Cost Optimisation

5 Sustainable & Cost-Effective Supply Chain Practices

December 20, 2023

With high consumer focus and preference around sustainable products, businesses globally are trying to adjust their product offerings, making them more sustainable than before. But with growing awareness among consumers, now it is not just about the product but how it reaches them. Hence, aligning supply chains to be more sustainable has become the need of the hour.

There are surveys that reflect a significant shift in corporate priorities recently. 81% of companies prioritize ethical and environmental sustainability. Also, 83% are keen on being perceived as environmentally conscious and ethical brands. Companies want to prioritize sustainability without the additional burden of added costs. To meet these priorities, supply chains become a crucial lever. 

What is a Sustainable Supply Chain?

A sustainable supply chain differs from the traditional one at its core. It integrates environmental, social, and economic factors into its operations. The core of the sustainable supply chain focuses on making money for the company while caring for our planet.

Key Elements of a Sustainable Supply Chain:

  1. Environmental Responsibility: Optimizing operations to reduce the carbon footprint, such as using eco-friendly materials and implementing energy-efficient practices.
  2. Social Equity: Ensuring fair labor practices and positive community impacts throughout the supply chain.
  3. Economic Viability: Efficient resource management to balance cost-savings with long-term sustainability goals.
  4. Transparency and Accountability: Open reporting and dialogue on sustainability metrics and impacts.
  5. Collaboration: Working with all supply chain stakeholders to find innovative, sustainable solutions.

Integrating these components is the first step toward building a sustainable supply chain, and here are some interesting numbers to substantiate it.

Supply Chain Sustainability: The Need in Numbers

The importance of sustainable supply chains is highlighted by some compelling global statistics:

  • Growing Consumer Class: By 2025, the global consuming class is expected to increase by 75% from 2010, reaching 1.8 billion people. This highlights the urgent need for supply chains to evolve sustainably.
  • Contribution to Greenhouse Gas Emissions: More than 80% of global greenhouse gas emissions are tagged to supply chain operations. This amplifies the need for eco-friendly SCM practices.
  • Impact on Natural Resources: Supply chains account for over 90% of the impact on air, land, water, biodiversity, and geological resources, highlighting their significant environmental footprint.

These figures demonstrate supply chains' substantial role in environmental sustainability. These can be the quantitative reasons for the more logically driven. 

5 Sustainable & Cost-Effective Supply Chain Practices

How to design and manage the supply chain to make them more sustainable. Here are five practices that companies can adopt for this. 

  1. Sustainable Logistics

Companies are increasingly opting for eco-friendly transportation options. Electric and biofuel vehicles reduce carbon emissions and fuel consumption and also reduce costs. Combining it with efficient route planning and shipment consolidation, businesses can significantly lower transportation costs and reduce their environmental impact.

  1. Technology-Driven Supply Chains

Advanced technologies like automation and data analytics optimize operations. Accurate forecasting with the help of big data analytics minimizes overproduction, aligning production closely with consumer needs and reducing process and energy wastage. 

  1. Sustainable Sourcing

Selecting suppliers who provide sustainable materials is crucial. This supports the environment and meets the growing consumer demand for responsible products. Long-term relationships with suppliers committed to sustainability can provide substantial cost savings and a more reliable supply chain.

  1. Green Inventory Management Practices

Adopting green inventory management practices like JIT, EOQ, VMI, etc., reduces waste associated with overstocking and minimizes storage costs.

  1. Circular Supply Chains

Implementing recycling and reuse practices in the supply chain reduces waste and lowers raw material costs. Designing products with recyclability and reusability in mind reduces environmental impact and can lead to cost savings.

Challenges in Sustainable Supply Chain Transition

While sustainable supply chains are the way forward, and we have discussed about sustainable practices as well, there are some challenges in adopting sustainable practices, such as:

  • Investment Costs: Initial investments in sustainable practices and technologies can be a big one-time expense. For example, changing the supplier base for sustainable packaging or implementing a green inventory management practice can be a substantial one-time cost, but the long-term benefits, both environmentally and financially, are significant.
  • Stakeholder Alignment: Ensuring all stakeholders understand and support sustainable initiatives is crucial for effectively implementing sustainable supply chain practices.
  • Continuous Improvement: Sustainability is an evolving process, and it requires leadership sponsorship, regular reviews, and adaptation of practices.

Holocene is Leading the Way in Sustainable Supply Chain Management

By adopting sustainable logistics, technology, and other best practices, businesses can build supply chains that are both environmentally responsible and economically beneficial. Holocene is built to support your company in this transition. Holocene offers tools and insights for a more sustainable, efficient future in supply chain management.