Manufacturing News

Building sustainable supply chains

WHILE how to approach the sustainability challenge remains an open question, leading supply chain organisations are already proving that exploring sustainable options is giving them the advantage over competitors.

They have responded to the concerns and opinions of consumers by taking sustainability into the heart of their supply chain management practices and strategies.

In implementing more sustainable processes, they have been able to simultaneously improve their cost effectiveness and customer service levels while establishing a strong foundation for their company’s future.

The supply chain is increasingly at the heart of policies being developed with the aim to reduce carbon emissions and the impact of manufacturing on the environment.

As legislation continues to grow in this area, stipulating reduced carbon emissions and additional costs for emitting pollutants, organisations should carefully consider their response.

They should not be looking for the quickest solution which that allows them to call their operations ‘sustainable’, rather, they should examine making real, long term, strategic investment into sustainable practices as this has proven to lead to a marked improvement in performance.

Although the impression that implementing sustainable processes and technology is costly still exists, it is important to remember that a company’s supply chain can represent up to 50% of its total asset value and up to 70% of the cost of doing business.

By implementing sustainable practices, organisations are able to make long term changes to their processing habits and improve cost effectiveness and capital efficiency.

They are also ticking the boxes and answering the questions of new investors who are now assessing the future value of organisations according to their ability to address the social as well as the environmental dimensions of sustainability – the triple bottom line of economic, environmental and social outcomes has become more relevant than ever before.

Research results

Accenture recently carried out research to better understand what organisations were doing to become more sustainable and environmentally friendly in the long term.

The results, reported in “The Sustainable Supply Chain”, clearly show that top performing organisations able to address becoming more sustainable and more cost efficient in a combined fashion, are the most highly rewarded.

Overall, the results showed that by making sustainability a consistent focus throughout the supply chain, these organisations were able to apply solutions that streamlined operational processes at several stages as opposed to a ‘green washing’ of afterthought at one single stage near the end.

They implemented solutions which were strategically considered and within the scope of their organisational processes and systems. Their chosen solutions were not only practical and cost effective; they also contributed to improving other areas.

Following the survey, Accenture suggests the following tips to implementing a sustainable supply chain:

1) Design an operating model that is simple on the inside and differentiated on the outside – Although supply chains that drive high performance are inherently complex, using a holistic view of the chain’s architecture to simplify behind the scenes functions will improve efficiencies and flexibility. To do this, organisations must develop the integrated view of the end to end supply chain that masters hold.

2) Focus on value, not assets High performing organisations manage value not assets. With a deeper understanding of total cost (and value) of ownership, organisations can differentiate between (necessary) and (other) resources and capabilities, allowing them to outsource non-core functions.

3) Consider carbon at the beginning – When considering a business case or project, the carbon footprint should be considered at the beginning and integrated into the plan from the beginning. By doing this, organisations easing the strain of having to make significant changes after it has begun.

4) Invest for flexibility – Identifying an understanding and segmentation of the risks to your supply chain will allow you build in an ability to adapt and respond to these risks, ensuring a flexibility that can be leveraged in times of need.

5) Selectively invest for mastery in differentiating capability areas – Becoming a high performer in one particular domain can lead to high performer in other domains and an increased business value and performance overall. Improvements to the supply chain will also benefit sourcing and procurement, manufacturing, transportation, planning, product life cycle management and service management.

It is not surprising that it is the same organisations which are taking the lead in developing innovative supply chain strategies and then proactively embedding sustainability within their operations which are the ones which will most likely stay ahead in supply chain performance over the longer term.

While the supply chain organisations surveyed have not provided a model answer as to the best approach to sustainability, they have clearly established that prioritising sustainability will help to improve overall business strategy and performance.

What remains now is how they will further evolve their efforts in sustainability to remain ahead of the pack into the future.

* Zeljko Nikolic is managing partner, supply chain management with Accenture Australia, www.accenture.com/Global/Consulting/Supply_Chain_Mgmt/R_and_I/TheSustainableSupplyChain.htm.

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