New Value Promise of Sustainable Supply Chain
A series of recent conversations with various customers and experts have motivated me to explore where the value and urgency is today in regards to sustainable supply chain. From a SAP perspective we have defined Sustainable Supply Chain to address the following concerns:
- Increase Transparency and Reduce Risk (Via Supplier Processes, Traceability & Recall Mgmt)
- Reduce Waste and Consumption (Via Execution, Green Logistics & Sustainable Network Design/Supply Chain Planning)
- Increase Efficiencies and Reduce New Costs Associated with the above Topics
Given the topics above where should one look to achieve new value? Better yet, where should a solution provider such as SAP place it’s investment strategy given sustainable supply chain requirements today and in the future? One trap for supply chain professionals is to only focus on those core processes that have been at the heart of supply chain growth, innovation and value in the past. Why not, as supply chain views focused on inventory, planning, transportation, visibility, collaboration etc were and continue to be key areas for hard savings. These same areas hold tremendous promise for reducing waste and consumption by extending existing processes and creating new areas of collaboration across the ecosystem.
So what has changed? “Sustainable” supply chain is causing us to look at things more holistically, involving a larger set of stakeholders and KPIs. Sustainability has promoted more strategic thinking which has elevated concerns around risk, transparency and opportunity creation into the supply chain context. These concerns which may have been considered the softer side of supply chain management need to be accounted for with equal weight to traditional supply chain principles given today’s environment. Sustainability is evolving the scope of these other concerns and placing new importance based on some of the drivers discussed below:
- Supplier management costs and information velocity continue to go up driving new inefficiencies in the information supply chain
- There are greater company risks associated with sustainability in the supply chain, companies are spending more resources responding to supply chain inquiries & concerns
- Issues in quality in regards to product & supplier processes are more associated with non-traditional product concerns such as sustainability
- Companies again can make supply chain a strategic advantage and can differentiate themselves to large customers through sustainability
Focusing more in the sourcing, procurement, supplier management and traceability areas should not be viewed as a less worthy objective. In fact, by ensuring a long term viable sustainable supply base we can achieve savings (supplier management, switching, auditing, and longer term material aggregation costs), reduce risk (ask many large brand owners how much they are spending to address sustainability concerns that have surface in their supply base) and support growing a company’s brand value.