Are we moving towards green supply chains?
Global supply chain vulnerability has led to a 6.8% increase in the price of Canadian goods over two years. However, on the plus side, the issue has raised awareness of the need for fundamental change. The 15% of global companies that have simplified their manufacturing process, and the 11% that have repatriated part of their production are, according to McKinsey, at least a step in the right direction.
Article by Stéphane Ricoul, Executive Director
While economics would dictate that supply chains links should be one of the first to be strengthened, this is equally true from a greenhouse gas (GHG) emissions perspective. In fact, the eight largest global supply chains – food, construction, fashion, fast-moving consumer goods, electronics, automotive, professional services and freight – account for over 50% of CO2 emissions. Companies in these sectors must move quickly to make their business models more efficient and sustainable. Integrating digital technologies will help them grasp the implications and potential losses of doing nothing and, more positively, directly affect their environmental impact.
According to Industry Canada, it’s now standard practice for Canada’s top-performing logistics and transportation companies to introduce new technologies into their transportation management practices, to create so-called green supply chain management (GSCM). One example is the use of green dashboards: computers that monitor a vehicle’s greenhouse gas (GHG) emissions. But, aside from a few examples, generally speaking, supply chains are slow to implement digital transformation, with a level of digitization that stood at only 43% in 2017 and, what’s worse, a priority level of only 2% for digital strategy. Since we know that access to digital data and transforming it into valuable information is key to the efficient operation of these complex chains, we must ask ourselves: how do global supply chains intend to meet the UN’s Sustainable Development Goals, including the twelfth goal of reducing the social and environmental impact of the entire product supply chain?
And yet the data is there. It enables companies to perform predictive analysis based on historical data, so they can make decisions that lead to more effective optimization. Tools and utilities are also part of the process: Cloud Computing, Transport Management Systems, ERP – all these systems that enable us to be increasingly efficient – combined with algorithms, whose goal is to achieve a sustainable impact and economic growth. Not to mention the Industrial Internet of Things, as applied to transportation, which includes:
- Fleet management: predictive maintenance, real-time tracking, and monitoring;
- Inventory and asset management: intelligent inventory management, damage detection, visibility and optimization, etc.;
- Geo-location: route planning and management, etc.
It’s clear that making effective, sustainable changes to business models in order to reduce GHG emissions isn’t a question of technology. It’s a matter of will. The technology is there, from 3D printing to robotics to artificial intelligence. However, strategically planning the investment for a well-thought-out digital transformation means understanding what the next step will be to meet the twin targets of staying economically competitive and respecting our planet.
According to a Léger study conducted for Talsom, 46% of Québec and Ontario companies have a digital investment plan, and 60% have a plan for their digital transformation. However, on the flip side, 55% and 52% of companies surveyed, respectively, realize they aren’t using digital technologies to their full potential in their day-to-day operations or production. Yet, according to a McKinsey study, CPOs expect digitizing their supply chain to increase year-over-year savings by 40%, and reduce time spent sourcing suppliers by 30%.
Thibaut d’Hérouville, VP Group Industrial Supply Chain at Michelin, the world’s leading tire manufacturer, explains (French-only page): “On top of the cost of managing intercontinental supply chains, we have to add the cost per ton of CO2, development costs, plus the fact that not all factories can produce the same tires. Trying to calculate how best to optimize the supply chain has a huge impact on investment decisions for manufacturing sites, sustainable development policy, logistics costs, service quality, and so on.”
Recently, companies have been forced to model and simulate complex systems, inventory levels, demand fluctuations, and many other supply chain variables – all this as they deal with a pandemic, shipping crises, labour shortages, and meeting sustainable development goals. Add to this complying with ESG policies, and it’s easy to see that, after a cost/benefit analysis of digital transformation, the process may be much more advantageous than you’d think.