Managing Operations and the Supply Chain Paper Example

Paper Type:  Research paper
Pages:  7
Wordcount:  1917 Words
Date:  2022-08-15


The circular economy is a concept I the world of economics that largely explains the ways through which money and the activities that surround it are involved. The players in this flow of economy are discussed together with their importance in the broader economy. The circular chain is also another thematic concern that many companies have resulted in employing in their daily operation. A practical scenario is provided therein. The paper, therefore, covers on these two great principles of business operation in the daily economic activities in the globe.

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The circular economy is a type of a model that illustrates the basic and common relationship of the economy within an economy in a market. It is a flow of economy that shows the state of balance or equilibrium between leakages and injections in an economy. Part of the model of circular income includes injections, while the other part of the model illustrates leakages. The circular flow of economy represents how money moves in an economy and what it has exchanged is. The stream also includes businesses, governments, and households. The banking system is also inclusive in this flow of the economy; the banking system facilitates money exchange and, even as it will be discussed later in this report, the banking system is used as a tool in the flow of income for turning savings to investments. In the flow of the economy, money is used as an exchange for services and goods. Services and products move in the economy in one way while money transfers in the other opposite direction.

Characteristics of circular economy

Households - There primary function in the economic model set is the supply of domestic firms with the essential production factors. The factors of production include; capital, entrepreneurship, and land. Also, labor is another factor of production in any given sector. The prices that the households get in return for this factors include; wages, profit, and rent. Entrepreneurs bring together the other three aspects, bearing the risk involved in the process of production. The households buy services and goods from businesses to satisfy their wants which are unlimited.

Firms - their primary mandate in the circular income is to provide the domestic households with services and goods. Also, they offer products to homes and other firms abroad. For them to accomplish all this, they use the factors of production and pay dues for the services provided. The payments are in the form of wages, interests, and profits.

Government - the state also plays a role in the circular income. They levy taxes on businesses and households for the providence of some benefits to everyone.

Leakages and injections - the elements that bring money into the economy are the injections, while those that drive capital out of the economy are the leakages. Leakages into the circular economy include imports, taxes, and savings. Injections into the economy, on the other hand, are; government purchase, investments, and exports. Savings tend to leak out money to borrowers since it enters the banking system. Borrowers utilize the money for the purchase of goods and services. It then drives money back to the circular economy. Taxes from the state leaks out while the state spending drives the money back to the flow. Imports drive capital out of the stream while exports, on the other hand, inject money back to the creek because we get earnings from the services and goods that are exported.

Importance of circular income

Helps with the problems of disequilibrium

The flow of the annular stream of income allows economists in the understanding of disequilibrium. It is the state of imbalance in an economy and which sets the economy at large at a sorry state for business activities. Thus the circular income comes in handy as it helps economist in its study and the possible way for its restoration.

Effects of inflows and leakages

Leakages play a significant role in the study and understanding of their impact on the economy of the national status. For instance, imports drive out money out of the economy, since they act as payments to another country to put an end this leakage, the government needs to adopt measures that are appropriate to decreases imports and increases exports.

The link between consumers and producers

The flow of income sets a connection between consumers and producers. Producers buy their services as of the production factors with which their services buy products from producers. It only becomes possible because of income earned through the circular flow.

Creation of networks of markets

As an extension to the point above, the linkage between consumers and producers via the circular income and the expenditure has enabled the creation of a network or chain of markets for various services and goods. It is where the related problems to purchase, and sales are solved automatically.

Deflationary and inflationary tendencies

Injections and leakages in circular flow tend to disrupt the smooth operation of the economy. For instance, savings act as a leakage exiting expenditure channel. In the case of savings increases, the situation results in depressing the flow of income. It then reduces employment, prices, and revenues, thus leading to the deflationary situation. Consumption, on the other hand, increases employment, output, income, and expenses that translate to tendencies of inflationary.

