Three Enablers of Sustainable Supply Chains
If there was one key take-away we learned from the pandemic, it was how vital supply chains are to our social and economic well-being.
Supply chains matter greatly – not only to countries and businesses who count on these often invisible networks to keep the wheels of commerce turning, but also to citizens who rely on supply chains to deliver food and other essential goods to our stores and homes on a daily basis.
When our school officially launched the George Weston Ltd Centre for Sustainable Supply Chains two years ago, one of our aims was to make the Centre a leading hub for insight and analysis on how to create and secure supply chains facing major challenges such as war, global pandemics and climate change.
In this month’s column by Centre Director David Johnston, we see how the Centre is laser-focused on the convergence of two of the biggest issues in business today: supply chain and sustainability. The column also provides a look at how the Centre is sharing supply chain best practices with the many vital industries that drive our economy, while also bridging the gap between academic research and industry practitioners.
Perhaps most importantly, the Centre is creating a road map for organizations looking to build robust, resilient supply chains – a vital need in today’s fragile global economy.
Detlev Zwick, PhD
Dean, Tanna H. Schulich Chair in Digital Marketing Strategy
Schulich School of Business
Three Enablers of Sustainable Supply Chains
The pandemic has exposed the fragility of supply chains. As we cope with the aftershocks of product shortages and price inflation, both the public and organizations realize the value of sustainable supply chains – ones that are both reliable day to day and resilient when disrupted, whether that be from climate change, social change, and/or international conflict. Sustainable supply chains do not exhaust the finite supply of people and natural resources needed for the future. Leaders wishing to avoid being blindsided in the future should answer two questions about their organization’s capabilities:
- How do you plan to secure the supply of goods and services from the potential disruptions triggered by environmental and social events?
- How do you engage all relevant stakeholders, including suppliers, employees, customers, and the community at large, to secure supply chains in the long run?
The conversation in boardrooms and in politics is moving inexorably to recognizing that there is a climate crisis, that talent does not flourish when forced to do unsafe, meaningless work, and that there is a lack of circularity in the production of goods and services across economies that is wasteful, pollutes communities, and creates scarcity. And there is a growing recognition that these are real existential threats for the organization. The pragmatic questions now are where to act, what to do, and how to implement change. The path to answers for any organization, I believe, can be enabled by developing capabilities in the following three interdependent areas.
- Operational Excellence. This is not a new capability. Leading organizations for decades have empowered their employees to interrogate organizational processes for continuous improvement through programs such as lean six sigma. Where these programs in the past targeted sources of customer value, they now can be turned to achieving environmental goals such as waste reduction and social goals like eliminating lost time injuries. Industry and academia have developed over decades a tool kit of operation research tools to optimize and simulate supply chain tasks such as routing trucks that support decisions to reduce costs and improve delivery times while cutting carbon emissions. We know how to design products for supply chains so that they are lighter and packed denser to ship more efficiently but also to be repaired and reused to promote a circular economy. As we discovered recently, helping organizations improve the supply chain for PPE during the pandemic, there are a lot of opportunities in simply thinking more strategically about sourcing. The challenge here is less about inventing new methods as enabling more supply chain managers to lead change in firms of all sizes and across all sectors to do the fundamentals well.
- Purpose-Driven Analytics. Data analytics is fueling the digital transformation of many industries and professions. In supply chain management, Artificial Intelligence (AI) is being imbedded in demand planning systems to forecast, manage assets such as inventory and schedule improving availability of products and improving return on assets. To benefit from advanced analytic techniques such as AI and associated white-collar automation, organizations need valid and accurate data and the managerial wisdom to give purpose to these capabilities. Fortunately, practitioners of the natural and social sciences are increasingly providing data, metrics, and models that can be the backbone of managerial dashboards that mix traditional supply chain metrics such as cost and delivery information with structured data like weather metrics and unstructured data like social media.
- Transparency. Individual organizations may know the impact of their own policies on their profits, people, and immediate environment. But what about their suppliers that often comprise the majority of their exposure to the risk of supply disruption and impact on the environment? Despite public financial disclosure and corporate social reporting, suppliers are “black boxes” in terms of their Environment Social Governance (ESG). Industrial certifications, technical standards, and regulations requiring disclosure have been helpful to identify better or worse performers and define coping with hard trade-offs but this in not an exact science and there are a proliferation of scoring models with no generally accepted reporting standard for supply chain sustainability. The challenge for individual organizations is to see far enough upstream in the supply chain with sufficient clarity about aspects of sustainability that are material to them to avoid risky behavior and be purposeful in achieving goals like carbon reduction. To be effective this inevitably requires both private and public organizations (i.e., government and NGOs) being capable of greater collaboration.
The George Weston Ltd. Centre for Sustainable Supply Chains is focused on the convergence of supply chain and sustainability. For more on this historic convergence, read our white paper entitled, “Our Journey to Sustainable Supply Chains.”
We can help organizations build these capabilities in two ways. The first is educating the next generation of talent to manage change in their organizations and supply chains. For example, in the Winter 2022 semester, over a third of our student teams in the Master of Supply Chain Management (MSCM) program worked with organizations to analyze and implement sustainability initiatives such as the adoption of lifecycle costing in sourcing products, single use plastic reduction, reducing carbon emissions in global logistics decisions, and reducing the amount and cost of product disposed in landfill. The second way is empirical research and analytics that provides greater transparency into decisions to make, buy, and transport goods and services that secure supply by addressing environmental and societal outcomes as well as profitability. To this end, the Centre, through its research programs and its associated researchers, do what academics do best: provide a resource for defining, measuring and managing best practice. In addition, we provide a bridge between academic research and practitioners to explore emerging issues at events such as our annual Supply Chain Research Forum.
David A. Johnston, PhD
George Weston Limited Chair for Sustainable Supply Chains
Director, George Weston Ltd Centre for Sustainable Supply Chains
Program Director, Master of Supply Chain Management