The sustainability of your supply chain is inextricably linked with the long-term financial health of your business, in addition to its economic, social, and environmental impact.
Instigating sustainable practices across your supply network can initially seem daunting. In this article, we will explore what makes a supply chain sustainable, and detail 6 simple rules for getting started with increasing the sustainability of your supply chain.
What does it mean for a supply chain to be sustainable?
From bloating inventory to improper disposal of waste, there are numerous ways in which the unsustainability of our supply practices can impact the long-term health of our businesses.
Waste is not only damaging to the financial health of a business but contributes to the growing misuse of natural resources and potentially lasting environmental damage to our planet.
Paying due attention to each link in your supply chain, and minimizing inefficiencies – be that in material usage or working capital – can help to reduce overall waste and ultimately avoid forfeiting profits.
Benefits of a sustainable supply chain
Optimizing your supply chain to be more sustainable can have several benefits for your company:
It may go without saying that increasing sustainability – particularly of a financial nature – can contribute to overall cost reduction.
However, increasing the environmental sustainability of your supply chain can have the additional cost-saving benefit of cutting energy, transportation, fuel, and material costs, not to mention avoiding possible carbon-related taxes and penalties.
Reducing wasted working capital is another clear way of cutting costs within your supply chain, and can help to contribute to the long-term financial health of your business.
With increasing consumer emphasis on environmental and social sustainability, increasing the sustainability of your internal and supply-chain practices can serve to provide a welcome boost to brand reputation.
Whether you achieve this through environmentally-conscious sourcing of raw materials or prioritizing collaborating with partners with stringent abidance to local labor laws, creating functional and policy-oriented changes can help to protect your business’ reputation.
Inventory and supply continuity
A sustainable supply chain is by definition one that is efficient enough to facilitate a business to run, continually, in a way that is not likely to face collapse.
In this situation, you are likely to experience the benefit of improved inventory and supply continuity. Whether this is achieved by staggering or reducing bulk ordering, using increasingly local suppliers to reduce transportation costs and time, or facilitating greater resilience through reliance upon multiple suppliers, supply continuity can be an excellent benefit of increased supply chain sustainability.
The three key facets of supply chain sustainability
The financial element – striving to improve your business and the economy
Financial stability for any business refers to the ability to maintain financial revenue growth and the capacity to expand operations in line with strategic goals. Achieving financial sustainability is a long-term concern, and thus requires more than short-term profit-boosting solutions.
Increasing overall efficiency in order to run a leaner supply chain is central to increasing the financial sustainability of your organization. Identifying inefficiencies – both internally and within your wider supply network – and working to optimize these processes can be a great way to cut costs, reduce waste, and increase financial sustainability.
One of the easiest ways in which to start creating a more sustainable supply chain is to gain visibility through supply chain management software. Simplifying the collection and analysis of data – in addition to enabling automation where appropriate – can be fantastic ways to facilitate greater efficiency.
The environmental element – striving to serve the planet
Environmental sustainability refers to your company’s ability to function whilst limiting the negative impact that it has on the environment.
Key aspects of environmental sustainability include waste generation, fuel consumption, pollution levels, overall energy consumption, and waste disposal and recycling.
Investing in renewable sources of energy or aiming to offset carbon emissions can be two ways to optimize your environmental sustainability. With an increasing emphasis on the impact of industry upon the environment, it may be possible to optimize on incentives that target and/or reward environmentally sustainable practices.
In order to assess the environmental sustainability of your practices, it may be helpful to consult a specialist who can also help you to optimize your processes and facilitate ongoing assessment.
The social element – striving for social equity
From your internal employees to your suppliers, to your customers, people form a crucial part of every supply chain. Social sustainability refers to a business’ ability to effectively manage and mitigate its effect on the people it engages with and employs.
This can include ensuring that you partner with suppliers and distributors who abide by all legislative and regulatory requirements relating to labor, ethical employment, and health and safety.
6 simple rules for building a sustainable supply chain
Rule 1: Identify wasted working capital
The first way in which you can increase the sustainability of your supply chain is to identify – and rectify – wasted working capital within your network. Operational inefficiency is a key cause of poor financial sustainability, and can adversely affect a business’ ability to invest and grow.
To establish whether your working capital is at a sustainable level, it is first necessary to gain visibility into the financial ingoings and outgoings of your business. Long-term profitability is incompatible with excess wasted working capital, and thus this is a crucial place to start when assessing the sustainability of your wider supply chain, and implementing change.
Rule 2: Identify duplicate materials in your network
Similarly, identifying duplicate, unnecessary, or unused materials within your network can be another great way to increase the overall sustainability of your supply chain.
Not only can this help to reduce waste – which can substantially drain resources – but it can help to reduce the environmental impact of the use and disposal of raw materials.
Optimizing your materials procurement to accurately reflect demand can be made considerably easier by following rule 3: utilizing supply chain management software to increase visibility.
Rule 3: Utilize supply chain management software to increase visibility
The increased visibility – and potential for automation and other machine learning and artificial intelligence-enabled features – are just some of the ways in which utilizing supply chain management software can help to increase the sustainability of your supply chain.
Centralized data reporting and clear visibility across multiple locations and/or geographies can help to ensure that both internal and external workers are on the same page regarding supply and demand – ultimately reducing wasted resources, time, and money.
Rule 4: Reduce off-catalogue spending
Identifying and reducing any unnecessary off-catalogue spending can be a practical way to increase the financial sustainability of your business. Conducting a spend analysis across your entire supply chain can help to provide the necessary visibility to allow you to create the required changes.
This can be one way to root out inefficient spending patterns, wasted capital, and ultimately optimize your business’ spending.
Rule 5: Aim to reduce fuel consumption and carbon emissions
Whether it’s reducing the number of trips taken by a vendor to deliver supplies, or the energy used to process materials, planning and optimizing product creation and delivery can be a great way to increase the environmental sustainability of your business practices.
Similarly, engaging in practices that serve to limit or offset carbon emissions can serve to both limit negative environmental impact and avoid carbon-related taxation.
Rule 6: Ensure you follow up to allow for continuous improvement
Insight into the data that relates to your supply chain can help you to highlight areas for improvement, set targets, and follow up to ensure that these are met.
Internal checks and ensuring ongoing supplier compliance can be challenging without the proper tools to do the job. Shared digitized software that implements accountability through centralized data visibility can help you to stay on track with sustainability goals, and to strive towards continual improvement.
Need a hand increasing financial sustainability?
Verusen offers supply network and supply chain sustainability and optimization for the modern-age business, starting with AI-powered processes supported by human expertise to get the perfect blend of flexibility and performance.
Reach out to us to start reducing your risks today.