Sustainability in supply chain – A mandate of today for a better tomorrow

Supply Chains today are facing major challenges in the market i.e., shortage of material, visibility of futuristic stock for demand, resource unavailability, and skill challenges. But is this the only problem? There are also challenges from the social and environmental point of view else we will land up in universe that will end very soon, if not taken care of. This is what sustainability is all about. It is the management and coordination of all supply chain activities focusing on being economically efficient, socially responsible, and environment friendly. To do that, every single step of the supply chain process needs to be reviewed and aligned. For e.g – In a manufacturing process, we need to focus on reducing waste or scrap, reuse of waste, emission reductions, and decomposition of waste. Likewise, we also need to look for environmentally friendly transportation methods for in and out transfer of materials from the factories or warehouses.

To achieve this, the first and foremost important thing is to make everyone in the organization aware of what sustainability is and how it will help in the present circumstances and the future. For this, there needs to be a proper strategy and vision which would not only involve steps of how to achieve it, but also educate the employees in terms of training and certifications, and how it will benefit. But for the fact that this cannot be only achieved internally by the organization, there is a need to educate the suppliers and customers on their vision and goals. And finally measure the progress and request feedback from employees, stakeholders, customers, and suppliers. With all these steps, there needs to be a focus on priorities based on 3 pillars:

·       Economic – Does it support long-term growth?

·       Environmental – Does it reduce the negative impact on the environment in the long run?

·       Social – Does it take care of the well-being of a community or culture?

There is a focus on the environment in terms of mitigation or adaption of climate change, increase in resource efficiency and reduction of non-degradable or hazardous waste, human rights in terms of banning child labor, non-discrimination and freedom of association, labor practices in terms of the employer-employee relationship, working conditions, and health and safety at work and finally fair operating practices in terms of fighting corruption, respecting property rights and responsible political involvement.

We discussed what sustainability is and how is it important for companies in the present and the future. But the next question that comes up is how we achieve it. We need to refer to the 3 R’s in sustainability –

a)       Reduce: Reduction of waste. To achieve it, there needs to be a proper analysis of the manufacturing, storage, shipping, and receiving processes to reduce the number of rejections, storage, and transportation strategies

b)      Reuse: Use a closed-loop process to recycle the waste from one process as raw material for another.

c)       Recycle: Breakdown of the waste into its base raw material, thus creating new items and using them in the supply chain processes

To achieve all of these and many more, organizations need to have a clear sustainability strategy. As a part of it,

i.          It needs to look at the supply chain position today in terms of environmental impact

ii.        It then needs to build a matrix to identify the most critical environmental supply chain issues that the supply chain faces today and will likely face tomorrow

iii.      It will then need to identify potential levers to address these critical issues

iv.      And then finally devise a performance strategy and transformation plan

Strategies are good if only they are executed properly, and the outcome is clearly defined and obtained. To do so there needs to be a proper action plan.

a)       Stakeholders need to be aligned and a buy-in need to be obtained

b)      Clear vision and narrative need to be formulated to how it can be built into the supply chain

c)       Devise a detailed business case to evaluate the costs in terms of strategic benefits and environmental impacts

d)      Collaborate with government agencies and regulatory bodies to define benchmarks for the industry

e)      Engage stakeholders across various supply chain processes and built teams with accountabilities and incentives

f)        Instill governance to enforce ownership and responsibilities

g)       Demonstrate to investors the outcome, and improvements from previous stages and plan for the next stages

Will the overall strategy in plan and the action items coming out of it, there need to be strong control and validations at multiple steps of the process to ensure that the sustainability targets are met. As we previously discussed, it is not only the internal stakeholders that will help achieve sustainability for an organization, there are external stakeholders also. Some examples of intra-company indicators are the number or value of certified products, rejection rates, a collaboration between supply chain-specific stakeholders, training of employees etc. Similarly, some examples of external indicators are the sign of a code of conduct, submission of self-assessments, number of audits etc. But who are these external stakeholders?

One of the major ones is the supplier of various raw materials or intermediate products as a part of the supply chain processes. Some of the steps that need to be followed to get these suppliers into the sustainability program are to get the first-tier suppliers to set their own sustainability goals, include lower-tier suppliers in the organization’s sustainability program, and finally identify personnel to monitor their progress regularly. Another one is the transportation companies which move material either from the supplier to the factory or storage location or from the internal location to the customers. One of the key factors that needs control here is the emission at each route or leg of the delivery cycle. The consumption of gas or diesel in each of these modes of transport is also to be verified and balanced out.

We have also seen that different organizations have used technology-enabled sustainability solutions with greater predictiveness, configurability, and efficiency. Loop optimization, Green Vehicle Route planning, Long-haul truck route planning, carrier allocation systems, and sustainability dashboards are several solutions used by various organizations.

We discussed what sustainability is, what types of problems we might face if we do not focus on it, how we strategize or actionize as an organization, and who all needs to be involved. In the end, we also talked about the various tech-enabled solutions that are available in the market for use. But is this very simple? Not that simple, as I feel there are many obstacles in the path for it. There are challenges in terms of alignment with various stakeholders. Promoting it to suppliers can be challenging and it might not be restricted to a single level. Process changes to achieve this sometimes become very cumbersome and may result in a change in their manufacturing cycle from the extent of raw materials, machinery, and labor. Finally, the most important thing is to identify the sustainability practices that are needed for your organization with their proper risk analysis and outcome determination. We must all realize that achieving sustainability is a marathon and not a sprint and thus need to be planned in such a way as to realize maximum benefits in the present with a view to the future.

Please feel free to share your feedback/questions in the comments section or via email.

Author Details

Arijit Pramanik

Arijit has 20+ years of consulting, project management, and pre-sales experience. His expertise includes Oracle Cloud as well as applications for supply chain management and procurement. He has vast implementation experience with global clients in North America, Europe, and Asia. He is the product owner and anchor for the Infosys Oracle Cloud’s Stratos Hi-tech solution. He is also an Oracle Panelist & Presenter for B-school and Lateral recruitments. He is a Thought leader in Oracle space having published multiple whitepapers in various forums.

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