How ‘demand’ chains could increase profits while fighting climate change

If we want to save the planet, we must change the way we move goods around it. We must create more sustainable supply chains.

In their 2021 study The Sustainable Supply Chain Paradox: Balancing the Bottom Line with the Green Line, researchers from Oxford Economics and SAP wrote, “The moment for setting small-scale sustainability goals has passed. For companies across sectors and around the world, creating and maintaining greener supply chains is an increasingly urgent priority. “

With enough commitment from the many diverse companies (and even consumers) that make up today’s supply chains, we could in one fell swoop make the world a better place for future generations. By turning supply chains into demand chains, fueled by a data-driven understanding of what consumers actually consume, why, and where, companies could make less, sell more, and minimize the deleterious effects of supply chains that operate mostly in the dark. In a demand chain, the customer initiates the flow of goods, not the manufacturer, giving sustainable companies not only the ability to match supply with demand but also the opportunity to build lasting, profitable relationships with like-minded customers both before and after what used. to be a one-off transaction.

A demand chain requires visibility – a digital, holistic view of materials, products, and packing as they move from design and manufacturing, through distribution and sales, to use / reuse / recycling. When companies can “see” where their supply chains fall short, two things happen: Profits increase and the planet benefits. No more choosing one over the other in a corporation’s drive to be more sustainable. Profits, planet, in perfect alignment.

The current state of supply chain inefficiency

Unsustainable inefficiencies and waste across all types of supply chains have a significant impact on the planet. Consider:

  • According to the Food and Agriculture Organization of the UN, food systems consume about 30% of available global energy, 38% of which goes into producing food that is either lost or wasted. Moreover, the World Wildlife Federation says the production of wasted food in the United States alone is equivalent to the greenhouse emissions of 32.6 million cars.
  • In the US, according to calculations by the Environmental Capital Group and retail solutions provider Optoro, product returns lead to about 16 million metric tons of carbon dioxide emissions – the same amount of carbon pollution produced by 3 million cars per year.
  • According to the UN Environment Program and the Ellen MacArthur Foundation, the fashion industry is responsible for 10% of carbon emissions worldwide. If it can’t operate more sustainably, the industry’s greenhouse gas emissions will surge more than 50% by 2030.

Such inefficiencies aren’t just environmentally unsustainable, they’re flat-out wasteful and a drag on companies’ overall success. Notably, the MacArthur Foundation, while discovering that less than 1% of used clothing is recycled annually, estimated $ 500 billion is lost every year when clothing is barely worn, neither donated nor recycled, or ends up in a landfill. Aligning production with consumption and monitoring the useful life of products can help minimize such waste.

The solution to such problems is greater visibility – the ability to accurately observe products throughout their lifecycles. The critical enabler of greater visibility is digital technology, including the Internet of Things, cloud-based data collection, and analysis.

The wrong supply chain for the times

Professional services giant Ernst & Young (EY) reported recently, “Companies today find themselves with supply chains designed for a world that no longer exists. [they] need greater visibility, agility, and flexibility to address today’s crises and prepare for tomorrow’s. ” During an EY webcast in April 2020, participants cited end-to-end visibility as the number one factor in creating a successful supply chain, but only 6% were confident their systems and capabilities were up to the challenge.

That’s because the old ways of digitizing supply chains and creating visibility have been expensive and focused on the places supply chains converge – factories, warehouses, distribution hubs, stores – rather than on the products moving through those places.

When companies integrate discrete, self-powered, inexpensive digital tags into everything they make, they have a better understanding of how they move through the supply chain, where they are at any point in time, and – significantly – how they’re consumed. In the case of clothing, a recent study by The Sustainability Consortium, Arizona State University, and the University of Arkansas found that digital tags in garments could have a major impact on the industry’s inefficiencies and waste. Among the benefits are a better understanding of how their fashion designs impact consumer use and a greater ability to forecast demand.

Such digital tags can also sense environmental conditions, especially in the shipping of food, to minimize unsustainable waste. They’re affixed like stickers to products, packaging, containers, and more, making everything in the supply chain “smart.” Each tag connects wirelessly to an existing or purpose-built infrastructure of low-cost, Bluetooth-enabled wireless access points. Each has sensor interfaces to detect location, temperature, and more and then communicate that data to the cloud, where companies collect and analyze the information to make decisions.

Ripe for quick wins in boosting sustainability

Whether it’s clothing, food, consumer packaged goods, pharmaceuticals, or something else, this kind of visibility – knowing where products and materials are at all times – can help companies maintain proper inventory levels, anticipate supply and demand, ensure sourcing from sustainable partners, Develop fewer, shorter, and more direct delivery routes to save energy, and reduce waste throughout the supply chain. This, in turn, can help minimize a supply chain’s carbon footprint.

In their joint study of sustainable supply chains, Oxford Economics and SAP found only 12% of respondents said they’d made progress in logistics and delivery over the past three years, and only 19% expected to be in the next three.

By imbuing everything in a supply chain with digital intelligence, companies can truly revolutionize the manufacture, distribution, sale, consumption, and reuse of products. But more significantly, such efforts won’t just translate into healthier profits, they may just save the planet.

Steve Statler is Senior Vice President of Marketing of Wiliot.

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