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Key Strategies for a Sustainable Supply Chain

Consumers today no longer see sustainable products as an alternative. With the growing consumer demand for sustainable goods and products, organizations are feeling the pressure to ensure that their products consist of sustainable materials and their values and processes. Consumers pay more attention to every value chain element, from materials to manufacturing, packaging, and transparency. However, meeting these objectives require organizations to implement changes throughout their supply chain, and have a solid road map. This article discusses the key strategies for a sustainable supply chain.

Sustainable procurement
Picture taken from SIPMM: https://publication.sipmm.edu.sg/main-considerations-sustainable-procurement/

Good Governance Strategy

Good governance is critical to long-term sustainability success, and this requires a robust structure that includes committed management, clear visions, directions, and positive influence. Sustainability governance ensures its sustainability strategies and policies are in line throughout its business operations. This entails managing report processes, strengthening relationships with external stakeholders, and ensuring the overall accountability. It requires participation of the board of directors, shareholders, and management in a collaborative environment to formalize a strategy. After which, it is transformed into concrete actions for implementation and follow-ups by the regime. An organization needs to stimulate an environment of innovation and thought leadership to maintain a competitive edge. As critical components of accountability, it is equally essential to establish traceability and transparency towards its actions in sustainability. Organizations can benefit from improved reputation, strengthen stakeholders’ confidence, and allow them to respond to a changing external environment, especially in today’s complex business environment. As an example, Nike, a footwear manufacturing company, is a pioneer in supply chain transparency by publishing its supplier list.

Strategic Supplier Collaboration

With most distributed supply chains, organizations do not have control over resources, materials, or quality – collaboration is the only way to unite its supply chain. Developing supplier collaboration allows organizations to manage risks and impacts of their supply chain operations while capitalizing on opportunities for value creation. Successful supplier collaboration involves strategic alignment, cross-functional engagement, organization governance, communication and trust, and value creation and sharing. Aligning suppliers around the business strategy and critical goals helps develop innovative new products, improved quality, cost reduction, productivity efficiency, customer satisfaction, and boosting revenues and profits for both parties. Most organizations embrace partnerships and collaborations by encouraging and driving creative innovations to achieve sustainability goals. Similarly, the cosmetics company, L’Oréal, participates in collaborative activities through a forum that allows its suppliers to present ideas and products concerning L’Oréal events and needs.

Strategic Supplier Collaboration
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Circular Strategy of Waste Reduction

Organizations can help reduce waste and ensure sustainability by incorporating circular economy initiatives into their supply chain. In a circular economy, materials are dissembled, channelled back to production, and reused as raw materials to create new, sellable products. Thus, minimizing waste. In addition, it enables organizations to be less dependent on “virgin” raw materials and natural resources, allowing them to achieve sustainability goals while gaining profits. Organizations must consider waste reduction at every stage, from product design to distribution, and consider efficient logistics journeys for returning products into the supply chain loop, including reverse logistics. Decathlon is among the few companies that adopt a circular supply chain by using recycled polyester yarn (made primarily from recycled plastic bottles) to produce their eco-design fleece and other products, turning waste into a reusable source. 

Eco-Friendly Sourcing Strategy

An organisation can implement eco-friendly sourcing or sustainable practices by incorporating ethical policies with its sustainability goals throughout its supply chain. It includes materials sourcing, manufacturing, logistics, product design, and end-of-life product management. Organizations must find ways and solutions to implement eco-friendly sourcing and practices within their supply chain to gain a competitive advantage while still growing profit. Sourcing organic, eco-friendly, or sustainable materials and goods help reduce supply chain risk and develop long-term sustainability. To ensure a successful sourcing strategy, implementing guidelines and criteria of eco-friendly materials and products helps every purchasing decision, including purchases outside its core supply chain, such as cleaning supplies, paper for office use, merchandising, and packaging materials. The outdoor clothing brand, Patagonia, uses organic cotton as an alternative for its products and reduces product packaging to reduce its carbon footprint.

