If you are running or working in a supply chain today, you have witnessed the rise of global mass production driven by increasing consumer demand. This era has introduced new business and supply chain practices such as outsourcing, offshoring, and economies of scale – to name a few. It has created global corporations that have sold standardized products in every corner of the world. More importantly, in this era, we have seen the growth of emerging economies, which will reshape business for years to come.
Markets are changing, and we are also seeing increasingly conscious consumers. This means our customers are now more likely to be asked: Where are your products sourced?
Can businesses show that they are engaging in sustainable business practices? I believe sustainability will become a business imperative, because sustainability means to act and make decisions with a long-term emphasis. While today we can fulfill some of their expectations with programs offered by our corporate sustainable responsibility colleagues, we simply can’t address our customers’ expectations at scale. We should not continue to treat sustainable business practices as separate initiatives.
Just thinking “green” won’t be enough; you need to start embedding sustainable business practices at SCALE. Yet, before you make any disruptive changes to your supply chain, you should ask yourself whether embedding sustainability makes sound business sense. Ask questions like:
- Is this strategy going to reduce my costs?
- Is this move going to increase my revenue by expanding my addressable market or solution portfolio?
- Will this help me differentiate myself from my competition?
The use of innovative technology enables you to achieve three business outcomes. First, it can reduce waste and the costs of excessive inventory, transport, and disposal. Second, it can help you expand your services portfolio by utilizing Big Data. Third, you can obtain new unique selling propositions to make your offering stand out in a crowd.
Systematic cost savings: Additive manufacturing, demand planning
Lowering CO2 emissions by saving fuel represents only a fraction of your overall cost-saving potential. Many businesses are overproducing just to operate plants at full capacity. By more accurately predicting demand, you can reduce waste of raw materials and finished goods. You can also optimize your supply response through better supply chain design and relying on new technology such as additive manufacturing (3D printing), which produces lighter-weight products and lowers your transportation costs. With machine learning, you can combine shipments and reduce empty truckloads while offering your customers higher service agreements. As you save the cost of logistics on goods that exceed their demand, you can also save the costs of carrying excessive inventory.
Product and market development through improved logistics: Digital twins, IoT, predictive maintenance
The ability to create a digital twin of your product and predict its servicing needs can help you reduce maintenance costs while extending the product’s life and reducing downtime. An important first step is to store technical and business documentation about your product in a digital form so your sales and service teams, customers, and authorized partners can access it from anywhere. Then, using data delivered by sensors, you can derive meaningful insights so you can predict service or replacement needs. Finally, you can combine the data on the product and the sensors with mathematical and physics-based models that help you create a high-fidelity twin of the product.
These technologies enable you to digitally inspect your product and repair it. Without this visibility, you run the risk of equipment breaking at inopportune times and delaying the delivery of goods. Instead, targeted logistics help ensure you replace or repair only what is needed for the equipment to run flawlessly. This frees your resources for more strategic tasks such as offering remote support using augmented reality or inventing data-driven service packages.
Differentiation on the go: supply chain visibility, track, and trace
As customers expect customized products, they also expect you to provide visibility into how these products were sourced, what materials went into production, and the products’ and components’ end-of-life scenarios. When I ask business leaders how much of a certain component has been used in their product, where it was sourced, and how they think it can be recirculated into the economy, they often don’t know the answers. They would need to search through endless streams of data, which doesn’t always deliver the necessary information.
Technologies that enable you to track the material composition of your product can better equip you to offer complete transparency to and build trust with your customers. As you use data to know how your product is being used and predict its end of life, you can also offer a path for it to reenter the economy. If today’s logistics can be used to facilitate the tracking and sustainable disposal of products, you can win customers for life.
These are just a few proof points that show that sustainable supply chains are not just a viable business strategy but can help business leaders grow their business and delight their customers with innovative products.
I truly believe that by creating digital supply chains and utilizing the new technologies that are available today, more businesses will find that there are solid business cases for creating and running a sustainable supply chain at scale.
To learn more about the Network of Digital Twins, register to read the Infobrief by IDC and join an interactive session featuring Jeff Hojlo, program director, Product Innovation Strategies at IDC, and Hans Thalbauer, senior vice president, Digital Supply Chain & Industry 4.0 at SAP, to get inspired about how best-in-class companies are reinventing their supply chain. Register here.