusing on durability,maintenance,repair,and long-lasting design.These characteristics are then focused on in marketing campaigns to raise awareness to consumers how to extend lifetime of their products.This type of strategy is similar to share and optimize strategies by The Ellen MacArthur Foundation(2015).The Intensifying strategy aims to challenge the idea of ownership by offering products-as-a-service(PaaS),and is similar to the share strategy(Ellen MacArthur Foundation,2015;Geissdoerfer et al.,2020).A good example of this is the Finnish company Whim,which offers mobility-as-a-service(MaaS)through a subscription-based transportation service that allows users to rent cars and use taxis,public transport,and car-sharing(MaaS Global,2022).Lastly,dematerializing strategy means that instead of offering physical products,companies create software-based solutions to offer software-as-a-service(SaaS),without physical products(Geissdoerfer et al.,2020).This type of strategy is closely related to virtualize strategy by the Ellen MacArthur Foundation(2015).For example,before offering a subscription-based SaaS,Netflixs business-model was built around an online website on which consumers could browse DVDs,and then order physical copies to their home via post(Netflix,2022).2.3.2 Circular Business Model Innovations The role of innovation in implementation of CBMs is crucial as the most significant challenges faced relate to technical challenges,such as appropriate technological solutions and sufficiently educated workforce;and economic conditions,such as path dependency and technological lock in(de Jesus&Mendona,2018).Kiefer et al.(2021)highlight eco-innovations,as the systemic approach to a holistic and transformative reaction to the existing unsustainable business practices,play a fundamental part in the transition to CE.Eco-innovations are defined as socio-technical solutions designed to mitigate environmental impacts,reduce resource consumption,and retain value for materials extracted from nature and put into production process(de Jesus&Mendona,2018;Kiefer et al.,2021;Vence&Pereira,2018).40 Kiefer et al.(2021)describe five types of innovation.Systemic innovations are novel to the market and typically lead to disrupting the status quo,have significant environmental benefits,and change perception of competitive edge.Systemic innovations,however,can be context specific so it is important for companies not to blindly adopt to a disruption that is not relevant to them(Salvador et al.,2021).Radical and tech-push innovations are similar to systemic ones,but their source is in the scientific or technological advancements.They too are disruptive in nature and change the competitive landscape in the market(Kiefer et al.,2021).These types of innovations typically shift the conditions in the market dramatically and it is important for companies to keep an eye out for either acquiring or reacting to such innovations.Also forming strategic partnerships helps draw market knowledge to the companys network and prevents disruptive innovations to appear elsewhere(Salvador et al.,2021).Externally driven innovations are coined due to pressure from outside,for example from legislative pressure(Kiefer et al.,2021).With the increased attention on sustainability it is increasingly more important for companies to take the environmental and social aspects of product use into consideration to create an offering that is regenerative and restorative throughout its lifecycle(Salvador et al.,2021).Continuous improvement innovations are incremental improvement in the daily operations to the exiting solutions(Kiefer et al.,2021).They fit well with existing business processes and are typically developed in-house.Continuous improvement allow companies to test out various combinations,which helps in systemic innovation(Salvador et al.,2021).Eco-efficient innovations are incremental innovations where environmental benefits are gained through product or process innovation.Digitalization can aid companies monitor and track productivity to fine tune the rate of eco-efficient innovation(Salvador et al.,2021).From organizational perspective,the acquisition of innovation can vary as well.According to Geissdoerfer et al.(2020)the change from linear to circular business model for a company can be achieved through four paths.The company can transform its existing business model into a circular one or it can diversify its operation by adding a circular business model within the organization or by adding a subsidiary or a joint venture.Both transformation and diversification would require closed innovation.The other direction is to utilize companys network,and transition to circular business models through open innovation.The two 41 options are creation of a circular start-up or acquiring a business with circular business models and merging it into existing business.Systemic eco-innovations are just as efficient whether they are developed in-house at companies and later embraced by other actors in the market or if they are obtained from external sources.Development and dispersion of eco-innovations is beneficial for the whole market in the global transition towards CE.However,scaling up the below system-level eco-innovations is difficult,which is why transitioning into circularity at the global level requires systemic innovation.Also,even though the type of innovation does not matter from a technological perspective,the systemic thinking needs to shift radically to be able to reach CE.This is due to the infrastructural lock-in that is created in incremental innovation processes.(Kiefer et al.,2021:1543)2.3.3 Challenges in Practical Application of Circular Business Models While there are various CBM strategies identified in literature,achieving CE in practice is much more complex.Throughout literature,CE derives its theoretical framework from industrial ecology concepts such as industrial symbiosis(IS).The influence of IS on CE is significant.IS can be defined as:“A collaborative network of stakeholders within an industry,who participate in by-product exchange,energy sharing,and innovation efforts,to improve individual stakeholders economic and environmental performance.”(Ghisellini et al.,2016)Even though IS is not a new concept,its importance to CE has not decreased over time.IS plays a key role in the transition to a CE and CBMs,and it is often illustrated through the perspectives of CE and IE as these two perspectives are complementary in nature and facilitate forming successful clusters for IS(Baldassarre et al.,2019;Ghisellini et al.,2016).The IE perspective on IS focuses on reducing the environmental impact of industrial systems on the environment through collaboration with external stakeholders.Life cycle assessment and material flow analysis are key tools used to assess the environmental impacts of IS(Baldassarre et al.,2019).The circular economy perspective on the other hand focuses on the business model level where technical innovation,collaboration,and sustainable business 42 innovation are utilized to slow,narrow,and close the loops(Baldassarre et al.,2019;Bocken&Ritala,2021;Geissdoerfer et al.,2020).The main differences between IS and traditional linear supply chains are the heterogeneity of inputs,the higher number of actors collaborating in the supply chain,and the shared goal of minimizing waste leakage and to improve resource efficiency(Turken&Geda,2020).To facilitate the implementation of IS,the participating stakeholders need new forms of communication and collaborative platforms to ensure that inputs and outputs are matched,and to enable creation of tools to analyze various enterprise resource planning,product lifecycle management,and product data management systems(Halstenberg,Steingrmsson,&Stark,2017).The economic benefits gained from IS are direct,such as additional revenues from selling by-product or reduced costs due to reduced need for waste management,and indirect,such as increase in supply chain security and flexibility or improved reputation and higher level of innovation(Ghisellini et al.,2016).Most of the time these symbiotic systems develop between geographically close stakeholders,and the most famous examples of IS,such as the Kalundborg eco-industrial park,were initially set up for purely competitive purposes but later on“accidentally”identified to incorporate symbiotic features(Halonen&Seppnen,2020:151).Another driver for practical application of circular economy is government-led projects,where certain industries have purposefully been led towards symbiotic systems(Ghisellini et al.,2016).The majority of IS clusters are located in China,where CE has been adopted as a key strategy in the transition towards sustainable business.In China,the focus is on using CE as a tool for product and technology development,equipment upgrades,and improvement in industry management,whereas in EU and the US,CE implementation is often linked to waste management,reuse and recycling programs and product life cycle assessment(Winans,Kendall,&Deng,2017).The Chinese adoption of CE follows a top-down strategy,which enables the wide adoption of CE strategies across the country and industries.In other countries,CE is driven by individual companies aiming to gain an economic advantage with CE,which means that the adoption of CE is completely dependent on the industry,and the skills and knowledge acquired within a network of stakeholders(CIRAIG,2015).The CE barriers(market,cultural,institutional,and environmental)detailed in chapter 2.1.3 create the context in which companies aiming to achieve circularity operate in.These CE barriers and the developments in reducing their impact serve as a macro-level foundation 43 upon which individual companies carry out their micro-level decision-making.Achieving CE requires companies to implement CBMs,which has its context-specific challenges.Unlike the CE barriers,the challenges related to implementation of CBMs are more detailed and affect a specific function or process within a company or network.The CBM challenges are actionable items,and companies can utilize CBM innovations to provide solutions to these challenges.A thorough investigation into the practical application of CE in prior research uncovered various CBM challenges that companies face,and these findings are presented in table 4 below.Table 4.Challenges in implementing CBM throughout literature Category Description Author Economic Lack of financial resources(limited funding for CBM)High up-front investment costs Higher costs related to the new CBM Unclear/weak financial business case Dominance of economic indicators in decision making(Guldmann&Huulgaard,2020;Kirchherr et al.,2018;Tura et al.,2019;van Keulen&Kirchherr,2021;Vermunt et al.,2019;Wrlsen et al.,2021)Knowledge&Technology Lack of technical know-how and expertise(human talent)Lack of information/data and lack of practices and systems for collecting,sharing and utilizing CE information/data Ability to deliver high quality products Design challenges to create durable products Difficulty in handling heterogenic CE material flows Lack of large-scale demonstration projects(Guldmann&Huulgaard,2020;Kirchherr et al.,2018;Tura et al.,2019;van Keulen&Kirchherr,2021;Vermunt et al.,2019;Wrlsen et al.,2021)Organizational Administrative burden&lack of management buy-in Incompatibility with existing linear operations and strategy More complex management and planning processes Conservativeness in business practices&conflicts with existing culture No clear responsibilities and ownership of CE projects&silo thinking between departments Validating and verifying all environmental effect calculations is difficult Narrow focus on existing sustainability strategies (Guldmann&Huulgaard,2020;Kirchherr et al.,2018;Tura et al.,2019;van Keulen&Kirchherr,2021;Vermunt et al.,2019)Supply chain Lack of partners and low availability of materials Higher dependence on external parties Lack of information exchange between supply chain actors Conflicting interests between actors in the supply chain between stakeholders Lack of consideration on circular design from supply chain actors Bad re-use practices/reluctance of third parties Limited cooperation and silo thinking between companies Scalability of CE products and services Reverse supplychains non-existent Takes time to build new partnerships and mutual trust (Guldmann&Huulgaard,2020;Kirchherr et al.,2018;Tura et al.,2019;van Keulen&Kirchherr,2021;Vermunt et al.,2019)44 There are four categories for the challenges:economic,knowledge and technology,organizational,and supply chain.The economic challenges relate to issues in securing funding for hard-to-define business cases with high upfront costs and the dominance of economic impacts over environmental and social benefits(Kirchherr et al.,2018;Tura et al.,2019;van Keulen&Kirchherr,2021;Vermunt et al.,2019).Knowledge and technology related challenges refer to the lack of human talent and little experience in practices and systems,as well as the difficulty to design durable products and recycling heterogenic waste flows(Kirchherr et al.,2018;Tura et al.,2019;van Keulen&Kirchherr,2021;Vermunt et al.,2019;Wrlsen et al.,2021).The organizational challenges are typically conflicts between existing organizational culture and desired direction,lack of visibility on responsibilities and ownership of CE projects,and the incompatibility of CBMs with the existing linear business model and strategy(Guldmann&Huulgaard,2020;Tura et al.,2019).Lastly,supply chain related challenges often derive from the conflicts that appear when the number of participating stakeholders in a network increase.The novelty of CBMs typically means that the processes to enable circularity need to be built,and experience and trust between stakeholders needs to be gained(Guldmann&Huulgaard,2020;Kirchherr et al.,2018;Tura et al.,2019;Vermunt et al.,2019).2.3.4 Conceptual Framework for Circular Economy,Circular Value Chains,and Circular Business Models As noted in the thorough investigation of prior research on CE,transitioning to CE requires implementation of novel business models.These CBMs require companies to take an innovative approach to defining CBM strategies most suitable for their business,and they need to be aware of various challenges related to successfully implementing a CBM.The implementation of CBM is tightly connected to the transformation of supply or value chain into a circular one.To help visualize and harmonize the CBM strategies and their relation to the circular value chain,a new conceptualization is presented.Adopting from the conceptualization from Geissdoerfer et al.