February 09, 2021 | Andy Makeham

Building Sustainable Supply Chains and Technologies that Can Help

supply chain strategies

Sustainability of supply chain systems has become a prime focus for SMEs during the pandemic and is likely to remain so as business moves back to some form of normality.

A recent Oxford Economics study of 1,000 SMEs concluded that “Sustainability will be a growing focus for SMEs over the coming years as they seek to satisfy consumer demand, and comply with increasing regulation.”

Interestingly, 86% of the study’s respondents flagged the fact that ‘a sustainable supply chain is a competitive differentiator’, which of course makes a great deal of sense as it means that you can probably deliver when others cannot.

Unsurprisingly, the key technique flagged in the report was visibility and collaboration of your suppliers.

Wim Vandenholst, Head of Supply Chain with consultancy Mitra commented, “historically suppliers were all too often viewed as remote third parties on whom we placed orders and hoped for timely delivery. The recourse for failed performance was simply selecting a different supplier. In today’s connected world that attitude simply will not work.

Suppliers need to be treated as partners, as an extension of your business, you need to know as much about your key suppliers as you do about your own internal key departments.”

Technology can certainly help. In our increasingly digital world, collaboration tools are available in abundance that will enable you to create ‘glass walls’ into your supplier’s business. From simple tools such as ‘Slack’ that enables you to build pan-company teams to improve communication, through to a raft of products enabling you to share projects, order visibility etc. (some free-ware, some payable) that are best explored via Google search.

For many (often larger) companies, the benefits of a more collaborative and transparent supply chain is the shared opportunity to reduce (eliminate?) waste, and for this the consultants have come up with yet another buzz-phrase the circular economy where companies design products for life and move away from the traditional “Take-Make-Waste” linear flow towards a recycle flow that enables the regenerative use and reuse of materials, products and packaging. 

This, too, makes sense as having less inventory in the supply chain reduces waste and if we can continue to move towards a just in time capability, we will use less transportation and storage which will reduce consumption and increase profitability.

The other technology that can help to significantly improve efficiency of the movement of goods from your suppliers to your customers is warehouse automation.

Honeywell, the technology and automation giant, observed recently “80% of distribution centres still operate manually despite the rise in e-commerce.”

This is quite an eye-opener, as the savings to be made through warehouse automation are massive. If we take Amazon as an excellent bell-weather. Amazon, famous for its automated fulfillment centers will spend $1m on a single robot packer which seems a great deal of money until you realize the payback period is just two years which is indicative of the massive savings and efficiencies that can be made with warehouse automation. So how much are they saving over 5 years or 10 years?

We SMEs need to wake up and smell the coffee. Warehouse automation is a reality, and because of the rapid advance in technology, prices of warehouse automation equipment to manage automated picking and put-away are plummeting. A warehouse robot can now cost as little as $20,000. Can we afford NOT to do it?

And there’s more!

Adoption of emerging technologies, such as Artificial Intelligence (AI), the Internet of Things (IOT), Blockchain, and cloud computing are all starting to have a significant impact.

With AI, it is now quite feasible for your back-office ERP system to plug into AI engines, so opening the planning systems to real-world data. Imagine a scenario where AI messages your ERP system to advise that as there is a hurricane due to hit Costa Rica, the following purchase orders are a risk of disruption, and should be re-sourced to guarantee supply.

This is a long way from purchasing against an internal master production schedule.

And whilst today these AI developments are the preserve of the big boys, with the relentless speed of technological development and change they will be with us SMEs in no time at all.

Cathy Morrow Roberson, the President of Logistics Trends & Insights observed, “manufacturers will invest more in technologies because of the supply chain disruption brought about by COVID in order to improve supply chain visibility. In short this means more robotics and more automation.”

Cloud is here, we are all in some way reliant on the cloud in our business lives.

BlockChain, however, has been talked about forever, and never seems to impact SME-land. Well, that is about to change. Before long, blockchain will radically change every transaction we execute. It will aid in supply chain management and logistics, improving data transparency and the safety of transactions as businesses shift to more digital collaborative purchasing.

Resiliency, risk mitigation and ensuring sustainability require visibility, which in turn, demands reliable, and real-time data and this will increasingly bring the cloud, IOT and blockchain to the forefront of our thinking.

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