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Key Challenges for Adopting Sustainable Supply Chains

In the modern world, goods are acquired through different channels and it becomes increasingly difficult to maintain supply chain sustainability across them. Besides this, cost is also a key aspect for companies to adopt a sustainable supply chain. As such, most large companies will have more advantages compared to Small Medium Enterprises (SMEs). When monitoring the adoption of sustainability there is also no clear data information. In some cases, data may be so overwhelming that it becomes inefficient. Some common frameworks, such as Environmental, Social and Governance (ESG) may be interpreted differently by individual companies. If the company is able to overcome these challenges, it still has to face the requirements of the right human resource and technical tools to bring about the implementation. This article discusses the key challenges when companies adopt sustainable supply chains and explore possible solutions.

Supply Chain Complexities

Consumers acquire products through many channels. Thus, routes to different markets will increase. As such the supply chain must adapt to support the different channels. E-Commerce sells directly to consumers which will adopt last-mile delivery and local logistics. Retailers and wholesalers require large storage locations in core business districts. Companies like Amazon require close compliance with terms and conditions. Drop shipping retail will need consumers to receive goods faster. Supply chain leaders need to manage multiple supply chain channels while serving customer demand. A company’s supply chain network is extremely complicated. It is increasingly difficult to have good transparency across the network to maintain a green supply chain. In some companies, some of the lower-level supply chains are in developing countries. These countries are not encouraged by incentives to follow this path. Maintaining supply chain sustainability becomes difficult with the different business models. It is also very difficult for companies to understand the vendor’s performance concerning sustainability. Multinational companies may have even thousands of vendors and be separated into different tiers also.

Cost of Sustainable Supply Chains

Larger companies will have access to more resources compared with SMEs. They have bigger investments thus their adoption rates will be higher concerning environmentally-friendly products and resource efficiency. It will be easier for bigger companies compared to SMEs to get eco-friendly certifications and digital technology usage. SME’s will face more challenges in capital and cost compared to larger companies. SME’s will also not have the sustainable workforce to acquire the certifications due to high turnover rates. Larger companies have a greater capacity to adopt Corporate Social Responsibility (CSR). Llama Soft revealed that 38 percent of the companies believe that the higher initial cost remains a big barrier to adopting sustainability in a survey. It also unveiled 34 percent of the participant companies reveal that the sustainable supply chain will eventually reduce the cost and achieve their breakeven shortly. Capital investments are needed to implement sustainable supply chains. Current trend studies show the cost of ignorance of sustainability in supply chains by the year 2026 can be around 120 billion dollars. If there are regulations from the regulatory boards and customers then the companies are often pressured with tremendous cost to implement the initiatives required for sustainability.

Monitoring Complex Supply Chain

Large companies do have many different products. A supply chain can be very complex. Every product may have a set of different material suppliers and manufacturers across the supply chain. In trying to track sustainability measures used in a product’s supply chain, the company process of monitoring each step of the product’s manufacturing work is cut out for them. Implementation of a sustainable supply chain has to go through several signatories. Lack of understanding and data were among the reason businesses did not push for a sustainable supply chain. As global supply chains may be very large scale thus collecting information from and of their suppliers quickly result in them being overrun with a lot of data. Data that cannot be trusted creates issues as well as difficulty in reconciling datasets that do not match. These create challenges for anyone who retrieves this information from the open internet. There are also challenges to determine whether this information is correct or should be ignored.

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Ray Yao Ru Sheng
Ray Yao Ru Sheng
Ray Yao has over 15 years of engineering and manufacturing experiences in the semiconductor industry. His current job responsibility is in strategic and operational roles for the entire spectrum of supply chain. Ray holds an Engineering degree with Honours from the National University of Singapore (NUS) and he is a member of the Singapore Institute of Purchasing and Materials Management (SIPMM). He completed the Graduate Diploma in Procurement and Supply Chain Management (GDPSCM) in June 2023 at SIPMM Institute.

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