The supply chain and transport industry have long since been the backbone of any business, and in recent years have become more strategic than ever. But the more reports and studies we read, the clearer it becomes… Digitalisation is coming, but far too many of us are still trapped in the ‘traditional way’ of doing things. You know, the types of people that say: ‘’Well, it may not be pretty, but it works, and we can’t afford to take any risks, so why change it?’’ … the inevitable inertia cycles!
Well, this week I re-read a series of industry reports and articles from last year that drove home just how vital this step change is to business, social communities and environmental impact.
Here are my interpretation and thoughts:
An IMechE (Institution of Mechanical Engineers) report estimated that congestion costs the UK economy £13bn per year, with poor air quality being responsible for nearly 29,000 premature deaths a year…
According to this report, up to 30% of all haulage vehicles on UK roads are empty and around 150 million miles are driven unnecessarily per year, all because of a lack of on demand visibility and cooperation between businesses.
But RHA chief executive, Richard Burnett disputed this by saying, “The number of lorries on our roads has hardly changed over the years; nor has empty running, much of which is inevitable.”
Now while I fully take on board that the 30% figure is not representative of the full situation (as it includes petrol and milk tankers returning to base, where there is literally nothing else you could put in them). I can hardly believe that milk and petrol tankers represent a large enough percentage to throw away the over arching research all together…?
Is it just me, or is taking the ‘’We have hardly changed in a decade’’ stance not good enough to displace our ownership in the larger problem? I mean, there is no denying that today’s supply chain leaders have had to fight tooth and nail to get where they are now, but so little seems to have changed in that time, and to succeed during the next technology revolution, leaders will need to be far more forward thinking.
Responsible supply chains: The Challenge and Opportunity
Creating a responsible supply chain, driving sustainable value for local economies, environments and businesses – is a challenge that every supply chain officer faces every day.
Risk is everywhere, but as an industry we are letting fear of the unknown stand in the way of digitalisation and true transformation.
Based on another report by Beyond Supply Chains, business analysts are full of shocking stories of the negative impact commerce can have on society today… from child labour violations, unethical working conditions, toxic product distribution… the list goes on.
But underneath the big headlines there are smaller dramas that seem to perpetuate despite repeated attempts to intervene.
‘’The root cause for many of the world’s worst societal and environmental conditions lies in failures in decision-making and in barriers to implementing improvements.’’
– Making a business case for sustainability – according to the UN Global Compact, many programmes fail because to the business case for investment in sustainability, is too difficult to quantify
– Not identifying and exploiting the full range of options on sustainability initiatives, driving both value for business and society
– Not being able to make the first move in under regulated areas because companies fear the risk of the unknown.
However, against this backdrop of wanting to keep ‘the monster you know’, changing market dynamics are increasing the importance of sustainability efforts:
– Customers are becoming more sensitive to sustainability. With younger consumers demanding sustainable products and practices but, will also pay more to get them…
– Natural resources and rising commodity prices make resource efficiency and waste reduction crucial variables for companies to remain profitable.
– The regulatory environment and NGOs are pushing for more transparency when it comes to socio-economic issues.
– And this in turn, drives non-compliance costs and can create a backlash from the marketplace.
But the facts are clear, companies who want to succeed in this space, will need to act now and look beyond classical supply chain performance…
A new type of responsible supply chain
So, what are the beliefs that companies hold when it comes to sustainability? And how do you steer the course from rhetoric to action?
According to these studies, many companies are pursuing sustainability programmes to either mitigate risk (complying with regulations) or to gain efficiency improvements.
The two key drivers that influence a company’s commitment to sustainability efforts are:
1. Business strategy
Companies that strive for cost leadership tend to be more hesitant when it comes to assuming social responsibility in their supply chains. So, tend to focus more on low-risk eco-efficiencies.
While corporations following a differentiation strategy, are more actively engaged in socially responsible practices.
And unsurprisingly, the higher profit margins associated with differentiation strategies, provide companies with extra room for supply chain innovation and allow them to take more risk when it comes to sustainability and social investments.
2. Supply chain maturity
Companies with mature supply chains have greater transparency, deeper integration across departments, strong collaboration with partners and solid governance structures. These characteristics of a mature supply chain all facilitate the implementation of sustainability programmes and help companies manage the complexities involved.
As noted earlier however, root causes for failures in sustaining societal and environmental conditions often lie in the decision-making process – having full transparency on choices, a clear business case and hands-on implementation guidance.
Now is the time to get it right. The question really is, are we doing enough today, to ensure our future tomorrow?
Interestingly, Grant F. Reid – CEO, Mars doesn’t think so: “Mars has been in business for four generations and intends to be for the next four generations. The only way that will happen is if we do things differently to ensure that the planet is healthy and all people in our extended supply chains have the opportunity to thrive. We must work together, because the engine of global business – its supply chain – is broken, and requires transformational, cross-industry collaboration to fix it.”
He goes on to say that although we as an industry we are starting to make good progress on our own operations, we haven’t yet made enough progress in the broader supply chain. Efforts to address poverty and human rights down the global supply chain have been well-intentioned, but ‘’the current level of progress is nowhere near enough’’ and ” the scale of intervention needs to be much bolder!’’
So, what are the action points we need to take?
The Beyond Supply Chains report researched this phenomenon and identified a set of 31 proven supply chain practices which provide companies with a blueprint of where you can gain both commercial and socio-environmental advantage:
Personally, we couldn’t have summed it up better ourselves. The problem of course is, where do you even start? It is one thing to plan for a digital future, but in reality, we still need to bridge the gap between our current working processes and this ‘automated future’ in which IOT, delivery drones, electric / autonomous trucks are an every-day occurrence…?
But remember, this is a marathon not a race! To finish strong, you need training & practice before the big event, or you could be left behind. Luckily innovative technology providers are enabling the industry to start ticking these boxes (yellow arrows above), right now!
Companies like TGMatrix have built a community where shippers and carriers come together, to break the traditional silos of visibility, and mutually work together towards a common goal. One where a sustainable supply chain is achieved by automating large scale transport processes to ensure 100% delivery visibility, full carrier compliance, maximum asset utilisation, increased cost savings and environmental excellence.
With all the evidence that has been presented to date, when it comes to digitisation, isn’t it time to take a leap of faith for the sake of the greater good?
We would welcome your thoughts and comments!
Thank you & Best Regards
Marketing & Client Development Director
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