Six ways to achieve supply chain sustainability
Fueled by consumer demands, i...
The sustainable supply chain has become a vital – and ever more visible – element of social corporate responsibility.
Fueled by consumer demands, increasing regulations and a mounting business case, steering supply chains in a more sustainable direction has grown from laudable ambition to requisite for long-term preservation.
A sustainable supply chain is about far more than the environment, though that’s where consumers might focus their attention. Sustainability is a confluence of social, ecological and economic environments. A sustainable supply chain must avoid compromising both the environment and the business itself.
It’s also important to recognise that a “responsible” supply chain isn’t necessarily the same thing as a “sustainable” supply chain. A responsible supply chain typically ensures it operates within all legal and ethical parameters. This doesn’t affirm sustainability, however. A sustainable supply chain takes into account environmental and societal reference points. The sustainable chain requires that all partners consider how their processes and actions can be supported by nature and society over the long term.
There’s no quick and easy path to sustainability, but the right supply chain solutions can help your business strive toward, and eventually achieve, a bottom line defined by not just profit but also by people and the planet.
Create a detailed map
Little, if nothing, can be accomplished within your supply chain if you don’t have useful visibility of it. Shockingly few companies actually have detailed views of their entire supply chains, which are more complex and global than ever. Mapping your entire supply chain is the starting point. A quality map of your supply chain will allow you to identify impacts, risks and drivers of waste.
This “aerial” view of the chain can help you understand environmental, economic and social challenges faced by suppliers. These can be extremely variable based on your industry, but a thorough map of the chain accounts for how human and natural resources are used along each step of operational and production process.
Educate and change the culture
Some measures to sustainability require not only procedural changes, but behavioral and cultural changes. An important step to achieving sustainability is earning buy-in from your own staff and that of suppliers. Education and training resources can help align everyone with the mission. Showcase success stories and leverage successful case studies to build momentum within your organisation and throughout the chain. Develop training programs that instill the mission from the time new employees are onboarded.
Encourage and assist upstream
Sustainability can’t be accomplished unilaterally. You’ll need support and co-operation all the way back upstream. Though you may not have the kind of persuasive power over your chain like a Walmart or Amazon, you do have the ability to influence supplier practices. Performing audits and/or enacting codes of conduct can encourage suppliers to promote your sustainability efforts.
Furthermore, be willing to assist them when possible. Helping them with best practices design and implementation advances your sustainability efforts while furthering the overall goals. It might be necessary to apply pressure in some instances, but don’t be afraid to do so if the ultimate objectives are important to you.
Technology has taken supply chain management from art to science. Continued advances in technology are providing organisations with once-unconceivable abilities to analyze, tweak, measure and optimise operational processes like inventory management, order and distribution management and transportation management. Insights gained through data and machine learning can be leveraged to find and exploit opportunities for sustainable processes.
Individual efforts don’t solve complex supply chain issues, at a personal level or even a company level. Many competing companies share portions of supply chains, and collaborating on efforts to develop and establish sustainable practices can benefit all. While it may feel counterintuitive to work with rivals, combining efforts on sustainability practices not only advances the objectives, but offers an opportunity for positive public perception and to build credibility with industry and consumers.
Build on success
You track financial objectives, such as revenue and profit, of course. It’s said you can’t improve what you can’t measure, so develop sustainability objectives and track their successes. Then, build on these successes and use them as springboards to further your efforts.
The road to sustainability can’t be accomplished overnight, and it won’t be done with shortsighted or apathetic efforts. It might also require initial investment to facilitate the necessary procedural and cultural changes. By starting your efforts now and building on each small success, innovation will breed throughout the process and strengthen the business case to work in conjunction with the social case.
Consumer demands and changing regulations have pushed environmental concerns into the discussion for businesses across the globe. Ultimately, a sustainable approach to supply chains will be the only viable choice for any company’s long-term success.
For more information on all topics for Procurement, Supply Chain & Logistics - please take a look at the latest edition of Supply Chain Digital magazine.
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.”