Supply Chain Best Practices

Stiff-arming suppliers. Penny-pinching over revenue generation. Increased visibility with no way to make sense of all your supply chain data.

Do these sound familiar? If so, you’re not alone. Today’s operations aren’t optimized to respond to fluctuating demand because they run on informational and structural silos. From procurement, to manufacturing, to warehouse inventory levels, to global shipments, no one — not even top executives of the world’s biggest brands — can see the whole picture with the resolution they need to get all their products to the right place at the right time. Instead, terrified of stock outs or missed sales opportunities, companies inundate their operations with buffer, while squeezing supplier margins.

At the present rate of operational inefficiency, 75% of S&P 500 companies will be gone by 2027.

Half of companies have digitized their marketing functions, yet only 2% of companies are building digital strategies into their operations. When supply chain digitization is so necessary, why are so few companies actually doing it? The fact is that supply chain is a monstrously big problem, with moving parts spanning the globe, composed of hundreds of players with their own operational style and their own limited knowledge of what’s happening at a given time. And digitization, despite seeming like a cure-all, is only one part of the solution. Companies that truly want to dismantle their operational silos and drive better product availability will have to:

  • Leverage talent and enable better collaboration
  • Reassess supplier relationships to turn them from transactions into mutual partnerships
  • Re-pivot their operations and logistics to put the customer front and center
  • Build their supply chain to be flexible, not just resilient
  • Create a contingency plan that holds up in the real world
  • Pursue visibility as a means to an end (product availability)
Moving your supply chain from a patchwork of operational silos to a connected, collaborative ecosystem won’t be easy. To help you get started, we’ve put together a best practices guide. We’ll lead you through the mindset changes and tactical steps you’ll need to take to start driving efficiency across your operations. Let’s get started!

Tapping into the Potential of Your Network
Supply chains are about people — they exist to serve our needs. They run on the coordinated efforts of individuals, not just within companies but across ecosystems. As a result, it is essential to nurture the people responsible for managing your supply chain. Let's take a look at a few of the practices instrumental to optimizing these multi-enterprise relationships, and review some of the mistakes commonly made along the way.

Stop Throwing People At Supply Chain Problems

The tendency to throw people at supply chain solutions is guided by the assumption that more hands will translate to higher inventory turns in the face of extraordinary demand. While this practice has been proven to work when dealing with large scale manual efforts, the value of having multiple hands working on a project rapidly diminishes when it comes to more technical endeavors. Fred Brooks’ seminal text, The Mythical Man-Month — also referred to as “The Bible of Software Engineering” — famously posits:

“Adding manpower to a late software project makes it later.”

In fact, the project becomes a micro-example of a diseconomy of scale, where increasing manpower correlates with increased cost.

Everyone’s doing it.
This brings us to a recent trend in the supply chain management and logistics communities.

Recent advancements in logistics technologies have universally increased the depth of supply chain visibility, in turn raising the expectations of consumers. Companies have been focusing more on supply chain security as a way to prevent losses and ensure the quality of products — especially in today's globally connected market. A recent Council of Supply Chain Management Professionals survey revealed increasing employment opportunities in logistics, transportation, inventory management, cargo and freight, and demand planning.

Some companies that have placed high volumes of job ads for supply chain specialists include Deloitte, McKesson, Pensky, IBM, the Army National Guard, Target, and Boeing. All of these organizations have increased the volume of job ads over the past year. While Deloitte placed the most job ads for these skills, IBM saw the greatest year-over-year growth, increasing hiring over 500%.

A simple solution.
What if we take this philosophy and apply it to supply chain? In this scenario, consider supply chain to be equivalent to the late software project (the problem). According to the original theory, the result of adding more people into the mix only magnifies the original problem (we’ll call it complexity). So we get the following:
“Adding manpower to supply chain increases complexity.”

You see, as much as we all love to think that putting more people on top of a problem makes that problem easier to solve, the truth is that it makes things worse. The trick isn’t to add manpower, it’s to optimize it—and this begins with learning how to interact with the people you already have.

