Sustainable Supply Chain Management: Balancing Today’s Needs with Tomorrow’s Challenges

Location, efficiency, packaging, transportation, and business continuity are key aspects of sustainable supply chain management.

TAKEAWAYS:
● Strategic location planning is crucial for financial and operational efficiency, enhancing proximity to partners and reducing risks.
● Efficient facility design and systems support current and future operational needs, including space and advanced management systems.
● Business continuity planning is essential to sustain operations through crises and disruptions, ensuring safety and communication.

What is sustainability when it comes to a supply chain? Many will think of environmental considerations, such as reducing carbon emissions in manufacturing or using energy-efficient lighting, but sustainability encompasses so much more.

Sustaining an optimal supply chain entails careful consideration of the entire supply chain process (Figure 1). It’s a delicate balancing act of planning for today and preparing for tomorrow while considering the innumerable disruptions that could affect the supply chain.

Figure 1: A sustainable supply chain

Location, Location, Location

Where a manufacturing or warehouse facility is located matters, for a multitude of reasons. One of the obvious reasons is financial—namely, facility costs and taxes. Many other key considerations exist, however, that will impact the effectiveness of your supply chain and other cost components. There are several key questions to consider:

How close are you to key strategic partners or suppliers?
Do you need access to rail lines or waterways?
Is the area prone to any natural disasters?
Is the facility strategically located to deliver customer orders in a timely manner? This could be a differentiator!
Is the location in a market good for your inbound carriers to secure backhauls in the event you don’t have an outbound load to provide them?

It’s also imperative to understand city and state laws and regulations, both existing and proposed, that could have an impact on your business.

Efficiency Is Key!

Once you have established the location, it’s time to plan the inner workings of the facility. Determining the optimal layout of the facility is essential for capacity planning, inventory slotting, material handling, and automation feasibility. These will all factor into operational performance.

Being sustainable is about planning for the operational needs of today while also planning for the growth expected in the coming years. With that in mind, you must ask some thought-provoking questions and understand the long-term goals for the business:

What are the long-term goals? Are they realistic and what is needed to achieve them?
Will the facility accommodate the number of employees expected as you grow?
Will you have enough space, dock doors, employee facilities, and parking?
Can you accommodate equipment, whether it be forklifts or robots?
What systems do you need to run the facility, such as a warehouse management system (WMS) and/or transportation management system (TMS)?

Moving large operational facilities is expensive and disruptive, so companies must plan for the future when designing.

It’s More Than a Box

Many of you may have received a box with messaging about fewer materials to make it, reflecting a company’s efforts toward sustainability. Other important sustainability initiatives related to packaging are often overlooked, however.

Companies need to use the right size overpack boxes, ensuring items are securely protected in transit while also reducing the labor and expense of using dunnage materials that will end up in landfills. A perfect example of this is NTT DATA’s work with Whisker, a leader in innovative pet care products (please read Whisker pounces on transformed packaging and customer experience).

The packaging used for products, as well as overpack boxes, represents your brand. Even if it’s a plain overpack box, if it arrives damaged, the recipient is not happy! We all realize that packages and pallets are often handled many times in transit and things will happen, but is your packaging able to withstand the rigors of the shipping environment? Does anyone in the organization monitor the frequency of particular products being returned because of damage, as well as monitor for what overpack box was used?

While packaging may not seem like a worthwhile focus area at first glance, let’s dig a little deeper. Consider the following:

If you have damaged freight that is refused or returned, that is lost sales revenue.
The item is returned, incurring additional transportation fees.
There are labor costs—both operational and financial—to process the return.
There are costs to refurbish and/or repackage the item.
If the item needs to be sent for destruction, there is a fee for that service as well as an additional transportation cost.
Some customers assess monetary penalties for not receiving their order on time and in full.
Loss of market share may happen if this is a recurring issue. What are your customer acquisition costs?

All of those fees, labor expenses, carbon emissions, and reputational damage started from inferior packaging. Evaluating packaging issues may be a worthwhile investment.

Transportation Is the Hub

Your business evolves over time, and there are many market factors causing fluctuations as well, so a dynamic transportation strategy is necessary.

The Transportation team is responsible for ensuring the timely arrival of inbound goods for sale and/or materials used in manufacturing. Without this critical function, plants may shut down and there is nothing to sell, so there is no revenue.

Transportation works with Sales, Customer Service, IT, Operations, and carrier partners to ensure orders ship in a timely manner, thereby enhancing customer satisfaction and revenue recognition. Post-shipment, they often must work with Finance or third-party freight audit and payment organizations to ensure accurate payment of freight charges. Transportation is the hub connecting these teams and processes. Transportation also ensures business continuity during a crisis by implementing strategies for the movement of goods.

It is essential to be strategic when sourcing capacity, particularly in fluctuating markets. What can you do to become a preferred carrier partner?

We recommend the following:

Provide carrier partners with backhauls
Ensure carrier partners are loaded/unloaded quickly (which also prevents detention charges)
Provide facilities for drivers to use, such as restrooms and a breakroom
Ensure timely payment of freight invoices

A TMS can enable automation of various processes, from planning and tendering loads to freight claims and freight payments. It’s important to understand current and future business needs to ensure the TMS used will allow for connection of processes and efficiency throughout the supply chain process.

Transportation, quite literally, keeps an organization moving and plays an integral role in its success. Thus, the right network strategy, supporting systems, cost-competitive rates, and timely carrier payments are also essential.

Keep It Moving!

We would be remiss if we didn’t consider business continuity in this process. Companies need to think about how the operation will run, or how locations or processes may need to shift during a crisis, such as a fire, flood, or tornado. Consider the following:

How do you check on and ensure the safety of employees? Do you know who was on-site? How do you access contact information to check on those who were not?
Where can employees meet to work on activities to stabilize the operation?
If you have salvageable merchandise and material, where will you store it?
How do you identify and re-direct inbound materials, and to where?
How do you identify and notify carriers on outbound loads?
How do you identify orders impacted and notify customers? If running a multi-facility operation, do you have redundancy in materials? How do you prioritize and allocate the remaining inventory across customer orders?

Unfortunately, a crisis is often abrupt and unexpected, so it is essential to have a plan, and train team members on how to execute it. Digital resources are key, such as being able to text employees and having them confirm they are okay and whether they can work remotely, if their role permits. Using automation to identify what was the current state at the point of the crisis, and being able to alert partners quickly, and in mass, is critical.

Sustainability doesn’t mean only planning for a disaster to your operations, it also entails planning for a disaster or disruption from any of your vendors. Identifying those who are critical to your operation and discussing their business continuity procedures should be factored into your business continuity plans.

Conclusion

A truly effective and sustainable supply chain encompasses more than environmental considerations. Take these six other considerations into account:

Understanding where facilities should be located to improve your network.
Establishing an efficient operation that considers future needs.
Implementing the right systems to support the entire supply chain process.
Considering how packaging can improve sustainability and ensure success.
Implementing transportation strategies that afford cost-competitive operational effectiveness while ensuring customer satisfaction.
Ensuring a business continuity plan is in place to sustain the organization through a crisis.

An end-to-end evaluation of your supply chain can address immediate needs while also planning for future needs and risk mitigation. You can learn more about this by visiting us at Supply Chain Consulting | NTT DATA. M

About the author:

Tanya Wallace is a senior manager in Supply Chain Consulting at NTT DATA.