Ep 40: Improve Operations with Sustainable Supply Chain Planning

Introduction

THERESE: Welcome to our DELMIA Podcast, Globe Operations on the go. I'm your host, Therese Snow. Today, I have the pleasure of speaking with Adrian Wood, DELMIA Strategic Business Development Director. Adrian, welcome!

ADRIAN:  Thanks very much, Therese. Glad to be back on the show.

THERESE: Absolutely. Glad to have you. So, Adrian, for those new to tuning in, can you please tell us a little bit about yourself?

ADRIAN: I've been at Dassault Systèmes for about five years now, but had a long background in supply chain software and technology. At DELMIA, I focus on strategy and business development for that area of our solution set around supply chain planning and optimization. So happy to bring some of my experience and what I hear from the industry and events to the show.

THERESE: That sounds fantastic. And definitely the right person to talk to today because  we are going to discuss sustainability and supply chain planning. So let's start with this: What exactly does it mean to be sustainable in supply chain planning?

Being sustainable in supply chain planning

ADRIAN: Sure. Sustainability has become much more of a central focus for companies when they think about their supply chain, rather than a byproduct of being more efficient at operational supply chain. And when companies now think about being sustainable, it means really evaluating and improving every step in the value chain that they have from their products. That starts right at the beginning. When you're considering about where you're sourcing your raw materials or ingredients from through to the manufacturing process, the distribution and storage of those products and delivery to the final customer. So it's now about the holistic supply chain versus just pieces of it. And I think that companies are putting this as a primary focus because they're more aware of consumer sentiment.

Being sustainable not only means sustainable in your own practices, but providing a sustainable product to those consumers and customers that you're servicing as well. To do that, it means becoming more of a cultural focus on supply chain as well as an operational change; you need to embed it in everything that the company does to truly become sustainable throughout the entire process and build it into all of those operations. Then operationally, I think specifically means capturing and integrating those sustainability goals into the planning process versus just the operational metrics. It’s a combination of thinking about the supply chain holistically from end to end, but also looking internally at the company and culture to make sure that it's integrated into everything that a company does. 

How sustainability is achieved

ADRIAN: How exactly is that achieved? Well, from an operational point of view, the achievement of becoming sustainable focuses on, as I said, all parts of the operational process from raw material all the way through to delivery. The way companies today should be thinking about sustainability and how to achieve it is to look at things like resource efficiency. Reducing the consumption of the raw materials that they buy and therefore the, uh, the energy throughout the supply chain to remove some of the overhead in terms of waste of energy and raw materials, uh, sustainable sourcing. So procuring materials from suppliers who not just have a great price and a great lead time, but who also adhere to environmental and social standards so that you can provide traceability all the way back to the raw materials and ingredients.

It's about monitoring your carbon footprint to reduce greenhouse gas emissions generated by those manufacturing processes, distribution, transportation, logistics processes,  reducing waste throughout the entire supply chain process. Implementing strategies that would minimize waste generated during production and distribution at points where you are perhaps making things with less efficiency or less quality than you should, or wastage as you get through moving product through the supply chain.

Logistics planning with the virtual twin experience

The logistics planning part is also a key part of it in reducing mileage. Optimizing the transportation and distribution to reduce the environmental impact of trucks on the road or rail, or wherever you move your product to improve efficiency overall. There’s a number of different ways how companies can look at initiatives to try and achieve that sustainability from an operational standpoint.

THERESE: That makes sense. I think those are all practical suggestions as well. Thank you for that. Are  there any obstacles, for example, that might prevent a company from having a sustainable supply chain? And if so, how can these barriers be overcome?

ADRIAN: Well, there are some practical ones and then there are some cultural sort of barriers to be overcome. Let’s take some of the practical ones. For example, when it comes to planning the supply chain, any plan needs a lot of data and information to drive it. And so there's a need for real-time data and connectivity, which can sometimes be a challenge for companies. To provide real time decisions and make decisions quickly, you need real time visibility into those operations. The virtual twin is something that people talk about a lot.  When they talk about supply chain, the supply chain virtual twin, that's a model of the supply chain that allows you to experiment with scenarios and make decisions. Of course, that needs to be fed with data.

For example, you might use real-time data analytics to monitor fuel consumption during the distribution transportation operations. Based upon that information, you might adjust routes to minimize carbon emissions, perhaps. So that's a challenge. The way to overcome that, obviously, is to work with a technology partner and strategy that will put a solution in place and a framework that allows for that connectivity. I think also capturing the uniqueness of the supply chain, so if you want to build a virtual twin of the supply chain, it needs to be accurate so that you can make accurate and timely decisions. Then one of the, one of the barriers to be overcome is to, is to find capabilities that model--the uniqueness of your particular supply chain.

Changing the mindset of a workforce

ADRIAN: And again, technology can help with that, but it's important to be able to know that going into any transformation or innovation change, the culture and the mindset within the company was one that I mentioned. I think that you have to embed this within every part of the operations to make sure that sustainability is not, as I said, a byproduct. It's one of the key things and so stakeholders at all levels have got to prioritize and commit to that sustainability, that philosophy. That can be difficult in environments where the focus is on short term financial performance versus long term sustainability. That's a transformational change that comes with the transformation of the technology as well. I think there are other things as well. Of course, companies see this as an expensive endeavor, so the perception of, of cost and complexity might be a barrier for some companies to even sort of make an initial move, but you can build a business case, you know, to prioritize that and make sure it's easily  justified and understandable. That's something from Dassault Systèmes. We have our value engagement methodology, which provides that robust framework for constructing a compelling business case. Lots of barriers, some perceived, some actual, some technical, but again, working with the right partner, you can overcome all of those.