Strategies for Forming Stronger Supply Chain Partnerships

In order to distill the most value from your network, careful attention should be given to identifying strategic partners. Without them, your operations are left completely siloed, forcing you to make costly decisions in the dark and ultimately disappoint customers. With them, silos are broken down, allowing you to gain insight and work faster as one unified ecosystem.

Managing relationships with suppliers, partners, carriers, and factories is easier said than done. And after a deal is signed is when the work really begins — partnerships require a two-way communication that enables both parties to jointly manage the relationship, resulting in a more effective one that serves to create value for the customer.

By pivoting away from adversarial relationships and towards strategic partnerships, businesses can unlock value, enhancing product availability and creating a consistent experience that buyers can depend on. The following principles outline the path to turning this goal into a reality:

  1. Partnerships, not Transactions: Regard suppliers as long-term partners, as opposed to antagonizing them and turning every interaction into a quid pro quo. Stiff-arming and penny-pinching fail to be effective tactics in an economy in which value creation for the customer, not cost reduction, is the benchmark of future success.
  2. Time for a Reality Check: Dependency on third parties is a common reality in the contemporary product landscape. Today, sixty to seventy percent of a firm’s cost is typically controlled by the extended supply chain. As a result, the risks associated with outsourcing have been compounded. The heightened risk tends to bring out a knee-jerk defensiveness among executives, but a smarter response would be to make this dependency known to partners. By disclosing the significance of the relationship, suppliers are more likely to reciprocate with a renewed investment in the partnership and a willingness to re-prioritize when the chips are down.
  3. Transparency with the Good, the Bad & the Ugly: Though perhaps an obvious, even clichéd, piece of relationship management advice, transparency continues to elude even the most seasoned of operations leaders. Ideally, transparency starts from the beginning, when choosing who to partner with. Businesses should look for partners who share the same priority of creating value for customers, and are also willing to share in the burdens and benefits equally.In essence, it’s a two-way communication that requires the buyer and seller to jointly manage the relationship, resulting in a more effective exchange.
  4. Change Management: The businesses that will succeed into the future are not those that dictate change, but rather, those that help company culture evolve, bringing processes up to speed and allowing for the organic uptake of new configurations. Outsourcing often necessitates streamlining communications in the face of disconnectedness, and instilling habits of transparency and over-communication, not just internally, but with partner teams as well.

The Importance of Behavioral Dynamics

Because supply chains run on the sustained efforts of people, they too are subject to human bias, irrationality, and informational gaps when it comes to decision-making. By encouraging a culture of collaboration and trust, organizations can align the behavioral aspect of supply chain management with business operations. Perhaps counterintuitively, behavioral optimization can be achieved by systematizing communication channels so that every decision is backed by process and rationality rather than guessing games and assumptions. This type of collaboration can be achieved in 3 steps:
  • Create a platform for solving problems
  • Develop goals for improvement on both ends
  • Make sure that performance measurement objectives are attained

How to Solve Your Supply Chain's Talent Problem

“A majority of people in supply chain today didn't get there on purpose.”

It's no secret that the supply chain space is currently battling a widening talent gap. In fact, some studies indicate that the demand for supply chain professionals exceeds supply by a ratio of six to one. Finding supply chain professionals with the right skill sets required to run these highly complex operations is becoming increasingly difficult, especially at the middle and upper management levels. Here are a few reasons why:

  1. The industry is expanding faster than workers are becoming qualified.
  2. The qualifications needed for supply chain careers are expanding.
  3. There’s an education shortage and companies have trouble gauging a good supply chain mind.
  4. “Supply Chain” has an image problem.
Read the full article here.

As a growing portion of supply chain work becomes automated, workers possessing creative problem solving skills on top of strong digital, operational and domain expertise will add the most value to business operations. To meet these demands, CEOs should support a much more agile talent sourcing function — one that doesn’t just hire skilled candidates, but also coaches, develops, and paves defined career paths for them. Increased investment in the up-skilling of existing supply chain teams is a decision that will pay off in spades by shrinking the talent gap over time.

