Understanding the State of Supply Chain Sustainability
- Sustainability
The emphasis on sustainability within supply chains across industries has increased in recent years. Today, companies across the globe report on sustainability efforts and progress each year and set goals to reach ambitious environmental and social sustainability targets. This increased focus has prompted questions regarding how sustainability practices are interpreted and understood. How do different demographic groups (i.e., gender, language, location, age, and industry) interpret the current state of supply chain sustainability? Have the long-term implications of COVID-19 affected companies’ commitments to supply chain sustainability? Our analysis used response data from the 3rd Annual State of Supply Chain Management Survey and context gathered through supply chain executive interviews to answer the two main research questions. After slicing the survey response data into demographic categories – gender, age range, region, survey language translation, and industry – we performed non- parametric Mann-Whitney-U and Kruskal-Wallis ANOVA tests to see if the different groups interpret sustainability commitments significantly differently. When testing within single demographics, results showed significant differences in responses by demographics. This seemed to explain some of the difference in how people interpreted supply chain sustainability; however, when isolating groups further, this became less apparent. Upon isolating the gender, age range, and location demographics by major industries, fewer responses showed significant differences. From this, we can conclude that comparisons of sustainability guidelines and practices should be industry-specific, rather than specific to other demographics such as gender, age, or location. Our capstone results could provide the basis for future research to understand the variations in how different groups of people interpret supply chain sustainability within the same company, industry, or outside of an organizational setting entirely.
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Supply Chain and Logistics Management
Supply chain management (SCM) and logistics are closely related but distinct.
SCM involves handling all activities related to the flow of goods and services. This includes everything from getting raw materials, converting them into products and delivering them as products to customers. An organization collaborates with suppliers to ensure the product journey from raw materials to end users is seamless. 1
On the other hand, logistics is a fundamental component of SCM. It deals with the physical movement and storage of goods within the supply chain. The goal is to ensure products are delivered to the right customer at the right time and in the right condition. 2
Effective supply chain and logistics management reduces costs. It also improves production efficiency.
Read on to discover the key components, strategies and optimization techniques that make supply chains efficient.
Key Components of Supply Chain Management
Supply chain management activities are complex, but they can be broken down into five basic components:
Planning involves forecasting demand, determining the required material to make a product and creating a production schedule. Essentially, it’s figuring out what needs to be done and when. Big enterprises often use enterprise resource planning (ERP) software to streamline this phase of supply chain management. 3
Sourcing entails collaborating with suppliers who provide raw materials throughout the manufacturing process.
Different industries have varied sourcing requirements, but generally, business leaders should aim to partner with suppliers who meet the following conditions:
- Offer fair prices
- Provide parts that meet specifications or quality standards for the production of a particular item
- Have a proven record of delivering resources on time, especially if the raw materials are perishable
- Are flexible and reliable in emergencies such as during a sudden increase in demand
Considering the above requirements can help supply chain management professionals build effective supplier relationships critical for long-term business success. Additionally, optimizing inbound logistics–the transportation processes involved in the flow of resources from suppliers into an organization–is vital. 3
This is the core of supply chain management, where an organization uses its systems, workforce and machinery to transform raw materials into finished products. This may involve manufacturing, assembly, testing and packaging. 3
Distribution or Delivery
Distribution is getting the finished products to the customer (outbound logistics). This involves warehousing, transportation and order fulfillment. Effective distribution channels ensure products reach consumers on time without any physical damage.
Additionally, organizations should strive to diversify their delivery methods. Doing so ensures that alternative channels can be used when one distribution method becomes unavailable due to unforeseen events such as natural disasters. 3
Return Management
Return management deals with customers' return of products, either due to defects, damage or simply a change of mind. This involves establishing return policies, managing reverse logistics processes and implementing strategies to increase customer satisfaction. 3
Common Supply Chain Strategies
A supply chain strategy aims to optimize the flow of goods from raw material suppliers to the end consumer. The strategies below can help businesses minimize costs, stay competitive and streamline their global supply chain management:
- Lean Supply Chain Strategy: This approach maximizes efficiency and minimizes waste. Its five principles (value, value stream, flow, pull and perfection) help companies create high-quality commodities, only produce what’s needed to avoid overproduction and eliminate bottlenecks so that supply chain processes occur smoothly and products reach customers swiftly. 4
- Agile Supply Chain Strategy: This strategy emphasizes making supply chains flexible or highly responsive to changing market dynamics. It allows companies to react quickly to unexpected events, such as sudden shifts in customer demand. Faster response to changes helps companies adjust production based on what’s happening now. 4
- Hybrid Supply Chain Strategy: This approach combines lean and agile strategies. It aims to make a supply chain both flexible and efficient. 5
Techniques for Logistics and Supply Chain Optimization
Below are the top supply chain and logistics optimization techniques:
Efficient Inventory Management
Inventory management involves procuring, storing, using and selling an organization’s inventory (raw materials and finished products). There are multiple techniques for handling these processes affordably and efficiently.
