Go green or go home: Sustainability in Supply Chain

We have a big problem: our planet is on fire

We cannot ignore it anymore: extreme weather events and global warming are just some of the symptoms that attest to the rising sustainability problem. Inactivity and indifference towards this topic are a risk for the long-term survival of our planet and our society.

Research by The World Economic Forum has shown that 8 supply chains – from raw materials to end-product manufacturing – account for 50% of all global greenhouse gas emissions. The new market landscape rocked by recent socio-economic disruptions (like the COVID pandemic) doesn’t help either. By 2030 the growth of e-commerce will require +36% delivery trucks, causing an increase of 32% carbon emissions. Packaging is also problematic: currently the equivalent of a truck full of plastic enters the ocean every minute, and this figure is set to quadruple by 2050 if no action is taken.

The data is clear: decarbonizing supply chains can be a game changer and have a huge impact

Actions on supply chain management can minimize the effects of the ongoing climate emergency.

Many businesses are concerned about the potential challenges of implementing sustainable practices, starting from the costs in terms of time, effort and money, as well as limited support from their suppliers, which is crucial to make this work. They simply do not know where to begin – engaging a fragmented supplier base, with limited data visibility and transparency, as well as seemingly conflicting priorities, seems to make it harder to execute.

However, the pros outweigh the cons by far: implementing sustainable practices means building efficiencies and optimizing costs, ensuring long term profitability. Not only that: investing in sustainability means earning the customer’s respect, a factor which is increasingly influencing purchasing behaviors.

Over the past 5 years, the demand for products marketed as sustainable grew around seven times faster than the demand for their conventionally marketed counterparts. [NYU Stern] 52% of consumers say that environmental concerns have prompted a switch to different brands [Hearts & Science].

Increased attention from investors, as well as growing regulatory pressures from local, national and international authorities, are also factors to consider. The evidence is clear: sustainably-focused businesses are more successful and resilient in the long run. In fact, according to Gartner, by 2026, circular supply chain practices will drive profit increases for 60% of global enterprises.

Which solutions can businesses adopt to make their supply chain more sustainable?

Process Optimization

Optimizing existing processes can significantly reduce their environmental impact. Minimizing space, resources and time investments seems the first, obvious way to go about it. In the past years, the “Digital Transformation wave” in supply chain has centered around the Automation & Optimization of Warehouse processes, as well as the integration & communication between IT systems and actors in the supply chain ecosystem.

There are many ways to implement sustainable practices in a warehouse:

Optimized Storage Strategies: smart storage strategies allow businesses to reduce warehouse size and energy use. For example, slotting algorithms can support in organizing a warehouse to maximize space and efficiency, even taking into account real-time demand requirements.
Advanced Picking Paths: advanced algorithms calculate the best routes for operators & machines for picking operations, in order to minimize the distance covered within the warehouse
Leaner Management of Stock: Predictive analytics, powered by statistical algorithms, ML & AI can help businesses to identify demand patterns. Innovative replenishment algorithms are able to compare inventory data with information on fluctuations of market demand (for e.g. seasonal peaks together with issued purchased orders), to forecast the ideal level of stock, reducing unsold items and waste, especially for fresh foods or other perishables.
Paperless Approach: By digitalizing primary warehouse operations, it becomes feasible to transition the fruition of information and processes, both in terms of execution and decision-making, from physical paper to mobile applications. Warehouse managers are no longer required to print out tasks for operators; instead, mobile apps offer a comprehensive list of activities to be carried out and provide step-by-step guidance to users throughout the execution process (such as scanning barcodes, confirming quantities, and more)

Supply Chain Visibility

Supply chain visibility helps optimize processes and reduce the "bullwhip effect," where demand fluctuations cause delays and waste. This also cuts Scope 3 emissions, which make up 80% of a company's carbon footprint, by improving communication and efficiency across the supply chain.

Supply Chain Visibility technologies leverage real time data and event streaming models to provide companies with:

• Accurate data to allow a better understanding of their corporate footprint

• Prescriptive recommendations on how to improve process efficiency

• Overviews of supplier/carrier certifications within the ecosystem, to choose the most sustainable SC partners

This technology not only allows suppliers to measure their emissions, but also provides a comprehensive overview of the network, taking into account disruptions and fluctuations in demand. The result is a significant improvement in the exchange of information and consequently in the collaboration and efficiency of working between suppliers, which directly benefit decarbonizing efforts.