(2020)for CE presented in chapter 2.1.1 and the circular supply chain processes by Vegter et al.(2020),illustrated in chapter 2.2.2,a conceptual framework of the implementation of CBMs in circular value chains is proposed,and illustrated in figure 10 below.45 Figure 10.Conceptual framework for circular economy,circular value chains,and circular business models.Adapted from(Geissdoerfer et al.,2020;Vegter et al.,2020)The cycling strategies loop materials that would otherwise be lost back to the value chain through reuse,remanufacturing,refurbishing,and recycling.These strategies aim to retain value in all phases of the value chain(Yang et al.,2018).The reuse of products is the least energy intensive cycling strategy as it retains the value directly from the return phase and loops it back to the delivery phase,which enables the product to be re-utilized without any modifications.The environmental impacts of this strategy are related to warehousing and logistics.Remanufacturing and refurbishing strategies require the product to be modified to be able to be re-utilized.In addition to reverse supply chain operations,there are repair and manufacturing operations(Vegter et al.,2020).The recycling strategy is the most energy intensive as the product is processed to return it to a raw material state.Depending on the sourced material,the recycling process capability to retain value varies.The extending,intensifying,and dematerializing strategies all relate to the use phase of a product and are the least energy intensive strategies and their capability to retain value is high.The 46 dematerializing strategies represent the highest form of CBMs as they provide solutions without the use of physical products(SaaS),which directly decreases the material input into economic system.The intensifying and extending strategies retain value through two different logics,intensifying use phase through novel PaaS solutions or extending the use phase through superior product design,repair,and maintenance(Geissdoerfer et al.,2020).To summarize,the literature review describes how CE research has become a core topic of research in the last years,fostering multidisciplinary research between technological,engineering,environmental,policy,management,and organizational scholars.In this thesis I propose a conceptual framework regarding the development of LIB CE,circular value chains,and CBMs.There are numerous challenges related to these concepts,some influencing the macro-level of CE,and some hindering implementation of CBMs at the micro-level.The key challenges to CE transition and adaptation are market and strategic related barriers,cultural and behavioral related barriers,institutional related barriers,and environmental related barriers.The key challenges to CBM implementation are related to economics,knowledge and technology,organizational aspects,and supply chain.47 3 Research Methodology This chapter starts with an explanation of the research methodology and reasoning for the choice of a qualitative study using the inductive interpretive theory building approach as the chosen methodology.This is followed by a detailed description on data collection,including the data sampling strategies,interview protocol as well as introductions of interviewees.After that a detailed description of the practical implementation of the Gioia method(2013)in the data analysis phase is given to bring clarity on how the results of the study were developed.Finally,this chapter provides a justification for the validity of the results and the reliability of the study structure.3.1 Qualitative Research and Inductive Interpretive Theory Building Qualitative research is an efficient research method for investigating a limited number of variables in a specific context.The five key attributes of qualitative research are minimizing the use of positivist or post positivist point of view,acceptance of postmodern sensibilities,capture the perspective of an individual,examination of the boundaries in life,and gaining elaborate descriptions(Harrison,Birks,Franklin,&Mills,2017).In business literature,one of the most common forms for a qualitative research approach is a case study.Case studies have been described as a method or methodology interchangeably depending on the author.However,the most significant case study researchers consider methodology to be the underlying driving force for the research design,on which different data and methods are applied(Harrison et al.,2017).A case study is the investigation of a bounded system or multiple bounded systems over time through in-depth data collection considering multiple qualitative sources of data and resulting in a case description and case related themes(Creswell,Hanson,Clark Plano,&Morales,2007).The goal of a case study is to adopt the participants perspective and try to gain understanding on the studied phenomena within the selected context(Harrison et al.,2017).While case studies are popular in qualitative research and they provide accurate descriptions of the studied phenomena,their scope is often(intentionally)limited to allow definite conclusions to be made and to prevent issues in reliability.However,building the foundation of a study on prior concepts and constructs,48 which is often the case with case studies,has its challenges.It often narrows the focus of the study to only elaborating what is already known rather than expanding on what could be discovered.This is due to the need for measurable facts,which skews the decision of methodology towards research methods that utilize a status quo against which positive or negative change is measured.Not all phenomena exist within prior theory,which is why an exploratory research approach is suitable especially when studying novel concepts and constructs(Gioia et al.,2013:16;Jebb,Parrigon,&Woo,2017:274).For this study an inductive interpretive theory building approach to data collection and analysis is chosen to investigate the lithium-ion battery(LIB)industry in Finland from a perspective of the practitioners in the industry.The reasoning behind this decision is twofold:first,there are not many well established concepts or constructs of circularity in the LIB value chain,and second,the rapid development of the LIB industry causes the taxonomy to continuously evolve,and the industry landscape to shift.The selected research approach allows capturing industry specific insight through which accurate concepts and constructs can be defined.The objective of this study is to identify opportunities and challenges for circular business in Finland,in the chosen context.The focus of the study is the perspective of the actors participating in the Finnish LIB recycling value chain.A qualitative research approach is chosen to generate a point of view on existing phenomena and to help create a new theoretical foundation that reflects the reality of the studied phenomena(Rahman,2016).To facilitate detailed descriptions of the underlying themes,an inductive interpretive theory building approach is applied.In this study a holistic approach is implemented due to the difficulty of identifying sub-units for the phenomena within the context,and due to the need for a complete overview of the opportunities and challenges for circular business models as well as interactions between actors in the context.3.2 Data Sources and Data Collection The most typical form of collecting qualitative data is through interviews.Semi-structured interviews are a more flexible form of interviews where interviewees are posed both open-ended and close-ended questions,offering a setting where di
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2 Contents 1.Textile and Apparel Sector Overview.4 1.1.Global Industry Overview.4 1.2.Trends Impacting the Global T&A Industry.6 1.3.Indian T&A Industry Overview.8 2.Achieving the Next Target of US$250 Billion by 2025-26.10 2.1.Leveraging Government Schemes.10 2.2.Aligning with Global Buyers Needs.11 2.3.Strengthening the Textile Value Chain.11 2.4.Focus on Skill Development.13 2.5.Boosting Indigenous Machine Manufacturing and Investment in Machinery.13 3.Enhancing Exports and Global Competitiveness.14 3.1.Exploring Untapped Markets and Free Trade Agreements(FTAs).14 3.2.Focus on New Products and Emerging Trends.15 3.3.Building Scale and Taking Cluster Approach.17 3.4.Attaining Manufacturing Excellence.18 4.Planning for a Sustainable and Prolonged Growth.19 4.1.Adopting Best Manufacturing Practices.19 4.2.Developing an Agile and Versatile Manufacturing Capability.20 4.3.Role of Research and Development.20 4.4.Focus on Sustainable Development and Circular Economy.20 About FICCI.22 About Wazir.23 3 List of Figures Figure 1:Global Textile&Apparel Trade (US$billion).5 Figure 2:Domestic Market of India(US$Billion).8 Figure 3:Domestic Market of India Growth Projection(US$Billion).8 Figure 4:Indias T&A Exports 2021(US$Billion).9 Figure 5:Overall Indias T&A Market(US$Billion).9 Figure 6:Industry 4.0 Factors.19 List of Tables Table 1:Global Apparel Market(US$billion).4 Table 2:Global Major Exporters of Textile&Apparel 2021(US$Billion).5 Table 3:Major Apparel Supplier Share in the Global Apparel Trade(US$Billion).6 Table 4:MMF Based Product Global Trade(US$Billion).7 Table 5:Indias Exports Share in Major T&A Markets(US$Billion).14 Table 6:Opportunity for India if FTAs with Major Markets are done.15 Table 7:Top 10 Global Traded Categories(US$Billion).15 Table 8:Indias Top 10 Exported Categories(US$Billion).16 Table 9:Indias Share in top MMF Based Apparel Commodities(US$Billion).16 4 1.Textile and Apparel Sector Overview 1.1.Global Industry Overview Global Apparel Market The global apparel consumption in 2021is estimated to be around US$1.5 trillion.The market recovered by approx.16%compared to 2020.The market is estimated to reach US$2 trillion by 2025 growing at a CAGR of 4%from 2019.In 2021,US was the largest apparel consumer market,worth US$257 billion with a growing CAGR of 5%.EU-27 has declined at a CAGR of 11%in 2021 post covid impact,and stood at US$211 billion.China,the 3rd largest market in the world,grew marginally from 2019,due to pandemic,however,is expected to grow with 11GR(highest among all markets)and becomes the largest apparel market,worth US$340 bn.by 2025.Other major markets include Japan,India,Brazil and Canada.Table 1:Global Apparel Market(US$billion)Country/region Value 2019 Value 2021 Value 2025(P)CAGR 2019-21 Projected CAGR 2019-25 EU-28 264 211 280-11%1%USA 235 257 265 5%2%China 184 188 340 1%India 78 80 135-4%Japan 101 78 105-12%0.5%Brazil 48 39 60-10%4nada 25 22 37-6%7%RoW 690 600 778-7%2%TOTAL 1625 1475 2000-5%4%Source:Published Data and Wazir Analysis Growing economies such as China,India are growing at much higher rates then developed regions owing to the growing domestic market and increasing disposable income.Together these market account for 59%of the total apparel market while rest of the world accounts for remaining 41%share.Global Textile&Apparel(T&A)Trade The global T&A trade in 2021 was US$869 bn.The trade showed a significant recovery of 22%post covid and a 2%growth over 2019.Apparel was the largest traded segment accounted for 57%of the total trade and stood at US$492 bn.,followed by fabric with 13%share.The trade is projected to grow at CAGR 3%and reach 1000 billion by 2025 with apparel being the largest traded category,worth US$573 billion.5 Figure 1:Global Textile&Apparel Trade (US$billion)Source:UN Comtrade China is the largest supplier of T&A in the world with 37%share followed by Bangladesh with 5%share.India is the 4th largest supplier in the world with 5%share and exports worth US$42 billion.Vietnam and Poland have registered the highest CAGR of 10ch followed by Bangladesh with CAGR8%since 2010.India on the other hand is growing moderately at CAGR 4%.Table 2:Global Major Exporters of Textile&Apparel 2021(US$Billion)Country 2010 2019 2021 CAGR Share China 234 279 318 37ngladesh 18 44 43 8%5%Germany 30 41 42 3%5%India 27 36 41 4%5%Viet Nam 14 44 38 10%4%Italy 32 36 37 1%4%Turkey 22 29 34 4%4%USA 24 28 26 1%3%Spain 11 20 21 6%2%Netherlands 10 17 20 6%2%France 15 18 18 2%2%Pakistan 12 14 17 4%2%Poland 5 11 15 10%2%RoW 160 224 200 2#%Total 613 840 869 3%Source:Un Comtrade 33348249257393113112123313436404151606716393648547278884549546261384086910002010201920212025ApparelFabricFibreHome TextilesOthersTechnical TextilesYarnTotal 6 Since,2010,China has lost 4%share in the global apparel trade whereas Bangladesh and Vietnam have gained 3%share each.Indias share remained stagnant during the same period.Table 3:Major Apparel Supplier Share in the Global Apparel Trade(US$Billion)Major Apparel Supplier 2010 2021 China 362ngladesh 5%8%Viet Nam 3%6%India 3%3%Total(US$Bn)333 492 Source:UN Comtrade 1.2.Trends Impacting the Global T&A Industry Growing Focus on Sustainability and Circular Fashion Today,sustainability has grown from being just a buzz word to a crucial factor in shaping the T&A industry.The global textile industry is amongst the most polluting industries and the environmental concerns facing the textile sector are significant.However,to counter and control the negative effect,textile companies worldwide are taking significant corrective measures with the ultimate aim of becoming a green&sustainable industry.These measures include controlled use of natural resources like water and energy in production processes,using raw materials which are sustainable in the long run,proper handling of hazardous chemicals used in dyeing and coating,proper waste disposal,treatment of water before discharge,using recycled products and adherence to certain guidelines to eliminate health-risks of workers,consumers as well as the environment.Also,there are various internationally acclaimed standardizations and autonomous accreditationspresent today which have become a yardstick for measuring the sustainability of any company.Supply Chain Digitalization As the global compliance getting stringent,transparency in the supply chain has become an unavoidable factor.Post covid the world has discovered the digital way of conducting business and this digital transformation is changing supply