Building a robust, quality assured network of supply chains is essential to any manufacturing business . The supply chain must be traceable and transparent, and ensure the required quality and supply continuity of your products and services.
However, the impact of industry on the environment and the communities has become ever-more apparent. As a result, a sustainable and ethical supplier network has become essential to support the delivery of goods and services.
But what makes a supply chain sustainable? Ricardo’s supply chain management experts explain why a sustainability should be at the heart of your operational strategy, and how your business can benefit from it.
What makes a sustainable supply chain?
A sustainable supply chain is one that that delivers positive impact socially, economically, and environmentally. It also enables the delivery of your products on time, on budget and to a high quality.
The term ‘sustainable supply chain’ is often used interchangeably with ‘green supply chain’. However, focusing solely on the environmental impact of your supply chain is not enough to ensure sustainable practices. A truly sustainable supply chain model will also factor in social responsibility and economic stability.
Social responsibility relates to the people and communities affected directly or indirectly by your supply chain practices.
This includes ensuring that your business practices and those of your suppliers:
- adhere to all legal requirements
- are focussed on human rights
- pay a fair wage
- operate in good working conditions.
There should also be consideration for how organisations contribute to the communities that they operate in. There is a growing expectation that organisations should contribute positively to local communities beyond the scope of traditional business activities.
Economic responsibility relates to the financial impact of your business and the extended supply chain. This includes responsibility to all stakeholder groups , such as shareholders, customers, suppliers and employees. It also refers to the wider economic impact of businesses on the community.
Economic factors are also crucial in supply chain management. Businesses must balance the need for profitability with social and environmental sustainability.
It is essential to ensure that companies are viable and financially stable. Investing in unsustainable ventures can be costly and harmful. Not just to your business, but also to the social, economic, and environmental landscapes in which your suppliers operate. Additionally, you should consider the impact your supplier network has on local economies.
Environmental responsibility refers to the environmental impact that your business and your supply chain has. It is probably the first thing you think of when you are considering the term ‘sustainability’. So, it will come as no surprise that it is a critical consideration for your business and your supply chain.
Are your suppliers able to measure and monitor their carbon emissions? Are they reporting independently and is it verified? Do they have a greenhouse gas emissions reduction plan in place? Are they sourcing energy from renewable sources?
These are all questions which should be considered when taking environmental responsibility into account.
It is no longer enough to consider the environmental impact of one part of the value chain. Consideration for the impact of the product and its components across the full product life cycle is critical. From the sourcing and extraction of raw materials right through to the product’s end-of-life. This should be reflected upon throughout the supply chain management process.
How to build a sustainable supply chain?
Developing a sustainable supply chain brings with it all kinds of challenges and opportunities. Here is a step-by-step guide on how to begin building sustainability into your supply chain network.
1. Build your knowledge and understanding of sustainability
Develop your knowledge and understanding of your supply chain. Research supply chain sustainability practises, and the processes involved in producing your product from end-to-end. Consider the current social, economic, and environmental impact of your processes and document them. Ensure there is a common understanding among all partners in the supply chain of what sustainability means to your businesses.
It’s important to consider that different organisations in your supply chain will have different capability in terms of understanding sustainability. Group your supply base into groups based on their current sustainability standards. This will allow you to set expectations and development plans aligned to each supplier.
It is also critical to remember that your business is a part of the supply chain too. The actions that you take can have an impact further down the chain so take the time to research thoroughly.
Our New Product Introduction knowledge hub has resources to help you with this step.
2. Set objectives
Determine and define the priorities, goals, and objectives and share them across all impacted partners within your supply chain. All partners need to have a shared ambition, a common objective and a shared goal to achieve maximum benefit.
Make sure that all parties communicate openly about the sustainability objectives. There should also be clarity on what is achievable and measurable.
