Supply Chain Optimization is the Cornerstone of Sustainability Improvement

In 2020, CDP found that GHG emissions in a company’s supply chain are, on average, 11.4 times higher than its operational emissions.1

Of the 239 companies that signed up to the Science Based Targets Initiative in 2020, 94 per cent included commitments to reductions in emissions at customers and suppliers. Scope 3 accounts for 80 per cent of the overall climate impact for many companies.

Increased globalization, competition, and continuous supply chain disruptions force companies to be more efficient and agile. While companies should match their economic objectives, at the same time operating sustainably while meeting consumer needs.

Sustainable development of Supply Chain is a crucial part of any business and efficient Supply Chain are imperative.

Sustainability starts with product design, which feeds into the manufacturing and supply chain processes. The supply chain involves moving materials and services from upstream to downstream operations.

Today’s supply chain consists of multiple operations, suppliers across locations, and facilities in different countries, regions, or parts of the world. A digitized resilient supply chain helps companies:

  • To be more agile(Proactively and profitably sense and respond to market dynamics)
  • Increase Productivity (Deliver high-quality, mass-produced, make-to-order products faster)
  • Improve connectivity with Business partners and helps in running a sustainable business
  • Run sustainable business practices that maximize reuse and minimize waste of materials from design to operate, reduce carbon footprint across the supply chain network, and protect the health and safety of employees

Sustainable sourcing is critical across all industries. It is the process of sustainably selecting materials, products, and services from suppliers. In applying sustainable sourcing, organizations integrate social, ethical, and environmental factors into selecting their suppliers. As supply chains expand globally into developing countries, seeking lower costs and greater production capacity, they expose companies to an even more comprehensive array of risks.

Hence, Managing the social, environmental, and economic impact of the supply chain is a crucial priority for companies to achieve long-term success. Not only does this helps to comply with sustainability legislation and environmental regulations, but the sustainability of the supply chain can also affect the business’s profitability, work opportunities, professional partnership, and reputation.

It is crucial for companies to collaborate within their own departments and suppliers across their supply chain network to reduce the scope 3 emissions.

How does Supply Chain Optimization help companies on their sustainability journey?

Each stage of the supply chain can impact all three aspects of the “triple bottom line” — profits, people, and the planet

In Today’s supply chain, goods might travel halfway around the world before reaching their final destination, significantly impacting a company’s carbon footprint. Hence, collaborative supply chain planning and execution are at the heart of companies’ brand and business success and help companies with their environmental goal.

Eight global supply chains account for more than 50% of annual greenhouse gas emissions. Only a small proportion of these emissions are produced during final manufacturing. Most are embedded in the supply chain. 2

Supply Chain Planning

Supply Chain Planning is the intelligent brain to optimize the supply chain to improve the sustainability goal of the companies. This helps companies to plan resources, inventories, capacities, and ethical sourcing. This is helping companies in reducing overall environmental impact and wastages across the supply chain.

In many organizations Today, the planning team is isolated from the rest of the value-generating teams and plans product demand in siloes. Here are the details on How collaborative and Synchronized Supply Chain Planning can help companies in reaching their sustainability goal sooner:

  • Sustainable supply: Helps the planner in ethical sourcing across your entire supply chain and better collaborate with suppliers on the sustainability sourcing targets
  • Increase forecast accuracy to create a more accurate plan that reduces waste, expediting and obsolete inventory
  • Predict end-of-life scenarios for products and facilitate measures to circulate them back into the economy
  • Use sustainability targets and planetary boundaries as capacity constraints
  • Resource Optimization: Planning helps to optimize equipment and resources. This practice allows companies further optimize energy and emissions from the equipment.

Supply Chain Execution

Emissions from logistics businesses during the delivery of goods have been on an upward trajectory, increasing by 1.9% annually since 2000. Most of this can be attributed to the rise of globalization and increased demand for consumer goods. Transportation is one of the areas in which getting to zero emissions is a crucial goal for companies. That includes reducing travel distances and increasing efficiency.

Here are the details: How optimized Transportation and Warehouse processes help companies ensure the logistics processes are managed sustainably by saving resources and protecting the environment.

  • Transport Optimization: Optimize loads and reduce mileage across operations, making such deliveries more sustainable, end to end – from raw materials to factory, to the warehouse to doorstep. This helps companies in reducing emissions and costs and improves utilization.
  • Warehouse planning to optimize the storage and warehouse activities
  • Use CO2- and energy-optimized warehousing and transportation.
  • Develop a process to ensure workers’ safety and that only qualified personnel can handle dangerous goods.

Collaborative Logistics Network

Logistics is complex. It manages the movement of raw materials, intermediate products, and packaging across the globe to manufacturing facilities and the distribution of products from origin to consumption.

Today’s sustainable enterprises want more profound insights into their supply chains, including the sustainability values of their trading partners. They want to align those of their own and their consumers. SAP Business Network, along with our ecosystem of partner applications, creates the transparency needed to make decisions based on a range of criteria. And when the performance of existing trading partners doesn’t align with a business’ sustainability goals, shifting to new trading partners has never been easier. With Today’s Collaborative logistics Network, companies can quickly discover new, more sustainable providers across industries and geographies.

A digitized logistics network helps companies foster collaboration within the supply chain to support a circular economy and sustainable business models.

  • Utilize data to reshape design, manufacturing, and delivery for improved sustainability
  • Supplier segmentation, risk assessments and collaboration
  • Tracking and facilitating the reuse, recycling, and remanufacturing of serialized
    consumer goods
  • Manage internal and external manufacturing to forecast a circular economy
  • Leverage logistics networks to efficiently plan and execute delivery
  • Business networks to manage end-of-life scenarios for connected assets
  • Collaborate with the entire supply chain network

How does SAP help?

SAP’s supply chain management solutions can help companies to think and behave green. The solution helps to capture sustainability data across every stage of the supply chain to align with regulatory and corporate sustainability goals while balancing profitability.

  • Design recyclable and sustainable products with a minimal carbon footprint, planet-friendly packaging, and a responsible end of life
  • Plan to reduce emissions, source materials ethically, and support circular processes.
  • Manufacture with minimal waste and environmental impact by monitoring energy use based on production volume
  • Deliver products and optimize logistics to support product traceability and decrease miles driven, carbon footprint, and energy use
  • Operate assets in an energy-efficient and safe way to extend the life of your equipment and minimize the environmental impact of their operations

SAP Business Network for Logistics: With an open logistics network, companies can improve freight collaboration, goods tracking, material traceability, and supply chain resilience.

How to begin the journey?

  • Start Transformation: Gain insight by aligning people, processes, and technology to holistically manage sustainability aspects across your enterprise and the supply chain.
  • Get a baseline and identify the areas for improvement: Assess how you perform – environmental, social, and governance impact.
  • Focus: Set the overall direction of where you want your company to go. Identify impact areas, and define targets, milestones, and timelines.
  • Sustainability Performance: Monitor, measure, analyze and report on improvements around sustainability performance

References:

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