For now, many organizations are addressing the shortage of experienced workers by implementing formal talent management programs that enable employees to acquire skills through real world, on-the-job experience. However, this type of investment shouldn't be confined to just the mid-career level. While companies may be skeptical of investing in younger hires who are more likely to leave for grad school or alternative career tracks, this mindset constitutes a major part of the problem driving the talent shortage in the first place. Organizations are struggling to attract millennials and posture supply chain as a viable career path for a generation that regards the industry as dull and outdated. The first step in shifting the paradigm is to express interest in this untapped demographic. Reciprocation will follow.

Creating a Demand-Driven Supply Chain
The global product economy exists for one end — to get customers what they want, when they happen to want it. Shifts in demand are not driven by industries, the products they create, or the ability of successful businesses to cultivate a recognizable brand image. Rather, the success of businesses is driven by how sensitive and responsive they are to demand. And despite efforts to forecast what customers are going to want next quarter, the fact is that customers are human — in other words, they can be flippant and unpredictable. Any operations exec who has been forced to confront a warehouse full of unsold, unsellable, items, after an inaccurate demand forecast, knows this truth. Let’s explore how consumer demand is reshaping supply chain and how businesses must adapt to stay competitive.

Are Your Operations Customer-Obsessed? (They Should Be)

The business landscape has changed dramatically. Since Amazon Prime exploded on the scene in 2005, free and fast shipping has ceased to be a privilege and is now an expectation. More companies are investing in their own immediate fulfilment services to get products to customers faster because they know that brand reputation alone isn't enough to drive sales.

But it’s not just a matter of up-leveling last-mile logistics. Building a supply chain that truly caters to customer wants means taking the time to understand where those wants derive from. But many companies currently make decisions based on a poor understanding of what motivates their target audience. Here are a few reminders to help businesses keep customers at the center of their supply chain operations.

  • Put yourself in your customer’s shoes: It’s not just about wanting things “now” — consumers are seeking accountability from brands. They need the convenience and predictability that comes with products being available — on the shelves or on their doorstep — when they want them. 

"It’s not just about wanting things ‘now’ — consumers are seeking accountability from brands"

  • Think of better product availability as a way to drive product innovation and inventory planning — not another burdensome requirement: Consumer data in the form of feedback can’t drive future product development if consumers aren’t even getting the product. And supply chain planners shouldn’t be making million-dollar decisions on imperfect data caused by patchy product availability. Getting rid of defective inventory frees up resources not only to improve on products faster, but also to drive faster production cycles.
  • It’s not all about e-commerce: The idea that the popularity of e-shopping is ushering in a “retail apocalypse” is a myth. In the new “experience economy” people want to touch, photograph, and try things on for size — and still have the option of placing an order online that will arrive on their doorstep in a day.

Read our blog for more on how changing demand is reshaping last mile logistics.

How to Nurture Flexibility in Your Supply Chain

From e-commerce to more quality in-store experiences, the people have spoken: companies must make products available at the right place and time, and cleverly manage both online and physical sales channels, to stay competitive. This requires the ability to flexibly reallocate inventory based on demand. But large businesses are stuck with rigid inventory management and ordering systems that aren’t designed to react to rapid demand shifts.

For supply chains to adapt to demand rather than being blindsided by it, businesses should be aware of where their inflexibility stems from and how to fix it.

What’s Hindering Your Operations?
Demand is volatile — forecasting it can feel like trying to read tea leaves. It’s the sisyphean task of inventory planners to forecast not only what consumers will be buying next week, but what they’ll be buying three months out. And they’re left to deal with the consequences of decisions they made weeks or even months ago, based on data that no longer reflects reality. This is why so many companies lose money holding excess inventory — they know that their data is too old to give a clear picture of demand, so they overstock to compensate.
"Forecasting demand can feel like trying to read tea leaves."

In the "bullwhip effect,” relatively small distortions in consumer data amplify as they cascade up the supply chain, propelling much larger and unpredictable swings in demand further upstream. The result? Empty shelves, inventory in the wrong places, or excess product sitting in warehouses and tying up cash. These costly supply chain casualties are all results of siloed operations that inhibit communication and cross-functional collaboration. With no better option, supply chains have to rely on rigid planning systems based on infrequently updated spreadsheets. Decisions about how much of a product to order or manufacture are made with inherent blind spots.