3. Decide what to measure and how they will be measured
Identify the areas that need to be measured to quantify the success of achieving your sustainability goals. These could include factors such as environment, health and safety, social, compliance and energy. There are many touchpoints to consider here from manufacturing to logistics, from managing inventory to what powers a facility.
Decide on your KPI metrics and how you will monitor and measure them. Software tools are invaluable to collate and analyse data across your programme.
4. Standardisation and procedures
Standardise the processes and procedures by creating quality and operational manuals that consider ESG and sustainability aspects. Ensure clear communication and put the new standards into practice.
This stage includes building in processes which cover the actual production of your product and the impact of the supply chain. It covers standardising practices to measure and monitor these processes, as well as capability for continuous improvement such as supplier audits.
5. Product design
Consider the impact of product design by applying design for assembly, design for manufacture, and design for repurpose principles. Assess the energy, coatings, and availability of raw materials used in manufacturing. Consider if there are processes or practices that can be changed to improve the sustainability of your product.
6. Monitoring and continuous improvement
Continuous improvement is essential to good supply chain management because nothing ever stays stationary in business. There are many factors that could affect your supply chain. Leaving potential risks unchecked could impact your sustainability, quality, or profit goals. So whether you’re building quality assurance or sustainability into your network, you should never be ‘done’ with developing your strategy.
Choose partners that have a commitment to continuous improvement and a good strategy for sustainability which aligns to your business goals.
7. Be transparent
When it comes to sustainability, transparency and traceability are everything. Ensure you always have the documentation, accreditations, and operating standards to be able to demonstrate your sustainability credentials to the market or to other suppliers in the network.
Need help getting started with your sustainable supply chain build?
What are the benefits of sustainable supply chain management?
There are many benefits to building sustainability into your supply chain management strategy. Here are some of reasons that could have the biggest impact on your business:
Supply chain sustainability has become an essential element for businesses to compete and remain competitive in the marketplace. Consumers are increasingly aware of the social, economic and environmental impact of the products they are purchasing.
A significant factor in being able to claim a product’s sustainability credentials is to ensure transparency and traceability across the full product lifecycle. Knowing the provenance and impact of every component in your product is key to good supply chain management. With the right practices in place, your business will be able to capitalise on this growing consumer requirement.
Keep up with legislation and mitigate risk
Legislation is a big driver of sustainability practices. For many businesses, keeping up with the latest standards and legislative requirements can be challenging. Continuous improvement and forward planning are important steps in the process of developing a sustainable supply chain network.
With the right tools and practices in place, your business will be able to effectively respond to most challenges that come your way. It will be able to respond in a timely manner to help to minimise any impact to your manufacturing programme and your supply chain.
It's good for the community and it’s good for the planet
Being able to deliver a more sustainable product to the market is a benefit in and of itself. From global warming to the cost of living, your product’s sustainability footprint can have a huge impact on the world we live in. This is particularly true with complex, global supply chains.
Being able to reduce the environmental impact of your product or contribute positively to the local community through your business processes are all benefits of sustainable supply chain management.
Attract new talent
Another benefit of supply chain sustainability is the attraction of staff and talent, particularly for the younger generation People are looking at businesses' performance in sustainability areas and are more likely to want to work for companies that recognise sustainability and ESG. Consideration for sustainability could give your business the edge in attracting new talent and growing your capability.
Reputation in the marketplace and essential bid qualifier
Sustainability has a massive impact on the reputation of a business in most marketplaces. Increasingly we are finding that understanding your company’s sustainability credentials and being able to prove them are deciding factors for bid qualifying. Having a transparent manufacturing strategy with clearly demonstrable sustainability credentials can make all the difference when bidding for contracts in certain market sectors. Building a supply chain network that has sustainability at the heart of it can make your business much more competitive.
Ricardo’s supply chain management experts specialise in developing sustainability strategies for businesses across multiple sectors. We can support businesses with every aspect of building a sustainable supply chain management. From start-ups to major OEMs, our team of experts are on hand to help you get the most out of your supply chain management programmes.