Supply Chain Management (SCM) over the past few decades has proven there to be opportunity to reduce cost and add value in the supply chain. However, traditional supply chain management has focused primarily on cost, with professional consulting targeting costs (including transport, inventory, and administration) of 7% to 9% of revenue.
The recent emergence of sustainable supply chain management provides the opportunity to review processes, materials, and operational concepts from a different perspective. It incorporates the role of the environment in supply chain value creation.
In fact, the Procurement Strategy Council states, “Procurement is uniquely positioned to increase quality, delivery, and partnerships between critical suppliers and internal business partners. Leveraging a fortified relationship to manage supplier performance is a powerful way for procurement organizations to create value for the enterprise beyond just cost reductions”.
With the shift in consumer preferences over the past few years, companies have been aggressive to respond to the growing ‘sustainability’ value opportunity. Leading companies are finding unique value opportunity in sustainable supply chain management: Pepsi-Cola Saved $44 million by switching from corrugated to reusable plastic shipping containers for one liter and 20-ounce bottles, conserving 196million pounds of corrugated material.
The ability to meet consumer expectations can become a key differentiator from the competition. In previous posts, we have defined the importance in creating stakeholder engagement as a first of many steps in building trust and confidence with customers. But what are the other benefits and additional reasons to incorporate eco awareness in the supply chain?
1. Increase Profitability - Proactively incorporating sustainability concepts into your supply chain will decrease cost and add the value to operations.
2. Asset Utilization – Incorporating greater eco awareness into transportation and inventory practices will increase utilization of key assets.
3. Risk Mitigation – Promoting greater understanding of sustainability within the company’s supply chain will mitigate environmental, social, and market risks.
4. Innovation – Incorporating sustainability concepts into the supply chain will be a catalyst for supplier innovation.
5. Alignment - Negotiating business sustainability policies with suppliers and customers will promote alignment across the supply chain.
6. Continuous Improvement - A common understanding of sustainability concepts, goals and objectives provides a platform for continuous improvements.
7. Customer Service - Implementing sustainable best practices within the supply chain will standardize operations and allow for improve customer service.
8. Regulatory Compliance - Green supply chain management will help ensure regulatory compliance.
9. Product Differentiation – Creating uniquely different green supply chain practices will differentiate the company and its products in the market place.
10. Enhance Reputation – Demonstrating green business practices will promote business sustainability and enhance company reputation.
As sustainability consultants we see some common best practices in the successful implementation of a sustainable supply chain:
• Align supply chain goals with business sustainability goals
• Evaluate each product and service supply chain as a single full life-cycle system
• Leverage a sustainable supply chain as a catalyst for innovation with suppliers and customers
• Focus on source management
These practices don’t just apply to the large manufactures or environmental businesses. Building a comprehensive business sustainability plan includes incorporating sustainability concepts in the supply chain. Our sustainability consulting and small business resources provide information and tools to clients seeking to develop successful business sustainability strategies that transcend traditional business sustainability strategies, like cost cutting. Visit us at Taiga Company to learn more.