For more on how technology can stop the bullwhip effect, read this.

Solutions for a More Flexible Supply Chain
Digitizing to unlock better communication will open up opportunities for brands to not just be big, but to leverage their scale to become agile as well. Accessing data about components, products, routes, and locations — and having that data available across their supply chain ecosystem — will empower large companies to react faster to issues or demand fluctuations, allowing them both to decrease buffer inventory and meet customers’ high expectations.

But digitization is not a fix-all solution. It requires involving everyone in and across a company’s operations. Aligning employees and partners on a strategy will require grit and the right kind of leadership to make tough decisions. Within their organizations, leaders will have to confront resistance to leaving behind outdated (but familiar) systems. And across their supply chain ecosystem, they may have to reassess how they think about partner relationships. But to successfully leverage digital opportunities to make quick decisions across functions, everyone needs to be on board.

A Flexible Supply Chain Will Empower Businesses To…
  • Make smaller, more frequent orders to suppliers — staying on top of customer demand
  • Respond swiftly when demand spikes
  • Produce customized product offerings more affordably, and get them to market faster

Last-Mile Logistics: Your Products Are Great (But Can You Deliver?)

While traditional retail isn’t dead, e-commerce sales are here to stay. Businesses are recognizing that being able to get their products to doorsteps at the customer’s convenience is what will make or break them.

Last mile logistics is about successfully closing the deal with the customer at the point of contact. Here are some things to keep in mind to ensure that your logistics strategy doesn’t let customers down:
  1. Logistics isn’t just another expense: Logistics is a service function — not a cost center. In today’s digital age, customers expect instant gratification. If their order isn’t fulfilled at a place and time convenient to them, they won’t care about the meticulous planning that occured at every step of that product’s supply chain. They will only see (and remember) the unsatisfactory experience with your business.
  2. Customers want information: Every smartphone owner has the power of information at their fingertips, and their increased expectations for speed and visibility aren’t limited to the news. When it comes to interacting with brands, today’s consumers want to be able to view the entire delivery process, even including inventory status updates. This is why it’s so important for businesses to have better control and oversight of their entire supply chain. If you don’t know where in the world your products are, how are you going to keep your information-hungry customers in the know?
  3. Precise and personalized deliveries are the future As we mentioned above, customers today want access to multiple delivery options and the convenience of deliveries that can be completed at any time and place — not just during the day or to their residence.
The payoff of honoring customers’ diversified shopping habits is big: businesses with dedicated customer experience management programs across all their sales channels yield an increase in customer retention of 91% year-over-year, compared to those that are less sophisticated in their omnichannel approaches.

Remember: The Future of Business is Customer-Obsessed
Supply chain professionals understand all too well the precise orchestration of people, locations, and capital required to get goods to their final destination. But success at the last mile is the only way for customers to see the result of those efforts. And the quality of delivery is ultimately how they will decide whether to remain customers or head for another brand. By understanding how today’s customers engage with brands, and making their operations flexible enough to react to market fluctuations, companies can arm themselves with everything they need to make products available to customers at the right time, place, and quantity.

Case Study: Xiaomi’s Demand-Driven, Adaptable Supply Chain

Chinese smartphone company Xiaomi’s demand-driven manufacturing model made it one of the world’s highest-valued startups and a top brand in China. But when the company set its sights on the Indian market, this model proved to be an issue. Though in 2015 more than 100,000 customers placed pre-orders for the Mi-4’s launch in India, Xiaomi only made 10,000 units available at release. To counteract the issue and scale up production, the company built an e-commerce distribution center in Bangalore. Localized distribution eventually helped them outcompete other startups in the region and gain brand recognition. Xiaomi is now India’s Number 2 smartphone brand with a 15.5 percent market share, second only to Samsung.