One of them is Just-in-Time (JIT) inventory management. It involves ordering raw materials only when they are needed for production or sale. This level of inventory control keeps the amount of inventory on hand to a minimum, reducing storage and insurance costs. It also eliminates the expenses of storing and discarding excess inventory. 6
Another technique is economic order quantity (EOQ), which helps companies establish their optimal inventory levels. EOQ enables organizations to identify how much raw materials or finished products to hold to maximize inventory while keeping storage costs down. It also reveals how often a business should reorder inventory to avoid running out of stock. 6, 7
Reliable Demand Forecasting
Demand forecasting involves predicting how much of a product customers will want. When done accurately, it helps organizations understand demand patterns and then use the insight to adjust their production, inventory and distribution strategies accordingly. 8
With the increasing pressure to make demand planning and forecasting more accurate, multiple companies rely on predictive analytics solutions powered by artificial intelligence (AI). AI-driven supply chain analytics solutions can reliably identify patterns in customer data and reveal insights to anticipate the future more precisely. According to McKinsey, AI-powered forecasting in supply chain management can reduce prediction errors by up to 50%. 9
Transportation Optimization
Optimizing outbound logistics keeps organizations on top of product movement in the supply chain and enhances customer service. Companies can achieve this by implementing a transportation management system, such as Freightflow.
The software creates transparency by allowing organizations to track inventory throughout the supply chain. As a result, they know exactly where their shipments are at all times and can share the details with customers. That way, enterprises can quickly provide consumers with updated delivery dates if there’s a delay or any other issue in the supply chain.
The technology is also useful for a business that delivers products through multiple modes of transportation. With it, it’s easy to track commodities transported by air, road, and sea—all on a single platform. 10
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- Retrieved on March 19, 2024, from ibm.com/topics/supply-chain-management
- Retrieved on March 19, 2024, from forbes.com/sites/katevitasek/2023/08/18/whats-the-difference-between-logistics-and-supply-chain-management-and-why-it-matters/
- Retrieved on March 19, 2024, from investopedia.com/terms/s/scm.asp
- Retrieved on March 19, 2024, from dfreight.org/blog/supply-chain-strategy-a-comprehensive-guide/
- Retrieved on March 19, 2024, from inboundlogistics.com/articles/hybrid-supply-chain/
- Retrieved on March 19, 2024, from investopedia.com/terms/i/inventory-management.asp
- Retrieved on March 19, 2024, from shopify.com/retail/economic-order-quantity
- Retrieved on March 19, 2024, from gep.com/blog/technology/how-to-plan-supply-chain-demand-forecasting
- Retrieved on March 19, 2024, from mckinsey.com/capabilities/operations/our-insights/ai-driven-operations-forecasting-in-data-light-environments
Retrieved on March 19, 2024, from blog.hubspot.com/service/transportation-management-system
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Supply Chain Management in the Modern World Essay
Supply chain management in the modern world demands a new approach towards shipping not only to reduce production costs but also to be reasonable in terms of fuel expenditure. Indeed, “do not ship air” and “do not ship water” are now the foundational principles of many successful businesses. These ideas indicate the need to organize product transportation so that there will be minimum or no empty space and unnecessary items will not be placed. The essential elements of Porter’s value chain, which views business activities in systems, are inbound and outbound logistics as well as internal operations (Mind Tools, n.d.). The logistics part ensures that the storage and transportation of raw items and ready products are performed in the most efficient way (Mind Tools, n.d.). It means that the maximum number of required commodities should be sent in one delivery.
The same logistics and organization principles used nowadays were relevant in the past. One such example is the Silk Road, which was one of the major supply chains and cultural exchange sites of the ancient and medieval world (Coates, 2012). Specifically, merchants and agents sold various valuable products along the road or delivered them to foreign states (Coates, 2012). Since transportation took a relatively long time during that period, people strived to utilize the available space effectively. If individual merchants had to consider practical packing, the leaders of caravans were obliged to think about the safest routes and transportation methods (Mhugos, 2019). For instance, they had to choose camels wisely depending on the climate of the places they traversed (Mhugos, 2019). Overall, the supply chain management of the past and present have many common features, especially regarding the wise use of space and routes.
Coates, R. (2012). The Silk Road – The first global supply chain . Supply Chain. Web.
Mhugos. (2019). Ancient Silk Road – First global supply chain . SCM Global. Web.
Mind Tools. (n.d.). Porter’s value chain . Web.
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IvyPanda. (2024, May 6). Supply Chain Management in the Modern World. https://ivypanda.com/essays/supply-chain-management-in-the-modern-world/
"Supply Chain Management in the Modern World." IvyPanda , 6 May 2024, ivypanda.com/essays/supply-chain-management-in-the-modern-world/.
IvyPanda . (2024) 'Supply Chain Management in the Modern World'. 6 May.
IvyPanda . 2024. "Supply Chain Management in the Modern World." May 6, 2024. https://ivypanda.com/essays/supply-chain-management-in-the-modern-world/.
1. IvyPanda . "Supply Chain Management in the Modern World." May 6, 2024. https://ivypanda.com/essays/supply-chain-management-in-the-modern-world/.
Bibliography
IvyPanda . "Supply Chain Management in the Modern World." May 6, 2024. https://ivypanda.com/essays/supply-chain-management-in-the-modern-world/.
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Supply Chain Management in the Modern World Essay. Supply chain management in the modern world demands a new approach towards shipping not only to reduce production costs but also to be reasonable in terms of fuel expenditure. Indeed, "do not ship air" and "do not ship water" are now the foundational principles of many successful ...