How a More Sustainable Supply Chain Reduces Cost, Time, & Risk

How a More Sustainable Supply Chain Reduces Cost, Time, & Risk

Between the ongoing US-China trade war and global pandemic, the need for more sustainable, resilient supply chains is more evident than ever. As firms scramble to ensure continuous supply and repair supply chain disruptions, attention must be paid to the root cause of these breakages. While at present it might seem that there are more pressing issues than thinking about how sustainability can improve your supply chain, the reality is that leveraging sustainable methodologies can provide proactive solutions to many long-term problems while reducing your overall cost, time, and risk. To emerge from this period stronger and more resilient to future threats, systemic failures must be addressed now and paired with strategic, long-term planning.

The term sustainability can carry many different meanings, but at its core can be defined as focusing on meeting the needs of the present without compromising the future. In the context of supply chain management, that means embedding a more proactive, long-term strategy to management and execution with respect to:

  • People: successful supply chain management rests on fostering close partnerships with suppliers and customers, making each stakeholder critical to your overall success
  • Planet: having healthy, vibrant communities and markets is critical for continued business success; the market for planet-friendly products and services is largely untapped and presents an interesting business opportunity
  • Profit: there’s a misconception that going “green” is expensive, and that sustainability comes at the expense of economic prosperity; businesses must be financially sound in order to operate which is why this remains a vital pillar to any measurement of success

How a More Sustainable Supply Chain Reduces Cost, Time, & Risk

1. Reduce Cost

When it comes to having a sustainable supply chain, it’s important to look at the big picture. Disruptions are costly and can delay the time your products are available to sell on the market. Focusing on a more sustainable supply chain will prevent disruptions and reduce your costs.

Further, partnering with more sustainable suppliers creates a competitive advantage for your firm given the recent increase in people interested in sustainable products. As the demand for sustainable suppliers increases and there’s an increase for sustainable suppliers to meet that demand, so too will the industry standard for sustainable products, therefore driving down prices of sustainable material and creating a cost savings.

Finally, integrating sustainable design principles in your various systems and processes can lead to massive cost savings while simultaneously reducing your environmental footprint. This can be achieved by incorporating more recycled material in your products—which reduces new material purchase price—or by reducing waste and energy usage in your facilities and fleets.

2. Reduce Time

Time: every firm wants more of it. Reducing the amount of time a product takes to get to market, or reducing the amount of time to source raw materials and sub-assemblies, is critical for all. Sustainability aside, companies are highly motivated to perfectly align delivery of materials and goods to reduce waste in their supply chain. During a product launch, this typically takes the form of putting out unforeseen fires.

Addressing unknown challenges in sourcing takes time and it typically equates to money left on the table. An unfortunate byproduct of addressing these unknown challenges as quickly as possible usually leads to higher cost and less sustainable solutions. Have you ever paid exorbitant shipping costs to save a day on delivery? By taking a less prepared, more reactionary approach, companies limit their options, thereby boxing themselves into a cost-time-risk trade-off that is not always necessary.

One strategy to employ here is onshoring or moving to a more localized supply chain, which can help prevent many of these disruptions at the source. Many have had the unfortunate task of chasing updates from suppliers in China amid the COVID pandemic, which is much more difficult than managing a supplier within driving distance. By adopting a sustainable and holistic approach to product design and launch, which requires the utilization of forward-thinking supply chain solutions, companies can identify and act on opportunities to streamline their supply chain and ultimately spend more time on what they do best in their own market segment.

3. Reduce Risk

When it comes to sustainability, decreasing cost and time does not lead to increased risk. While you can never eliminate risk, long-term planning and supply base optimization can lead to increased resiliency in the face of economic downturns or geopolitical uncertainty. Generally, the more risk and uncertainty there is in the world, the more risk there is to your supply chain. As your firm focuses on what a post-pandemic world will look like, planning for increased resiliency can help mitigate risk in both the short and long terms. Whether this is through onshoring, diversifying your supply base, or simply deepening relationships with your current supply base, strategic planning to reduce risk will decrease supply disruption while making your supply chain more sustainable.

Conclusion

Disruption in your supply chain will end up costing you much more time and money in the long-term, so taking the time now to plan for the future while making your supply chain more sustainable is critical to your business’ overall success; however, this can often feel like a daunting task which is pushed to the back burner as you deal with your current slew of daily operational challenges. If we learn nothing else from the current COVID-induced climate, it’s that sustainability is linked to both the short- and long-term successes of your business and can no longer be considered secondary.

Not sure where to start? Make sure to check back for the next post in our series highlighting different strategies for making your supply chain more sustainable.

-Sam Alden, Cody Semmelrock, & Prakriti Timsina (MBA Consultants)

Sam, Cody, & Prakriti are students in the University of Vermont’s Sustainable Innovation MBA program. The team worked with IndustryStar on their capstone project, which focused on developing new opportunities to increase sustainability in the supply chain space.