How sustainability is influencing product design
There are many factors that can influence a buyer’s purchasing decision. Cost, convenience and verified product or service reviews are examples of the main factors that people have traditionally considered when they want to buy a new product or service – however, in recent years, this has shifted.
As part of the evolution of the purchasing experience, consumers are also expecting safer goods that are more environmentally responsible. This changing demand from consumers means that organisations are reinventing the way they plan, design and produce their products and services, with sustainability now front of mind. But sustainable product design can be challenging, and organisations must consider the entire supply chain and ensure that their product is not only environmentally friendly but also satisfies consumers.
Our mindsets are changing
Acknowledging the need to start operating more sustainably is the first step towards becoming a leading sustainable organisation. Conversations around climate change and what’s happening to our planet are prevalent and consumers are more aware than ever of the arguments in favour of changing behaviour and habits to be more sustainable on both a micro and macro level. A recent survey found that consumers are willing to pay more for sustainably produced products, meaning sustainable products are in higher demand and consumers are willing to prioritise them. Using green products has also been shown to make people happier, enhancing the enjoyment of their experience of the product.
As these consumer mindsets have developed, the pressure is increasing on businesses to transform their operations to be more climate responsible. Sustainability is becoming a core part of the business for many companies across almost all industries. High-profile brands have been announcing their carbon neutral plans at an unprecedented rate at the start of this decade. For example, Microsoft has taken their sustainability plans to the next level by committing to being carbon negative by 2030.
What the supply chain can do
There are several frameworks and many coalitions forming to develop sustainability solutions for specific industries. For example, organisations such as the Sustainable Apparel Coalition or the Sustainable Packaging Coalition have developed standardised value chain measurement tools to help organisations measure their social and environmental impact. By using this measurement, organisations can address flaws and inefficiencies in their processes, improve their sustainability performance and maintain a level of environmental transparency, helping them move one step closer to achieving their targets on carbon dioxide emissions and waste.
Then there’s the lifecycle assessment of a product – including its raw material use through end of life scenarios and potential alternatives for designing waste out of the system. Are there ways to make the product componentised, such that if the entire product can’t be recycled or refurbished can it be deconstructed in a manner to allow other goods to be created?
Identifying where sustainability measures can be put in place across the supply chain is one thing, finding innovative ways to be sustainable without passing higher prices onto the consumers is another – and that’s where the main challenge lies in product design. However, there are two ways to overcome cost issues when developing sustainability practices in the supply chain.
The first is by integrating circular economy into practices, such as through direct product innovation. We’ve seen this already with companies incorporating recycled materials into their products – this is becoming increasingly common in the manufacture of clothing and footwear.
The second is through organisations developing innovative product and service models. The likes of IKEA, for example, are planning on testing furniture rentals and leasing, which would use less materials and resources. By adapting existing services, organisations can implement innovative ‘greener’ solutions in their company that are mutually beneficial to both the company and the consumer.
What to expect going forward
Currently, we are seeing new entrants inject exciting innovations into the marketplace, and challenging established companies to adapt their products, but many companies still have a long way to go. It’s estimated that over 70% of Fortune 500 company emissions come from their value chain, not the direct energy they use.
Businesses big and small must develop a company culture with sustainability embedded at its core. In today’s market, implementing clear objectives, which every department and employee can drive towards, and transforming operations to become more sustainable is critical to satisfying changing buyer demands and enabling companies to experience the many benefits that sustainable business practice has to offer.
Ultimately, both consumers and businesses alike will benefit from sustainable innovation and company strategy. In spite of the challenge’s businesses may face short term, the longer lasting effects will be felt by consumers, employees and stakeholders.
By Shy Muralidharan, Director, Product Management at ENGIE Impact and Susanna Cagle, Senior Product Manager at ENGIE Impact
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.”