chain relations of buyer and supplier across the globe.Digitalization has enabled buyers to locate suitable supplier from any corner in the world.Suppliers who are able to deliver better,transparent and more efficient business have become first choice of buyers.Digitalization in the textile supply chain has had a huge impact on aspects,such as sourcing approach,supply chain visibility,partner collaboration,information sharing and analysis.Theres no doubt that a digitally well-prepared textile business will be more adaptable to modern supply chain management and preferred by players across the value chain.It is important for all textile businesses to quickly respond to new market trends and customer expectations,adopt an Omni channel value chain,and identify profit-generating relationships with other businesses.Impact of Xinjiang Cotton Ban In January,the US had announced an import ban on cotton products from Chinas Xinjiang region over allegations of use of forced labor.Following the ban,buyers become more conscious about their sourcing and began focusing on reducing dependency on China for sourcing requirement.This action opened up opportunities for other manufacturing nations such as Bangladesh,Vietnam and India to increase their share in the global T&A market and boost exports.The US ban on cotton opened up 7 huge market especially for Indian cotton-based products on global level.Taking advantage of the production-capacity shift in the labor-intensive industry away from China over the past few years,countries in South Asia have been steadily increasing their market shares in terms of textile exports to the US.The US boycott of Xinjiang cotton has been another catalyst of the trend,and it may further fundamentally reshape the global textile supply chain by isolating China the worlds biggest textile producer,exporter and consumer.Inclination towards comfort wear The pandemic spread by Covid-19 has forever changed the way people live their lives.As people were pushed to stay home to contain the spread of the virus,a need to be in comfortable clothing arose and gave boost to comfortwear clothing.Comfortable clothing which is mainly made using stretchable fabrics further increased demand of cotton-spandex,polyester and Nylon spandex raw materials.Induced by covid,increased interest in comfortability for the past couple of years,gave boost to athleisure category.With casual clothes becoming more and more functional and gym clothes designed to look good even outside the gym perhaps a mix of styles was inevitable.And so,a shift of trends was on the horizon.Wanting clothing to show off ones lifestyle and values has become increasingly important to us.Since athleisure,harmonizes perfectly with the increased focus on sustainability and wellness we have seen in recent years,it likely plays a role in why consumers wholeheartedly have accepted the comfortable style phenomena.Growing share of synthetics The Manmade Fibre(MMF)segment accounts for 70%share in the global fibre consumption with the majority of share held by polyester fibre.The global fibre consumption has increased from 87 mn.tons in 2014 to 103 mn,tons in 2022.Polyester has replaced cotton to become the largest and the fastest growing category in the world with current global consumption of 57 mn.tons.The demand for manmade fibre is growing significantly across the world.There are several reasons behind this trend.Low cost,the demand-supply gap in cotton,and versatility in design and application are some of the key reasons.Realizing the potential of the synthetic Industry,the government of India has also taken the initiative to promote synthetic textile manufacturing in India and launched dedicated schemes like PLI and MITRA.Approximately,49%i.e.US$427 bn.of the global trade comes from man-made fibers and is growing at a CAGR of 3.7%since 2010.In 2021,MMF based apparel stood at US$237 bn.growing at a CAGR of 4.6%while cotton based apparel stood at US$207 bn.MMF based fabrics being the second largest category stood at US$69 bn.growing at a CAGR of 3.4%during the same period.Table 4:MMF Based Product Global Trade(US$Billion)MMF Based Products 2010 2019 2021 CAGR(2010-21)Fiber 11 11 11-Yarn 26 30 32 1.9bric 48 70 69 3.4%Home Textile 15 22 27 5.5%Apparel 145 248 237 4.6%Technical Textiles 27 39 46 5.0%Others 3 3 3-Total 286 457 427 3.7%Source:UN Comtrade 8 1.3.Indian T&A Industry Overview Domestic T&A Market is expected to reach US$250 bn.by 2025-26 Indian T&A market is estimated at US$153 Bn.,70%of which is domestic consumption while exports constitute the rest 30%.The overall domestic market of India stood at US$110 bn.in 2021.Within this,apparel retail contributes US$80bn.,technical textiles contribute US$22 bn.and home textiles contribute US$8bn.Figure 2:Domestic Market of India(US$Billion)Source:Wazir Analysis The domestic market is further estimated to reach US$190 bn.by 2025-26 growing at a CAGR of 10%.Domestic home textile market is estimated to grow at a CAGR of and reach US$13 bn.whereas technical textile market is estimated to grow at CAGR%and reach US$42 bn.during the same period Figure 3:Domestic Market of India Growth Projection(US$Billion)Source:Wazir Analysis Domestic consumptionUS$110 bn.ApparelUS$80 bn.Home textilesUS$8 bn.Tech.textilesUS$22 bn.2488135112022422135788013528501061101902005-062010-112019-202021-222025-26(P)Home TextilesTechnical TextilesApparelTotalCAGR 10GR 10%9 Growing Exports Share of India In terms of global ranking,India is ranked 2nd in textile export with 7%share and 6thin apparel export with 3%share.Overall,India holds 4thposition with 5%share of global exports.Indias T&A exports were US$43 billion in 2021-22 and have grown at 3.7GR since 2010-11.The exports are further estimated to grow at 9GR from 2021 and reach 60 billion by 2025-26.Figure 4:Indias T&A Exports 2021(US$Billion)Source:UN Comtrade Apparel is the largest exported category in Indias exports with a dominant share of 36%in 2021.It is followed by the exports of home textileand Yarn with 7%share each.Fibre/Filament category has registered the highest growth in Indias export of textile and apparel with a CAGR of 11%over the last decade.USA,UAE and UK are the largest markets for Indias apparel exports with 30%,14%and 9%share respectively.The other major export markets for India are Germany and France with 6%and 4%share respectively.India is a growing economy and the T&A market is poised to grow.The market is estimated to reach US$250 billion by 2025-26,making India as one of the largest producers and consumer of Textile and Apparels.Figure 5:Overall Indias T&A Market(US$Billion)Source:Wazir Analysis 42444488465712161628457101333293643602010-112019-202021-222025-26(P)FiberYarnFabricApparelHome TextilesOtherTotalCAGR 3.7GR 9P10611219029364360791421552502010-112019-202021-222025-26Domestic MarketExportsTotalCAGR 8GR 9 2.Achieving the Next Target of US$250 Billion by 2025-26 As mentioned above,analysing the growth that the Indian T&A industry has shown in last decade and especially the massive rebound post Covid-19,it can be firmly said the Indian textile industry has the potential to become a US$250 billion industries by 2025-26.Currently,the textile sector in India accounts for 10 per cent of the countrys manufacturing production,5 per cent of its GDP,and 13 per cent of exports earnings.Post covid there is also a boost in the demand and the government support in form of attractive schemes such as PLI&MITRA will further drive the way for the US$250 billion target.However,a roadmap to achieve the full potential of the industry is what the industry needs to deliver this target in time.The Industry need to focus on leveraging its core strengths to gain momentum in both domestic and global market.2.1.Leveraging Government Schemes The Indian government is actively supporting the growth of T&A industry.With the vision to make India a global sourcing hub,the Indian govt.has introduced various turnkey policies such as Production Linked Incentive(PLI),Mega Investment Textile Parks(MITRA)and National Technical Textiles Mission(NTTM).Production Linked Incentive Scheme PLI scheme,which was launched in early 2022 to promote synthetic textile and technical textiles with an outlay of Rs.10,683 crores,is a big game changer for the Industry.The scheme saw an active participation from manufacturers across India.A total of 64 companies were selected for the incentives under the PLI scheme.At present,the selected companies are in various stages of their investment process.Further to this,the government has plans to launch PLI-2 scheme as well which is set to boost the finished product categories comprising of apparels and made-ups.The PLI-2 scheme has an outlay of 4283 crores and will further promote the investment in the T&A sector.The PLI scheme is expected to generate investments in the sector especially in new product categories like synthetics which will help India tap the huge global apparel market and increase overall global share.Mega Integrated Textile Region and Apparel(MITRA)Scheme Recently,the Union Cabinet approved the setting up of seven Mega Integrated Textile Region and Apparel(PM MITRA)Parks at an outlay of Rs.4,445 crores.The MITRA parks will be fully integrated from fibre to final product and the government plans to incentivize man-made fibre-based manufacturing.MITRA park will be developed by a Special Purpose Vehicle which will be owned by the Central and State Government in a Public Private Partnership(PPP)Mode.Each MITRA Park will have an incubation centre,common processing house and a common effluent treatment plant and other textile related facilities such as design centers and testing centers.The Master Developer will not only develop the Industrial Park but also maintain it during the concession period.Under the scheme,the centre will provide development capital support for the development of common infrastructure of Rs 500 crore for each greenfield MITRA park and upto Rs 200 crore for each brownfield park.An additional Rs 300 crore will be provided as Competitiveness Incentive Support for the early establishment of textiles manufacturing units in each of these parks.Moreover,investors who set up“anchor plants”that employ at least 100 people will be eligible for incentives of upto Rs 10 crore every year for upto three years.The MITRA scheme will give a competitive advantage in the global market by reducing logistics costs and strengthening the value chains.Each MITRA park is expected to generate 1 lac direct jobs and 2 lac indirect jobs.11 National Technical Textile Mission The government also launched National Technical Textiles Mission(NTTM)with a view to positioning the country as a global leader in Technical Textiles.The mission was sanctioned a total outlay of Rs.1480 crores.The mission has 4 components Research Innovation&Development,Promotion,and Market Development,Export Promotion and Education,Training and Skill Development.NTTM is a crucial step in achieving the US$250 billion target by 2025-26 as it will give boost to domestic manufacturing of technical textiles and take technical textile market to US$42 billion by 2025-26.The Ministry of Textiles recently cleared 23 strategic research projects worth around Rs 60 crores in Specialty fibres,Sustainable Textiles,Geotextiles,Mobiltech and Sports textiles under the National Technical Textiles Mission.2.2.Aligning with Global Buyers Needs Quality of the product and the service levels are the foremost things that a buyer seeks while purchasing products from any country.In terms of quality,India is amongst the top-quality suppliers of yarn and home textile products as we have a well-established spinning sector with the latest technology.However,in the weaving and processing sector,due to the lack of the latest technology and technological know-how,India is not able to develop high-quality products,especially in synthetic textiles.Also,in the garment sector,India needs to develop strong capabilities in several products which are in high demand in the export market,for example,outerwear,suits,sweaters,lingerie etc.In order to achieve the quality levels required by international buyers,Indian textile industry needs to raise the performance of machinery,process and skill training of the manpower.Indian companies also need to focus on providing full package services to buyers and become long-term supply chain partners.India is a reliable destination for buyers in terms of service levels.Indian companies(organized and unorganized)have the flexibility to cater to different order sizes(although there is a restriction in catering to high bulk orders in garments).However,India needs to further develop its product and services to tap the huge global export market potential.2.3.Strengthening the Textile Value Chain One of the key challenges faced by the industry today is structural weakness in the manufacturing value chain.As we proceed downstream in the value chain,the manufacturing capacities continue to reduce thereby losing out on the opportunity of value addition.Significant amount of value addition opportunity is lost because of exports of unfinished goods viz.raw fiber,yarn and greige fabrics.Hence,it is must to strengthen the value chain to gain better value for the service.The fundamental issue within the chain lies with the fabrics manufacturing and processing sector,which suffers from lack of capacity and use of obsolete technologies,to an extent that the upstream and downstream processes are not able to utilize their full potential.12 Gaps in Indias Textile Industry The Indian textile&apparel industries have one of the longest and extremely fragmented supply chains in the world,with existence of many intermediaries between the producer and the final consumer.Each intermediary lead to lengthening of lead times as well as costs.For India to be a cost competitive destination,it has to address the aforementioned apart from dealing with other key challenges as given below:Lower cost competitiveness to competing nations A major reason for lower cost competitiveness is due to lower efficiency levels in Indian apparel manufacturing compared to key competitors like China,Vietnam and Bangladesh.Also,India has one of the highest costs of capital compared to most competing countries which affects the cost of production and thus its competitiveness.The present lending rate in India