Visibility to Drive Product Availability
Visibility is the often-invoked, but seldom seen, unicorn of the supply chain world. Today, there are countless supply chain solutions promising to bring visibility to your operations, as if the only thing you need to solve your most deeply-entrenched problems is a bigger magnifying glass. But this kind of messaging is misleading; visibility alone is just a means to an end — and that end is product availability.

Don't get us wrong — visibility is necessary for operational success. But visibility alone, without a way of understanding the data before you, only adds to the chaos and confusion. Visibility with no filter cannot delineate a clear line of action. A truly worthwhile solution should enable firms to gain a competitive advantage in terms of cost structure, responsiveness, and operational execution.

Visibility in Numbers

In a recent survey of chief procurement officers conducted by Deloitte, 65 percent said they have limited to no visibility beyond their tier 1 suppliers, while only 6 percent of CPOs surveyed said they have "full transparency" of their supply chain.
The State of Supply Chain Visibility
A 2017 survey of 623 supply chain professionals in 17 countries described their challenges with visibility:
  • 70% of firms described their supply chain as "very" or "extremely" complex
  • 6% said they have "full visibility" to their entire supply chain
  • 74% said they use four to five different transportation modes in their supply chain
  • 81% of firms are using one to three KPIs to assess supply chain performance
  • 84% outsource their transportation services
Source: Geodis 2017 Supply Chain Worldwide Survey

While these numbers are alarming, they also indicate a significant opportunity for growth; improved transparency of pricing, supplier locations and critical dependencies can help supply chain leaders deliver greater value while avoiding potentially dire regulatory, reputational, and operational risk.

How to Plan for Contingencies: Part 1

The concept of the “resilient” supply chain is outdated. In the age of instant gratification, you need a predictive supply chain. Companies that build their supply chain with an awareness that the unexpected is inevitable, react to adverse events faster than the competition; they take market share, and they outperform, resulting in an average 7 percent higher stock performance, according to PwC and World Economic Forum analysis.

If you’re not anticipating risks and mitigating them before they become an issue, you’re wasting time, money, and precious resources. In other words: when you’re shopping for SCM systems, make sure they’re from this century.

The Business Continuity Institute’s 2017 Supply Chain Resilience Report found that 65 percent of businesses had experienced at least one disruption over the past year, ranging from IT outages to supplier insolvency. How can you prepare your supply chain for guaranteed uncertainty? For volatile consumer preferences? For natural disasters, political upheaval, delayed shipments?

Enter contingency planning — by having a contingency plan in place, supply chain managers can provide a clear plan of action, ending the urge to throw money at the problem and enabling quick resolution.

Contingency Planning Begins with Identifying Risk
Supply chain contingency planning begins with identifying potential risks. In today's "I want it now" market, the wait-and-see approach is almost guaranteed to maximize the time and resources spent on expediting fees and last-minute scrambling. You need to know the unique threats posed to your supply chain so you can start planning for them.

Three Most Common Sources of Supply Chain Disruption
  1. Unplanned IT or telecommunications outage
  2. Cyberattack and data breach
  3. Loss of talent/skills
Implementing Your Contingency Plan
Identifying sources of risk and developing a plan are only part of the story. In order to get the most out of the investment, businesses must be self-disciplined and follow their own procedures, putting in the time and effort to ensure that production doesn't grind to a halt when failures occur. Conduct dry-runs to verify that the steps outlined on paper align with reality. It is also important to regularly test your contingency plan to make sure it is up-to-date and relevant to the current operational environment.

The Fundamentals of Contingency Planning
  • Iteration: Review and revise your current contingency plan on a regular basis.
  • Mastery of the information: Don't let chaos reign; get ahead of the problem and drive action.
  • Transparency: Make information available as you rally your troops around a common goal.

Case Study: West Coast Port Strike Disrupts Shipping Lanes

When a breakdown in labor negotiations led 20,000 dockworkers to go on strike at two of Washington state's largest ports in October 2014, cargo-laden ships were left stranded as the flow of goods came to a halt for six months. The slowdown had a final price tag of $770 million for Washington businesses alone — the sum of net delinquent shipments and additional costs such as warehousing and truck idling fees. Without robust contingency plans in place, American companies that were unable to ship their products in a timely manner began accumulating more and more extra supplies and products. This inventory glut crowded warehouses, eventually forcing companies to cut back on their new orders to clear out their backed-up storage facilities.

