Companies that are shedding the limitations of traditional linear supply chain models are finding that they’re more resilient, agile and adaptable to change.
Supply chain resilience is a hot topic right now as organizations continue to wade through the complexities brought on by the global pandemic while also planning for the future. Defined by Gartner as an organization’s ability to avoid or absorb the business impact of major disruptions, resilience is a deliberate strategy focused on strengthening the supply chain’s ability to manage risk and disruptive events.
There are numerous ways to address supply chain resilience. Improving visibility, monitoring supplier performance, paying attention to end user consumption and usage patterns, and gaining a better understanding of what’s going on across all nodes of the supply chain are just some of the strategies that companies are using.
Putting extra effort into supply chain sustainability is another pathway to resilience. Put simply, when companies consider both the environmental and human impacts of their supply chains—from raw material sourcing to manufacturing, warehousing, delivery and transportation—their business resilience also improves.
Making Sustainability Inroads
In Sustainability Is the Pathway to Supply Chain Resilience, representatives from The Conference Board and CBRE discuss how the concept of resilience has risen to top of mind for supply chain executives, who must prepare for unforeseen disruptions and ensure speedy recoveries. “Companies also face increased expectations from legislators and consumers to address environmental and social responsibilities,” they write. “In this respect, supply chain sustainability is inseparable from the drive for resilience.”
They say improving sustainability performance is among the top three factors that will influence future supply chain design, according to a recent Conference Board survey. Yet companies still have deeper inroads to make when it comes to properly engaging in sustainable supply chain practices. “Just 6% of S&P 500 companies disclose the share of new suppliers they screen using social criteria,” they report, “and only 5% disclose the share of new suppliers they screen using environmental criteria.”
Here are three ways that the authors say companies can start making more meaningful sustainability-resilience connections:
- Define your appetite for responsible sourcing. “A robust sustainable supply chain program requires top-level organizational commitment,” they write. “External stakeholders may demand specific criteria, but without a push from investors or customers willing to accept the investment, anything beyond minimal compliance is unlikely.”
- Build partnerships that drive change. Start by identifying those key suppliers that you can collaborate with to drive joint sustainability initiatives. For example, the authors say one global manufacturer uses digital tools to engage and partner with its key suppliers on specific joint innovation programs.
- Shift cost focus to overall price of ownership. “Moving the narrative from contract cost to total cost of ownership is essential to engaging the business on the benefits of sustainability,” the authors state. “Executives will need to carefully balance the trade-off between achieving cost savings and building and maintaining a sustainable supply chain. In some instances, discussing the intangible organizational costs of working with less sustainable suppliers — reputational harm, for example — can move the dialogue away from the cheapest contract price to the lowest overall cost throughout the supplier relationship.”
The Conference Board and CBRE aren’t the only ones highlighting the clear connections between a company’s sustainability initiatives and its resilience. According to the chief procurement officer (CPO) at Rolls-Royce, the link between sustainability and business performance makes sense, and the most resilient supply chains are also the most sustainable ones.
“A resilient supply chain is a sustainable supply chain,” the automotive CPO said, as reported by the Chartered Institute of Procurement & Supply (CIPS). “Achieving our sustainability goals is complementary with achieving efficiency, circular economy, attracting great talent – it’s not a mutually-exclusive thing, it’s heavily embedded.”
Steps in the Right Direction
As supply chain shortages and disruptions continue to permeate the business landscape in 2022, organizations are looking inward at their own supply chains. They’re finding ways to enhance resiliency while also evaluating the long-term impact of how products are sourced and transported. Companies whose supply chains were designed to be lean, efficient and linear are rethinking their approaches and breaking out of the “take, make, waste” model, according to InformationWeek.
“As global threats continue to emerge, organizations must adapt their supply chains to become more flexible and resilient,” the publication states. “By shedding the limitations of a traditional linear supply chain model, entire industries can be confident in their abilities to overcome material scarcity, ensure sustainability of their operations, and enhance their readiness in the face of inevitable future disruption.”