Industry TalkRegular Industry Development Updates, Opinions and Talking Points relating to Manufacturing, the Supply Chain and Logistics.
Want a healthier planet? Make Supply Chains shorter, smarter, and more circular
As economies around the world being to open up, governments are being urged to purse a “green recovery”. The global lockdown and the resulting fall in emissions has highlighted the impact our actions have on the health of our planet’s land, air, and water. As Supply Chain practitioners it’s worth reflecting on where and how our industry fits in the conversation. And the answer is: right in the thick of it.
Based on data from 100+ global organisations and 5500+ of their suppliers, the CDP reports that the supply chain accounts for 5.5x the emissions as a company’s direct operations. And it’s not just in the air; the impact of supply chain operations on our planet’s land and water are far-reaching. To reduce this impact, we must find ways to make supply chains shorter, smarter, and more circular.
The COVID-19 outbreak has highlighted the benefits of shorter supply chains in terms of resilience, but they also provide the plus of being more sustainable. The greatest contributor to air pollution and CO2 emissions is transportation, making up almost a quarter of total global CO2 emissions. However, these numbers can be cut down drastically by making supply chains shorter and more efficient.
Opportunities to reduce the ‘length’ of a supply chain can fall across several dimensions: physical distance, lead time, and the number of echelons or levels. For most people the first of these – distance – is easy to understand. If you’re driving, flying, and shipping each product across a shorter path, expect the emissions impact to go down. Reducing lead times helps by driving inventory out of the network, as well as reducing the potential for waste. Removing levels or hand-offs in a network reduces complexity and has positive impacts on inventory, lead times, and transport mode utilisation.
Companies should factor in the cost not just to their bottom line but also the environment. While sourcing a singular part from a manufacturer further away may be cheaper, if you end up shipping that part halfway round the world for assembly, it could be worth looking a little closer to home.
The digitalisation of industries and processes is happening at a rapid pace and in supply chain management the situation is no different. Recent advancements in algorithmic intelligence and cloud computing mean supply chain practitioners now have a large and growing toolkit innovative technologies and algorithms at their fingertips. These developments enable them to maximise the efficiency of supply chains, therefore creating smarter more sustainable processes.
To truly make sustainable supply chains a reality, companies must be able to look at their whole supply chain, from the start to the last mile. Technology such as digital twins enable this, as you can digitally replicate and test your supply chain strategy. This means you can efficiently load and route trucks and take advantage of backhaul opportunities. Using this technology, the industry can look ahead: towards a supply chain which is both profitable and environmentally friendly.
In addition to driving efficiency, companies can use recent innovations to ensure the suppliers they use meet certain sustainability standards. Supply chains can be extraordinarily complex— a small apparel company might have a personal relationship with 200 to 500 suppliers. Therefore, by using technology to aid with data collection, monitoring, and accountability companies can ensure that their suppliers adhere to the strictest standards.
Supply chain practitioners now have the technology to allow them to work smarter and in doing so create more sustainable ways of operating.
If companies are to embrace sustainability, they should be looking at moving away from the traditional linear supply chains of the past, to a more circular version. Circular supply chains are based on the wider economic model which looks to increase productivity and reduce waste by employing methods such as reuse, repair, sharing, refurbishment, remanufacturing and recycling.
Returns have long been an issue for supply chain practitioners, especially when it comes to reducing waste. The growth in internet shopping is only set to increase this further. Therefore, companies should look to gain a better understanding of how much will be returned and the condition of these returned items. To do this, businesses can utilise decision prediction algorithms, quality control and targeted marketing to minimise return flows. The visibility and understanding this provides means companies can improve the design of networks to be able to manage reverse logistics efficiently and taking into account that different items, at different lifecycle/customer demographic stages will have different patterns.
Moving from linear to circular supply chains is not easy task. However, through creating efficiencies and removing waste, companies can not only improve their sustainability but also their profitability.
To achieve widespread sustainability it will require a change in both mentality and practice. Companies will have to expand their focus beyond cost and service, placing greater focus on sustainability and risk considerations. The standard ‘take-make-waste’ supply chain strategy will also have to be rethought and replaced. It is generally true that, in the short term, reorienting in this way is neither cheap nor easy. It’s also true that the businesses which are able to create shorter, smarter, and more circular supply chains are set to benefit from lower operating costs, improving profit margins and better brand image – that’s good for the planet, and good for business!