Improving links between supply chain and sustainability
<p>Wal-Mart and Dell were able to leverage supply chain expertise for competitive advantage. Will sustainability be next?</p>
Get the right product to the right place at the right time. That is the mantra for supply chain operations. But as a profession, supply chain management has only been around for the past 30 years. Early adopters such as Wal-Mart and Dell were able to leverage supply chain expertise for competitive advantage. Will the same happen for sustainability?
Managing corporate sustainability efforts is just now emerging as a profession (download our annual State of the Profession report to learn more). And yet in new research performed by GreenBiz Group and Supply Chain Insights, supply chain professionals indicated that sustainability teams had a better understanding of supply chain operations than the supply chain folks do of sustainability. In fact, 71 percent of supply chain respondents rated their sustainability peers as understanding their company’s supply chain goals while only 42 percent thought their supply chain team understood their corporate sustainability goals.
We surveyed 35 sustainability professionals and 31 supply chain leaders from manufacturing, distribution and retail companies to uncover where the missing links are between corporate sustainability organizations and supply chain teams. The full report can be accessed here.
Lora Cecere is the CEO of Supply Chain Insights and author of the report “Building the Green Supply Chain.” She says one of the major points of disconnect is that the supply chain and sustainability organizations lack common goals as well as common processes and definitions for governance. When those surveyed were asked how their company balanced sustainability goals with supply chain goals, 56 percent of respondents said supply chain goals come first.
Cecere also noted that the greatest impact on corporate sustainability (often more than 70 percent of resources consumed by manufacturers, retailers and distributors) is outside the company’s four walls. And yet only 20 percent of respondents are focused on the entire value network, from the customer’s customer to the supplier’s supplier.
The challenges of supply chain sustainability goals
Managing the extended supply chain poses challenges when adding sustainability goals into the equation. The figure below highlights the challenges of meeting the twin goals of sustainability and supply chain.
Cecere points out in the report that the past decade is riddled with the failures of the audit-based approach. Slowly, companies are gaining an understanding that supplier audits are not sufficient. Increasingly, the management of the supplier base is happening through principle-based programs. However, the implementation of this principle-based approach requires the redefinition of the procurement program and the building of a robust supplier development program to design, implement and train suppliers on the expectations. Cecere emphasizes that this will take cooperation and dedication from both the sustainability and the supply chain organizations.
Building sustainable supply chain competency
The report concludes with recommendations for supply chain executives. To successfully integrate sustainability practices into their operations, supply chain executives must:
- Focus on metrics definition and alignment with a goal in mind. Early phases of collaboration typically focus on cost-reduction programs. As programs shift from costs to value, the scope becomes more complex and goals must be clearly defined.
- Align the supply chain center of excellence on capability building. Companies should make the sustainability strategy a part of sales operations and planning and actively measure the impact of network redesign activities on the elements and measurement of sustainability.
- Actively network with other thought leaders. Supply chain leaders need to budget time and resources to learn about sustainability trends within their industry and across other industries.
Managing end-to-end supply chain efforts is a complex business. To get a real world example of some of the issues and challenges (and rewards) of managing an integrated supply chain, watch the video of the supply chain panel we put together for the recent San Francisco GreenBiz Forum. We follow the beer supply chain from consumer to retailer (Wal-Mart) to manufacturer (MillerCoors) to Gary Beck, who manages a barley farm.
It’s a good example of how all the ingredients for supply chain sustainability can come together in a heady brew.
Image by Jan Hyrman via Shutterstock