How to move towards a more sustainable supply chain
Janina Nakladal, global director of sustainability at Celonis, looks at the current complexities facing supply chain disruption and how technology can catalyse action to improving sustainability.
Supply chain leaders are under pressure from all sides to become more sustainable, not just from board-level executives but also from customers and investors. In fact, research by Celonis and IBM found that more than half of Chief Supply Chain Officers (CSCOs) would be willing to sacrifice up to 5% of profit to become more sustainable.
One key way of improving sustainability is getting rid of process inefficiencies which create significant waste and increase unnecessary emissions. Excess stock or production waste is often the result of unclear processes, miscalculations, quality deficiencies, or capacity bottlenecks. The materials and products wasted in the process drive up costs and have a negative impact on a company’s carbon footprint. But it’s often the case that companies can’t even see hidden process problems.
Through data-powered process mining, it is possible to find and fix the hidden process problems that you don’t know you have and improve your sustainability performance.
The missing data
The sustainable procurement of materials is fundamental to achieving overall sustainability in the supply chain. Transparency with regard to the exact ecological and social impacts of suppliers is important. However, this is precisely where sufficient insight is often lacking or information is not always available in a timely manner.
Shipping delays at ports worldwide have wreaked havoc on global supply chains, with research suggesting that as little as 34% of container vessels arrived without any delay to their destination in February 2022. This statistic is only a glimpse of the huge inefficiencies in supply chain that lead to unnecessary carbon emissions and a negative environmental impact. As an example, 1.6 billion tonnes of food are wasted each year, contributing to roughly 8% of the world’s carbon emissions. 78% of this waste occurs before the food reaches the consumer due to inefficient supply chains, meaning food is actually perishing before it hits supermarket shelves. Businesses are therefore forced to order more food than is needed in order to account for the shortfall.
A common problem here is that decision-makers simply do not have the necessary information for climate-friendly route planning, and the amount of data is one of the biggest obstacles. What seems paradoxical at first glance has its roots in the increasing number of IT systems and applications as well as the virtually exploding mass of stored information. Whereas 25 years ago even larger companies worked with only a handful of different IT systems, today there are usually hundreds, often with numerous applications being used to support a single process. This complexity leads to breaks and inefficiencies in processes that cannot be detected, let alone fixed, with traditional methods.
At the same time, these weak points mean unnecessary consumption of resources and thus increased costs and avoidable CO2 emissions.
Why process mining works
This is exactly where process mining and execution management come in. Process mining works like an X-ray machine for internal procedures and can illuminate and subsequently optimise critical business processes. It does this by visualising the current state of internal operations, including all process variants on the basis of data. With valid, data-based insights across all procedures it is possible to break down silos and incorporate sustainability into every decision or measure. All processes and different data sources are taken into account. By bringing together data from all common IT systems, such as SAP, Oracle or Salesforce, and mapping it in its actual form, business processes become holistically understandable.
By applying process mining and the right execution management in this way, companies can shrink the time it takes to find a process problem from years to hours, and make great leaps and bounds in sustainability goals in a short span of time.
The path to sustainability
Making a business more sustainable actually has a positive effect on the bottom line. Some of the world’s leading companies measure the impact of inefficiencies within their supply chain processes in order to minimise resource waste. Process mining and execution management helps these companies find and realise opportunities to significantly optimise fuel consumption, yielding material, financial and environmental benefits.
Carbon commitments and sustainability goals are no longer seen as afterthoughts. Rather, they are fundamental aspects of a company’s overarching business strategy. As processes determine how businesses run, they enable operational and even systemic change. Once processes are analysed and improved with intelligence and data execution, it becomes possible to prioritise sustainability in every operational decision.
This continuous measurability is a crucial aspect for many companies in view of the increasingly strict regulatory requirements. To put it in a nutshell: AI-supported technologies and continuous follow-up are the prerequisites for a sustainability process that is ‘sustainable’ in the literal sense of the word.
© Faversham House Ltd 2023 edie news articles may be copied or forwarded for individual use only. No other reproduction or distribution is permitted without prior written consent.