Sustainability driving resilience and efficiencies in supply chains
Resiliency in supply chains walks hand-in-hand with sustainability and needs to be front and centre of our agendas said speakers at the Supply Chain Europe Virtual 2020 Summit
“For me, there is no conflict between resilience and sustainability,” said Lucas van der Schalk, CEO of packaging company Corplex, who was speaking as part of the recent Supply Chain Europe Virtual 2020 Summit.
“For us we invested considerable in-business resilience and it … has a very close link with [the] sustainability agenda,” explained Saskia Groen-in’t-Woud, CEO of Maersk subsidiary Damco.
“I think the more resilient your loops are, and they are loops, the more sustainable our businesses become as well,” said van der Schalk, which is why “everything we do is focused on the circular economy.”
It appears that the industry is waking up to this, as respondents to the online polling conducted as part of the virtual summit said that sustainability was now a core part of the conversation and overall corporate goals. Seventy-three per cent said that environment sustainability initiatives are now given a high priority or put at the very top of organisational management.
This is why Graeme Munro, Head of Construction Europe, GLP believes “getting [sustainability] into the supply chain, I think, at an early stage is critical to really drive it. We do it at the tendering stage at day one as soon as we acquire a brownfield site to see what is involved with it.”
A sustainable network
For Electrolux, thinking about incorporating sustainability provided a major advantage during the pandemic through improvements to the connectivity of their transportation network. At a time when blank sailings were increasingly common and rates were rising, many scrabbled around to find transportation capacity. One potential answer was in rail transportation, which is greener than trucking due to economies of scale. “All of our factories are connected by rail” due to sustainability planning, noted the company’s Europe Distribution Process Manager, Nico van den Berg. “There is a very strong push on multi-modal instead of only road transportation. However, this is quite a challenge because the suppliers for multi-modal transportation are not that many and not always able to provide us with the right services.”
Damco’s Groen-in’t-Woud agrees that maximising sustainability with partners can be challenging and says: “What it really comes down to is your supplier choice. So, being able to have vendors that have an updated fleet and that fleet is well maintained and efficient is really key and then it comes down to fuel choices. By being part of Clean Cargo and the Sustainable Air Cargo Alliance, we are able to quite a lot of good data on the performance of suppliers from a CO2 perspective and then be able to make sure our decision making reflects the right CO2 levels from a partnership with a supplier.”
That partnership is likely to save carbon and therefore costs through efficiencies, with sustainability nearly always overlapping with efficiencies in the supply chain, both in the long and the short term.
Coyote Logistics’ entire business model sits in this overlap, through finding and filling trucks for its return journeys. “If you look at both the European and the US trucking market, there is a huge fragmentation in the supply chain,” said SVP Head of Europe Jaap Willem Bruining. “There’s a lot of small trucking companies struggling to get a back haul. There is an estimated 20% to 30% of back haul runs being empty. What our mission is, is to fight that empty back-haul capacity and basically use that as sometimes spot, sometimes multi-year commitments to our customers both on pricing and also on volumes.”
This efficiency gap is critical to its business model because “the only way for us to be competitive is to find the empty back haul or else carriers don’t need us for the ordinary trips,” but it is a niche that pushed them to $4 billion in revenue in the US, showing the potential win-win pay-offs from supply chain efficiencies.
Packaging up the carbon cost
Van der Schalk gave another example of maximising the utilisation of trucking volume by a smarter approach to packaging. This is another huge source of environmental damage that can be limited to provide a company with both a sustainability win and a bottom-line victory
The company focuses on both “the fit and fill of your trucks” and “sustainable packaging. Everything we do is reusable and once the usage of the packaging has been completed, we will take it back and make new packaging out of it.”
This means that it designed “packaging that is completely collapsible, so it goes out full … and every fourth time it comes back collapsed. As a result, we saved that company, just on the single product, 300 tons of CO2 in a year. Bear in mind these guys are producing thousands of products, we are talking about hundreds of thousands of tons in your packaging.”
That carbon burden reduction then also translates into fewer truckloads per year and a closed loop system, which means lower touch points, lower reordering requirements and less managerial burden, representing a cost-efficiency measure.
Sending out the right signals
A further advantage is in the consumer perception of a company. “Our commitment serves as a powerful differentiator for our customers,” said Volker Schmitz, Head of Global Logistics at HP. “We know it delivers strong business value.”
He thinks “customers look at HP to help them meet their own sustainability goals” and “in 2019 sustainability impact helped HP to win more than $106bn in new sales which is an estimated increase of 69% year over year.”
Sustainability also “signals to investors that the company is creating resilience and building for the long term.”
This is why HP looked at its product line and worked on it until the company was recognised as having “the world’s most sustainable PC portfolio”.
Examples of where they are changing their material profile and introducing recycled elements include:
• Using more than 80% recycled material in all mechanical parts of their Elite Dragonfly laptop
• Using plastic recovered from oceans in display units
• Replacing plastic foam in packaging with moulded pulp and more bulk packaging
• Producing printer cartridges with 48% to 73% recycled plastic content
• Producing a printer, the HP Tango Terra, with 30% closed-loop recycled plastic, which they say is the first carbon-neutral printer.
These are further examples of closed-loop systems and recycling that can provide multi-faceted benefits for a company. They reinforce the idea that sustainability will dictate the future of the supply chain.
This is part of our reporting from the Summit. To be notified when we release the complete post-Summit report,sign up to our newsletter here!