What is the most important indicator of success in your supply chain operations? Is it throughput or cost per unit? How about order accuracy and returns? Maybe labor hours gives you the best barometer these days? These are just a few common factors. But, sustainability is quickly becoming a critical component of warehouse management and supply chain, and it really deserves serious consideration as a KPI in and of itself.
Perhaps going all the way back to the Industrial Revolution, the name of the game was making and delivering goods faster and cheaper than the competition. The ends justified the means. While speed, cost, and efficiency will always drive business, how businesses get the job done matters more today than ever before.
Let’s take a look at some of the top reasons why sustainable supply chain is far more than a trend.
Pushing Upstream Supply Chain Change
Sustainable practices could be the difference between winning and losing huge deals in the near future. A Forbes article illustrates that more and more of the world’s top organizations are not only looking in the mirror for greener practices, they’re taking a hard look at suppliers too. According to the article, 115 businesses (combining for over $3 trillion in purchasing power) say they’re leaning on suppliers to act with more environmental responsibility. The 5,500 suppliers that reported emissions in the study average about five-times the greenhouse gasses compared to the 115 companies partnering with them.
That’s a scary picture. Fortunately, placing pressure on upstream suppliers brings results. Forbes cites a reduction of 633 million metric tons of carbon dioxide among these suppliers.
Eco-friendly no longer applies to hippies and niche businesses manufacturing hemp straws. Whether you’re a manufacturer, CPG, 3PL or otherwise, there’s a good chance that your big-brand customers will want to see emissions reporting as well as other environmental barometers such as water risks or lumber consumption.
If customers aren’t asking about your sustainability, investors will. Investopedia lists ESG, or Environmental, Social, and Governance criteria, as a growing set of standards for socially conscious, green-inclined investors. ESG holds the most popularity with younger investors, and according to the US SIF Foundation, there was about $11.6 trillion in assets chosen with ESG as a criteria at the beginning of 2018. It’s been a long time coming, but sustainable supply chain is going mainstream in a big way.
Cutting Carbon, Cutting Supply Chain Costs
The color of money just so happens to be the same as sustainability: green. Forbes also mentions that the reduction of greenhouse gasses led to $19.3 billion in cost savings among the 5,500 companies reporting emissions. For those of you wondering, that’s an average of $3.5 million in savings per company, while saving the planet.
We’ve seen this in action. Adore Beauty recently told Logistics Magazine that not only was sustainability a key part of selecting HighJump as a partner, it’s core to their warehouse operations. By upgrading from a paper-based system to completely paperless picking operations that utilize RF scanners, the online cosmetics retailer saved about 631,500 sheets of A4 paper per year for picking operations. Further, the company projects about 26,000 kilograms of reduced cardboard annually thanks to new boxing operations through its WMS. The company lives by its values, customers are delighted, cost savings can be invested in driving additional value to shoppers, and their carbon footprint dropped dramatically. Not bad for Australia’s top online cosmetics store.
These are just a few examples. But, as you can see eco-friendly supply chain operations and warehouse management can also bring new business opportunities and real results on profitability.
Supply Chain: The Next Generation
Similar to the generation of investors placing value (and dollars) on sustainability, other millennials in the workforce care about their work environment and green-inclined company culture. In the same article, Adore Beauty says that their warehouse staff is entirely millennials, and being a part of an eco-friendly company is important to their happiness.
Today, when businesses struggle to retain warehouse workers, they’re compelled to incentivize with higher wages and other perks. It’s refreshing (and cheaper) to retain talent through culture and sustainability.
Going back to our earlier reference to the end justifying the means, eco-friendly doesn’t mean compromising productivity. Adore Beauty achieved three-times the picking speed when replacing their paper-based system. Businesses need to innovate in order to reduce environment impact while driving fast, efficient order fulfillment.
For some, reducing their impact on the planet may require additional investment or approach their supply chain challenges from different angles and philosophies. But, the world is turning, and greener businesses appeal to people in a way that opens new opportunities. So, whether it’s for closing new business deals, attracting new talent, improving profitability, or simply saving the world, consider what adopting sustainable supply chain practices would mean for your business.