Creating an Operational Roadmap to Better Supply Chain Sustainability
To achieve long-term supply chain sustainability, you must understand the needs and restrictions in your supply chains and tiers. However, once you have a fairly good lay of the land, scalability and increased operational sustainability is certainly achievable with much less stress.
Here are 5 steps to help you get started building a better operational roadmap…
#1: Supply Chain Mapping
Many companies lack comprehension of their supply chain sustainability. To begin, you need to inventory your suppliers, identify their social and environmental challenges, and prioritize your efforts with them.
New Balance, the athletic shoe company, reduced suppliers based on how the suppliers performed against the company’s sustainability criteria. Instead of quantity, New Balance focused on solid supplier partnerships and reduced its supply chain by 65%.
It’s unrealistic to tackle every supply chain discrepancy in one fell swoop. Begin with readily achievable goals and prioritize those that will result in the highest ROI. Set short-term goals for operations and map how the environmental, economic, and social aspects interact. Remove the most critical issues, and then work your way through every problem in order of urgency.
Thanks to technology, supply chain management has advanced from an art to a science. There are endless possibilities for optimizing routes, reducing waste, cutting fuel consumption, finding better fuel alternatives, or identifying underperforming carriers.
Engage your suppliers and get them involved in the process.
#2: Explore Corporate Responsibility
Senior management should develop internal objectives to meet corporate responsibility. Creating your own environmental and social goals and being open about them is vital to proving your commitment to external stakeholders.
Leverage the insights gained through data analysis to unlock new opportunities for sustainable processes. Create policies that align with your strategies, goals, and objectives.
These actions likely will require change agents within your company – employees who understand the business processes and have the skills needed to redesign them. These change agents can pass along and reinforce what your sustainability strategy means.
#3: Benchmark Supplier Performance
It’s hard to know when you need to change one supplier for another or engage a supplier to make sustainability improvements with you. But to build a sustainable supply chain, you must have a baseline for supplier performance.
To measure and monitor supplier performance, take advantage of industry indicators. Regularly compare your internal corporate responsibility goals to supplier performance to see who is on track to help you meet time-dependent objectives.
The most common KPIs used for supply chain monitoring include:
- 40% Daily performance
- 35% Cost reduction
- 29% Production service rate
- 28% Inventory turn
- 27% Production time
- 27% Lead time
- 25% Return rate
- 22% ROA
CH2M Hill (now Jacobs Engineering Group) established a reporting strategy for supply chain sustainability implementation progress in 2010. Suppliers at Tier 1 and Tier 2 levels had to turn over information on sustainability and show continuous improvement. Suppliers could earn “preferred” privileges based on business impact and volume.
#4: Use Industry Accreditations and Peer Groups
Recognize that addressing complex supply chain challenges can’t be solved individually. A side benefit of working with industry peers is that it’s a great way to share knowledge about supplier sustainability performance.
Take advantage of the hard work done by accreditation providers. Research industry accreditation standards and work only with suppliers willing to meet them, especially ones related to sustainability. Share your company’s accreditations on your website and other messaging to demonstrate your commitment.
#5: Drive Continuous Improvement
You may feel exhausted by this point. However, you’ve barely scratched the surface of building a sustainable supply chain. Retaining a commitment to adapt to new industry standards continuously is essential to keep making progress.
However, you must strive to focus on your company’s long-term vision while expecting it to change over time as new standards emerge in the industry. Stay on the lookout for new chances to innovate. Spend time regularly researching new methods and materials.
The only harmful efforts are those that have you standing still or, worse yet, going backward.
Here are a few resources you may find helpful as you create or revision your roadmap:
- The United Nations Global Compact publication, “Supply Chain Sustainability — A Practical Guide for Continuous Improvement,” includes suggestions on writing a code of conduct for suppliers.
- The Electric Industry Citizenship Coalition (now the Reliable Business Alliance) has developed an audit process covering environmental and social performance with a certification program.
- Together for Sustainability, a joint initiative of chemical companies is a global supplier engagement program designed to assess and improve sustainability sourcing practices.