From Cost-First to Eco-First; A New Trend of ‘Lean and Green’ Supply Chains
Jan 14, 2020 Comments (0)
Supply chain management has long embraced strategies and solutions for optimising efficiencies.
Think Six Sigma and Just In Time. This has seen the prioritisation of eliminating waste and improving processes to drive down costs and boost margins. The growing importance of sustainability will see this prioritisation shift towards making supply chains leaner, so they are ‘greener’.
Manufacturers, retailers and supply chain operators all realise the end-customer – the consumer – generally wants to be more sustainable. However, consumers also demand value. This was evident in Advanced Supply Chain Group’s research of 2,000 online shoppers. The research looked at consumer attitudes towards returning items to retailers – an action which can increase the carbon footprint of supply chains.
Research data showed 43% of consumers would be more likely to shop with retailers offering ‘greener’ returns services, but only 23% would be willing to pay for such a service. A much higher proportion of shoppers were more inclined to opt for a no-cost returns service over one that was more environmentally friendly.
Companies realise they must make sustainability cost effective. Being ‘green’ needs to be affordable for consumers. This will see supply chains becoming leaner and greener and more innovative in three key areas:
1) Returns and reverse logistics
As well as incurring more transportation miles, consumers sending items back leads to margin dilution, which squeezes the ability to offer value-added services like low- and no-cost deliveries and returns. In turn, this affects competitiveness and sales, therefore limiting the opportunity to reinvest in supply chains and enhance important areas like sustainability.
By enhancing reverse logistics to better process items coming back, goods can be more effectively and quickly restored to prime condition. This maximises the availability to sell products, while also improving efficiencies through optimised time and resource management. It’s a lean approach that means retailers aren’t firefighting to tackle the costs of returns and can focus instead on eco-initiatives.
We’ve already seen forward thinking retailers like ASOS launch plans to trial reusable mailing bags in 2020. This is part of its commitment to reducing plastics in its operations. Elsewhere, we’re seeing more and more retailers using GreenPE mail bags. Packaging manufacturer Duo UK was the first in Britain to make these bags from a renewable and sustainable source, sugar cane. The bags are also resealable, meaning they are reusable.
2) Stock inventory management
Supply chains are becoming increasingly smart and connected. With the right software and data analysis, retailers can better predict the flow of goods, both in and out of their businesses. They can also glean a more accurate view of where stock is in the supply chain to the determine the optimal time to move goods. Variables such as flow of traffic and weather conditions can be better accounted for.
Improved tracking, stock visibility and data analysis means transportation miles can be minimised. The Government’s investment in the strategic road network from 2020, and the ongoing development of the Road Investment Strategy, will create further opportunity for retailers and supply chain operators to better control the movement of stock. In the meantime, there’ll be more of a shift towards businesses investing in systems that provide instant and real-time data about stock inventory management and performance. It’s both a lean and green way of saving carbon emissions and fuel costs.
3) Talent management
Automation has been a driving force in supply chains becoming more efficient and now there’s growing excitement about the possibilities of Artificial Intelligence (AI). This has inadvertently meant the importance of people and human intelligence is often overlooked. We’ll see this change as supply chains become leaner and greener.
Talent management is key to unlocking further efficiencies throughout operations. People are a really important part of quality control and deeply involved in the day-to-day running of supply chains. They are at the coalface and can influence so-called marginal gains, which further eliminate waste. Through a combination of training and development, and internal communications, companies will be able to better share and implement employees’ ideas for ways to improve sustainability.
Manufacturers, retailers and supply chain operators are already at the fore of embracing sustainability. They are embedding corporate responsibility within their operations and driving an ‘eco-first’ approach to being lean. This benefits balance sheets and makes sustainability attainable and affordable for their customers. Put simply, lean and green supply chains create competitive advantage, which is why they’ll be a growing trend in 2020 and beyond.
Ben Balfour is Commercial Director at international logistics company Advanced Supply Chain Group. He has over 25 years’ experience working with companies to create supply chain solutions that optimise stock inventory management, improve efficiencies and minimise margin dilution.