End-to-End Supply Chain Visibility

End-to-end supply chain visibility allows organizations to monitor and track various components, materials, and finished goods in transit, starting from the initial purchase of raw materials through the delivery of finished goods to the customer. It involves careful and regular monitoring throughout the entire process. Organizations will then organize the data captured in a central database where organizations will use it to review, analyse and mine for actionable insights. Since this implementation requires a proactive approach to data management, organizations will require significant investment to support this digitalization and data management system. In a competitive global environment, visibility is crucial for organizations to make accurate, strategic business decisions and respond to necessary supply chain events that could impact profitability and customer experience. Organizations will gain better control of their inventory management, warehousing, and logistics across their entire supply chain. Organizations must establish connections and collaboration with relevant stakeholders for this to happen. 

Sustainability Compliance Strategy

Sustainable supply chain work by setting consistent ethical and environmentally responsible standards and ensuring all relevant processes, actions, materials, and stakeholders comply with them. For this to work, benchmarks, policies, targets, and guidelines must be spelled out. It is then shared and agreed to among all stakeholders, including suppliers across the chain. It includes defining the social and environmental standards and evaluation criteria. Organizations must consider essential factors and processes that meets its sustainability goals and values when selecting strategic suppliers and ensuring they comply. Organizations can use supplier evaluation and code of conduct to measure suppliers’ compatibility and suitability. Sustainability certificates, audit results, material pollutants tests, and corrective action plans can be used to ensure suppliers’ adherence to these standards. Sports equipment company VAUDE considers environmental and social factors and quality standards when choosing key suppliers to balance functionality, style, price, and environmental friendliness in achieving sustainability.

Sustainability Compliance Strategy
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Digital Strategy for Efficient Operations

Incorporating digital technology is essential for efficient operations in this rapidly digitizing world. Organizations must understand how technology can assist, disrupt, or improve their supply chain operations. Identifying the right technologies that add value to the organization and supply chain operations can improve end-to-end visibility and increase transparency, accuracy, and efficiency. The extent and pace of implementing digital technologies are subject to crucial enablers – the capacity and environment and the capacity of trained employees to apply the technologies proficiently. Big data, advanced analytics, artificial intelligence (AI), mobile apps, blockchain, and RFID technology are some digital technologies organizations can use. They can be interconnected to optimize their full benefits for an effective supply chain. To stay competitive and improve profitability, organizations must adapt to the digital-driven changes happening outside and act as a road map for ongoing transformation.

Transportation Optimization Strategy

Transportation is becoming more volatile in the supply chain, with increasing fuel prices affecting freight rates and impacting the overall supply chain. Organizations must find new solutions to minimize transportation costs and ensure transportation capacity to maintain a competitive edge. Optimizing the transport network may be complex, but it eliminates cost overruns, reduces fuel consumption, and creates fewer emissions. As a result, it reduces carbon footprint and eliminates other disruptions to the functioning supply chain. Organizations must consider efficiency and effectiveness in optimizing a transportation network or execution level to achieve sustainability goals and maximize profits. With the constant evolution and supply chain complexity, intelligent technologies in transportation operations can help organizations improve transportation efficiency by finding the best route based on real-time conditions and increasing energy efficiency. It also contributes to the overall process for organizations to stay competitive.

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Noor Rasidah
Noor Rasidah
Noor Rasidah has substantive years of experiences in the specialised field of logistics, supply chain, and customer service, and specifically in the wholesale and retail sector. She holds a Specialist Diploma in Supply Chain Management from Nanyang Polytechnic, as well asa Bachelor’s Degree in Business from University College Dublin (UK). Rasidah is a member of Singapore Institute of Purchasing and Materials Management (SIPMM). She will complete the Graduate Diploma in Logistics and Supply Chain Management (GDLSCM) in January 2023 at SIPMM Institute.

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