is 10.0%to 12%while that in other competing countries like China,Turkey,Vietnam,etc.ranges from 5 to 7%.Absence of fibre neutrality Globally,manmade textiles and garments are in high demand.But India,despite being second largest textile exporter in the world,lags in this category because of unavailability of manmade fibres at competitive prices.The textiles value chain in India bears a differential tax treatment while countries like China,Pakistan,Sri Lanka,Indonesia and Thailand follow a fibre neutral policy.There is a need to align our production with the world consumption patterns through the introduction of a fibre neutral tax policy.Low technology level The Textile Industry suffers from the use of low and outdated technologies especially in the power loom sector,processing,etc.In general,spending on R&D,product development etc.by textile companies in India is quite low.As a result,India has had a nominal presence in high value-added segments and innovation driven technical textile segment.Fragmented nature of industry lacking economies of scale Indian textile sector is largely unorganized and small in size,especially the fabric manufacturing,fabric processing,and garment manufacturing segments.These segments suffer from lack of capacities and use old technologies.Capacity expansion or technology upgradation is a big challenge for these small and medium scale units with limited resources because of the higher risks perceived by lenders and also because of lack of awareness.13 2.4.Focus on Skill Development Indian textile industry needs requisite technical know-how and the skilled manpower required for the manufacturing of high-end products.Hence skilling initiatives need to be taken to develop manpower at both technical and managerial levels.Steps should be taken for the inclusion of textiles in the curriculum of various universities/institutions at graduate and postgraduate levels e.g.Medical/civil engineering/agricultural/Textile Engineering etc.This will result in the formation of an efficient&innovative workforce which will lead the industry to greater heights.2.5.Boosting Indigenous Machine Manufacturing and Investment in Machinery To be on top of the competition it is important to use the best and updated machineries which help in producing quality products and offer better margins by reducing rework and breakdown.However,most the top-class machinery available today are German or Japanese and importing them is a heavy cost plus their availability of repair parts and regular maintenance charges are also very high.Now,as Indian T&A market is growing to reach US$250 bn.,a lot of investments are on their way which will support this growth,these investments creates a huge opportunity for developing the high-quality machines,domestically,and offer a better service in terms of quality,price and post installation maintenance.Manufacturing in India will also give a significant competitive advantage to the global machinery manufacturers in providing better service to buyers,especially in terms of spare parts.The present textile machinery manufacturers are already exporting all over the world and the fresh investment in this sector will scale it up many times.Once machinery manufacturers decide to set up their unit in India,spare parts suppliers will also follow them.Many Indian companies will also start manufacturing the machinery parts looking at the potential future demand.A similar scenario has already been observed in the automobile industry.Once spare parts availability becomes easier and quicker,it will also help in increasing the market size of those machineries.14 3.Enhancing Exports and Global Competitiveness T&A manufacturing has always been associated with low-cost manufacturing.Over the years,high-cost destinations such as USA,Europeans countries(incl.Italy,Germany,Belgium,France,and UK),Turkey,Japan,and South Korea have dropped their combined share in the global textile&garment trade.While low-cost destinations such as China,India,Bangladesh&Vietnam have increased their share during the same period.These countries have further added key competitive advantages over other countries to maintain their share.While all countries would like to increase the share of manufacturing,the top textile and garment manufacturing hubs i.e.China,India,Bangladesh,&Vietnam have developed themselves over the years to become competitive in their respective segments.India,will be looking to further consolidate on its competitive advantage to strengthen its manufacturing ecosystem and also attract investments.3.1.Exploring Untapped Markets and Free Trade Agreements(FTAs)India being the fourth largest exporter of textile and apparel commands 5%share in global textile and apparel exports.However,most of the global textile and apparel markets still remain untapped by Indian exporters.These markets offer a tremendous opportunity to our exporters for increasing Indias T&A exports.Indias Current share in global market is listed below:Table 5:Indias Exports Share in Major T&A Markets(US$Billion)Markets Total T&A Imports 2021 Indias Share USA 128 8.7%Germany 59 3.9%Japan 33 1.2%UK 29 5.9%Italy 27 2.9%Spain 24 3.9%S.Korea 17 2.5nada 15 5.0%Russia 13 2.0%UAE 8 15.4%Source:UN Comtrade It is understood that there are specific challenges related to the untapped markets like quality concern&cultural mismatch in Japan,high tariff incidences in Canada/South Korea/Russia and tariff barriers in Turkey.However,with increased focus on manufacturing excellence Indian manufacturers&exporters can position themselves distinctively to compete in these markets.FTAs with Major Markets India also enjoys FTAs and other trade agreement with many markets which can also be leveraged to venture in to a new market.At present India has trade agreement with Japan,S.Korea,Australia and UAE.India is also in final stages of FTA with UK which will give direct and free access to Indian goods in UKs market.Moreover,trade agreements act as a gateway for manufacturing nations for the development and investment in their industry.Countries like Bangladesh,Vietnam,Ethiopia etc.have leveraged their FTAs with US&EU to bring in large scale investments over the last decade.India on the other hand has failed to achieve the same result owing to the absence of such FTAs which makes it a less attractive destination for investments as it faces tariff barriers in major international markets.15 Therefore,an early finalization of FTAs with major textile and apparel markets will help drive investments in the country.Table 6:Opportunity for India if FTAs with Major Markets are done Country Global T&A Imports (US$Bn)Global Apparel Imports (US$Bn)Indias T&A Exports (US$Bn)Indias Apparel Exports (US$Bn)Indias Current Market Share%Potential India T&A Exports with 15%Market Share Additional Market for India (US$Bn)EU 125 86 7.2 4 5.8 11.5 USA 114 82 9.8 4.2 8.6 7.3 UK 29 21 1.7 1.1 5.9%4.3 2.6 Source:UN Comtrade 3.2.Focus on New Products and Emerging Trends Indian textile&apparel industry need to explore more products to keep its mark in the global landscape.Despite huge potential to gain more share in the markets,Indias exports to the global market are still average to 5%of the demand.To survive in this competitive landscape,manufacturers have to heed in finding new products,better services,new markets and new revenue streams.Aligning with global exports An analysis of globally top 10 traded commodities shows that 8 out of 10 commodities fall in the apparel category and Indias share in all those commodities is significantly low(less than 5%).For certain categories share in trade is as low as 0.4%.Table 7:Top 10 Global Traded Categories(US$Billion)Commodity Code Description Global Trade Indias Exports Indias Share 610910 Cotton T-shirts 34 1.7 5.0a1020 Cotton Jerseys/Sweater 30 0.2 0.7a1030 MMF Jerseys/Sweater 27 0.0 0.2b0342 Mens Cotton Trousers 25 0.5 1.8c0790 Made-ups 23 0.4 1.8b0462 Womens Cotton Trousers 22 0.2 0.9R0100 Cotton 17 2.7 16.0a0990 MMF and Other T-shirts 14 0.6 4.6b1210 Brassieres 12 0.1 0.7a0463 Womens Synthetic Trousers11 0.0 0.35%Source:Un Comtrade Also analysing Indias top exported commodities,it can be observed that Indias top ten commodities include commodities like fibre,yarn,garment and home textiles as well.16 Table 8:Indias Top 10 Exported Categories(US$Billion)HS Codes Description Indias Exports 520100 Cotton 2.7 610910 Cotton T-shirt 1.7 520523 Cotton Yarn 1.4 630492 Knitted Made-ups 1.3 630260 Cotton Terry Fabrics 1.0 630532 MMF FIBSC Bags 1.0 520524 Cotton Yarn 0.9 630231 Cotton Bed Linen 0.9 611120 Cotton Babies Garments 0.8 540233 Texturized Polyester Yarn 0.8 Source:UN Comtrade This analysis shows that Indias exports are not very much aligned towards global demand.There are various product categories wherein there is a large potential demand and due to lack of product diversification,Indias share in those categories is negligible.Indian textile industry needs to understand and capitalize on this potential market opportunity by investing into different products.Also,Indian textile industry needs to keep an eye on emerging product categories such as technical textiles,functional textiles,non-wovens etc.and target their growing markets as well.Keeping pace with the requirements of buyers in export markets and responsiveness to it can also help exporters to have better competitiveness.Developing capacities in Synthetic Textiles India is gaining strength in top MMF apparel commodities traded globally.In 2021,Indias share in the top MMF traded category globally was only 2%.However,India has shown significant growth of CAGR 8%in the MMF based apparel Category since 2010.Indias presence is still insignificant in the majority of MMF apparel commodities except for Dresses and Blouses where India has a reasonable share of 12%and 11%respectively.Going forward India can focus on consolidating these categories however,diversification to new categories is a must.Categories like Trousers,Sweaters,Jackets,Brassieres,and Overcoats are some of the major categories where India can focus expansion in order to increase its share in the global MMF apparel market.Table 9:Indias Share in top MMF Based Apparel Commodities(US$Billion)Sr.no.Row Labels Global Trade China Bangladesh Viet Nam India Indias Share Indias Growth(2010-21)1 Trousers 19.7 12.0 2.4 4.3 0.9 4%2 Sweaters 15.0 11.1 2.2 1.5 0.05 0.3%3 Dresses 9.2 6.9 0.5 0.6 1.1 12%4 Hosiery 8.7 6.3 0.03 0.3 0.2 2 %5 Jackets 6.7 8.0 0.2 0.4 0.2 3%6 Brassieres 6.2 4.4 0.7 1.0 0.1 1%6%7 Overcoats 4.5 3.2 0.4 0.9 0.04 1%4%8 Gloves 3.4 2.9 0.04 0.4 0.1 2%9 Blouses 3.2 1.0 0.3 0.3 0.3 11%3 Swimwear 3.0 2.0 0.2 0.5 0.01 0.2%-7%Others 157 34 3 7 2 1.3%1%Total 237 92 10 17 5 2%8%Source:UN Comtrade 17 Tapping the huge potential of Technical Textiles Technical textiles offer vast arrays of opportunities for the domestic market of India.This segment is still at a nascent stage in India and has the capability to grow at unprecedented rates in the future.This is due to the growing awareness about the benefits of technical textiles not only on industrial front but also in household usage.With applications in fields like healthcare,automobile,construction,agriculture,apparel,sports&fitness etc.Technical textile market is posed to reach a size of US$42 bn.in 2025-26 from a level of US$22 bn.(2021-22)registering double digit growth rate of 12%.Hence,this sector becomes is one of the most important areas for growth for Indian textile and apparel sector.3.3.Building Scale and Taking Cluster Approach Large scale Investment Indian textile industry is at a tipping point;moving forward from a low value-added product to high-end products.There is a vast scope on the horizon for India to improve its textiles consumption and production as it is expected to become US$250 bn.sector.With the increase in investments in India,we will be able to achieve economy of scale which will gain us competitive edge in the global market.Globally,the textiles industry is characterized by huge investments in research and development to develop novel products with more functionalities and features.The growth of India as a manufacturing hub for textiles will depend on the attractiveness of Indias domestic market and attracting investments in high-end textile products to cater to global demand.The textile industry can achieve its economies of scale by doing large-scale investments from foreign and domestic investors.Investment can be greatly amplified through improvement in ease of doing business,competitive lending rates,and a fibre neutral tax structure.Additionally,partnerships of financial and technological know-how sharing with global players will help in making our presence felt globally.Alongside various partnerships,focus on research and innovation has to be intensified domestically to make our products more R&D intensive and globally competitive.Cluster Approach Indian textile and apparel manufacturing is highly fragmented and spread across different clusters.Majorly the spinning is the most organized sector of the textile value chain whereas all the other sectors are largely unorganized.Woven fabrics are being produced in Surat,Delhi NCR,knitwear production happens in Ludhiana,Tirupur whereas garmenting is done in Bangalore,Delhi NCR,Tirupur,Ahmedabad etc.The unorganized manufacturing in these clusters face several challenges likelack of support facilities&infrastructure,limited scale,labour challenges,etc.The clusters need ot be upgraded and modernized to align with global market demands.The revival of manufacturing in the sector can be led by the consolidation of the unorganized manufacturing bringing them under one umbrella.The sector is labour intensive and such reforms will lead to the generation of employment and achieving a more inclusive economic growth of India.This will also help to lessen the supply side challenges and help to reach the target customers at the right cost.18 Clusters also allow companies to operate more productively in sourcing inputs;accessing information,technology,and needed institutions;coordinating with related companies;and measuring and motivating improvement by understand their core competencies.It will connect the array of industries which are related to skills,technologies,or common inputs,suppliers,etc.so that the buyers needs can be fulfilled.One example of a successful cluster is Tirupur