North Star for Circularity

In a functioning circular economy, one ideally sees not only the customer again, but also the products, in order to repair them – contrary to the linear economic model – refurbish them, feed them into an alternative use or recover their valuable materials for new production. Especially in the automotive industry, where complex and high-quality components are created from valuable raw materials, recycling, reuse and re-use are powerful levers to counteract the increased prices for raw materials, energy and CO² certificates in a sustainable way.

"In extending the useful life of products through repair, maintenance and take-back solutions, the automotive aftersales sector plays a key role," says Hanno Großeschmidt, Managing Director of Encory GmbH. "This creates trust, loyalty and strengthens brand loyalty," adds Lars Bertram, Director Sales & Marketing in the interview.

As a circular economy specialist, Encory GmbH focuses on the automotive industry and develops and operates end-to-end circular solutions for its customers. Encory provides both advisory and operational support, from strategy and product level to the implementation of a functioning logistics chain. Founded as a joint venture between the environmental service provider Interzero and car manufacturer BMW, the company has established itself as a force to be reckoned with in the industry thanks to its high level of process and system know-how.

Mr Großeschmidt, Mr Bertram, what potential does the circular economy offer for the aftersales sector?

Hanno Großeschmidt: Many of the sustainability decisions, not only in the automotive industry, are currently still driven more by regulation and are considered a cost factor. But we see a change in perspective among our customers: towards circularity as a value driver, differentiator and functioning business model. If manufacturers only offer new parts to their customers with older vehicles, there is a risk that they will leave in order to find what they are looking for on the independent spare parts market. To prevent this, we develop customised after-sales strategies and put them into practice.

What does it take to build and structure a circular aftersales product portfolio?

Lars Bertram: The first step is the will to anchor circularity as an element of the company’s continued success. This decision often takes place at the strategy level and we provide support here, for example, through our Circular Economy Roadmap, which serves as a compass for further action and identifies the topic areas that have the greatest circularity potential. In the second step, we evaluate products economically and ecologically in terms of their reparability or remanufacturability and consider the resulting market potential. As a final step, we establish a so-called circular supply chain for our customers, which ensures that circular products also find their way back in order to make circular economy possible in the first place.

What kind of products are suitable for circularity in the automotive industry?

Lars Bertram: The turbocharger is a classic for remanufacturing and, due to increasing electrification and the rising proportion of software, we are seeing growing interest in also returning, repairing or remanufacturing electronic components such as control units, electrical components and batteries from e-vehicles. In addition, high-voltage batteries and future technologies such as fuel cells are increasingly being considered under the circular approach, and we see enormous potential here. Thanks to our experience in the repurposing of high-voltage batteries, we see ourselves as very well positioned for the future challenges.

Hanno Großeschmidt: Product life extension is our focus and, from our experience, it offers the greatest economic and ecological potential. Only when all R-strategies (e.g. Reuse, Repair, Remanufacture, Repurpose) for extending the product life cycle have been exhausted do we think about recycling, which is of course also an R-strategy. But we also have to be honest enough to say that not all new products can be sold to the primary target group and many products with slight signs of use are destroyed. We offer a solution to this as well by buying up obsolete stock and distributing it through our worldwide partner network. In this way, we create a win-win situation: the products are not scrapped, but are put to further use without disrupting our customers‘ primary markets.

Lars Bertram: That’s an important point, which illustrates our holistic range of activities well. Our service portfolio ranges from strategic consulting on the product level to operational logistical implementation, including product and recyclable material sorting in our own logistics centre and trading in obsolete parts. We offer a full-service package that is hard to find anywhere else on the market in its breadth and diversity.

So every strategy that you develop, you can also build and operate?

Lars Bertram: Exactly. In addition to our consulting expertise, we also have the process, operational and logistical implementation competence that enables us to not only describe the Circular Economy as an idea, but to actually implement and scale it. We thus offer a full service that brings not only experience and expertise but also the necessary infrastructure and technological solutions. We can either set up greenfield solutions, run additional products of other customers on our existing infrastructure or implement operational solutions at the customer’s site to enable circular economy through professionalised returns management.

Return procedures are often time-consuming and tie up resources and operating funds.

Hanno Großeschmidt: The issue of reverse logistics is usually an unloved child. Logisticians may be able to move parts from A to B, but there is often a lack of value-added process steps and powerful, easily adaptable and scalable processes and tools. This includes, among other things, the identification and procurement of relevant parts, the provision of an intuitive and streamlined return platform for workshops and dealers, a digitised goods receipt including documented product diagnostics, sorting and storage, as well as the active management of a refurbishment programme. Especially the IT-specific requirements are not necessarily at the top of the priority list for CIOs today and are thus hardly implemented. Transparency, standardisation and performance analysis are thus difficult to achieve, but necessary to measure the success of Circular Economy measures.

Digital processes are therefore immensely important. At Encory, every process is accompanied by smart digital solutions.

Lars Bertram: That’s right. We have our own scalable and modular IT solutions to make the backward logistics chain transparent and efficiently measurable. Our solutions can be easily integrated into existing customer architectures and enable transparent control of all processes and involved process partners through continuous tracking and customer-specific reporting. This enables us to identify and avoid inefficiencies at an early stage, control processes more efficiently and consequently reduce costs and increase customer satisfaction.

Hanno Großeschmidt: Only data-transparent information in real time enables strategic decisions and thus makes Circular Economy measurable and economically operable.

What quantities are we talking about at Encory?

Hanno Großeschmidt: More than one million parts are processed annually in the logistics centres of our global network in Europe, China and the USA – and that’s just for one of our major customers. This allows us to ensure high quality and scalable reverse logistics. In addition to existing customers, we can easily onboard additional customers onto this infrastructure without having to set up additional staff or space.

Lars Bertram: Basically, we are flexible in our range of services and offer small, medium or large service packages and can offer topics such as parts procurement, dealer connections, customs clearance, logistics, sorting, storage, supplier qualification, inbound and outbound transports, third market connections, end-of-life parts management, parts inspections and support for hazardous goods transports singularly or fully integrated. For us, the customer benefit is in the foreground and we usually assess this in an initial discussion.