Industry Market Trends
A Sustainable Supply Chain Requires Managing Risk, Automating Data
January 31, 2013
As we reported last month, manufacturers are taking sustainability of supply chains and resources into account when they consider the overall impact of their products and the company at large. But new research shows success in sustainability has a direct correlation to success in business. Leaders recognize that sustainability is about more than protecting the planet -- it's about managing real business risks. Moreover, automation and data management processes are emerging as a key tool to help achieve more sustainable supply chains. Two Keys to the Future A new report from PricewaterhouseCoopers LLC (PwC) examines 500 global manufacturers, and underscores the factors that separate the Leaders (top 20 percent based on performance) from the Laggards (bottom 20 percent). The study finds that emphasis on speed, flexibility, and responsive is a major factor in supply chain management success, as well as overall business success. Here are six key findings from the report:When it comes to managing supply chains, manufacturing businesses are doing anything but quelling demands. In fact, many are imposing increasingly strict requirements and heavily scrutinizing suppliers to ensure that all levels of satisfaction are met.
- Leaders want it all. These companies deliver on time and in full (OTIF) 95.7 percent of the time. They achieve greater efficiency and better customer satisfaction without driving up working capital, and they do it by treating supply chains as a strategic asset.
- Top performers are investing in new tools and technologies and building out their supply chain networks to boost flexibility and responsiveness, both of which are necessary to keep up with ever-changing customer demands.
- Leaders tailor their supply chains to meet the needs of various customer segments.
- They let the experts handle it. Leaders outsource 50 percent of production and 60 percent of logistics to third parties that specialize in those fields, allowing the company to focus on core strategic functions, like sales, operations, and research and development (R&D).
- In both mature and emerging markets, Leaders invest more heavily in differentiating supply chain capabilities, including real-time demand-and-supply planning.
- The future of supply chain management will require two essential components. The first is a greater emphasis on automation and efficiency. The second is sustainability. Leaders are turning to RFID and other technologies to facilitate automation and efficiency, and they are requiring their suppliers to share their outlook and emphasis on environmental issues.
- To manage the risk of unintended environmental or social damage;
- To manage their company's reputation and the expectations of its shareholders;
- To reduce costs and realize productivity improvements, and;
- To create sustainable products, thereby increasing revenues and enhancing the corporate brand.
Collaboration Drives Sustainability According to the PwC study, among those companies that rate sustainability as a high priority, 87 percent focus on optimizing their overall carbon footprint. Many are also working closely with their suppliers. The same number stresses the importance of reaching an agreement with suppliers on best practices and ethical standards. In addition, 81 percent are collaborating with their suppliers to create a responsible supply chain footprint and procurement framework. But some are going even further. Last year's CDP Supply Chain Report noted that 62 percent of CDP participating companies reward their suppliers for practicing carbon management. In the 2013 study, 34 percent of CDP members claim they include sustainability-related obligations in their procurement contracts.