knitting hub where many SME apparel production units have consolidated to achieve common goal.This will collectively help to improve the competitiveness and profitability of the units.3.4.Attaining Manufacturing Excellence Another important step towards becoming a preferred manufacturing destination is manufacturing excellence.Better productivity,higher efficiency etc.can only be achieved if all the systems and processes are working in a synergy.Apart from a handful of the top companies,majority of textile industry lack manufacturing excellence.This leads to generation of higher waste,poor quality and low efficiency and productivity levels.Manufacturing excellence includes streamlining manufacturing operations,quality&process improvement,capacity improvement,and information systems for operations&control.Thus,an ideal production process would be where throughput time is minimal,inventory is balanced,bottleneck in operation is none,changeover time is negligible,defects are zero,and critical path is well defined.To remain competitive in the international market it is important to continuously improve quality and productivity through manufacturing excellence.Industry 4.0 Industry 4.0 has different components like Internet of Things,additive manufacturing,man-to-machine communication,smart manufacturing,and artificial intelligence.It is a revolutionary wave in the industry to transform the ways of manufacturing making the factories smart.Cheap labor and working with traditional manufacturing systems like Unit Production System(UPS),Progressive Bundle System(PBS)etc.will not have the supremacy as before against the newly adopted manufacturing systems.Industrial revolution commences with the introduction of disruptive technology.There are numerous factors that contribute to the birth of these innovations and technologies within the manufacturing industry.Some of the forces that are acting to bring about the Industry 4.0 paradigm are:19 Figure 6:Industry 4.0 Factors Source:Wazir Analysis 4.Planning for a Sustainable and Prolonged Growth Industrialistsneed to focus on incorporating best practices in order to sustain the growth in the industry and prolong the global competitiveness.There is also a need to attain sustainability in both process and product to ensure the prolonged growth.4.1.Adopting Best Manufacturing Practices Technology and innovation are synonymous with growth and development for any sector or industry.Globally renowned companies have become successful by continuously evolving their systems&processes to not only meet the ever-changing demands of consumers but also by introducing newer and better products.This evolution is the result of an amalgamation of new technologies and improved methods of manufacturing which are efficient and highly productive.This aspect of manufacturing has been neglected by the Indian textile industry as only a handful of large and organized companies actually follow any type of systematic procedures for manufacturing and focus on incorporating modern technology into the system.This leads to higher waste generation,poor output quality,more defects and faults which in turn results in the decrease in the value of finished products.To improve manufacturing performance of the textile industry of India,it becomes imperative to incorporate more efficient methods of manufacturing and newer technologies to complement the system.For attracting investments in the sector,it is required that good incentives should be given to investors.Incentives focused on technology up-gradation,capacity addition and long-term development of the sector are crucial at this point of time.The incentives need to be attractive enough for Indian as well as international investors.Improved investment environment will stimulate investments,provide technical know-how and develop state-of-the-art set-ups required for the sustainable development of the sector.Strict Adherence to Compliance and Regulations 20 There is a growing pressure on textile companies around the world to become sustainable and green.This pressure comes from the government,from society,environmental campaigners&NGOs.The result of which emerged in the form of various laws®ulations on the right ways of processing textiles&apparel.The government has built multiple compliances which range from labor compliance,social compliance,environmental compliance,and compliance for waste disposal&other manufacturing compliances.The objective of these rules®ulation is to provide a stipulated framework for the industry to work in such that it does not cause harm to the society&the environment.On an average,a manufacturing company in India has to follow around 70 compliances and file over 100 returns every year.Government authorities such as Labour Department,Director of Factories,PF&ESI office,Pollution Control Board etc.regulate these compliances.However,the key issue is that these compliances are not followed properly in the textile sector and the reason again is the fragmented state of the industry.Lack of awareness&training and the high cost of compliance makes the implementation of compliances complicated especially for small-scale industries.This non-compliance from the industry is not only harmful to the environment but it also adversely impacts the image of the Indian textile industry in the global market.Although the government has made stringent laws®ulation,if the industry will not comply with those regulations,sustainable growth cannot be achieved.For this,a joint effort between government&industry is needed wherein government can provide an accessible platform for the textile companies for eco-compliances while the industry must strictly implement the regulations laid by the government.4.2.Developing an Agile and Versatile Manufacturing Capability T&A manufacturers need to develop an agile and versatile approach when servicing global buyers.Competition has increased the demand for shorter lead times and variety in products,driving strong need for quick change over while maintaining efficiency levels and also manage a wide range of product portfolio.Being versatile,will enable manufacturers to gain competitive advantage over global manufacturers.Bringing new ideas into action is of importance as it can lead to finding new manufacturing methods to improve agility,producing better quality and designs and streamlining the entire process flow.4.3.Role of Research and Development The Indian textile and apparel sector is known for its traditional products but very limited innovation has taken place in the sector so far.Even for several home-grown technologies and process,commercial acceptability and adoption is not there in the sector.When compared to other competing countries,the efficiency and productivity levels of Indian textile sector is quite low.The government can have a R&D fund,which could be used for deploying state-of-art modern technologies.4.4.Focus on Sustainable Development and Circular Economy Sustainability is becoming a non-negotiable factor in global trade and sourcing decision factors and it is important for the supply chain stakeholders are aligned with the sustainability agenda and understand their responsibilities going forward.At the core of sustainable development lies the responsibility towards the environment.The mere definition of sustainable development says that it is an approach that aims to balance the economic development needs against an awareness of the environmental&social limitations.Staying within our environmental limits is one of the central principles of sustainable development.21 Textile manufacturing is an energy,chemical&resource-intensive industry.Right from the growth of fibers i.e.cotton(agriculture)or synthetic(chemical synthesis)to the manufacturing of garments,textile industry consumes a large number of resources(land,water,coal,other fuels,chemicals etc.).Consumption of all these resources means the release of large amounts of harmful emissions,solid and liquid chemical waste.It is a double-edged sword as it impacts the environment by both depleting natural resources and by releasing harmful byproducts in the environment.Future development of any industry cannot be based on a model where no regards are given to the impact that it has on the environment.Hence for the textile industry,it becomes much more important to adopt the sustainable way of growth.Companies are now adopting a green,low carbon&environment friendly approach.This is achieved by incorporating advanced technologies for energy saving&emission reduction,resource recycling and implementing low-carbon&energy-saving projects.The first step in this is to build an Environmental Management System(EMS).EMS is a set of practices&procedures that enable an organization to reduce its impact on the environment and also increase operating efficiency.Overall Indian textile and apparel industry has the potential to reach the target of US$250 bn by 2025-26 if the right steps are taken from a manufacturing perspective,marketing perspective and policy perspective.There is a strong window of opportunity for India to enhance its global presence and industry must be prepared to tap the opportunity.22 About FICCI The Federation of Indian Chambers of Commerce and Industry(FICCI)is an association of business organizations in India established in 1927.FICCI draws its membership from the corporate sector,both private and public,including SMEs and MNCs.The chamber has an indirect membership of over 2,50,000 companies from various regional chambers of commerce.It is headquartered in the national capital New Delhi and has presence in 12 states in India and 8 countries across the world.FICCI is a non-government,not-for-profit organization involved in sector specific business policy consensus building,and business promotion and networking.It provides a platform for networking and consensus building within and across sectors and is the first port of call for Indian industry,policy makers and the international business community.It organizes conferences,forums,exhibition,trade fairs,etc.bringing the industry insight forward.23 About Wazir Wazir Advisors is a Management Consulting assisting its clients in strategy formulation and implementation,forming alliances and joint ventures,investments and market understanding,sector analysis and due diligence-thereby providing end to end solution spanning the complete business cycle in textile value chain.Having worked with leading Indian and International companies,public sector organizations,Government departments,development agencies,trade bodies etc.,Wazir has a deep understanding of global textile sector dynamics and right connect with the people who matter.Wazirs team of textile experts possess experience across function projects,operations,sourcing and marketing in the sector.The team members have worked on strategy and implementation assignments in all major textile and apparel manufacturing and consumption base.Wazir leverages its body of knowledge,contact and combined expertise of its team to deliver value to clients.
2022-12-28
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Issue 24 November 2022|From Dezan Shira&AssociatesOpportunities in Singapores Manufacturing Sector i.
2022-12-26
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a manufacturers roadmap to modern commerce successstarting with PIM or commerce?hint:theres no wrong.
2022-12-23
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Epicor eBookEpicor for ManufacturingPush Past These Common Manufacturing Challenges2|Push Past These Common Manufacturing ChallengesEpicor for ManufacturingContentsSolving Common Manufacturing Challenges.3Managing a Skilled Labor Shortage.4Keep Your Shop Floor Equipment Running Smoothly.5Allow Your IT Department to Shine.7Were Here to Help .9Push Past These Common Manufacturing Challenges|3Epicor for ManufacturingSolving Common Manufacturing ChallengesManufacturers have a tough jobeven under ideal circumstances.There are so many complex steps required for a part to get into the hands of a customer.And when things go wrong,sometimes it can feel like youre fighting a never-ending series of fires.If the everyday challenges arent enough,demanding customers,supply chain disruptions,and shutdowns have forced manufacturers to adapt to change more rapidly than ever before.Instead of pushing against the same challenges,how can you break through and prosper?4|Push Past These Common Manufacturing ChallengesEpicor for ManufacturingManaging a Skilled Labor Shortage1“2018 Skills Gap in Manufacturing Study”.Deloitte Insights&Manufacturing Institute.2 Dorn,Kristi.“How Innovation and Growth Vibe Helps Distributor Find Labor Shortage Solutions.”The Shop Floor.Epicor,January 23,2020.The industry has been in what seems to be a chronic skilled labor shortage.Research from a Deloitte study estimates that manufacturing may have as many as 2.4 million jobs to fill by 2028 for the US alone1.This number is unlikely to be filled in one swoop.It may be time to face the reality of learning to do more with less,but things are far from hopeless when it comes to our workforce.Though there is a shortage of skilled workers,they are out thereand having modern technology is one way to attract the best available to come work for your business.Radwell International routinely has a flurry of resumes from younger candidates for open positions and gives their IT department credit for the high interest.Technology is very important to us,explains Mike Vostenak,Radwells global senior director of human resources.Applicants want to stay relevant,he says.If theyre working for a company thats not,then theyll typically move on.Since taking actions such as streamlining their online application process and adding short videos outlining what each role is about,Radwell has had a 30%uptick in job applications2.Attracting job applicants is just one part of the equation.How does technology empower your existing staff and lead to less turnover?The events of 2020 changed the workforce forever.These days,theres a greater emphasis on remote work capabilities than ever before.Employees need to be agile and flexible,relying on mobile devices and software to connect the entire organization.When your ERP is hosted in the cloud,staff can work anywhere,anytime.Whether at home,in the field,or on the shop floor,employees have the peace of mind knowing they can get the information and tools they need even while navigating lifes inevitable curveballs.Perhaps one of the most important ways to keep good employees is to give them opportunities for growth.Thomas Stone,senior research analyst at The Institute for Corporate Productivity,stresses the importance of promoting internal talent.It serves to retain valuable employees and shows others that your company invests in its people.Its becoming more common for manufacturing companies to disburse funds to employees up front to use for training and development instead of traditional tuition reimbursement.This is another area where modern ERPs have an upper hand.With extensive training capabilities and support,the right solution will turn any green employee into a highly skilled asset faster than ever before.Perhaps one of the most important ways to keep good employees is to give them opportunities for growth.Push Past These Common Manufacturing Challenges|5Epicor for ManufacturingTop 5 Costs of a BreakdownEquipment or tool breakdown can be very costly,but not just in terms of the breakdown itself.Keep Your Shop Floor Equipment Running SmoothlyYour shop is busy on a normal day,but when a machine breaks down unexpectedly?At best,its a major headache.At worst,it can put a screeching halt to your production.Utilizing predictive maintenance with Industrial Internet of Things(IIoT)technology can avoid these stressful situations.Andrew Robling,Product Marketing Manager at Epicor,explains,“By using sensors to connect to equipment and tooling,a manufacturer can get an understanding of when an asset is going to fail or break down before it happens.”These sensors,like a vibration sensor or a fluid level sensor,attach to the asset to report back information.