Moving Your Business Toward a More Sustainable Supply Chain
In recent years, the emergence of sustainability issues has become one of the most significant areas of discussion in organizations’ supply chains and networks worldwide. Companies are feeling the increased pressure from consumers, investors, and corporate partners to adopt sustainable ways of executing operations due to growing environmental, social, and ethical concerns.
What are sustainable supply chains?
Sustainability issues such as climate change, energy consumption, water scarcity, pollution, population growth, health and safety, poverty and human rights have a direct and indirect impact on supply chain management. These are driving companies to “go green” and to focus more on their social, environmental, and financial performance.
Sustainable supply chain management (SSCM) is a new way for companies to meet their stakeholders’ requirements and improve bottom line outcomes, while becoming environmentally efficient at the same time. SSCM encourages governance practices at all levels of lifecycles of goods and services that reduce waste, ensure long-term maintainability, and economic value of environmental and social well-being of all stakeholders’ interests in the creation and delivery of products and services.
Is sustainability profitable?
According to a study by Oxford University and Arabesque Partners, there is a positive correlation between the sustainability and financial performance of the company. The research was conducted based on 200 different data sources, such as industry reports and academic studies.
The findings showed that:
- 90% of the research indicates that complying with sustainability standards lowers the cost of capital of the company,
- 88% of the studies show that sustainability practices have a positive impact on operational performance of the organization,
- 80% of the research shows that stock prices of the company are positively influenced by following solid ECG practices.
Looking at the substantial economic impact that sustainability has on the organization, it is in the best interest of the board of directors and investors to incorporate successful sustainability practices in their company’s daily operations and processes. Supply chain transformations are necessary to minimize the negative impact of wasteful practices and to adapt more green and eco-friendly solutions.
How can analytics help your company transition toward a sustainable supply chain?
There are a lot of opportunities to drive the efficiency of supply chains by increasing the digital connection between systems, leading to the production and consumption of more data.
Data and analytics can help organizations to:
- Better understand the usage and consumption of materials,
- Establish efficient routes throughout warehouses to minimize fuel and energy consumption.
- Optimize logistic routes to avoid congested areas — not only does this help the environment, but it also helps improve the companies’ bottom line.
Lingaro contributes in many ways to our clients’ sustainable supply chain management and sustainable development by bringing advanced analytics together with smart applications, including AI, internet of things (IoT), and robotic process automation (RPA).
Below are some examples of how we help our clients to run more innovative, effective, and sustainable supply chains.
- Baselining supplier performance
By analyzing the source or content of raw materials provided by suppliers, organizations can have a detailed view on whether these materials are in line with the company’s sustainability standards. These findings then help to identify top suppliers by creating a sustainable metric which allows to baseline suppliers and find new, more sustainable partnerships.
- Minimizing overproduction through efficient supply and demand planning
Misalignment between supply and demand leads to unbalanced production of raw materials, manufacturing of goods, and distribution of products. This results in rework and waste. Predictive analytics helps forecast the likely demand and ensure more efficient supply and manufacturing processes. Also, this aligns inventories with consumption patterns, reducing the amount of products sitting on shelves and lowering the warehousing costs.
- Decreasing fossil fuel consumption by optimizing routes and by conducting carbon accounting
Data and analytics, together with frameworks used to calculate emissions can produce valuable insights about the daily logistics operations of your company. Analyzing vehicle fill rate, distance, fuel, and vehicle types helps to properly conduct company carbon accounting to reduce the carbon footprint.
- Fully utilizing containers and transportation to consolidate shipments
Often, once the shipment has been delivered, the container travels back empty. Data and analytics can solve this issue by identifying the routes where the container travels empty, and help in finding an efficient route to consolidate shipments from multiple suppliers to multiple destinations.
To summarize, sustainability is becoming one of the most significant challenges of the 21 st century for global industries. Organizations must act in a responsible way and transition to ways of running business that are more focused on improvement, preservation, conservation, and sustainability. Therefore, it is crucial for companies to effectively evaluate their supply chains, start measuring, and set up sustainable goals.
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