Resilience and Sustainability – A way forward for Global Supply Chains

2019 : Rationalising the US-China Trade War, but Sustainability remains on the agenda

From the viewpoint of 2019, by many accounts, 2020 was to be the continuation of a trend to drive towards sustainability. This includes the imposition of IMO 2020, traction towards the United Nation’s Sustainable Development Goals (SDGs), alongside multiple emissions control regulations imposed by various countries globally. 

Many large corporates had then announced their respective sustainability goals. For instance, Amazon pledged to be carbon neutral by 2030 in part by investing in renewable energy and battery-powered fleets, Kuehne + Nagel had also started offering CO2 neutral transports to clients.

The above initiatives, and many more, resulted in a report published by Global Data earlier in January 2020, calling out sustainability to be the top theme for 2020.

Unexpected disruptions from Covid-19

As the outbreak of Covid-19 became a global pandemic, the world began shifting away from the topic of sustainability, focusing their efforts on managing the virus and its impact. Since March 2020, countries have implemented lockdowns and social distancing rules as an attempt to curb the spread of the virus.

Both demand and supply took a hit: global consumer demand was severely hit by country-by-country lockdowns, and manufacturing plants were forced to shut due to social distancing measures or shortage of orders.  Cross border logistics capacity was accordingly hit, from blank sailings by carriers, to airfreight capacity being cut to a fraction of normal capacity due to planes being grounded.

Companies turned their attention back towards fundamentals such as cash flow management, as well as ensuring critical operations continue to run and finding ways to fulfil the new demand.

While Covid-19 is recognised as a Black Swan event across all boardrooms, companies are recognising the importance of resilient supply chains, and the need to strengthen supply chains to be more dynamic and resilient to unpredictable external events in the future to minimise and manage the overall impact to firms.

Driver for Resilience and Sustainability

Traditional and current Supply Chain resilience context have generally included:

1. Evaluating manufacturing & logistics sourcing strategies : Nearshoring, alternative suppliers, etc.

2. Inventory buffering: Introducing inventory buffers at specific points in the value and distribution chain

3. Supply Chain Visibility, dynamic orchestration and planning: To sense and respond quickly and effectively when events occur

In addition to the above, one key aspect that has emerged due to Covid-19 is the financial resilience of buyers and suppliers in the supply chain.

However, it would be remiss not to include sustainability as part of the equation when considering resilience.  By including Sustainability related areas, it will form the dual purpose of not only strengthening the scope of managing resilience in future supply chains, but also re-ignite the push for global sustainable growth, not at the expense of the environment, but as a symbiotic part of supply/value chains.

Interesting Sustainability areas that are closely integrated to, but not traditionally directly associated to, future Supply Chain resilience include :

1. Reverse logistics: Optimally managing returns and ultimately reducing waste

2. SKU rationalisation: Increasing product component modularization, increasing efficiency of manufacturing and reducing packaging waste

3. Supply Chain Network redesign: Including nearshoring and technologies that facilitate this

The Way Forward

Now is the time for companies and society to take this opportunity to add sustainability into resilience strategies

It is only through integrating ecological and sustainability considerations into our current Supply Chain resilience initiatives that can result in a truly sustainable (and resilient) growth – as a way forward for society globally and Supply Chains of the future.

- Marc Dragon