How to achieve a sustainable supply chain planning?
Sustainability just means going green, isn’t it?
Insights on Sustainability
Clearly, sustainable supply chains are becoming continuously more significant for executives and supply chain management, but why?
Governments and companies around the globe are working intensely on clear models and practices to reduce emissions of greenhouse gases and focusing on social sustainability. Rules and regulations by governments dealing with this green transformation, human health and safety, encouraging companies to consider environmental, societal and socio-economic concerns in their supply chains. But it is not only pressure put on enterprises to turn around, but also a change in mindset of society and business leaders. The target is to operate in an environmentally mindful and responsible manner.
Let us go back again to a classical supply chain planning approach based on usual supply and demand constraints, balancing constraints, capacity constraints, and many more. The focus is often on costs of materials, production, transportation, asset usage, maintenance, and so on. But is this really sufficiently addressing the challenges in today’s world? Rather not!
Yet, the question remains, how could a more integrated approach for sustainable supply chain planning look like? Firstly, you need to include environmental and social performances into your model. Secondly, you need to offer decision makers the chance to make choices and use alternatives.
Basically, a company needs to consider three valid flavors to achieve a sustainable and profitable supply chain:
It is based upon social science focusing on production, distribution and consumption of goods and services, mainly based on the demand and supply model. I wonder, if this approach can emphasize economic sustainability on top? Surely it can!
Enable to consider a multistage procedure in planning showing the impact on the environment and greenhouse gas (GHG) emission of each level of the supply chain. For example, effectively reduce waste and scrap. Plan your portfolio best long-term by considering environmental impact to reduce carbon footprint.
This means to incorporate social behavior into the supply chain. This does not only improve customer satisfaction and loyalty, but it strengthens the corporate image and reputation and ultimately leads to higher company profitability. For example, you can ensure good working conditions in your company and ethical supplier selections and operations by considering human impact on business.
But how could SAP Integrated Business Planning support you to become more sustainable?
SAP IBP can help your company to reflect social and environmental factors in supply chain in many ways. Three key capabilities supported by SAP IBP are:
Accurate demand forecasting enables you to prioritize products by their ecological footprint and optimize inventory positioning which reduces transportation emissions and resources consumption.
Using an optimized demand and supply matching reduces cost, waste and emissions.
Visibility into entire supply chain ecosystem ensures overall transparency and optimal management of supply chain disruptions allowing carbon footprint tracking as well.
Let us have a look into an example how a company can use SAP IBP to provide visibility regarding greenhouse gas emissions for long-term production plan.
Display greenhouse gas emissions of your plants on a geographic map.
Define alerts and react on exceptions.
Create scenarios to simulate changes and compare the outcomes.
Beside that, SAP IBP helps your company to listening to the voice of the customer even in early stages of the planning. Considering the environmental and human impact of the products' journey through the supply chain with what-if analysis and scenario planning. Identify sustainability issues early in planning with exception-based planning. Reflect social responsibility in collaborating with suppliers via a business network.
At the end, one can clearly outline that sustainability in a supply chain is beyond going green!