Green Packaging & Circular Economy

More and more organizations are committing themselves to integrate sustainability into their supply chain strategies, by streamlining distribution and packaging. Recycling, reusing and plastic-free initiatives are gaining popularity, while some startups are completely reimagining packaging, using durable and biodegradable materials. Other companies are driving change by adopting sustainable packing strategies.

It is estimated that the average shipping box is 40% too big for its contents [DHL]. Through advanced cartonization algorithms, which assist in the selection of the best parcel by considering the volume, weight and fragility of the items it is possible to reduce carton sizes and inners to use only the necessary material. Big brand names such as Costco, are already leveraging technologies like laser cutting, to use just the right amount of packaging for their products. Crucially, these algorithms enable companies to avoid shipping air and optimize freight transportation also impacting costs.

These algorithms make up part of what we can call the “4 R Strategy”, which consists of:

• Reducing unnecessary material used by limiting the weight and volume of the packaging.

• Reutilizing packaging for returns

• Rethinking through investments in green packaging and innovative materials

• Recycling paper and wooden materials for other uses

Some of these strategies can be implemented more easily, with close to zero impact on operating costs, functionality, and attractiveness of the packaging, for example by making packages more lightweight or by increasing the usage of recycled packaging.

Other applications surely require system-level changes, such as improving the existing recycling infrastructure and circular value chains. These initiatives, which require more effort and investments than the “low hanging fruits”, truly need consumer awareness and support for sustainability initiatives to be implemented.

Transportation & Last Mile

Last-mile deliveries account for 20-30% of city carbon emissions. The transportation industry must decarbonize, with many companies committing to carbon-neutral or zero-emission goals. Emissions can be significantly reduced by optimizing logistics networks, choosing the right transport modes, and managing routes and load capacities efficiently.

Solutions are many, ranging from fleet reduction leveraging on solutions to optimize transport activities through smart planning algorithms to optimize last mile deliveries, dock scheduling for a smooth distribution of trucks arrivals within the yard and integration of new delivery model to shorten the shipping activity.

• Smart Planning: for last mile delivery can be optimized by leveraging smart planning and route optimization algorithms, taking into account, best path calculations, real-time traffic information, fleet availability, and other logics to reduce the distance covered by delivery fleets. These “saved” miles can be translated into avoided carbon emissions and compared to government regulations.

• Dock Scheduling: In peak times, a truck may wait between 4 to 6 hours in queue to enter a distribution center or warehouse and deliver its cargo. [American Transportation Research Institute]. Scheduling appointments in the yard for loading and unloading activities allows to minimize traffic jams, save costs and lower carbon emissions.

• New delivery models: nowadays consumers are prioritizing delivery options not only taking into account price and delivery speed, but also sustainability. That’s why urban and inner cities businesses are increasingly adopting eco-friendly, hyperlocal last-mile practices. Additionally, many large retailers are starting to implement urban micro-fulfillment centers to easily and speedily deliver orders to customers in city areas, oftentimes using electric truck or bike couriers. Parcels can also be sent to automated lockers, or collected through pick-up in stores (BOPIS), curbside pick-up or drive thru models, in order to avoid missed deliveries and wasted trips.

The Keys for Success

Supply chain and logistics leaders can and must contribute to the sustainability cause. Building collaborative supply chains and optimizing operations are crucial contributions to mitigate the global climate crisis. So, how we can go about it? You might be surprised to learn that you have opportunities to make your supply chain more sustainable quite readily available.

First, we must leverage data. measuring the carbon footprint and impact along different steps of the supply chain is vital to take relevant decisions and plan interventions. Supply chain visibility is key: understanding and measuring the impacts of processes from planning and sourcing to returns, allows businesses to revise and activate more sustainable options. A Supply Chain visibility tool can help map the gaps and opportunities in your supply chain to start making changes for a greener business today.

Second, digital transformation is a must. cutting-edge technologies, such as automation and AI, can drastically improve processes efficiency, reducing resource and time efforts and waste. Innovative sustainable practices in packaging, such as sustainable materials or cartonization algorithms, avoid litter and excessive carbon emissions for transport.

Third, we must come together. Large enterprises can take a lead to help guide their smaller suppliers and partners in their decarbonization initiatives. Collaboration and knowledge sharing between the different actors in the supply chain ecosystem are fundamental to achieve sustainability goals.Last but certainly not least, there must be purpose: supply chain leaders must believe in the cause and implement sustainable practices through their business, engaging employees and stakeholders in the process.Supply chain leaders and employees, this is our call, let’s work together to create a more sustainable world!