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23 Nov 2022

How improvements to Supply Chain make retail more sustainable

Supply chain management is one of the key components of a successful business today, however, the sustainability of the supply chain processes is often overlooked….

Supply chain management is one of the key components of a successful business today, however, the sustainability of the supply chain processes is often overlooked. Since consumers are focused on business transparency more than ever these days, customers want to know how companies are contributing to the environment by using sustainable strategies.

Consumer pressure is not the only driving force causing sustainability within businesses. There is also pressure from stakeholders, investors, and consumers; these are considered to be the main drivers. Improving chain sustainability has two core benefits: a business will reduce its footprint on the environment whilst simultaneously increasing its brand awareness and reputation.

Where should a business start when it comes to making its supply chain more sustainable?

Supply Chain tends to be off-shore due to pricing differences and whilst this strategy could be beneficial to reduce expenses; a clear outcome of off-shoring is that there is likely to be an increase in transportation carbon emissions.

In a research carried out by RetailEconomics, the data indicates that since the pandemic, 23% of European retailers have switched supply chains nearer to their domestic economies, and 46% plan to do so in the future. It comes as a no-brainer that an on-shoring or near-shoring supply chain is the number-one action a business can take to improve its sustainability. In the same RetailEconomics research, the data highlighted that 14% of the respondents had already switched their supply to their domestic economies, and 42% are planning to switch to on-shoring in the future.

What other actions in supply chain management can lead to a more sustainable retail industry?

Simplified Processes

According to McKinsey, around 90% of the environmental issues are due to consumer packaged goods coming from the supply chain and how companies handle it. The supply chain is also accountable for up to 80% of greenhouse gas emissions.

Spotting this issue resulted in the creation of analytics tools that allow companies to map out the supply chain and identify potential waste sources. The implementation of said tools can significantly improve the efficiency of the processes. Understanding the unnecessary steps in the manufacturing journey has a direct impact on the efficiency and sustainability of the supply chain.

Reduced Overstocking

Consumer demand is constantly increasing, global supply chains need to adapt to this trend and plan accordingly.  However, the process of supply chain demand management is often very complicated. Companies can end up over-stocking certain items and products to prepare for unpredictable peaks in demand. Especially when it comes to holiday seasons, stocking and understocking are real issues that not always are dealt with accordingly. In fact, this can lead to massive waste and loss in profits, according to Retail Wire, overstocks cost on average 3.2% ($123.4 billion every year ) in lost revenue, while understocked items cost 4.1% ($129.5 billion yearly).

Supply chain managers need complete visibility into the business operations to determine when they need to be extra prepared for demand changes, and when it’s possible to slow down and take a step back. With the implementation of AI, the management of demand has done great leaps in terms of accuracy. Thus, reducing the overall cost and improving the sustainability of the processes.

Logistics Strategies improvements reduced fuel consumption

Excess fuel consumption is at the top of the priority list of companies trying to become more sustainable. Fossil fuels are extremely harmful to the environment and their supply is limited.

There are many solutions for this issue, retail companies pivoted towards sourcing some of their materials locally to reduce shipping costs and carbon emissions. Once again, this process has a positive double effect: it reduces the excessive consumption of fossil fuel, therefore limiting the footprint of the business, but also shows to its customers its effort in safeguarding the environment and the promotion of “homegrown” products, now 72% of industrial/B2B buyers “always or generally” prefer to source locally.

However, sourcing the material locally is not possible in some cases, making outsourcing the only viable option. In these instances, the use of AI technology and analytics in GPS devices can be optimal to plan the most efficient delivery routes.

On this aspect, after the pandemic, the EU is making great leaps forward in building a greener economic ecosystem. The EU rolled out Government rescue packages that will incentivize investment into digital and green technologies of around €750 billion in the form of grants and low-cost loans to support the European green economy as it recovers from the effects of the pandemic. This additional €750 billion will allow the European Commission to borrow directly from the financial markets for the first time.

Reviewing Processes improved Product Designs

The tools and technology we have today mean that products can be redesigned with far greater efficiency and complexity than before. Products like waterjet cutters and 3D printers can make manufacturing processes more affordable, environmentally friendly, and free of waste. The only way to determine whether a business can find new ways to reduce material waste is to analyze its processes. In terms of reduced waste, 3D-printed products can be up to 50% lighter than traditionally produced items.

In conclusion

The sudden and severe impact on supply chains forced action, with more than 55% of retail respondents reporting they had already diversified a number of their supply chains. Other measures included reducing product ranges (30%), near-shoring (23%), diversifying sourcing countries (15%), on-shoring (14%), and increasing inventories (5%). However, there was a marked difference between food and non-food retailers, with agri-food supply chains appearing to be much more flexible for switching suppliers and sourcing countries.

The crisis has highlighted numerous compelling ESG-related scenarios that cannot be ignored as economies look to rebuild. Retailers will face increasing pressure for transparency of their ESG standards, including supply chain management and emissions data.

Finally, consumer behavior is also playing a key role in the adoption of greener practices when it comes to supply chain sustainability. The awareness of consumerism and its impact is influencing behavioral change with rising demand for sustainably-produced products.

We are Storm5

With a market like the supply chain in Retail Technology industries accelerating at such a rapid pace, there will be numerous opportunities for growth for startups and scaleups. Finding the right talent to fill roles may be difficult for some due to the specifics. That’s where Storm5 comes in! We take pride in working with the best Supply Chain & Logistics candidates in the market, so please do not hesitate to contact us and our expert consultants.

We’ve helped some of the most successful RetailTech startups grow.

— now it’s your turn.