The supply chain in 2024. Part three: Sustainability and technology

A man in a navy suit and a woman with a light grey blazer and white shirt, holding a tablet, standing in a warehouse

In a turbulent landscape of energy crises, volatility and inflation, resilience will be a defining factor for supply chains and logistics in the coming years. As organisations work towards building greater resilience in their supply chains, the demand for technology and the pursuit of sustainability stand out as major factors that organisations must address to achieve their goals for greater resilience.

It’s a landscape rich with opportunity, but not without risk. Drawing on research from our recent supply chain survey and working in conjunction with Professor Omera Khan, Founder and Director of OQK Associates Ltd and global thought leader in the sphere of supply chain risk management, we’ve put together a four-part series exploring supply chain risk in 2024.

The sustainability problem

In 2018, sustainability wasn’t one of the major ways organisations gained a competitive advantage – in fact, it was one of the lowest factors ranked. But times have changed. Customers and employees alike are looking for organisations to step up with regards to environmental, social and governance (ESG) issues. And the business community is listening.

Speaking with over 800 business leaders in our network for our Transformational Leadership report, climate change and sustainability was identified as one of the key challenges facing organisations. And it’s one that will only increase, with the data revealing that 18% think it’s a problem now, but 28% single it out as an issue over the next five years.

Similarly, environmental concerns are one of the top three factors having a direct and significant impact on the supply chain in terms of risk for three in 10 respondents, according to our supply survey.

While it’s a challenge that poses significant risk, it’s one that organisations are already taking steps to address. We discovered that three in 10 have seen their boards change how they operate with regards to this issue, citing that sustainability considerations have become embedded into decision-making processes over the past two years.

“Sustainability issues are only going to demand more from supply chains,” says Omera Khan. “And it will become a bigger part of the decision-making process, especially as it’s driven not just by demand from customers and competitors, but by regulations.  The pace of regulations being introduced to global economies is increasing. The EU is driving the global momentum, but the rest of the world is also following fast because of the interconnectedness of global supply chains. Both consumers and regulatory forces will drive companies towards a more sustainable and circular business models.

The circular revolution

Efforts to improve the long-term viability of their supply networks are leading major supply chains to lean into the circular economy. This is potentially going to be a significant trend towards the end of this decade, as the move from linear to circular economies gains traction. It has the potential to fundamentally change how organisations do business – and reduce environmental impact and establish and foster resilience in the process.

“At a macro level we can expect to see manufacturers and retailers looking to reclaim materials for re-use or repurpose and reduce waste and raw material extraction,” says Omera Khan. “A growth in reverse logistics is undoubtedly on the cards and presents a huge opportunity. As organisations seek to capitalise on it, circular supply chains will be in more widespread use across all verticals, giving rise to new business models and mechanisms for returning products, waste, and materials.”

Technology in this scenario is crucial, offering visibility into the origin of products and materials, insight into its impact on the environment, and the ability to spot and flag ethical transgressions throughout the network.

Technology is a great enabler – when deployed strategically

Technology is indeed a great tool for enabling better working practices and building resilience: it can improve visibility, boost the ability to detect and respond to disruptions; streamline processes; give real-time insights and access to product availability; contribute to a fast and reliable customer service; and more. However, poorly implemented it can be a barrier. This is particularly the case as more and more organisations invest in technology without a targeted action plan. “The amount of information grows and can become self-defeating,” explains Omera Khan. “But there can also be challenges with trying to maintain the status quo. Legacy systems and siloed or poorly managed data, for example, are prohibitive.”

It makes sense that digitising the supply chain and automating processes, as well as data, are singled out as some of the most significant risk factors facing the supply chain today. With tech capabilities evolving and transformative demands on organisations increasing, there is a risk for organisations to want to pursue any and all data and digitisation initiatives. However, for investments in tech to be successful, organisations must understand the what and the why of their data needs – and maintain focus on them. Supply chain managers can help here.

“You don’t need to reinvent the wheel – start with the basics and focus on progress not perfection,” suggests Omera Khan. “To determine what kind of data you need, you have to be clear on your corporate strategy and determine what you don’t know. You then have a chance of figuring out what you need to know in order to make the right decisions. A highly focused approach to data, prioritising key information and metrics, can aid faster and more insightful decision-making, which will be the foundation of future supply chains.”

We can also expect to see more responsive and consumer-centric supply models in the near future. Real-time data and end-to-end visibility will enable organisations to meet consumer demand at the local and regional level, tailoring inventory accordingly and sparking an evolution in last mile delivery – not to mention increasing overall supply chain resilience. Given these benefits, it’s no surprise that two-thirds of those we spoke to are pursuing automation as a solution.

Visibility is key

Transparency and visibility are key strategies for mitigating risk in today’s supply chain. 95% of respondents are working on strengthening relationships and increasing transparency with suppliers or buyers, for example. A further 75% are currently using or planning to use digital solutions or monitoring tools in order to gain supply chain visibility and identify areas of risk.

In fact, tools or applications that improve supply chain visibility/tracking are the top technological innovations being considered to improve efficiency and guard against disruption.

“There are lots of changing dynamics and requirements in supply chains at the moment, so we’re at the start of a new learning journey of what the future of supply chain is and will be,” says Omera Khan. “The more information and visibility we have, the better. Armed with that and with well-executed technological innovations, we can start moving away from the supply chain being a cost centre to actually creating value. And not just value for the end consumer, but value for the planet.”

By investing early and investing well, organisations can optimise their working practices and data processes, stealing a march on their competition. Not only this, but it will go a long way to ensuring that an organisations supply chain is sustainable now and in the future. However, a clear strategy with goals and objectives clearly defined at the start of the investment is critical, without this technology could become a barrier rather than an enabler of a shift to a more sustainable supply chain.

So, what does the future look like for the supply chain, and how do organisations prepare themselves for what’s coming? Find out in the next and final article in the series.

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