Supply chain operations and management include a set of methods in the industry from manufacturers, suppliers, and distributors to retailers and customers.
Activities within the scope of supply chains related to the flow of materials/goods/products/information, financial data, and money.
Manufacturing companies perform different activities in supply chain management, such as designing new products, obtaining raw materials, and planning and production, distribution, and product return management activities.
Supply chain sustainability positively impacts manufacturing companies, allowing them to increase productivity, reduce costs, and increase revenues.
Sustainability enables better efficiency of machinery, tools, production, transportation, etc.
Supply chains are the materials, information/data, and services crossing different companies. It includes organizations involved in producing and delivering products and services to consumers.
Supply chain management is a sophisticated approach that allows companies to handle and manage the flow of materials, information, and services from raw-material suppliers through production plants and warehouses to consumers
A company’s survival in the modern business environment does not rely on gaining a competitive advantage. Although acquiring a competitive advantage is good, a company’s survival depends on how a manufacturing company streamlines its supply chain operations and whether they follow a sustainable approach. Today’s article explains the effects of a sustainable supply chain on manufacturers.
What is Supply Chain Sustainability?
The problem of sustainability in supply chains is a hot topic of discussion among organization leaders. Businesses across geographic and industry boundaries implement sustainability practices in the supply chain. The primary reason is pressure from consumers, investors, regional operations, employees, and other stakeholders.
Companies in the supply chain sector must design and manage their operations to deliver specific outcomes. Sustainability is one of these outcomes because customer needs drive it.
Sometimes, a company’s internal processes drive sustainability. However, most of the time, it results from consumer preferences, needs, and pressure and supply chain partners, federal, state-level, and local governments.
The primary objective of sustainable practices in the supply chain and its effects on manufacturers is achieving a holistic view to understand the impact of products/goods/services and focusing on improving various areas.
It involves the entire lifestyle of a product and the supply chain of that particular item. So, when companies address sustainability, it is often ineffective and unreliable to merely address sustainability initiatives within the company’s boundaries. To pursue and achieve sustainability initiatives with positive business impact, companies must look and act beyond the premises of their business.
The Importance of Sustainability for Manufacturers
A sustainable supply chain positively impacts manufacturing companies. It increases organizational productivity, streamlines efficiency, promotes financial stability, optimizes environmental performance, and allows companies to identify trends in organizational development.
Sustainability is critical in supply chains and influences manufacturing companies and their operations. As the climate crisis and global warming grow in magnitude, businesses pay more attention to their actions.
The U.S Environmental Protection Agency states that consumers and businesses contribute more than 13% of their carbon footprint, including greenhouse gas emissions. Likewise, supply chains make a substantial impact on emissions.
Therefore, developing a sustainable, environmentally friendly supply chain is one of the most reliable, efficient, and risk-free strategies to reduce a manufacturing company’s carbon footprint.
The supply chain involves different facilities converting raw materials into a finished product. Most businesses have conventionally focused on boosting quality, reducing costs, and increasing speed as a part of supply chain strategies.
However, manufacturing companies in the modern industry have shown that sustainability in supply chain management does not require focusing on these traditional management goals. So, they can implement sustainability in supply chain management without compromising quality, reducing costs, and increasing speeds.
You can’t understate the significance of sustainable practices in supply chain construction and management. Making suitable changes to create eco-friendly and sustainable supply chains offers manufacturers a wide range of benefits. Examples include collaborating and working with green manufacturing companies, optimizing networks, and developing more environmentally friendly packaging.
According to the United States Energy Administration, the manufacturing process will experience a 26% increase in environmental footprint and emissions. However, other high-producing sectors will remain at the current outputs.
The statistical data is shocking and daunting despite the fact that major manufacturing companies and supply chain organizations drive toward sustainability goals.
For example, Mcdonald’s is planning to make 100% of its packaging from renewable, eco-friendly, or recycled materials by 2025. So, companies in the manufacturing industry can do the same and leverage the opportunity to produce new products.
At the same time, manufacturers must tap into new markets, implement advanced technologies, and modernize their businesses to fully leverage the benefits of sustainable and green supply chains.
Implementing sustainable practices and going green can help manufacturers reduce costs in various ways. For example, companies can install energy-efficient lighting and reduce long-term energy costs.
Likewise, they can reduce water usage and cut down on the disposal of waste products, leading to significant savings over time. A research study published by Indiana University highlights that one company saved more than $7 billion via sustainable manufacturing, while another saved $80 million annually by reducing its energy consumption.
Local deliveries are directly proportional to lower distribution costs. 69% of manufacturing companies indicate that they are more likely to implement reshoring strategies in the future.
