Comment: Achieving a sustainability-centric retail model
Sustainability is increasingly becoming a board level issue, with 42% of fashion brands now publishing information on suppliers. But how can a retailer embed sustainability good practice into every aspect of the business? Alan Gunner, Business Development Director, Adjuno, considers the next steps for sustainable retailing.
Sustainability Led Innovation
Sustainability is set to drive innovation this year, especially within the fashion industry. However, achieving change is a huge undertaking. While there are a number of retailers leading the way – including M&S with its Plan A, H&M and ASOS with ranges made from recycled material – there is no best practice consensus as yet. And a handful of retailers alone cannot make the wholesale change consumers and regulators are beginning to demand.
From reducing water usage to minimising waste and improving recycling, while the creation of innovative products is clearly going to play an essential role in achieving these goals, there are steps that brands can take today that will deliver measurable improvements.
Step 1 – Understand the end to end supply chain
From the supplier on-boarding to routine environmental audits, the onus is on brands to have a deep understanding of how the manufacturing process operates, where materials are sourced, goods created and workers treated. A robust on-boarding process should ensure finance, ethical, technical and import teams are totally confident in the new supplier before any deal is signed.
A good model to follow is the 17 goals for sustainability laid down by the UN in 2015, including nine set by the Ethical Trading Institute (ETI). But while this may appear daunting, there are significant opportunities for retailers to collaborate – from sharing performance information to jointly funding ethical audits.
One organisation supporting this ‘open information’ approach is Common Objective, which is building up a database of suppliers – including their ethical and sustainable credentials - from information provided by retailers. This database will help other organisations quickly locate the best source of, for example, sustainably produced cotton T-Shirts, or suppliers that work to a specific ethical standard.
Step 2 – Improve product traceability
Organisations are looking to close the loop on the entire product lifecycle – and that means looking at recycling and regeneration. But it is also essential to understand how the supply chain is operating today. Can, for example, the retailer leverage end to end supply chain insight and control to track the source of every piece of wood used within the product line, from the type of tree to location and certification, to ensure all wood is sustainably sourced? Similar models could be adopted for products made from leather, cotton or feather and down, leading to best practice models for sustainable supply chains across an array of products and raw materials.
Step 3 - Collaborate
Creating a pool of trusted suppliers will enable retailers to work together to encourage and develop innovation within the existing supply chain – rather than embarking upon new relationships that will, once again, take time to bring up to the required sustainable standards. Working together, with common goals, retailers will be far better placed to build alternatives to materials and processes that have an impact on sustainability.
This collaboration also extends to academia and science to drive innovation – and sharing information between retailers and academia will be key to both fostering that collaborative model and raising awareness.
Step 4 – Make Sustainability Strategic
With consumers, especially younger consumers, increasingly adopting ‘mindful shopping’ sustainability is a board level issue – and that means supporting sustainable projects as part of the strategic decision making. Ensuring sustainability relevant reporting is delivered at board level is becoming key – if exceptions are identified in, for example, the sustainability of wood products, this needs to be addressed at the most senior level, fast. But there are also opportunities to consider sustainable models that appeal to certain demographics – from long life fashion to recycling bins in store, even fashion by subscription. Sustainability requires new thinking in many areas.
Step 5 – Be Patient
Change takes time. M&S introduced its sustainability focused Plan A in 2007 – and while improved collaboration between retailers should help to accelerate progress, especially given the direction provided by the UN’s 2015 objectives, there are massive issues to resolve. The key is to get started.
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”