Supply chains are a network of nodes that are required to function in a synchronised manner with each node adding value to the service. It is a complex ecosystem of people, processes, and technologies. Coordination and collaboration among stakeholders become a prerequisite for a sustainable supply chain network. It becomes a necessity for companies to strategically manage and improve environmental, social and economic performance throughout supply chains to optimise resources and processes, increase productivity, save costs, and promote ecological and corporate values; failure in doing which may prove to be the biggest risk of all.
While there is no single solution to create the perfect supply chain ecosystem, here are 10 factors that can be considered to create a sustainable supply chain ecosystem:
- Plan goals for your employees and suppliers
The success of a business depends on well-defined objectives and so is true for supply chain ecosystem. It is a prerequisite to clearly communicate sustainable initiatives to both internal stakeholders i.e. employees and external stakeholders i.e. suppliers. Once the objectives are communicated, take opinions from all stakeholders, conduct appropriate environmental research, and leverage on existing standards among industry counterparts to create compliance documents and risk mitigation plans to enhance applicability, legitimacy, and efficacy of policies. Depending upon code of conduct clauses set goals for your employees and suppliers because without goals employees and suppliers will neither understand the importance of compliance nor will be motivated to follow desired code of conduct, leading to inefficiency of the supply chain system.
- Make the sale to suppliers
Unless the importance of sustainability is clearly communicated to the suppliers, you will never reach your sustainability target. Hence select suppliers through an interview process with qualitative measures rather than quantitative measures. Also, create an open platform to discuss and promote supplier-led solutions. Assessments and audits should be followed with communication of audit results and advises if suppliers are not meeting the goals. A development programme for suppliers will further encourage understanding of reasons for supply chain failures and ways to improve future performance. All in all, when you sell your sustainability targets, back it up with adequate incentives and support too.
- Prepare for worst case scenario
Like it or not, but, every business or service does have risks involved in it. And the companies who have a strong risk mitigation plan sail through the untoward situation more smoothly than the ones who do not have a risk mitigation plan. Needless to say, that a breakdown in your supply chain will not only affect the customers but also raise questions about your credibility. It is mandatory to identify risk areas in your entire supply chain and design risk mitigation plan to deal with the untoward scenario.
- Map your supply chain
Companies should have a comprehensive understanding of the sustainability impacts of their supply chain. They should have an inventory of suppliers and identify the key environmental and social challenges, and accordingly, prioritise sustainability efforts with suppliers. In the long run, it may be profitable to form strong and positive partnerships with selected suppliers rather than having more number of suppliers on board. Prioritizing suppliers have a direct impact on cost, business continuity and regional network of supply chain structure. Thus, mapping the needs of the supply chain in accordance with your business is vital.
- Communicate expectations
As supply chain is a network of different stakeholders, it is important to candidly communicate your expectations to suppliers and customers with regards to your sustainability efforts. It is critical to establish and communicate your corporate values and culture through a supplier code of conduct. This also becomes a great platform to portray your sincere focus on sustainability.
- Baseline your supplier’s performance
Baseline assessment of your suppliersâ€™ performance becomes the starting point for assessing areas of improvement and developing sustainability programmes. Thus, once you have listed out your target suppliers and have set compliance standards, evaluate the suppliers using a simple questionnaire or self-assessment method. The assessment can be based on your companyâ€™s code of conduct or any focal area that is important to your business. Following the assessment, it is vital to communicate the outcome to the suppliers in a constructive way because this will set the pace for all future engagements and openness for improvement.
- Develop training and capacity building programs
Change is constant and when it is done for better it becomes an advantage for the business. Hence, training and capacity building programs are important steps to improve sustainability and motivate process changes across your supply chain. And there are experts available to support you in this regard targeting specific needs of your sector. One of the effective ways for knowledge transfer is to refer the best practices of top performing suppliers. Showcasing the success stories through seminars, conventions, campaigns or online training modules, not only recognises the effort of suppliers but also demonstrates and motivates others to incorporate sustainability initiatives in their chains.
- Drive performance improvement
Regular assessment and monitoring is a must for continuous improvement. So, after conducting the supplier baseline assessment, an audit program should be conducted to measure performance. Self-assessments are generally conducted by corporate groups like procurement or marketing, whereas onsite audits will provide insights to opportunities of improvement in areas of local practices and behavioural challenges which cannot be assessed through questionnaires. The audit is the beginning of improvement process and so has to be followed by corrective action plans by transparent communication of the audit results along with your expectations from suppliers, and developing a capacity-building program. You should understand that in the instance of continuous non-compliance you have to take the step of terminating the supplier. In addition, incentivising compliant suppliers can prove to be rewarding as well as motivating in driving improvement and building greater sustainability.
- Join industry collaboration
Sometimes putting away competition may be more beneficial for the business than engaging in the neck-to-neck race. It is a fact that the complexity of supply chain challenges cannot be solved by individual efforts, thus demanding for industry-wide collaboration. Peer companies with similar supply chains can build a knowledge bank to discuss sustainability strategies, set common standards, best practices, and industry-specific metrics for supplier evaluation. This kind of collaboration will prevent audit fatigue, training redundancy and piles of paperwork for suppliers to meet similar requirements from their customers resulting in increased productivity, and efficiency.
Adhering to these key factors may appear humongous and complex, take the time to understand, discuss, and strategize your action plan. Seek for expert advice and learn from performing supply chain models. At the end, act to build a sustainable supply chain network, because inaction will lead to failure.