Multiplier basics

In the case of leakages exceeding injections, the overall income tends to be less compared to the output generally. This situation promotes a cumulative decrease in income, employment, production, and prices in times to come. Injections, on the other hand, may exceed the leakages; this leads to increased revenue in the economy. It translates to a rise I employment cumulatively, salary also increases, output, and even prices rise over time. (Pignataro, 2013.10)

Importance of policies of money

The understanding a study of circular flow brings out the relevance of monetary policy to illuminate equality of investment and savings in an economy. It is brought about by the element of the credit market. The state by itself controls the credit market; this is through policies in the monetary aspect. If savings surpass investment, or investment exceeds savings, credit and money procedures assist in the stimulation or retardation of investment spending. It, therefore, shows how a rise or fall in prices is managed in an economy.

Importance of fiscal policy

The circular flow and expenditure of income direct to the relevance related to monetary policy. For national income to be at an equilibrium, then taxes plus saving as to be equal to government spending and investment. It represents leakages from spending channels of which as to be offset by injection of government spending plus investment into the stream. When savings plus taxes surpass investment plus government spending, the government, therefore, need to adopt the fiscal measures such as spending more or a reduction in taxes. On the opposite, when investment plus government expenditure exceeds taxes and savings, the government needs to adjust its cost and revenue by promoting tax revenue and savings. Thus, the flow of income and spending elaborates the relevance of fiscal policy that is compensatory. (Vega-Quezada, et al. 2017. P24)

Importance of trade policies

Likewise, imports in the circular flow are leakages. It is so since they are dues paid to other countries. Notably, to put that to an end, the state has to adopt measures related to trade policies that would decrease imports and increase exports. Therefore, circular flow directs to the relevance of adoption of promoting exports and controlling import policies.

Basics of flow of accounts

The flux helps in the calculation of national income; this is by the stream of reports. The stream of reports is concerned with every transaction in an economy that is accomplished through money transfer. The accounts show financial transactions in various sectors of the economy, and their interlink between investment and savings, borrowing, and lending. The circular flow, therefore, in this case, possesses significance in the economy theoretically.

The role of circular supply chains in supporting restorative processes advocated by the circular economy.Circular supply chain management becomes a very crucial operation in a firm primarily in the implementation of an annular business stream. The circular form of an economy is based on reintroducing and reusing their products at every end of their stage in their value chain. It thus enables a no limit loop from which its outputs become inputs.

The principal aim of the circular chain management system, therefore, is for the providence of the company with an end-to-end products life that is to be reused in the creation of more value. It is only possible by way of partnerships together with other firms by way of purchasing their waste products and using them in a different process.

The other role of circular supply chain in an economy is the issue with the creation of channels for recovery of ones already used products; this is so because its other principle is to design goods that are easy reused and repaired. For instance, in the case of the automobile sector, the circular economy becomes an exciting case financially. It is when a reverse chain of supply is managed in the best form and the strategies in place identified. When a firm introduces the reuse of waste products from other companies, the customer gets to get quality products at a lower price while the company profits through the development of un-ending relations with its clients. (Tisserant, et al. 2017. p17)

Circular supply chains also play a role in the helping in raising of GDP of a country. A circular as already known to be an economy presented as regenerative by way of design and restorative try to target to keep its components, products, and materials at the highest value at every time and also its utility. The continued relevance with reverse supply as the source of profit has seen companies adopt the approach of the supply chain. It reduces waste, assumes the advantage of the original form of the forward supply, and providence of an alternate source for inputs. Circular supply economy is responsible for the creation and capture of the new value of businesses. (Haupt, et al. 2017.p31)

The circular supply chain has helped many companies that adopt its form of operation gain a competitive against to competitors. Companies now are shifting to circular chain since customers also are signs showing their interest in companies that have strong environmental and social corporate policies. This form of operation also has helped improve customer's opinions on such companies which at the larger view creates a competitive advantage.

The circular supply chain has helped the customer hold more on their purchasing power as now they are more informed on the kind of products they are purchasing. Customer's expectation now is the ability to give back products that are faulty, or they bought in error. It enables them not to be concerned with the need for recycling or disposal. The circular supply chain thus plays a significant role in the circular economy as it advocates on the need for the customers who are a big player in the circular economy on the type of goods they need. The increased power on the hands of the customers helps shape the economy production level as this would create competition in the production sector. In the case of slow or poor management of service or production of goods, can significantly harm a company as it can result to loss of customer trust and loyalty and also destroy the reputation of the firm to the public.


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Managing Operations and the Supply Chain Paper Example. (2022, Aug 15). Retrieved from

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