Use Sustainability Mandates And Investments To Drive Supply Chain Innovation
The obligation to comply with supply chain regulations from the EU Supply Chain Act to a draft of US supply chain due diligence laws is spurring firms to rethink sourcing, supply chain, manufacturing policies, and supporting applications. In addition, the US and the EU alone are currently spending $1.4 trillion on environmental sustainability and climate adaptation. There’s also $17.5 billion in VC funding for green tech, and the global market for green financial instruments is $658 billion. These regulatory and investment initiatives provide your firm with opportunities to reassess your supply chain to focus on enhancing sustainability of critical processes such as monitoring supplier labor practices and diversifying supplier geographical risk. Position your firm for successful supply chain sustainability transformation by:
- Prioritizing regulatory compliance. You must adapt to escalating regulation and rationing. Manufacturers should consider platforms like Makersite or Exiger to ingest data from millions of sources to illuminate risk and cost-reduction opportunities across multiple tiers of suppliers, components, and/or raw materials.
- Balancing the environmental impact of emerging technologies. Many tech leaders are eager to apply emerging technologies (e.g., edge computing, IoT automation, blockchain, and 3D printing). to advance supply chain transformation and achieve environmental sustainability goals. These emerging technologies can aid in the observability of new data, increase resource and process efficiencies, and help reduce carbon emissions. Investment in software-defined microfactories will increase 20% this year to reduce environmental impact, meet regional needs, nurture local supply chains, and slash time to market. However, be sure to evaluate the necessary computing power and scale of implementing these technologies to ensure their benefits can offset the size of their carbon footprints and volume of waste.
- Rethinking data architecture. Complying with new regulations (e.g., around carbon accounting) demands competence in mixing the traditional rigor of data management in enterprise applications like DOP with more probabilistic data related to likely provenance or potential risk. Consider support for sustainability in solutions like Microsoft’s Supply Chain Platform or SAP’s sustainability control tower, or the ability of Green Tokens to amplify your own core enterprise applications.
- Redesigning the supply chain for rationing. Consider the role of platforms like Circular to help reuse materials and recycling to mitigate the shortage of rare earth minerals. At the same time, adapt your CX strategy to anticipate shortages, expect energy rationing, and consider the role of 3D printing in developing a low-carbon footprint supply network.
- Making the business case. Benefits from improved supply chain management differ by industry and even by company. From a sustainability perspective, ensure that you account for carbon footprint benefits including placing inventory in the network efficiently ahead of anticipated demand and close to customers to reduce carbon footprint. Other benefits include increased revenue and margin because of reduced stockouts or shorter lead times, accelerated inventory turnover, and reduced inventory carrying costs.
To successfully navigate this process, here are a few steps you can take:
1. If you are a Forrester client and want to learn more about this topic, please schedule an inquiry or guidance session with us.
George Lawrie, VP and Principal Analyst
Michele Pelino, Principal Analyst
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