Sustainable Supply Chains: How Can We Build Them?
Sustainable supply chains are largely discussed these days. Organizations design several strategies to reduce the environmental impact of their activities and reduce the carbon footprints originating mainly from the following critical processes: raw material sourcing, production, storage, and transportation.
A sustainable supply chain aims to reduce the harm caused to the environment with a focus on minimal waste production.
Difference between Conventional and Sustainable Supply Chains
Traditionally, supply chains were driven by one and only one thing, i.e., profit and cost reduction. That is why factors like speed, cost, and reliability were prioritized over their environmental impact. On the other hand, sustainable practices address critical global issues like human rights, fair labor practices, deforestation, and climatic changes. Indeed, they consider the traditional goals, but they add new targets to make supply chains more profitable for everyone, i.e., business, society, and our planet.
3 Benefits of Sustainable Supply Chains
Supply chains are at the core of the environmental impact created by any business, as they involve, among others, energy-intensive production as well as fuel expenditure on transportation. Therefore, an organization can generate a more significant impact by making its supply chains sustainable.
Here are three crucial actions that can be significantly benefitted from a sustainable approach:
Reduced Energy Expenditure
Sustainable supply chain strategies often begin with analyzing the overall energy expenditure on each energy-consuming activity. This analysis is the first step towards energy consumption, as it helps identify energy wastage and then take necessary measures to eliminate it.
Elimination of energy wastage leads to benefits like reduced cost of energy saving, which ultimately makes the business more fuel-efficient. Besides, it helps in reducing the carbon footprint.
Consumers are getting increasingly conscious of sustainability. Today, most final consumers prefer products produced and delivered to them in sustainable ways. In fact, various global studies have reported that consumers are ready to pay more for the brands to maintain supply chain transparency.
Improved Investor Relation
Unsustainable supply chain operations pose a significant threat to the brand’s reputation in the market. In several cases, media reports of irresponsible supply chain practices have badly affected the brand’s stock price. Investors are well-aware of the effects of this risk, and they carefully consider sustainability while making critical investment decisions.
Here, supply chain transparency is crucial, as it shares all the required information with the investors and the consumers. As a result, when a brand operates in a sustainable supply chain and is very open about its practices, it creates an excellent impression in the market. Eventually, it helps in building a solid relationship with all the stakeholders.
Sustainable Supply Chains for Cost Efficiency
The cost has been considered the biggest obstacle to sustainable supply chains for a long time. In particular, small businesses struggled to afford the cost of designing sustainable supply chain models. However, in the past few years, the gap between sustainable options and cost-efficiency has narrowed.
Sustainability is becoming a synonym for cost-efficiency, as it involves providing an economic benefit to the consumers by providing outstanding services at a lower cost. The best example I would like to mention here is compact packaging, which means reducing the size and number of shipments to lower its carbon footprint and cost at the same time.
Moreover, an increasing number of suppliers are changing their operational philosophies as a part of their green initiatives. As a result, they are changing the prices and marketing strategies in order to cater to the businesses designing sustainable supply chains.
Sustainable supply chains are not just built on expensive factors like packaging material or transportation. It means streamlining the operations in order to make a difference by providing economic benefits to customers and suppliers.
Ways of Integrating Sustainability within Supply Chain
Until now, we discussed the benefits of sustainability, so now it is time for real shop-talk, i.e., the framework for integrating sustainability.
Mapping the Entire Supply Chain
Analyzing all points of supply chains is crucial, as it gives you a clear idea of the current situation. During this step, you can map the inventory, social challenges, transport options, energy requirements, etc., to develop a comprehensive strategy to incorporate sustainability in the procurement, supply chain design, and operations.
Procurement of the Products
Energy and water are two of the most commonly required resources to be procured. So, companies can begin by looking at the sustainable programs in their areas to obtain these resources reducing the environmental impact.
Nowadays, several technologies are available to feed us with real-time data, which can be used to streamline and increase the efficiency of operations. Utilize modern technologies like AI and machine learning to establish adequate means of communication within your operations. A great example of how the integration of AI in the supply chain can help is the possibility of analyzing multiple combinations of transportation routes and determining the best possible option for reducing fuel consumption and carbon footprint.
Establishing a Circular Economy
The circular economy is a revolutionary concept that restrains economic activities from using non-renewable sources. It helps businesses to establish a resilient system that is excellent for not just economic results and people but also for the environment. The circular economy design tends to reduce pollution and unwanted waste from the supply chain structures.
AI has a great potential to form a solid foundation for the circular economy. This is because the AI-powered supply chains can analyze constraints and input to build a genuinely sustainable structure.
(Examples of Constraints: Accessible modes of transmission, capital expenditures, supplier contracts, asset capabilities, penalties, carbon credits, etc.
Examples of Inputs: projected demand, customer assignment, flow paths, current facility footprint, etc.)
The incorporation of AI can lead to benefits, like,
- More efficient fleet management and routing
- Reduction in waste
- Improved demand forecast
- Fluent communication between different departments of business
Syscons Group, as a brand, promotes sustainable supply chains as a holistic approach to lowering the environmental impact by reducing carbon footprint. In this blog, I mainly focused on the importance of technology, whereas I have a lot to say about the technologies we can use to make it happen. So, the next blog of this series will discuss the modern technologies that we can use to create sustainable supply chains in the modern world.