About 72% of B2B buyers prefer to source materials from local companies. On the other hand, 10% of companies prefer to source globally, and 46.7% do not like to source globally.
Better for the Environment
Most manufacturing companies shut down their businesses due to sustainability’s perceived costs. Although some sustainability practices require spending more money, most of them cut costs.
Reducing waste is the most significant factor that reduces overall costs and positively impacts the environment. Previously, many companies viewed waste products as an avoidable aspect of running a manufacturing business.
Moreover, companies in the hospitality industry would not think twice about throwing uneaten food in the trash. However, circumstances have changed, and today, it has become a norm to partner with a waste disposal company that recycles waste into fuel.
Furthermore, opportunities include switching to suppliers closer to your company. The purpose is to reduce the risk of carbon footprint. Likewise, it allows companies to use recycled and recyclable materials and packaging.
It offers employees incentives to walk or cycle to work. Manufacturers can use environmentally friendly machinery and work with supplying companies that use this type of equipment.
Reducing the overall environmental footprint and increasing production and operation efficiency offer advantages for sustainable companies. For instance, it creates value and reduces costs.
Although switching to environmentally friendly machinery and suppliers that do the same may require you to spend extra money, it can save you long-term. Similarly, suppliers that pay less on fuel, energy, and logistics can pass the savings on to your company.
In addition, businesses can leverage cost savings through recycling waste instead of throwing it into the trash or ending up in a landfill. Therefore, companies must follow eco-friendly or sustainability legislation to avoid fines for non-compliance.
However, this requires you to update your current practices and make them more sustainable. Moreover, savings occur when you have a transparent policy for green manufacturing and sustainable practices. It would help if you kept an eye on every dollar you spend and used materials when needed.
Improves Brand Reputation
Future generations will place a high value on social and environmental accountability. You can protect your brand reputation by designing and implementing transparent policies and partnering with a supplier that follows sustainable strategies.
Manufacturers focusing on financial, social, and environmental sustainability improve and maintain their brand reputation because consumers see them as more attractive and desirable.
Digital communication tools, including social media, play a critical role in today’s society. So, maintaining a brand’s reputation becomes more fragile to damage. The good news is that you can make efforts and implement sustainable practices in supply chain management to open doors for new corporate opportunities and partnerships.
As a result, your company will become more progressive and partner with sustainable suppliers and consumers. Other businesses that prefer sustainability will attract to your operations. Therefore, they will approach you for a partnership.
On the other hand, your company can also reach out to future-focused and ambitious suppliers and organizations. Sustainability is an excellent way to stay ahead of competitors and streamline business operations to attract more suppliers, partners, employees, and consumers.
Increases Employee Retention
Employee retention strategies play a crucial role in a manufacturing company’s survival. Creating a sophisticated plan can help your employees stay in your organization. At the same time, it streamlines productivity and promotes the highest engagement levels, leading to increased revenues.
When your manufacturing company partners with sustainable suppliers and focuses on green strategies, you can improve your employees’ experiences. Workers who feel they are contributing to the planet’s betterment make efforts, enjoy their work and create meaningful outcomes.
Implementing a code of conduct regarding supply chains and business operations can mitigate risks and optimize productivity. Not only does this enable you to perform a risk assessment with a unique approach, but it also helps you identify hazards that can harm your organization’s social, financial, and environmental wellbeing.
You will identify various potential risks that can harm your organization’s growth. At the same time, you will achieve more control, efficiency, and reliability. However, this requires you to focus on compliance, finances, reputation, health and safety, and ecofriendly approaches toward the planet. Thus, you can reduce risks holistically and achieve your goals.
Sustainable supply chains offer various benefits to manufacturers, including improved company reputation, streamlined operations, attractiveness to potential employees, and higher profitability.
We recommend formulating essential processes and choosing sustainable partners that add value to your manufacturing business. The results will improve recruitment, motivate consumers, boost employee loyalty, and help you achieve better relationships with suppliers.
Lastly, manufacturing companies can reduce their carbon footprint and greenhouse emissions by setting targets for their production plants, reducing waste, finding efficient solutions, maintaining equipment, considering renewable energy sources, disposing of waste correctly, and choosing eco-friendly-conscious suppliers and partners. Until Nex Time!
By Shantala Hickey, ESG, Sustainability Supply Chain Manager
Shantala joined GPSI’s team in 2022, following her post-graduate diploma in Environmental Management. She is responsible for the ESG Division and the corporate social responsibility strategy. Before joining GPSI, she held several management positions at Bombardier Aerospace as well as Galderma, a company operating in the pharmaceutical and cosmetics industry. She has more than 15 years of experience in procurement, logistic, and production planning. The environment and sustainable development are undoubtedly her greatest passions.
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