Industry TalkRegular Industry Development Updates, Opinions and Talking Points relating to Manufacturing, the Supply Chain and Logistics.
How can ERP help reduce unnecessary waste in the supply chain?
Tackling the causes of climate change and reducing energy emissions are quickly becoming top priorities for both enterprises and governments. Whilst many schemes and policies are being implemented to protect the environment, such as electric cars and the Clean Growth Strategy, there’s still room for improvement.
Sustainability is not just a concern for regulators and businesses. Consumers are also more environmentally conscious than ever, and there is renewed pressure on businesses to review the impact of their operations and reduce waste. This means that businesses visibly working to reduce their carbon footprint are positioning themselves to benefit from increased sales and customer loyalty.
One area in particular that needs to be addressed is the rise of unnecessary waste in the supply chain. The complexity of today’s supply chains, and the rush to get products to market, means that excess waste is a common occurrence. The good news is that much of this waste is entirely preventable with the right technology!
What’s causing the waste?
The first step for any manufacturer looking to transition to a more eco-friendly and streamlined model is to diagnose the specific causes of waste in the supply chain.
Mistaken forecasting, for instance, is one of the most typical causes of wastage, because it can potentially result in over-production and over-purchasing of materials. It’s estimated that between 5 per cent and 7.5 per cent of total annual waste stems from this factor alone, according to WRAP.
Inventory mismanagement and unnecessary transport of goods are also amongst the worst culprits of supply chain wastage. Any logistics activity that results in the needless transport of inventory increases the carbon footprint of the supply chain without cause or reason.
In order to address these long-standing and widespread issues, manufacturers must work towards cultivating an “agile supply chain”, using best-in-class technologies, such as business management software, to eliminate activities that don’t add value. This process will not only address environmental concerns, but has the added benefit of cutting costs and increasing profit margins as well.
The agile supply chain refers to a commitment to responsiveness, flexibility and quickness in the day to day operation of the supply chain. Agile supply chains harness real-time data to improve efficiency and eliminate excessively stocked inventory, and are able to adapt to rapidly changing economic environments.
According to analyst house McKinsey, agile businesses also offer higher levels of service, despite their smaller inventories. The report found that 94 per cent of deliveries from agile businesses arrived on time, compared to 87 per cent achieved by competitors, and inventory was held on average for 85 days by agile businesses, as opposed to 108 day by competitors.
So, how can businesses apply best-in-class technological solutions to achieve agility, save costs, and reduce their carbon footprint?
The benefits of improved visibility
Modern business management solutions are bridging the communication gap between the shop floor, back end, and planning and control systems, by forming an arterial route through which information can travel instantaneously, between the links of the supply chain. Manufacturers looking to take advantage of these benefits need to have the right systems in place that allow them to do so.
Modern Enterprise Resource Planning (ERP) solutions provide real-time updates and analytics, which creates greater transparency throughout the entire supply chain, ensuring orders are met on time and within budget. Business management systems such as ERP that better coordinate supply with demand and track loss and waste, represent a simple way businesses can work towards becoming more sustainable and efficient.
Further, as a result of increasing automation in industry, companies are able to consider reshoring their production, packaging and other operations to bring manufacturing closer to customers. For these companies, the cross-functional data provided by best-in-class ERP systems enables them to make fundamental improvements to their supply chain model whilst drastically cutting emission levels.
What’s holding back manufacturers?
So, what’s preventing manufacturers utilising the available technologies to become more eco-friendly?
Some common concerns holding back manufacturers from adopting cloud-based ERP include fears of potential downtime, maintaining business continuity when working from mobile devices, and transitioning away from on-premise data servers. However, with the right strategic approach to digital transformation, these concerns can be alleviated. What perhaps should concern manufacturers is the fear of the negative impact wasteful supply chain processes are having on the environment.
In order to champion sustainability and cut emissions, manufacturers must wave goodbye to outdated legacy technology and usher in digital transformation. Success depends on being able to take an integrated approach that looks across the entire supply chain. This will involve identifying opportunities to streamline processes, improve collaboration and ultimately drive greater efficiency. Implementing the right technology to do just that can boost both economic efficiency and environmental stability simultaneously.