Supply chain concerns remain front and center for most organizations as we move into the second half of the year. And, while there’s much debate about whether disruptions will continue, almost everyone agrees that technological evolution and automation are required.
The trade war with China, the economic impacts of the pandemic, the blockade of the Suez channel, port backlogs, workforce shortages, as well as Russia’s ongoing war in Ukraine, and inflation have exposed weaknesses in global supply chain networks, infrastructure, and systems. They’ve also elevated the visibility of teams that keep goods moving in a difficult, unpredictable, and rapidly changing environment.
Chief supply chain officers with foresight now have a once-in-a-generation opportunity chance to future-proof their supply networks — they may do so by adding 3 new objectives to the traditional supply chain KPIs of cost, quality, and service.
Why Supply Chain Sustainability is Important
It’s crucial to understand that the supply chain accounts for up to 70% of the world’s carbon impact. Putting on a false green front is no longer sufficient for businesses. Consequently, corporate decision-makers must embrace “nature-positive” business methods.
Supply chain executives state that customer expectations are key drivers in adopting sustainable supply chain practices. But according to an MIT Center for Transportation & Logistics report, roughly 80% of executives say the pandemic has actually increased their sustainability efforts, and 23% of those surveyed said that market pressure from investors was another contributing factor.
The relevance of sustainability in supply networks is increasing. Mitigating climate change, supply chain circularity, adoption of technology, and best practices to support sustainability are the new metrics proving to be the most effective at driving change. Regardless of business size, the most common sustainability activities include supplier audits, supply chain mapping, and codes of conduct. Sustainability is critical in the transition of supply chains to a clean and socially equitable economy.
In 2021, for example, 29% of organizations used ESG indicators in their employee incentive schemes, up seven points from the previous year.
Companies that want to avoid the growing reputational, regulatory, and financial risks associated with poor ESG performance are under pressure to respond. Strong environmental initiatives are also yielding genuine operational results: real-time sustainability activities have decreased energy usage by nearly 40% and trash by 20% over the last 10 years.
The supply chain is critical to the enterprise’s sustainability transition. The majority of the nine ESG initiatives noted by top executives in a 2020 industry study either directly involve the supply chain or have substantial consequences for supply network arrangements.
How to Keep Your Supply Chain Sustainable in 2023
Supply chain sustainability includes managing the environmental, social, and economic implications of manufacturing and delivering goods and services to the market, as well as adhering to rules that support long-term company operations.
Fostering supply chain sustainability requires businesses to connect with all of their stakeholders, including raw material producers.
A detailed grasp of the organization’s baseline impact is the cornerstone for an ESG-focused change. This would entail quantifying the used resources and produced emissions by the company’s direct activities as well as partners in its wider supply chain.
This baseline enables an organization to identify the most significant areas for change, allowing it to set difficult but achievable goals and timeframes that can be communicated to external stakeholders.
Capturing those gains leads to tight sustainability KPIs and changes from the shop floor to the boardroom, such as optimized operating practices, an ESG focus in procurement decisions, and the incorporation of more sustainable technologies into existing and planned manufacturing or logistics projects.
Businesses can also collaborate with their suppliers to assist them in implementing new procedures that are in line with collective sustainability goals. The following actions may also be implemented to ensure continuing and consistent involvement with suppliers:
- Training sessions on best practices for sustainability are delivered.
- Setting and conveying expectations for long-term supply chain operations
- Implementing recognition/rewards programs for meeting sustainability targets
This additional priority of sustainability cannot be added to current supply chain configurations. In reality, firms will need to be designed with sustainability in mind from the start, with aspects of sustainability included in every aspect of supply chain design, structure, and operation.
For many businesses, this will almost certainly require a shift in attitude, with risk, agility, and sustainability KPIs addressed alongside traditional ones focused on cost, capital consumption, service, and quality. To flourish in this supply chain dimension, culture change, technology investment, and operational management reforms will be required.
Because of the scale and complexity of global supply networks, supply chain technology must be used to identify areas of weakness and possibilities to enhance supply chain management. A supply chain visibility platform, for example, may be utilized to optimize the procurement process and reduce inventory carrying costs.
Supply Chain Digitization with Agistix
Agistix can help you overcome all of your supply chain challenges with our high-end visibility software. Our key advantage is a quick, non-disruptive integration that requires no change to your regular business flow; however, after implementation, you will see results in as soon as four weeks.
Our extensive business expertise lets us offer a multifunctional, easy-to-use visibility solution to have your supply chain in the palm of your hand. Learn more about our supply chain platform solutions today.