“When a sensor goes outside predetermined thresholds,the IIoT solution could set off an alarm or notify maintenance of a pending issue,”he adds.The key to an efficient shop floor is having actionable data.“Manufacturers are continually striving to streamline their business by increasing productivity,improving quality,and reducing downtime,”Robling states.By using IIoT solutions,you can easily and securely connect to smart devices that gather data to streamline your business.“By simply monitoring how long the process takes and using that information to identify where there are bottlenecks,you can make changes to gain efficiencies,”he explains.IIoT allows for real-time insights.Sensors collect the specific parameters that are important to you,like cycle speed,downtime,and machine conditions.By acting on this information,you can avoid a machine breakdown.13524Lost Production Time Possibility of Missing a ShipmentCosts of Expedited ShippingLow Vendor Ratings Possible Lost Business6|Push Past These Common Manufacturing ChallengesEpicor for Manufacturing“As a manufacturer,theres a lot of information that comes back from machines on the shop floor,so now we can review that data to make better business decisions.Real-time information is critical for production planning purposes as we manage orders that come in throughout the day,and its also important we have current,up-to-date information for our customers and vendors.”Christian Boddaert,IT Manager|Axelgaard ManufacturingPush Past These Common Manufacturing Challenges|7Epicor for ManufacturingAllow Your IT Department to ShineYou already have a ton to keep track of.IT challenges shouldnt have to take up more of your time.The good news is there are tools that allow your IT talent to be available for critical tech decisions instead of spending all their time upgrading software,pulling long data reports,and dealing with security breaches.If you find your IT spends more time compiling and explaining data than you do making decisions off those numbers,its time to investigate a different solution.Elizabeth Cain,product marketing manager at Epicor,shares how the right data system can make a big difference.“An IT department or consultant spends way too much time and money connecting ERP data to an off-the-shelf Business Intelligence solution.For the average end-user,deciphering what they compile might be no easier than looking at an Excel sheet with row after row of numbers and stats,”she explains.By using a comprehensive ERP with visible and drill-down analytics capabilities with packaged content integrating all areas of the business,you suddenly have instant access to real-time,user-friendly data that gives the full picture into your business.And its right there when you need it without taking up extensive IT resources.The kind of hosting you choose for your solution is another way to optimize your IT department.Maintaining a large business intelligence system with an on-premises solution is not an easy task.Cloud hosting grants you access to more powerful processing and greater dataand thats a load off IT plus a cost savings on expensive servers.Cloud offers the best when it comes to performance,scalability,and reliability.It also allows you to properly utilize the data your system collects,as Cain explains:“The term big data implies it is supported with the necessary hardware infrastructure for powerful data processing and massive data storage providing instant query results from enterprise-wide data.Until recently this was out of reach of most small to midsize manufacturers but that has changed with the availability of these services in the cloud.”On-premises solutions require complicated,lengthy upgrades to stay up-to-date,while cloud upgrades automatically.Additionally,on-premises hosting for your legacy ERP actually opens up your company to some hidden risks.Software is commonly hosted on the same network as company email,but this makes it easy for hackers to access your customer data and private business information.Additionally,servers are expensive!Having them on your property could be a huge risk in the event of flooding,temperature control issues,or even possible theft.Hosting on the cloud is more secure,as well as a load off your mind.Plus,cloud allows you access to the latest tech in your industry.Being on the forefront,instead of catching up,places you in the same tech ballpark as large organizations.Your talent can now do what they do bestemploy creative solutions using modern technology.Its an edge that can put you in front of your competitors.Cloud offers the best when it comes to performance,scalability,and reliability.8|Push Past These Common Manufacturing ChallengesEpicor for Manufacturing“Our new visibility,through our robust reporting system,allows me to receive a weekly report that compares week-by-week performance.This has been of particular use during COVID-19 in assessing the impact of the crisis on our business.We are also working on customizable reports for receivables,supply-chain,sales,and others that were previously manual.With Epicor,we now have real-time,reliable data from which we can draw actionable business intelligence.That means faster decisions,cost savings,and shrewder strategy.”Sameh Awad,Director|General International GroupPush Past These Common Manufacturing Challenges|9Epicor for ManufacturingIn a perfect world,I would like to see my business:A.Challenge larger enterprise competitorsB.Significantly shorten our production processC.Have full visibility from raw materials to finished,shipped productsD.All of the AboveWhen it comes to streamlining my business,Im most interested in:A.Being more agile with my technologyB.Reducing downtime on the shop floorC.Evaluating long-term trends and forecastingD.All of the AboveLast year,led to a stressful time at work.A.A security breach with our client and business dataB.A critical piece of machinery breaking downC.Lower sales than predictedD.All of the AboveWhen it comes to hardware and machinery,Im most worried about:A.The servers that host our legacy ERPB.Sensitive production machineryC.Machine and labor performanceD.All of the AboveWere Here to Help These are just some of the challenges your businesses face on a daily basis.Its a tough economic climate for manufacturers,but you dont have to be alone in the grind.Partnering with a company that understands your needs will pave a smoother road for the future.Take this quick quiz to see where your business can benefit from a helping hand in the form of technology tailored specifically for manufacturers.The area of my business with the most bandwidth issues is:A.ITB.Factory Foreman/SupervisorsC.Forecasting and FinancesD.All of the Above2020 made me aware of a need for:A.The ability for me and my employees to work remotely when necessaryB.Being more proactive when it comes to equip-ment maintenanceC.Additional visibility into my supply chainD.All of the AboveWhat Industry 4.0 Technologies Can Best Help Your Business?10|Push Past These Common Manufacturing ChallengesEpicor for ManufacturingInterpreting Your ResultsMostly AsCloud Its time to move to the cloud!Say goodbye to your on-premises hosting,and hello to agility.Lower stress with more capabilities,theres a lot to love about cloud hosting.From your cell phone to your factory,everything stays up-to-date without any of the headaches.Mostly BsIIoT Its the industrial internet of things,and its going to help your shop floor perform better than ever before.Know the ins and outs of all of your machinery with a variety of sensors that provide invaluable data for maintenance and provide data down to the second that will expose every area for improvement.Mostly CsAnalytics Real-time data opens so many doors for your business.With a robust analytics platform,you can finally achieve end-to-end visibility.Quick,easily-accessible data will give you the ability for accurate forecasting,supply chain management,process optimizations and so much more.Mostly DsComprehensive ERP It might feel like there are a lot of problems to fix,but we see it more like an opportunity to flourish.You have multiple areas you want to work on,but thats okay.Epicor has solutions tailored to your specific needs to address these challenges head-on.Were here for the hard-working businesses that keep the world turning.Theyre the companies who make,deliver,and sell the things we all need.They trust Epicor to help them do business better.Their industries are our industries,and we understand them better than anyone.By working hand-in-hand with our customers,we get to know their business almost as well as they do.Our innovative solution sets are carefully curated to fit their needs,and built to respond flexibly to their fast-changing reality.We accelerate every customers ambitions,whether to grow and transform,or simply become more productive and effective.Thats what makes us the essential partners for the worlds most essential businesses.Contact Us Today:|The contents of this document are for informational purposes only and are subject to change without notice.Epicor Software Corporation makes no guarantee,representations,or warranties with regard to the enclosed information and specifically disclaims,to the full extent of the law,any applicable implied warranties,such as fitness for a particular purpose,merchantability,satisfactory quality,or reasonable skill and care.This document and its contents,including the viewpoints,dates,and functional content expressed herein are believed to be accurate as of its date of publication,April 2021.The results represented in this testimonial may be unique to the particular user as each users experience will vary.The usage of any Epicor software shall be pursuant to the applicable end user license agreement,and the performance of any consulting services by Epicor personnel shall be pursuant to applicable standard services terms and conditions.Usage of the solution(s)described in this document with other Epicor software or third-party products may require the purchase of licenses for such other products.Epicor,the Epicor logo,and Eclipse are registered trademarks or trademarks of Epicor Software Corporation in the United States,certain other countries and/or the EU.All other trademarks mentioned are the property of their respective owners.Copyright 2021 Epicor Software Corporation.All rights reserved.Lets Talk Shop Epicor for Manufacturing is built on deep expertise and curated to help you seize trends,optimize products and services,and adapt to changing market conditions.Whether you want to explore IIoT solutions or dive into real-time data,lets talk about whats best for your business.Contact us at
2022-12-08
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1I N S I G H T S F R O M T H E 2 0 2 2 C O N N E C T I V I T Y B E N C H M A R K R E P O R TT H R O .
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Chemicals PracticeReimagining Mexicos chemical industry The countrys chemical sector could double in.
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1MANUFACTURINGINSIGHTS FOR 20232TABLE OF CONTENTSm INTRODUCTION.3m KEY TAKEAWAYS.6m STAFFING&OPINION.
2022-12-05
