Can the Circular Economy help solve the supply chain crisis?

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece Darren Pearce, Group CEO from TXO, explores innovative ways of extending the lifecycle of products.

Despite hopes that global supply chain issues will improve in 2022, some telecom operators think the worst is yet to come. While original equipment manufacturers (OEMs) are experiencing wait times for new products of up to a year or more, impacting sales forecasts and revenue, the situation is having a knock-on effect on operators, causing delays to network rollouts, delays in connecting customers, and raising concerns over spares ensuring network resilience. In fact, the delays are so severe that 72% of operators think supply chain challenges will be a problem for network deployments over the next year, according to our research.

Over the last year, operators have experienced equipment delays on everything from semiconductors to optical fibre cables. This has impacted delivery lead times and increased prices, for example, the price of fibre optical cables has increased by as much as 70% since March 2021.

These supply chain challenges couldn’t have come at a worse time, with operators under pressure to extend connectivity and meet government targets for 5G and fibre network deployments. In the UK, 2G and 3G networks are set to be phased out by 2033 as part of new plans to increase the capacity of the nation’s 5G coverage. The UK government has also pledged to deliver gigabit broadband to 85% of Britain by 2025.

To overcome supply chain issues, the industry needs to consider alternative options. Some operators are exploring product redesign to avoid using equipment they can’t get hold of, whereas others are turning to the circular economy.

Circular economy offers a solution

The circular economy is described as ‘a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible’ to extend the lifecycle of products, according to the European Parliament. By buying refurbished equipment operators can reduce their reliance on new OEM equipment and avoid excessive supply chain wait times.

But there are huge amounts of telecom products, some brand new and some old, sitting in warehouses, unused. Furthermore, there is a lot of equipment today that is in live networks but has become redundant, across both the fixed and mobile networks. This uses up power and could be used by an operator elsewhere. With telecom providers in need of increased bandwidth and capacity, this equipment can be vital for them to continue network rollouts and be used in critical end of support networks.

Also, as operators are under pressure to upgrade their networks, they need to do it cost-effectively. 57% of operators believe that joining the circular economy can help reduce costs. This is a priority for altnets, which are emerging as an alternative to the major operators but don’t have the same budgets.

Additional revenue can be made by re-selling old equipment that is no longer in use or rarely used, and so wastes power. This approach enables operators to significantly reduce their CAPEX by offsetting revenue generated against purchases of new equipment.

Lowering carbon emissions

As well as easing pressure on supply chains, the circular economy is enabling businesses to reduce their carbon footprints and minimise waste. It keeps materials and products in the economic system for as long as possible by extracting the most amount of value from them while reducing the environmental impact by creating fewer new products.

As operators work toward sustainability targets, 72% believe the main benefit of joining the circular economy is lowering carbon emissions by reducing the amount of new equipment manufactured. 70% think it offers huge advantages by minimising waste and extending the life cycle of existing equipment. The GSMA estimates that around 50 million tons of e-waste is produced every year, a figure that continues to rise. As operators target net zero emissions, using the circular economy can help them move towards a carbon-neutral future.

Building the circular economy into long-term buying decisions

Today, we’ve seen a huge demand for the circular economy accelerated by the onset of the supply chain challenges sweeping the industry. Many operators have been working in panic mode, trying to get their hands on equipment as quickly as possible to continue network rollouts and replace broken equipment. However, operators need to move towards a model where they’re refurbishing and reusing old equipment, as well as creating long term forecasts for how they can use the circular economy to deploy and maintain networks in the future. This means predicting what their needs will be in a year or years to come and working with companies that can help them source this equipment on a long-term basis. For many traditional operators, this means a change to their traditional procurement and purchasing relationships.

As operators face pressure to upgrade their networks to meet government targets, the circular economy offers a clear solution to help ease supply chain delays. By enabling them to accelerate network roll-out as well as reduce their carbon footprint, minimise waste and reduce costs, the benefits are significant. Not only can they overcome supply chain challenges, but joining the circular economy helps them meet their sustainability goals and create a more sustainable and resilient future for their business.

Darren Pearce is the Group CEO of TXO. His knowledge, insights and vast experience in the telecommunication and global supply chain delivery sectors support the continued growth and success of TXO globally. He joined TXO in 2013 as Global Telecom and Technology Services Director and advanced to the role of CEO – EMEA & APAC in April 2015 before being appointed to Group CEO in 2016.

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