Previously, I outlined the opportunities companies can take to implement sustainability protocols. This submission continues to identify sustainability measures companies can take.
When building a roadmap for the supply chain organization, leadership can look at sustainability in two ways: by considering the impact of each operational component in the supply chain separately, or holistically viewing supply chain sustainability as a standalone component. Either approach can yield the desired results, depending on the participation of leadership.
The following sections examine the seven most beneficial areas to review in order to identify processes and standards where opportunities exist to make sustainably a priority:
- Process optimization
- Product lifecycle management
- Reverse logistics
- Consumer communications
- Facility operating costs
This blog highlights procurement, product lifecycle management, and reverse logistics.
Procurement plays a vital role in overall supply chain sustainability. With requirements and plans in hand, procurement can begin the systematic process of sourcing supplies and labor for the execution of those initiatives.
Does the organization as a whole have a mission or vision that relates to sustainability? If the answer is no, then it will be very difficult for procurement to have an impact as the sourcing methods must align with the vision of the enterprise.
Category managers are responsible for establishing vendor relationships and contracts in their area of focus. They must assess suppliers based on these metrics before adding them to their selected list of approved suppliers.
Metrics, such as these, must then be applied when forming vendor alliances:
- Does the supplier have a sustainability plan?
- Does the organization look beyond financial metrics to track fuel
- consumption, amount of plastics incorporated into products, and net emissions?
Strategic sourcing managers are responsible for awarding contracts to suppliers based on the metrics set for the organization. Typical procurement organizations focus on metrics, such as total cost of ownership. Contracts are then awarded to suppliers that can help achieve financial targets and sustainability targets. Vendors should be ranked based on the established metrics that include sustainability.
Purchase Order Management
Buyers make day-to-day operations decisions when sourcing materials that fall outside the planning process. It is critical that buyers make these decisions based on the sustainability rankings set by the category and strategic sourcing managers.
Reporting against metrics is critical to every procurement organization. If an organization intends to focus on sustainability, it must include sustainability metrics in its reporting. Organizations must also hold their employees accountable in the continuous improvement of sustainability metrics, in addition to financial metrics.
Company executives must decide if they are willing to pay more for inputs in the supply chain for higher sustainability scores and determine the right balance between financial success and sustainable success.
The key to creating a sustainable procurement organization is finding the intersection of financial success and sustainable success. Once that balance is established, metrics must be put in place, and category managers, strategic sourcing managers, and buyers must be held accountable for meeting those metric targets.
Vail Resorts is an example of a company that developed an enterprise sustainability plan that focuses on procurement. In 2018, Vail Resorts launched an aggressive plan to contribute zero net emissions and zero waste to landfills. For the plan to work, metrics had to be established for suppliers that aligned with the plan to generate zero emissions and zero waste to landfills by 2030. World-class sustainable organizations focus on metrics that help them achieve their sustainability targets, such as the amount of net waste built into a product.
Product Lifecycle Management
Effective product lifecycle management (PLM) can play a vital role in the overall success of sustainability in the supply chain. Understanding when product lines will be introduced can provide better lead time for engineers and planners to incorporate sustainability goals into the product introduction. In turn, knowledge of the end of a product’s lifecycle can reduce the potential for excess raw materials and finished goods.
There are three key components within a PLM process where opportunities can be identified:
- Sustainable materials: Recycled plastics, lead-free paint, etc.
- Reduced materials: Less material used, lighter weight (shipping), more efficient (MPG of a car)
- Sustainable manufacturing: Less water used, less waste material/scraps
- Five-level framework (system, success, strategic, actions, tools)
- Natural step framework (Framework for Strategic Sustainable Development – FFSD)
- Effectively ramp down procurement and manufacturing/production
- Responsibility on the company to enable the successful reclamation or disposition of project materials that have been discontinued
The figure below demonstrates how to consider all phases of the product lifecycle for sustainability for mobile devices.
Over the past couple of decades, supply chains have changed dramatically through systems, processes, and efficiency gains. In recent years, however, there has been an even greater push for businesses to recycle waste and reuse what they can to conserve valuable resources, as well as potentially lower future operating costs.
Companies compare the disposal of products versus the cost of recycling and reusing products. Sometimes, the cost of recycling outweighs the benefits it produces. Therefore, companies must be proactive in understanding the end-to-end supply chains to maximize the benefits of products being used with the intention to produce goods that can be recycled and reused after initial use and at a minimal cost.
As a growing consumer base becomes more educated about recycling, a common question asked is, “Where does my returned product go? How does the product get reused or disposed?” Given that the consumer drives the demand, companies with a consumer-centric focus should design, build, and repurpose their supply chains with an effort to reduce waste and costs through maximizing recycling capabilities where possible.
It is difficult to say how much accountability companies may have for the disposition of their products in the future. Hypothetically, customers could recycle electronic waste based on a serial number tracked on a blockchain. That may sound farfetched, but a successful reverse logistics program requires visibility into where an item came from, and through directions, how it can be returned or discarded.
Technology can facilitate this process by integrating systems with tools, such as unique identifiers (e.g., RFID, asset tags) and partner integration (e.g., APIs, blockchain). These will be critical foundational components as greater scrutiny on what happens to a product as it reaches the end of its life.
An example of a company that implemented reverse logistics is Dish Network. The company established a receiver reverse and reuse cycle, where it recycles cables, sealant waste, reflectors, set-top boxes, remotes, packaging, and about three tons of alkaline batteries per week, among other materials. This process not only avoids significant impact on landfills, but the ability to recover and reuse receivers helps Dish avoid millions in annual capital costs that would be required to manufacture new receivers.
When a used product gets shipped back to a manufacturer, there is a specific intake process. This process starts with receiving, disassembling parts, and separating those parts by component in an assembly line fashion. Some products might be at the end of their life and sent for scrap, while others will be sent to “clean and screen,” commonly referred to as refurbishment.
Screen and clean is where the product is cleaned thoroughly, validated for operability, and systematically tracked by the old serial number. It is then assigned a new serial number that can be traced to future customer data. Once the product has been cleaned and screened, it is re-packed and palletized with similar products. It is then sent out when a sales order is created.
To learn more about developing and implementing a sustainability program into your business, you can download our guide here. Or, you can download the guide below.