The Business Case for Building Sustainable Supply Chains

The Business Case for Building Sustainable Supply Chains

Sustainable supply chains aren’t just better for the world; they also grow long-term value for your business. 

sustainable supply chain doesn’t just have a positive impact on the world. It’s also good for business and helps to support long-term growth. In light of both compliance standards and consumer preferences, non-sustainable supply chains create business risks, including higher chances for reputational damage and supply chain disruptions due to ecological collapses or international embargos. 
 
Building a sustainable supply chain helps create, grow, and protect long-term sustainable value for your business and all stakeholders involved in bringing your products to market. This guide looks beyond environmental sustainability and explains the business advantages of sustainable supply chains.

1. Avoid supply chain disruptions 

When you can clearly see what’s happening in your supply chain and trace the chain through all of its tiers, you have the visibility to detect and respond to issues before they occur. You can more easily sidestep supply chain disruptions by using strategies such as sharing components, accelerating delivery cadences, and repurposing production facilities to distribution centers. 

On average, these efforts help reduce lead times from 10 to 8 weeks and purchase order (PO) release to factory exit times from 17 to 4 weeks. Tightening up these time frames makes your supply chain more agile and poised for continuity, and with the ongoing challenges posed by post-pandemic disruptions, such advantages have never been more crucial.

2. Reduce issues at the border 

A supply chain that’s unable to illustrate authentic sustainability may lead to issues importing certain goods. For example, the Department of Homeland Security (DHS) has ordered detainments of shipments of cotton and cotton products from the Xinjiang Production and Construction Corps (XPCC) in China due to forced prison labor in these areas.  

In just a three-month period at the end of 2020, Customs and Border Patrol (CBP) detained 90 shipments, and businesses with shipments that have been detained typically have three choices: export their goods elsewhere, destroy them, or abandon them. Laws like these are not a fad, and they are likely to get stronger and more broadly implemented as the U.S. and other countries make a deeper commitment to sustainable environmental and labor practices.  

With this particular situation, the CBP can detain items from other locations if they believe the inputs came from the XPCC. Businesses with visibility into all tiers of their supply chain have the ability to identify when their suppliers source material from such an area to avoid these types of detainments more effectively. These businesses can also see when their supply chain has roots in undesirable areas and make changes as needed.

3. Improve compliance efforts 

Ensuring that your supply chain is sustainable also improves your ability to comply with government and industry regulations. For example, many fashion importers only know the first tier in their supply chain — the finished goods factory. They don’t necessarily have visibility of the fabric mill, the yarn spinner, or the cotton source for their imports.  

Without knowledge of these second-, third-, and fourth-level tiers, the importer cannot claim to have a truly sustainable supply chain and may struggle to maintain compliance standards. However, by creating a digital thread that maps their entire supply chain and creates chain-of-custody documents, the business can prove compliance with a range of standards.

4. Optimize business planning 

When you have an in-depth understanding of your supply chain and its sustainability practices, you can more easily see, evaluate, and optimize your business planning processes. You can make more effective tactical decisions about products, channels, and resources as you work toward your business goals.  
 

5. Streamline product movement through your supply chain 

Tracing your supply chain helps you assess sustainability, but that same data can also help you streamline the movement of products through your supply chain. As you track how products move from raw materials to the marketplace, you can identify areas that need to be addressed and decide when complex supply chain patterns make sense for your business. 

6. Balance inventory and demand  

A sustainable supply chain can also improve your inventory management to ensure that your business is striking the right balance between wasting resources on storage costs and risking not being able to meet consumer demand.  

When you have the visibility necessary to track all the data points related to your supply chain, you can leverage artificial intelligence (AI) and machine learning in a way that helps you predict market demand and identify the optimal time to introduce new products or phase out old products.  

You can also track the success of short life cycle products or special promotions. Ultimately, all of this information helps you create more accurate demand forecasts based on your diverse product portfolio and target market. 

7. Reassure customers about sustainability claims 

Again, a transparent supply chain doesn’t just help businesses deal with legal and operational concerns. Transparency is also critical for meeting the demands of consumers. Consumers of all ages and demographics are increasingly concerned with supply chain sustainability, and as 68 million Gen Z consumers become a stronger force in the world, this trend is not going to change.  

In the past, consumers typically trusted companies’ sustainability claims, but today’s consumers know about greenwashing. They know that companies have been making vague sustainability claims with no proof, and they also know that companies often claim to be protecting the environment one way while they’re harming it in another way.  

For years, these businesses were relying on the assumption that consumers would only do minimal research into sustainability claims, but this is no longer the case. Contemporary consumers don’t trust companies, and they verify their sustainability claims. If you don’t have traceability built into your supply chain, you don’t have the information you need to support your claims and satisfy your customers. 

8. Engage in anti-corruption  

There is a significant risk of corruption in the supply chain, and it includes procurement fraud, corrupt suppliers, and even crooked governments. Corrupt practices can degrade product quality, but they can also lead to business costs related to dealing with legal liability issues and reputational damage.  

When you understand what’s happening in your supply chain, you can minimize the risk of corruption, improve operations, and reassure consumers about your sustainability efforts. Ultimately, a sustainable supply chain safeguards your reputation and your bottom line whilst also improving the business environment overall.  

Contact Logility for supply chain sustainability solutions today 

At Logility, we make supply chain solutions that allow you to trace sustainability through all tiers of your supply chain. Our platform utilizes AI, machine learning, and automation to help you easily track and analyze your supply chain, so you have optimal performance and key insights at all times. To learn more, contact us today. 

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