October 28, 2021
Every supply chain strives to be resilient, sustainable, and efficient.
Recent global movement shows that all three pillars are necessary and non-negotiable. But how do we handle this delicate balancing act and excel in all aspects?
The basic premise of this blog series is that resiliency, efficiency and sustainability in supply chain are closely related. Some elements reinforce each other, while others are at odds. This means that the processes and systems that support these initiatives should be aligned.
In this first blog we will explore the challenges. The second and third blogs will cover how to tackle these challenges from a process standpoint, and finally a systems perspective.
The table below gives an overview of the relationship between resiliency, sustainability, and efficiency for a set of key supply chain aspects.
Challenge 1: Conflicting objectives
While some aspects positively impact all three initiatives, others have mixed or even negative effects. For example, if suppliers and logistics providers/3PLs had longer lead-times to optimize the fill rate of a truck/container, it would result in reduced transport cost & CO2 emissions, great for both sustainability and efficiency. However, this simultaneously makes your supply chain less agile and more vulnerable to disruptions, thereby, reducing resilience. Adding to the complexity, longer lead-times mean increased inventory and working capital and ultimately decreased efficiency. Longer lead-times also increase the risk of write offs as demand levels may have changed, reducing sales revenue and potentially reducing the positive sustainability impact due to increased waste.
Challenge 2: Siloed thinking
Another challenge lies in organizations’ siloed operations and KPI’s at best reflect some but seldom all the objectives of the three initiatives we are trying to achieve. And it’s not just our own organization we have to worry about, for the fact that supply chains are global and involve many parties, means that alignment between organizations is ever more paramount to success.
When we were primarily focused on efficiency this [our organization and direct partners] was typically the extent at which we would be looking. People would say “it’s no longer companies that compete with each other – it’s the supply chains that compete with each other,” but it feels like this is becoming rather outdated very quickly, primarily for two reasons:
- Sustainability has quickly moved from revenue maximizing intentions to an essential survival tool for our planet. It is now a community effort. It goes beyond the façade of reporting good sustainability numbers, it’s about helping the global community, which impacts everybody.
- The challenges from the COVID-19 pandemic in keeping suppliers afloat due to shortages in semiconductors, rare metals, and ocean container capacity has shown us how interconnected our supply chains really are and how reliant we all are on suppliers, scarce resources, and finite capacity.
Of course, we always need to look for the competitive advantage to ensure we can maximize our revenue and profit but, like it or not, we are all more connected and reliant on each other than ever before. We are all part of a larger ecosystem that requires commitment from all of us to maintain.
Challenge 3: Legacy deficit
The third challenge is that over the years, organizations have built or implemented many different solutions and integrations to communicate with partners. It is not uncommon to have a separate system or platform for product life cycle management, forecast sharing, order distribution, quality assurance, procure to pay, visibility, supply chain financing and performance management. More recent systems include capabilities to conduct Life Cycle Assessments, create end to end traceability of goods, reporting on Environmental, Social and Governance (ESG) standards as well as the sharing of ESG best practice.
Each and every choice of system and platform might have made perfect sense at the time, but it does leave our suppliers and other partners requiring integration and/or access to many different portals and systems to be able to work with your organization.
And from a supplier’s perspective, it can be even more bewildering as they deal not only with your organizations’ but with many different customers’ systems.
Larger suppliers might push their own platforms, but to a large degree that only escalates the problem. i.e., one customer or buyer having to connect with multiple supplier platforms.
The reality is that most organizations operate in a supply chain in which they have both large and smaller suppliers with significant room for improvement in the way we collaborative with our wider ecosystem.
So, what do we do? Clearly, we don’t want to rip out every system, but we should start reviewing our processes, which is the topic of the next blog written by Capgemini, and systems, which is the topic of my final blog in this series.
- Banking and Financial Services
- Equipment Dealers Rental and Service
- Food and Beverage
- High Tech and Electronics
- Industrial Machinery and Equipment
- Industrial Manufacturing
- Logistics and 3PL
- Oil and Gas Energy
- Professional Services