Tip: Develop a diversified approach to suppliers; similar to how investors diversify their portfolios for risk, it can be beneficial to diversify your supply chain to reduce dependency on a single supplier. Read about how supply stores survived Harvey and Irma here.

How to Plan for Contingencies: Part 2

"There are only two types of companies: those that have been hacked, and those that will be."

Cybercrime can spell disaster for a business, damaging employee and customer relationships — and most importantly, brand reputation. With regard to supply chain, an attack can compromise the efficiency of delivery routes, client confidentiality, and product quality. Across industries, the biggest challenge for cybersecurity involves determining the nature of the threat, and investing in the right types of controls to patch vulnerabilities.

As with anything else, prevention is always the smartest option. There are many simple practices you can incorporate to lower your organization’s chances of being affected by a supply chain attack.

  1. Assume Attack is Inevitable: Be proactive and base your cyber strategy on the assumption that your business will eventually be the target of an attack. Have a recovery plan in place in order to minimize the impact.
  2. Organize People Around Processes (You're Only as Strong as Your Weakest Link): Consolidate the rules protecting your data in a handbook that is accessible to all employees — this ensures that everyone is informed and that SOPs are clear so that if an emergency occurs, the response is quick and damages are limited.
  3. Control Information Privilege: Conduct an audit to determine the current state of affairs, and then limit data access by only giving employees of a certain rank or team access to crucial information, revoking that access once it’s no longer relevant to work-related tasks.
  4. Invest In Updated Software (Because Antivirus Can't Save You): Updating software might seem like a no-brainer, but not all businesses have someone on their payroll who is explicitly responsible for making sure updates actually happen.
  5. Be Smart About Passwords: There’s a reason multi-factor verification is growing more widespread: the more layers of security, the better. Using a number of unique passwords and security checks (biometrics, pin/pattern codes, etc.) creates more barriers to hackers.
Cyberthreats aren’t going away any time soon. Like the biological viruses they so often resemble, they will become faster, smarter, and more rampant, necessitating an iterative approach that evolves accordingly. These best practices can help keep your data secure and your supply chain resilient. As with most things, an ounce of prevention is worth a pound of cure.

Case Study: 2017 Merck Ransomware Attack

For the pharmaceutical industry, their greatest asset — and thus their greatest vulnerability — is information. Chemical formulas, corporate plans, and trial results make up just some of the sensitive data that pharma companies have to guard carefully. In June 2017, pharmaceutical giant Merck had its files held ransom in part of a global cyberattack that crippled its manufacturing operations and ultimately cost the company $300 million in lost sales and costs. Other companies affected by the attack were Dutch delivery company TNT and French materials manufacturer Saint-Gobain. Nayana, a South Korean web-hosting firm, paid a record $1 million in ransom to get its files back, demonstrating just how pricey a cybersecurity breach can be.

So Remind Me: What's Product Availability, And Why Does My Operation Hinge On it?

At the end of the day, visibility is worth little unless it drives product availability.

Why product availability?
Seventy-seven percent of consumers admit they they're less likely to stick with a brand out of loyalty than they were three years ago. One study found that 96 percent of consumers are willing to switch brands if competitors offer better value for the same price. Accegacy brands can no longer rest on the laurels of brand recognition to keep customers coming back for more. Rather, success will be determined by consistency in delivering products to the right place, at the right time. And leading the pack will be those companies that go a step further and anticipate customer needs before they even ask for it.

