The art of balancing resilience, sustainability and efficiency
Today, all supply chains strive to be resilient, sustainable and efficient. Recent developments show that all three of these characteristics are necessary and non-negotiable. But how is this handled in practice, how can we succeed in all three aspects?
Teksti Richard van der Meulen
"My conviction is that resilience, efficiency and sustainability often, but not always go hand in hand, which means that the processes and systems that support these three objectives should be designed in harmony with each other. The table above provides an overview of what relationships and connections look like between the three objectives.
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with each other – it’s the supply chains that compete with each other,” but it feels like this is becoming rather outdated quickly, primarily for two reasons: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 collaborate with our wider ecosystem.
So, what do we do? Clearly, we don’t want to rip out every system, but we should start reviewing those systems and related processes."
Richard van der Meulen is VP solution Consulting Strategic Edge EMEA at Infor.
Infor is a global leader in business cloud software products for companies in industry specific markets. Infor builds complete industry suites in the cloudand efficiently deploys technology that puts the user experience first, leverages data science, and integrates easily into existing systems. Over 65,000 organizations worldwide rely on Infor to help overcome market disruptions and achieve business-wide digital transformation.