Supply Chain Resilience and Sustainability – Partners or Adversaries?
One of the most critical lessons learned during the pandemic and its aftermath has been the importance of supply chain resilience. As organizations have been coming to grips with this reality, they have also been working toward achieving the goal of sustainability. The good news is that these two goals are not mutually exclusive. In fact, sustainability can be a big part of building a more resilient supply chain.
What Is Supply Chain Resilience?
A supply chain’s resilience is determined by its ability to adapt to and recover from disruption. The world has seen supply chain disruption at unprecedented levels over the past three years, starting with the global COVID-19 pandemic. Supply chain disruptions have continued with ongoing issues:
- Regional COVID-19 lockdowns
- Overloaded ports
- Restricted supplies of computer chips
- Rising fuel costs
- Extreme weather events
- War in Ukraine
The Cost of Supply Chain Disruption
The cost to companies that lack supply chain resilience is immense. According to a 2022 paper on the subject published by MIT Sloan School of Management, disruption is not going away. Researchers found that companies can expect disruptions lasting a month or more to happen at least once every four years. Over the course of a decade, a lack of supply chain resilience will cost the average company 45% of one year’s profit.
The Pandemic Adds to a Growing List of Notable Supply Chain Disruptions
The COVID-19 pandemic, which began in 2020, is the most famous and long-lasting example of a supply chain disruption. However, as a McKinsey report at the time pointed out, it is just the latest in a long list of shocks to the global supply chain. Among the other notable examples over just the past decade or so are:
- The 2011 earthquake and tsunami in Japan that shut down factories building components for cars and knocked the world’s largest producer of advanced silicon wafers offline
- 2011 floods in Thailand that kneecapped the global PC industry by shutting down factories that produced one-quarter of the world’s hard drives
- 2017’s Hurricane Harvey hit Texas and Louisiana—home to some of the country’s largest oil refineries and petrochemical factories—resulting in resin and plastics shortages
The Need For More Supply Chain Resilience in the Supply Chain
Supply chain resiliency isn’t just protection against the unknown. It’s good business, and it gives your company a competitive advantage.
What Is Supply Chain Sustainability?
Sustainability has been a buzzword in recent years, and it’s now a crucial consideration in building a supply chain. In this context, sustainability refers to an effort to minimize the environmental impact of materials in the supply chain while also taking the impact on society and social causes into consideration. Supply chain sustainability takes a wide range of factors—such as greenhouse gas emissions and minority-owned businesses—into consideration.
The Need for a More Sustainable Supply Chain
The need for supply chain sustainability is felt throughout the supply chain. A 2020 Harvard Business Review article titled “A More Sustainable Supply Chain” summed up the trickle-down effect:
“In recent years a rising number of multinational corporations have pledged to work only with suppliers that adhere to social and environmental standards. Typically, these MNCs expect their first-tier suppliers to comply with those standards, and they ask that those suppliers in turn ask for compliance from their suppliers—who ideally ask the same from their suppliers. And so on. The aim is to create a cascade of sustainable practices that flows smoothly throughout the supply chain, or, as we prefer to call it, the supply network.”
Can Supply Chain Resilience and Supply Chain Sustainability Work Together?
Supply chain resilience and sustainability are both more important than ever, but how can a procurement organization ramp up the adoption of both? The good news is that one doesn’t have to suffer in order to adopt the other. In fact, in many ways, supply chain resilience and supply chain sustainability are complementary. Taking the measures needed to support one gives you a head start toward adopting the other, as long as you have the necessary tools. Ultimately, a more sustainable supply chain is often a more resilient one.
Supply Chain Resilience, Sustainability, and PPO
Predictive procurement orchestration (PPO) is the missing piece for many companies, an approach that uses the power of behavioral science and machine learning to simulate procurement purchases in advance. Among its many advantages, adopting PPO gives far greater visibility into cost savings and strategy, allowing procurement teams to prioritize specific areas of the process—helping to build a resilient supply chain that also identifies sustainable suppliers. Organizations that adopt PPO are well-positioned to support both supply chain sustainability and supply chain resilience.
Tools Needed to Support PPO, Supply Chain Resilience, and Sustainability
While many organizations recognize the advantages of adopting PPO, building a more resilient supply chain, and embracing supplier sustainability, they lack the tools needed to do so. As important as these issues are, there is also a reluctance to throw away their existing procurement tools to go through the time and expense of onboarding staff onto an all-new system.
That’s why Arkestro is proving to be so popular in the procurement space. Our innovative predictive procurement orchestration platform can be used with existing ERP and P2Ps, making it easy to identify certified diverse and minority suppliers while supporting the development of supply chain resilience.
Take the Next Step and Book an Arkestro Demo
If your organization needs to step up its supply chain resilience and diversity game, take the next step toward supporting both goals. Get in touch with Arkestro today and see the many advantages of adopting the leading predictive platform.
Supply Chain Resilience FAQs
How can I create a more resilient supply chain?
2022 has become much more supplier-focused; Dr. Elouise Epstein calls it the year of the supplier. Make it easier for your suppliers to participate in sourcing events and improve the supplier experience. Arkestro is the platform suppliers want to use. Predictive procurement provides a starting price for suppliers in a sourcing event. And eliminating guesswork increases participation and speeds up sourcing events.
Do supply chain resilience and supply chain sustainability mean the same thing?
No, they don’t mean the same thing but often go hand-in-hand. Sustainable supply chains that focus on aspects like ESG and diversity are often resilient.
Can Arkestro help with supply chain resiliency and supply chain sustainability goals?
Yes. Arkestro removes friction from sourcing events and provides multi-line item award scenarios. As a result, different aspects of each supplier can be measured and weighed. Using Arkestro makes it easier to track metrics and corporate goals like how much spend is going to support ESG initiatives.