How does visibility drive product availability?
By allowing supply chain managers to:
  • Know when there is a critical supplier buried in the supply chain that multiple Tier 1s are buying from, avoiding a false sense of diversification.
  • Identify trends or patterns based on N-tier visibility (e.g., Are all suppliers of a specific component located on a coast in Indonesia or Japan?)
  • Model the cost structure and drivers for Tier 1 suppliers, and negotiate a better agreement for both parties.
  • Analyze Tier 1 delivery performance's correlation to its supply base structure.
  • Evaluate whether or not the end-to-end supply chain responds quickly enough to disruptions or sudden changes in demand.
A supply chain is like an iceberg. What the customer sees and experiences represents just a small fraction of all of the work that goes into producing and distributing the final product. The tip of the iceberg is your brand's product availability; without it, all of the activity that goes on below the surface is rendered irrelevant. Accordingly, companies need to strive towards visibility with the ultimate end goal of boosting product availability in mind.


Why Go Green?
The tides of consumer behavior are changing — in a big way. Consumers are more concerned than ever about how their choices will affect the land, air, and waters we call home. A third of people are more likely to buy products from a brand that exhibits social and environmental responsibility. Millennials, the biggest consumer bracket and the greenest generation yet, are leading the charge. More than 60% of Millennials say they would pay more for a product that was produced sustainably.  

Supply Change for Good
Companies can make a big impact at every step of their supply chain, and not only environmentally. The news is filled with examples of the dark side of supply chains, from toxic rivers in Mexico to enslaved fishermen in Indonesia. In an era of increased accountability, corporations should make visibility a priority. Instead of simply meeting basic standards, it’s important to consider examining the supply chain and looking for areas to boost efficiency, environmentally friendly initiatives, and social responsibility. Companies in every industry can afford to make sustainable and positive choices, using their supply chain for good.


Tips for Making Your Supply Chain More Sustainable

Your customers will know if you’re not genuine
Supply chain managers can no longer afford to ignore the environment. But the changes they make need to be well-researched, not casually implemented in response to trends. “Going green” is more than a buzzword: it’s a necessary step to garner consumer trust and nurture a supply chain that can survive well into the future.
“Going green” is more than a buzzword: it’s a necessary step to garner consumer trust and nurture a supply chain that can survive well into the future.

Give it a green light
By tracing their supply chains carefully, companies can increase efficiency, productivity, and ecological impact. The United Nations released “A Guide to Traceability” in 2014, a report focused on traceability as an economically viable and sustainable approach to supply chain management. They recommend that companies:
  • Partner with environmental organizations that can help them make sustainable AND economically viable choices.
  • Take advantage of sustainable alternative energy tax initiatives. The U.S. government offers tax credits for alternative energy use, both in appliance and vehicle use.
And to that we’d add:
  • Run supplier surveys to make sure suppliers are using sustainable manufacturing methods.
In recent years, big corporations have taken steps to green their own supply chains, saving money and boosting PR. Apple has three solar farms in the US, with plans to launch another in Nevada in early 2019. In 2016 Unilever achieved zero waste to landfill at 600 of its sites. And these initiatives are just the beginning.

In 2015, 154 companies signed the American Business Act on Climate Pledge under the Obama administration. The pledge was a commitment to support the UN’s Paris Climate Agreement — a global action plan to combat climate change starting in 2020. In 2017 the Trump administration pulled out of the Paris Agreement and issued an executive order to undo the Clean Power Plan. But because the price of clean energy is continuing to drop relative to fossil fuel, and given that tax credits for sustainable energy use remain in place, many sources say it’s unlikely that clean energy initiatives will be drastically impacted.

Learn more about companies that are taking sustainability into their own hands: Zero Waste: Turning Your By-Products into Buyable Products

Climate Change and the Supply Chain: What You Need to Know

33 Category 5 hurricanes have formed in the Atlantic since 1851. A whopping 11 of these occurred in the last 14 years. Meteorologists have pressed that there’s one common factor contributing to the formation of these monster storms that have killed hundreds and destroyed thousands of structures: climate change.

As climate change risks grow — rising sea levels, change in precipitation patterns, extreme droughts and heat waves, and intensification of hurricane events — global supply chains are vulnerable to major disruptions. But there are some mitigative measures companies can take to make disasters less costly.