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R E P O R TM U L E S O F T R E S E A R C HInsights from 1,000 IT leaders on people,processes,and technology IT Leaders Pulse Report 2022:Manufacturing 2Contents About this reportForewordExecutive summary:Manufacturing030425101705Process:Bringing IT and business teams togetherFrom technology enabler to business leaderPeople:Enhancing the employee experience06Technology:Empowering the workforce and creating exceptional experiences38Measuring future IT success3Manufacturers face an increasingly difficult list of challenges as they strive to enhance the digital customer experience,improve operational efficiency,and obtain a complete view of their supply chain.In addition,manufacturers must also consider strategies to combat cyber security,labor shortage,and ensure the safety of their employees.Already tasked with managing a plethora of networks,devices,and applications critical to business growth,IT teams have now been elevated to a strategic role,charged with driving multiple digital transformation initiatives often with little increase in team capacity or resources.These technology challenges are not unique to the manufacturing sector,which means IT leaders are in high-demand.Furthermore,the complexity of IT infrastructure,due to the specific needs of the manufacturing industry,leads to new challenges as manufacturers progress on their digital transformation journey including more unaddressed projects and increased stress and delay for IT leaders,respectively.As a result,IT retention grows more challenging every year and can impact innovation if unaddressed.But IT teams are finding new ways to become more efficient automating redundant processes,leveraging the right technology strategy,and empowering everyone with easy-to-use tools can help mitigate these challenges and drive improved business results.Michael Mitaritonna,IT Integration Lead,ABC Supply SAY EXISTING IT PROCESSES ARE HINDERING EMPLOYEE EXPERIENCE.893%PLAN TO INCREASE THE USE OF AUTOMATION(LOW/NO CODE DEVELOPMENT TOOLS)IN THE NEXT 12 MONTHS TO EMPOWER EVERYONE IN THE COMPANY.CONFIRM THAT THE GREAT RESIGNATION HAS WORSENED THE IT SKILLS GAP,WITH THE LARGEST GAPS IN THREE AREAS:59%IT AND SOLUTION ARCHITECTURE.47%SOFTWARE DEVELOPMENT.44VOPS.96%SAY A BEST-OF-BREED APPROACH HAS LED TO IT COMPLEXITY.75%PLAN TO INVEST IN NEW TECHNOLOGY TO ADDRESS THE SKILLS GAP.61%ARE CREATING FUSION TEAMS BLENDING WORKERS WITH TECHNOLOGY,ANALYTICS,AND DOMAIN EXPERTISE WHO SHARE RESPONSIBILITY FOR BUSINESS AND TECHNOLOGY OUTCOMES.66S%CITE TECHNOLOGY AS THE TOP IT INVESTMENT,AHEAD OF PEOPLE AND PROCESSES(47%).THE SKILLS GAP INTENSIFIESTECHNOLOGY IS AN INVESTMENT PRIORITYCOMPLEXITY CONTINUESIT AND BUSINESS ARE JOINING FORCES TO SCALEThe Great Resignation a recent phenomena where workers left or switched jobs in mass numbers as a result of shifting personal and professional priorities following the pandemic has evolved the role of senior IT leaders.Their focus has shifted to creating people-and experience-centric capabilities for customers and employees.The manufacturing sector is no exception.Manufacturers are under increased pressure from heightened customer expectations and supply chain disruptions.In turn,their IT teams are feeling the impact of greater demands and are looking to technology strategies and investments to deliver faster time-to-market.The findings of this report reveal the critical need for manufacturers to modernize IT operating models,increase alignment to ease the pressure on IT teams,and empower both IT and business teams across the enterprise to innovate.MuleSofts IT Leaders Pulse Report,in partnership with Vanson Bourne,was produced from interviews with 1,000 senior IT leaders across the globe.Out of 1,000,148 were senior IT leaders from the manufacturing sector.Below are the statistics specific to this industry.Executive summary:Manufacturing sector 4IT LEADERS PULSE REPORT 2022:MANUFACTURING5MuleSofts IT Leaders Pulse Report,in partnership with Vanson Bourne,was produced from interviews with 1,000 senior IT leaders across the globe.We conducted an online survey during June and July 2022 with participants from the United States,the United Kingdom,France,Germany,the Netherlands,Australia,Singapore,Hong Kong,and Japan.We used a rigorous,multi-level screening process to ensure that only suitable candidates participated in the survey.Respondents are all senior IT leaders,which are defined as those who hold a departmental or intermediate managerial position or above within the IT function.All respondents work at an enterprise organization in the public or private sector with at least 1,000 employees.About the reportFrom technology enabler to business leader S EC T I O N 01Experiences become increasingly importantAs digital transformation increasingly drives business strategy,senior IT leaders are moving from acting as IT operators to business leaders with deep technical expertise.Organizations are now realizing the importance of creating positive employee experiences to attract and retain talent after the Great Resignation.This type of exceptional experience is also expected for customer interactions.Today,86%of senior IT leaders agree that the experience an organization provides is as important as its products and services.86%OF SENIOR IT LEADERS AGREE THAT THE EXPERIENCE AN ORGANIZATION PROVIDES IS AS IMPORTANT AS ITS PRODUCTS AND SERVICES.01 From technology enabler to business leader7IT LEADERS PULSE REPORT 2022:MANUFACTURINGSuccess relies on tech-enabled experiences Roughly four out of five of respondents agree that improved customer-facing and employee technologies are critical for their organization to compete.This means that senior IT leaders are now making important business decisions with technology-enabled experiences in mind.This includes everything from technology investments to workplace environments to team structures and opportunities.85%OF SENIOR IT LEADERS AGREE THAT IMPROVED CUSTOMER-FACING TECHNOLOGY IS CRITICAL FOR THEIR ORGANIZATION TO COMPETE.OF SENIOR IT LEADERS AGREE THAT IMPROVED EMPLOYEE TECHNOLOGY IS CRITICAL FOR THEIR ORGANIZATION TO COMPETE.85 From technology enabler to business leader8IT LEADERS PULSE REPORT 2022:MANUFACTURING9IT LEADERS PULSE REPORT 2022:MANUFACTURINGSenior IT leaders are shifting their investment priorities.Across all industries,IT investment priorities over the next 12 months are evenly split,with half going toward technology and the remainder being spent on people and processes.The remainder of this report highlights the ways organizations are using or plan to use automation,best-of-breed technologies,and low/no-code tools to empower their employees and create market-winning experiences.IT investing in technology,people,and processesTECHNOLOGYPROCESSESPEOPLE(EMPLOYEES)How organizations plan to prioritize IT investments over the next 12 months:50&$ From technology enabler to business leaderPeople:Enhancing the employee experienceC U S T O M E R S P O T L I G H Tits a new era for the world of work.as people recalibrate their lives,values,and priorities,many are leaving their jobs in search of better employment conditions and opportunities.accelerated by the pandemic,the great resignation has created new expectations for senior it leaders.Workers today want employers that offer work-life balance,remote-or hybrid-working policies,more meaningful work,flexible hours,or higher pay.and as companies lose talent,they experience short-term business disruptions and skills gaps that can become increasingly difficult to fill.to appeal to top talent in todays job market,companies must offer more than a competitive salary they must also consider employee wellbeing.many senior it leaders are already recognizing this and are urgently adjusting their operations to center their focus on people.02 PeoPle:enhancing the emPloyee exPerience11IT LEADERS PULSE REPORT 2022:MANUFACTURINGWellbeing is shaping the future of workEmployee wellbeing now an investment priorityWhile technology remains a standout priority,nine out of ten senior IT leaders agree that investment in people is hugely important and theyre reevaluating their investment budgets accordingly.Over the next 12 months,the majority of respondents plan to invest in improving IT employee wellbeing,ahead of upskilling and increasing team headcount.This includes providing enhanced remote and flexible working capabilities.IT team investment priorities over the next 12 months:87%INVESTING TO IMPROVE IT EMPLOYEE WELLBEINGUPSKILLING EXISTING IT EMPLOYEESINCREASING IT HEADCOUNT82xh%OF SENIOR IT LEADERS AGREE THAT INVESTING IN PEOPLE IS HUGELY IMPORTANT.02 PeoPle:enhancing the emPloyee exPerience12IT LEADERS PULSE REPORT 2022:MANUFACTURINGSkills gaps related to implementation and management of new technologies is not a new issue for IT.However,the Great Resignation has made the problem much worse across a wide spectrum of IT functions.Most notably,three out of five(60%)senior IT leaders say they now have skills gaps within their IT and solutions architecture function,while almost half(45%)see gaps when it comes to cloud and infrastructure management.Where has the Great Resignation created skills gaps for IT:Skills gap stretch across IT functionsIT AND SOLUTION ARCHITECTURECLOUD/INFRASTRUCTURE MANAGEMENTSECURITY/INFOSEC60E98844)%3%SOFTWARE DEVELOPMENTDEVOPSNETWORK AND SYSTEMS INTEGRATIONDATABASE ADMINISTRATIONBUSINESS ANALYSIS/INTELLIGENCEPROJECT MANAGEMENTNO SKILLS GAPS HAVE BEEN CREATED DUE TO RECENT DISRUPTIONS IN THE LABOR MARKET02 PeoPle:enhancing the emPloyee exPerience13IT LEADERS PULSE REPORT 2022:MANUFACTURING60XWSQ%Many senior IT leaders are turning to automation and self-serve initiatives to address the growing skills gap.Across industries,58%of organizations are tackling this by automating tasks and processes,while 53%are empowering non-technical employees to meet their own needs.Other strategies include outsourcing IT functions and reskilling existing employees.Empower your organization with an end-to-end automation strategy.Watch now.How organizations are addressing the IT skills gap:Addressing the skills gap with automationINVESTING IN NEW TECHNOLOGIESAUTOMATING TASKS/PROCESSESOUTSOURCING IT FUNCTIONSEMPOWERING NON-TECHNICAL EMPLOYEES TO MEET THEIR OWN IT NEEDSRESKILLING EXISTING EMPLOYEES02 PeoPle:enhancing the emPloyee exPerience14IT LEADERS PULSE REPORT 2022:MANUFACTURINGAs more people leave their current roles,organizations struggle to hire people with the right skills.Nearly three quarters(73%)of senior IT leaders agree that acquiring IT talent has never been harder.As a result,the challenge of talent acquisition now influences technology choices for 98%of organizations.and reskilling existing employees.Technology choices driven by talent acquisition challengesOF ORGANIZATIONS SAY THAT TALENT ACQUISITION CHALLENGES INFLUENCE TECHNOLOGY INVESTMENT DECISIONS.98%OF SENIOR IT LEADERS AGREE THAT ACQUIRING IT TALENT HAS NEVER BEEN HARDER.73& PeoPle:enhancing the emPloyee exPerience15IT LEADERS PULSE REPORT 2022:MANUFACTURINGCompanies are adapting their people strategy to build a workforce that meets the needs of the business today and tomorrow.This means widening their recruitment criteria 80%of senior IT leaders are seeking developer talent from non-traditional backgrounds and focusing on upskilling and reskilling workers.At the same time,86%of senior IT leaders agree that business acumen is an important skill for technical talent.Widening recruitment criteria80 %OF SENIOR IT LEADERS AGREE THAT THEY SEEK DEVELOPER TALENT FROM NON-TRADITIONAL BACKGROUNDS(E.G.,VETERANS,NON-TECHNICAL PEOPLE CHANGING CAREERS,ETC.)OF SENIOR IT LEADERS AGREE THAT BUSINESS ACUMEN IS AN IMPORTANT SKILL FOR TECHNICAL TALENT.02 PeoPle:enhancing the emPloyee exPerience16IT LEADERS PULSE REPORT 2022:MANUFACTURING17IT LEADERS PULSE REPORT 2022:MANUFACTURINGEighty-six percent of senior IT leaders recognize that they must improve their training and development resources to properly upskill and reskill employees in other areas or as an incentive to attract new talent.While people are an important piece of the puzzle,an IT and business strategy also requires efficient processes to be successful.Move to improvedevelopment resources86%OF SENIOR IT LEADERS AGREE THAT THEIR ORGANIZATION NEEDS TO IMPROVE THEIR TRAINING AND SKILL DEVELOPMENT RESOURCES.02 PeoPle:enhancing the emPloyee exPerienceProcess:Bringing IT and business teams together98%2%OF SENIOR IT LEADERS AGREE THAT WORKING PROCESSES BETWEEN IT AND BUSINESS TEAMS COULD BE SIGNIFICANTLY IMPROVED.Improved collaborative processes needed between IT and business teams IT is no longer just a technology enabler;IT now solves business-critical problems,tackles major business objectives,and helps develop competitive advantages with technology.This shift requires IT and business teams to work in closer collaboration for strategic objectives.However,more than half of respondents(54%)think that working processes between IT and business teams could be significantly improved while only 2%said there was no room for improvement.Learn how IT and business team alignment impacts business outcomes.Download report.03 Process:bringing it and business together19IT LEADERS PULSE REPORT 2022:MANUFACTURINGWhere do process improvements fall for IT organizations:Forty-six percent of senior IT leaders say making process improvements is a major priority for their organization over the next 12 months with many reporting that their existing processes are hindering progress.This push to improved processes is particularly prevalent in the communications,media,and technology(CMT)industry(60%),as well as the public sector(52%).Process improvements are a key priority for ITMAJOR PRIORITYMODERATE PRIORITYMINOR PRIORITY46H%6 Process:bringing it and business together20IT LEADERS PULSE REPORT 2022:MANUFACTURINGWhere IT processes are hindering the organization:Nine out of ten(91%)senior IT leaders say that existing IT processes are blocking their teams productivity.Process challenges are also hindering innovation,technology adoption,and customer and employee experiences.Existing processes block productivity and transformationCUSTOMER EXPERIENCE32B%EMPLOYEE EXPERIENCE34%TECHNOLOGY ADOPTION349%PRODUCTIVITY31C%INNOVATION368%TO A MAJOR EXTENTTO A MODERATE EXTENTNOT AT ALL03 Process:bringing it and business together21IT LEADERS PULSE REPORT 2022:MANUFACTURINGWhere IT processes need to improve to support innovation:Most IT leaders believe processes need to improve across a range of IT functions including data management,integration,and security and governance to support innovation effectively.Innovation hinges on process improvements DATA MANAGEMENT/ANALYTICS6GG%IT INTEGRATION5IF%SOFTWARE DEVELOPMENT7EI%SECURITY&GOVERNANCE6EI%IT SERVICE MANAGEMENT8FF%THEY COULD BE SIGNIFICANTLY IMPROVEDTHEY COULD BE SOMEWHAT IMPROVEDNO ROOM TO BE IMPROVED03 Process:bringing it and business together22IT LEADERS PULSE REPORT 2022:MANUFACTURINGHow organizations are using or planning to use fusion teams:To address process challenges,senior IT leaders are looking to create fusion teams.These are multi-disciplinary teams that blend workers with technology,analytics,or domain expertise and who share responsibility for business and technology outcomes.Already 69%of organizations have created or are in the process of rolling out fusion teams,and an additional 22%plan to do so within the next 12 months.Of organizations with fusion teams already in place,63%of IT leaders say these teams have helped the business meet its goals.Fusion teams bridge alignment and drive success37c%OF SENIOR IT LEADERS SAY THAT FUSION TEAMS HAVE HELPED THEIR BUSINESS MEET ITS GOALS.28A%6%3%WE HAVE ALREADY CREATED FUSION TEAMSWE ARE IN THE PROCESS OF CREATING AND ROLLING OUT FUSION TEAMSWE ARE PLANNING TO