Supply chains have always had their operational challenges, but since the COVID-19 pandemic, manufacturers have struggled to rein in their supply chain management strategies. Over the past three and a half years, organizations have dealt with raw material scarcity, labor shortages and a range of other logistical barriers that have caused both financial and reputational strain.
Beyond impacting profitability and brand reputation, these supply chain issues have also affected manufacturers’ carbon footprints. According to the U.S. Environmental Protection Agency, “organizations’ supply chains often account for more than 90% of their greenhouse gas emissions, when taking into account their overall climate impacts.” Consumers and lawmakers alike are becoming increasingly aware of the negative environmental impact of supply chains. Today’s customers expect brands to prioritize sustainability across products, services, and operations — including supply chains. Shoppers want organizations to be transparent in their supply chain operations, and include and educate them in their sustainability tactics. And legislators are presenting their own set of regulations — from the Securities and Exchange Commission’s new mandate on climate-related disclosures to the Bipartisan Infrastructure Law, which will provide federal funds for improvements at major ports, and utilize renewable energy across freight transportation and industrial facilities.
These post-pandemic financial, operational and reputational strains come as no surprise to manufacturers, and neither does the enhanced public scrutiny of their net-zero strategies. Yet many leaders are failing to realize that these issues are interrelated, and therefore the solutions to these problems are, too. Companies know that intelligent supply chains are the answer to their business concerns, but it seems they fail to recognize that smart supply chains are also inherently sustainable and help reduce their overall carbon footprints.
Data-driven, predictive and agile supply chains can help companies achieve their net-zero goals by enabling overall end-to-end efficiency. From a Scope 1 (direct) emissions perspective, intelligent supply chains help companies maximize their routes and thus minimize their fuel consumption. For Scope 2 (energy-related) considerations, digitally enabled supply chains can help manufacturers cut down on production and sorting time in facilities, reducing electricity usage.
As of now, most manufacturers have a strong handle on their Scope 1 and 2 emissions, but like many companies across sectors, they’re struggling to track and mitigate Scope 3 emissions, or those produced by supply chain partners. Net-zero goals falter because of manufacturers’ inability to trace upstream and downstream activities across their networks of suppliers, distributors and others. Data-enabled intelligent supply chains can help address these challenges, but only if stakeholders within manufacturers’ broader supply chain ecosystem enter into data-sharing agreements. These allow all parties to track and sharing their Scope 1 and 2 emissions data in real-time. Data detailing gas, oil and electricity consumption and waste production will be especially particularly helpful for all partners to track environmental, social and governance (ESG) metrics, train their intelligent systems, and collectively mitigate emissions. However, just 14% of companies across sectors and geographies are engaged in advanced data-sharing partnerships.
Manufacturers may still be wondering how they can activate intelligent supply chains to drive greener operations and meet net-zero commitments. The right strategies are not a one-size-fits-all proposition; they vary according to type of product, technology stack maturity, geographic location, regulations, organization size and a slew of other considerations. However, at a high-level, most manufacturers should consider these key tactics when implementing environmentally friendly and intelligent supply chains:
Adopt advanced data management practices. The first step in enabling truly smart operations is acquiring more data. Manufacturers not quality data from their own organizations as well as from their partners and other external sources. A comprehensive data-management strategy addresses with tracking, storage and beyond. Equally important is the formation of collaborative data-sharing ecosystems covering the network of stakeholders. This can be achieved by establishing a formal, mutually agreed upon strategy that outlines governance policies, key use cases, ecosystem model design, current capability gaps, and appropriate technology platforms.
Encompass the full lifecycle of products. By doing so, companies can not only address operational and design concerns, but can also pinpoint junctures throughout the supply chain that cause increased carbon emissions.
Develop reverse logistics plans for reuse, refurbishment, and remanufacturing. Circularity is key to reducing carbon emissions, but manufacturers have historically struggled with reverse logistics. Manufacturers need to understand how they can lessen material and product waste without adding unnecessary, carbon-emitting transportation routes back to their facilities.
Incorporate sustainability data into logistics control towers. Such systems aren’t new to supply chain management theory, but most manufacturers have failed to plug sustainability data sets into them to make more informed and greener decisions.
Deploy intelligent solutions. These include artificial intelligence, internet of things sensors, automated machinery, advanced planning and forecasting algorithms, track-and-trace logistics optimization, and even 5G connectivity.
Intelligent supply chains are a requirement for modern manufacturers. It’s not enough to enable smart solutions; manufacturers must prioritize sustainability as they deploy intelligent supply chains. Consumer demand and government regulations have only heightened this reality in recent years. Now, as manufacturers restructure their strategies post-pandemic, leaders must focus their attention on enhancing data, product lifecycles, circularity and technology stacks, in order to ensure that their supply chains do not cause financial, operational or environmental strain.
Chris Scheefer is vice president and North American lead for intelligent industry, and Vincent de Montalivet is principal and data for net zero offer leader, with Capgemini Americas.
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