Here are some ways for businesses to avoid raw material shortages in the face of increasingly unpredictable weather:
  • Diversify raw material sources
  • Rezone production facilities based on updated SCRM assessments
  • Vet locations thoroughly before setting up warehouses and factories. Be aware of their vulnerability to climate change events in the long term.
  • Get access to real-time news about supply chain impacts, especially weather events. Updates like these will help you react fast to control (or contain) any situation that might put your supply chain at risk.
  • Address the operational ineffiencies that are inhibiting cross-functional communication and issue resolution.
Case study: Walmart Looking to Reduce Footprint

Traceability: The Key to a More Sustainable Partner Ecosystem

Sustainability and traceability go hand-in-hand. The ability to track the lifecycle of a good from source to point-of-sale enables both businesses and their customers to act responsibly when it comes to choosing between different vendors and brands. What can businesses can do to move the needle on their own traceability initiatives?

What Is Traceability?
Traceability refers to the process of identifying and tracking a product's path from raw material to finished good. When implemented properly, traceability creates end-to-end transparency that can keep your first-, second-, and third-tier vendors — and those beyond — accountable and in line with ethical, sustainable business practices.

Why Does It Matter?
Traceability allows organizations and their customers to verify that sustainability claims about products are backed by ethical practices. The ability to trace the lifecycle of a good is particularly important in tightly-regulated sectors like the food industry, where the mislabelling of products and the risk of recall pose a constant threat to brand reputation. It is likewise highly relevant in the apparel industry, where labor rights abuses regularly make headlines.

Achieving traceability is much easier said than done, as many obstacles stand in the way.

Obstacles to Traceability
  • Information Silos: Most supply chain user groups only have access to information on the products with which they come into direct contact, and not any other material flows.
  • Temporality: Especially in the food industry, time constraints compound the challenge of tracking products. Perishability is in constant tension with the time lag it takes to discover and respond to issues.
  • Extended Networks: Data is spread across vast, multi-tiered networks that exposes them to different kinds of risks such as fraud, code of conduct violations, and variability.
  • Internal Opposition: Demands for a short-term ROI tend to be a common argument against pursuing more long-term traceability initiatives.

How to Implement Traceability
  1. Engage stakeholders: Traceability initiatives require the cooperation of internal leadership, vendors, partners, governments, and NGOs that share an interest in the sustainability of a given product or commodity. Stakeholder engagement enables the standardization of expectations, processes, and systems along the way.
  2. Conduct research: Conduct a deep dive to identify key commodities and gain an understanding of relevant sustainability issues and risks associated with them.
  3. Develop the business case: Distill the information obtained in the previous step to convince senior leadership that traceability is a worthwhile pursuit within the context of overarching business goals.
  4. Choose the right model: Identifying a traceability model that aligns with your organization’s needs is a crucial step in determining the future success of the initiative. It is likely that there is already an existing traceability program for your needs.
  5. Take action: Deploy the tools you will use to execute your traceability initiative. Stakeholder engagement should continue to happen regularly through this step and beyond, as it is important to align on an internal policy and ensure that commitment to traceability remains strong throughout your extended network.

Case Study: Cargill’s Traceable Turkeys

Cargill's traceable turkey initiative demonstrated the value of traceability in a world in which supply chain transparency is increasingly influencing sales. In the 2017 holiday season, the agricultural conglomerate leveraged blockchain in a campaign that allowed customers to trace the path taken by their Honeysuckle White turkey from a family farm straight to their table. The traceable turkey initiative catered to consumers desire for transparency and person-ability when it comes to the brands they buy.

Traceability isn’t just important for food and fashion. Read this for more: The Role of Traceability in the Pharma Supply Chain

Managing complex supply chains is not going to get any easier overnight. It won’t be a matter of hiring a genius employee with 30 years of experience. Nor will it be as easy as dedicating funds to a snazzy new digital supply chain management system. Creating an efficient supply chain that gets products to the right place, at the right time, every time, will require a multi-pronged effort that unifies people, systems, and communication channels under one goal: product availability. Driving this kind of interconnectedness throughout your operations will take grit and determination. But it’s not just possible — it’s vital for the survival of your business.

Ready to take the leap? Learn about how Elementum’s platform unifies multi-enterprise data and drives collaboration to help companies adapt faster and plan better.

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