INTRODUCE FUSION TEAMS IN THE NEXT 12 MONTHSWE ARE PLANNING TO INTRODUCE FUSION TEAMS BEYOND 12 MONTHSWE ARE INTERESTED IN THE CONCEPT BUT HAVE NO PLANS TO INTRODUCE FUSION TEAMS03 Process:bringing it and business together23IT LEADERS PULSE REPORT 2022:MANUFACTURING24IT LEADERS PULSE REPORT 2022:MANUFACTURINGFusion teams also deliver value across the business via improved efficiency,higher employee and customer satisfaction,increased agility,and accelerated innovation.Both people and processes rely heavily on technology to meet business objectives.The next section looks at the ways organizations are using technology to make people and processes more efficient.Fusion teams adding value across the businessExpected outcomes from fusion teams:58WSS%GREATER EFFICIENCY/REDUCED COSTS60%IMPROVED EMPLOYEE SATISFACTIONIMPROVED CUSTOMER SATISFACTIONINCREASED AGILITYACCELERATED INNOVATION03 Process:bringing it and business togetherTechnology:APIs,integration,automation,and low/no-codeALWAYS STANDARD41%MOSTLY STANDARDROUGHLY EVEN SPLIT BETWEEN STANDARD AND CUSTOMIZED26$%MOSTLY CUSTOMIZED9%ALWAYS CUSTOMIZED1%Processes IT organizations use to adopt new software:Implementing new software allows organizations to evaluate their existing processes and standardize them.However,75%of organizations require customized processes when adopting new software to meet their business requirements.This is one of many considerations senior IT leaders face as they look to future-proof their technology stack.New software requires custom implementation processes04 technology:aPis,integration,automation,and loW/no-code tools26IT LEADERS PULSE REPORT 2022:MANUFACTURINGOF SENIOR IT LEADERS PREFER TO UPDATE OR UPGRADE EXISTING SOLUTIONS WHEREVER POSSIBLE,RATHER THAN REPLACING THEM.72(%IT is leaning in to existing investments,rather than buying new technologyMost IT leaders(72%)prefer to update or upgrade existing solutions wherever possible,rather than replacing them.With growing economic headwinds,many organizations are looking to extract further value from their existing infrastructure instead of making investments in brand new technology.04 technology:aPis,integration,automation,and loW/no-code tools27IT LEADERS PULSE REPORT 2022:MANUFACTURINGBest-of-breed approach can lead to greater IT complexityOrganizations are using best-of-breed technologies to create new customer and employee experiences.While a best-of-breed strategy can increase agility,81%of respondents say that this approach correlates to struggles with IT complexity especially within the healthcare sector(87%).OF IT LEADERS AGREE A BEST-OF-BREED APPROACH MEANS THEIR ORGANIZATION STRUGGLES WITH IT COMPLEXITY.81 technology:aPis,integration,automation,and loW/no-code tools28IT LEADERS PULSE REPORT 2022:MANUFACTURINGIntegration projects take too long and cost too muchIn order to create connected experiences,organizations need integration.Two-thirds(66%)of IT leaders believe data or system integration projects take too long and 69%of them say they are too expensive.At the same time,68%of senior IT leaders recognize that a lack of data or system integration creates a disconnected customer experience,which damages customer loyalty and retention.682%OF SENIOR IT LEADERS LEADERS AGREE THAT A LACK OF DATA OR SYSTEM INTEGRATION CREATES A DISCONNECTED CUSTOMER EXPERIENCE WITHIN THEIR ORGANIZATION.664%OF SENIOR IT LEADERS BELIEVE DATA OR SYSTEM INTEGRATION PROJECTS TAKE TOO LONG.691%OF SENIOR IT LEADERS BELIEVE DATA OR SYSTEM INTEGRATION PROJECTS ARE TOO EXPENSIVE.04 technology:aPis,integration,automation,and loW/no-code tools29IT LEADERS PULSE REPORT 2022:MANUFACTURINGHow integration concerns influence an organizations decision to build a new application or software in-house:Integration now major factor in purchasing decisionsIntegration struggles are now influencing buying decisions.Most(98%)of senior IT leaders say that new technology investments are influenced by a tools ability to integrate with existing technology.While roughly 90%say that the decision to build or buy is influenced by integration concerns.How integration with existing technology influence IT investment decisions:How integration concerns influence an organizations decision to buy a new application or software:37S%8%1%TO A MAJOR EXTENTTO A MODERATE EXTENTTO A MINOR EXTENTNOT AT ALL599%2%TO A MAJOR EXTENTTO A MODERATE EXTENTTO A MINOR EXTENTNOT AT ALLTO A MAJOR EXTENTTO A MODERATE EXTENTTO A MINOR EXTENTNOT AT ALL41P%8%1 technology:aPis,integration,automation,and loW/no-code tools30IT LEADERS PULSE REPORT 2022:MANUFACTURINGHow organizations plan to use low/no-code tools over the next 12 months:Low/no-code tools play a key role in IT strategy Faced with a lack of coding talent,many senior IT leaders are turning to low/no-code tools to enable business users to build and test new experiences.Almost all organizations(96%)currently use low/no-code tools and 36%plan to increase their use over the next 12 months.WE CURRENTLY USE THEM AND PLAN TO INCREASE USE36S%WE DONT CURRENTLY USE THEM,BUT PLAN TO7%3%WE CURRENTLY HAVE NO PLANS TO USE THEM2%WE CURRENTLY USE THEM AND PLAN TO DECREASE USEWE CURRENTLY USE THEM AND PLAN TO MAINTAIN USE04 technology:aPis,integration,automation,and loW/no-code tools31IT LEADERS PULSE REPORT 2022:MANUFACTURINGCurrent IT strategies for low/no-code tools:Variety of low/no-code strategies usedIT leaders have various approaches for implementing low/no-code tools.An upfront strategy is used by 32%of organizations in parts of their business,31%have adopted a bottom-up approach driven by developers or systems integrators,while 26%have implemented an upfront strategy across a majority of the business.BOTTOMS-UP APPROACH DRIVEN BY DEVELOPMENT TEAMS/SYSTEM INTEGRATORSUPFRONT STRATEGY THAT IS IMPLEMENTED IN PARTS OF THE BUSINESSUPFRONT STRATEGY THAT IS IMPLEMENTED IN THE MAJORITY OF THE BUSINESSMANDATORY COMPANY-WIDE LOW/NO-CODE STRATEGY FOR ALL PROJECTS312&%7 technology:aPis,integration,automation,and loW/no-code tools32IT LEADERS PULSE REPORT 2022:MANUFACTURINGautomation maturity is growing as more organizations turn to automation to enhance customer experiences and product/service quality.two-thirds of organizations(67%)have either automated their it operations and many have introduced automation across other business functions including finance,customer support,marketing,sales,and hr.however,fully automated processes remain quite low with an average of 23%of organizations saying theyve reached this across business functions.Automation is driving process efficiencySee how automation is already revolutionizing the way the world works.Read more.04 technology:aPis,integration,automation,and loW/no-code tools33IT LEADERS PULSE REPORT 2022:MANUFACTURINGHow automated are the following business functions:543%77%66%6%4%68%6$5 %5!6$%63!%NO AUTOMATED PROCESSES AT ALLMINORITY OF PROCESSES AUTOMATEDAROUND HALF OF PROCESSES AUTOMATEDMOST PROCESSES AUTOMATEDFULLY AUTOMATED PROCESSESIT OPERATIONSNO AUTOMATED PROCESSES AT ALLMINORITY OF PROCESSES AUTOMATEDAROUND HALF OF PROCESSES AUTOMATEDMOST PROCESSES AUTOMATEDFULLY AUTOMATED PROCESSESCUSTOMER SUPPORTNO AUTOMATED PROCESSES AT ALLMINORITY OF PROCESSES AUTOMATEDAROUND HALF OF PROCESSES AUTOMATEDMOST PROCESSES AUTOMATEDFULLY AUTOMATED PROCESSESMARKETINGNO AUTOMATED PROCESSES AT ALLMINORITY OF PROCESSES AUTOMATEDAROUND HALF OF PROCESSES AUTOMATEDMOST PROCESSES AUTOMATEDFULLY AUTOMATED PROCESSESSALESNO AUTOMATED PROCESSES AT ALLMINORITY OF PROCESSES AUTOMATEDAROUND HALF OF PROCESSES AUTOMATEDMOST PROCESSES AUTOMATEDFULLY AUTOMATED PROCESSESENGINEERINGNO AUTOMATED PROCESSES AT ALLMINORITY OF PROCESSES AUTOMATEDAROUND HALF OF PROCESSES AUTOMATEDMOST PROCESSES AUTOMATEDFULLY AUTOMATED PROCESSESHRNO AUTOMATED PROCESSES AT ALLMINORITY OF PROCESSES AUTOMATEDAROUND HALF OF PROCESSES AUTOMATEDMOST PROCESSES AUTOMATEDFULLY AUTOMATED PROCESSESFINANCENO AUTOMATED PROCESSES AT ALLMINORITY OF PROCESSES AUTOMATEDAROUND HALF OF PROCESSES AUTOMATEDMOST PROCESSES AUTOMATEDFULLY AUTOMATED PROCESSESEMPLOYEE ONBOARDING04 technology:aPis,integration,automation,and loW/no-code tools34IT LEADERS PULSE REPORT 2022:MANUFACTURINGTop 5 business priorities over the next 12 months:Information security#1 priority for businessWith new laws and regulations emerging every year requiring businesses to adhere to complex data control requirements,data privacy and protection remain top of mind.Information security is the most significant business priority for organizations in the next 12 months,ahead of digital transformation and cloud strategy.DIGITAL TRANSFORMATIONINFORMATION SECURITY CLOUD STRATEGYDATA STRATEGYCUSTOMER EXPERIENCE280$! technology:aPis,integration,automation,and loW/no-code tools35IT LEADERS PULSE REPORT 2022:MANUFACTURINGSecurity degrading customer experienceMore than three-quarters(77%)of senior IT leaders agree that internal security and governance risks are as high as external ones with 83%saying they monitor how employees access and use customer data.However,maintaining high-quality customer experiences while securing data can be a challenge.Sixty-three percent of IT leaders say their security and governance controls degrade the customer experience.637%OF SENIOR IT LEADERS BELIEVE THAT THEIR ORGANIZATIONS SECURITY AND GOVERNANCE CONTROLS DEGRADE CUSTOMER EXPERIENCE.77#%OF SENIOR IT LEADERS AGREE THAT INTERNAL SECURITY AND GOVERNANCE RISKS ARE AS HIGH AS EXTERNAL RISKS.83%OF SENIOR IT LEADERS SAY THAT THEIR ORGANIZATION MONITORS HOW EMPLOYEES ACCESS AND USE CUSTOMER DATA.04 technology:aPis,integration,automation,and loW/no-code tools36IT LEADERS PULSE REPORT 2022:MANUFACTURING37IT LEADERS PULSE REPORT 2022:MANUFACTURINGEighty-three percent of senior IT leaders say public concerns over data privacy have prompted their organization to increase security and governance investments.For 84%,data protection regulations such as GDPR and CPRA have influenced investment decisions.Most organizations are also communicating with customers about their data security strategy with 82%saying they are transparent with customers about how their data is used.Data privacy concerns driving security and governance investments82%OF SENIOR IT LEADERS SAY THEY ARE TRANSPARENT WITH CUSTOMERS ABOUT HOW THEIR DATA IS USED.83%OF SENIOR IT LEADERS SAY PUBLIC CONCERNS OVER DATA PRIVACY HAVE PROMPTED THEIR ORGANIZATION TO INCREASE SECURITY AND GOVERNANCE INVESTMENTS.84%OF SENIOR IT LEADERS AGREE THAT DATA PROTECTION REGULATIONS,SUCH AS GDPR AND CPRA,HAVE PROMPTED THEIR ORGANIZATION TO INCREASE SECURITY AND GOVERNANCE INVESTMENTS.04 technology:aPis,integration,automation,and loW/no-code toolsMeasuring futureIT successOF SENIOR IT LEADERS SAY THEYVE HAD TO DEVELOP NON-IT SKILLS TO BECOME MORE STRATEGIC WITHIN THEIR ORGANIZATION.The role of senior IT leaders has shifted dramatically in recent years more than any other enterprise function.As technology becomes increasingly integral to business success,so has the senior IT leaders influence in shaping organizational strategies in the modern digital era.In a post-pandemic world,senior IT leaders require a skill set that is much broader than technology expertise.The evolving role of senior IT leaders84 measuring Future it success39IT LEADERS PULSE REPORT 2022:MANUFACTURING53RPHFE%SERVICE AVAILABILITY/SYSTEM PERFORMANCEEMPLOYEE PRODUCTIVITYCOST REDUCTION/OPTIMIZATIONCUSTOMER EXPERIENCEEMPLOYEE EXPERIENCEPROJECT DELIVERYSALESKPIs IT leaders are being measured on:Roughly half of all senior IT leaders are now evaluated on employee productivity(52%),cost reduction and optimization(50%),and customer(48%)and employee experience(46%).This varies between industries;for financial services and insurance,for example,62%of senior IT leaders are measured on employee productivity.IT now measured by productivity,cost reduction,and experiences05 measuring Future it success40IT LEADERS PULSE REPORT 2022:MANUFACTURING41IT LEADERS PULSE REPORT 2022:MANUFACTURINGAs economic conditions remain volatile,senior IT leaders are under pressure to empower their organization to remain agile while focusing on meeting business goals.However,three-quarters(74%)of respondents say project backlogs are preventing them from working on strategic initiatives.To overcome these challenges,organizations need to leverage APIs,automation,and low/no-cost tools to create connected customer and employee experiences.By automating processes where feasible,senior IT leaders can realize value faster,accelerate innovation,and successfully support their organization navigate todays challenging landscape.IT burdened withproject backlogs74%OF SENIOR IT LEADERS AGREE THAT PROJECT BACKLOGS PREVENT THEM FROM WORKING ON STRATEGIC INITIATIVES.05 measuring Future it success41it leaders Pulse rePort 2022:manuFacturing42IT LEADERS PULSE REPORT 2022:MANUFACTURINGWant to learn more?The state of digital transformation for manufacturingTake a look at the Connectivity Benchmark Report data through a manufacturing lens to see how digital transformation has become a critical driver of customer satisfaction and improved process efficiencies.Read the reportUnlock the value of dataManufacturers are experiencing a data explosion,as a confluence oftechnologies drives the digitization of the sector.Learn what leadingmanufacturers are doing on the path to data maturity.Download the eBookBuild a connected supply chainLearn how manufacturers can proactively implement a better process to manage their supply chain using APIs.Watch the webinar05 measuring Future it successSalesforce,the global CRM leader,empowers companies of every size and industry to digitallytransform and create a 360 view of their customers.For more information about Salesforce(NYSE:CRM),visit .Any unreleased services or features referenced in this or other press releases or public statementsare not currently available and may not be delivered on time or at all.Customers who purchaseSalesforce applications should make their purchase decisions based upon features that arecurrently available.Salesforce has headquarters in San Francisco,with offices in Europe and Asia,and trades on the New York Stock Exchange under the ticker symbol“CRM”.For more information please visit ,or call 1-800-NO-SOFTWARE.MULESOFT IS A REGISTERED TRADEMARK OF MULESOFT,INC.,A SALESFORCE COMPANY.ALL OTHER MARKS ARE THOSE OF RESPECTIVE OWNERS.
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