THERESE: No, I can definitely see where that is achievable. And again, even starting with the mindset, within a company to making sure everybody is on board. Okay. So, say a company now has a sustainable supply chain. Why exactly would that be important?

The importance of a sustainable supply chain

ADRIAN: Well, I mean, there are  a lot of reasons, not the least of which is because it contributes towards a greener environment for all of us as human beings. Of course, most companies are primarily focused on being profitable and providing value to their shareholders, but the two don't need to be  in conflict. Why is it important to be a sustainable supply chain? I think in general,  companies that prioritize sustainability as part of their supply chain initiatives not only contribute towards a greener future, but because of the consumer sentiment they're also gaining a competitive advantage by meeting those consumer demands and the regulatory demands There's a lot of regulation that needs to be adhered to as well.  So it gives them a competitive advantage From an investment point of view, as investors look at which companies they're going to fund and put investment into, they're also looking for companies that have a proven sustainability message and philosophy. So that helps with growth of the company as well.

From an operational point of view, sustainable practices do lead to cost savings through all of those improvements in resource efficiency, waste reduction. There's a lot of financial bottom line benefits to sustainable practice as well, but I think primarily the biggest thing is the consumer. We wouldn't be changing our practices, um, you know, easily if it weren't for us as consumers demanding it from the products we buy. We all have a growing demand for sustainable products and services. We're becoming increasingly aware of the impact that our purchasing decisions make on the environment. And so that's primarily the biggest driver, I think, that's forced the change over the last 10 years or so. If you have a sustainable supply chain, then if you're satisfying your consumers and improving your operations. It’s good for all of the operational part of that. And of course, it's providing us with a greener future for the planet as well.

THERESE: There are so many benefits all the way around from production, supply chain, consumer, et cetera. What would you say the benefits are to a sustainable supply chain?

Operational benefits

ADRIAN: I think it helps to think about the benefits from a operational point of view, and then also translate that into the sustainable impact as well. For example, with effective supply chain planning and optimization, you can increase inventory turnover so you can achieve better imagery management, you get increased imagery turnover rates. Typically, companies can see an improvement anywhere from 15 to 25 percent turnover, and that results in reduced holding costs and a minimized risk of obsolescence. And that's a big impact on sustainability. If you end up developing or producing a whole bunch of stock or inventory or in food and beverage product that goes out of date, that all becomes waste.

Then there's a tremendous environmental impact on what you're doing. That wastage, especially in perhaps electronics industries, where you develop things with very difficult to recycle components and so imagery turnover is just getting things moving faster through the supply chain is a great impact in terms of business benefit and sustainability, order fulfillment rates. So if we increase our order accuracy at the speed of the fulfillment using supply chain planning, we can see an increase in order fulfillment rates leading to higher customer satisfaction and retention, and also getting those products to the consumer faster. Let's see a production cost reduction. So if we can reduce our production costs by optimizing production schedules and resources, we can see a 10 to 15 percent reduction perhaps on averaging costs through improved operational efficiencies, and that again minimizes the waste throughout the supply chain, transportation costs. We spoke a little bit about mileage and CO2 emissions of distribution and if we can plan those transportation routes optimally, companies will typically see a reduction of perhaps 10 to 15 percent in transportation expenses by optimizing the supply chain. And that leads to less miles on the road, less fuel consumed, less carbon emissions. It’s better for the environment overall, if we can minimize that transportation.

ADRIAN: I'll pick one last one--around forecasting--especially in commodity food and beverage or process industries where we're, we're getting constant demand, but it's fluctuating. If we can improve our forecast accuracy, um, perhaps by 20 to 30%, which is typical for  different industries. That leads to more precise planning of the products that we actually make and then we don't get a loss in terms of waste for excess inventory, or we don't have to scramble and perhaps put additional capacity, energy and raw material into products that we, you know, we didn't plan for. So,  All sorts of great operational benefits, but every one of those operational benefits also has a, you know, sustainability tie in to make sure that we were satisfying both the, uh, the business goals and the sustainability goals side by side.

THERESE: Absolutely. Those benefits are very important. Now,, what would you say are some of the critical technologies that can help companies develop sustainable supply chains?

ADRIAN: I mentioned virtual twins before, you know, this virtual model of the supply chain and that's one of the critical components because everyone is reacting to disruption or changes in demand or fluctuations in supply. And so being able to experiment and do what if scenarios is key in the virtual twin allows us to do that. It's a virtual model of all the supply chain components. Which they can use to simulate and optimize sustainable practices without any physical trial and error. So, you know, for example, in the auto industry, you use virtual tune technology to simulate production processes, identify opportunities for reducing water, energy use, as well as minimizing waste. And so that's a key foundation element, I think, of all sustainable practices is being able to develop a model of the supply chain and then determine what the best sustainability options might be before you actually put it into action in real life Along with that, is the demand sensing and responsiveness.

We spoke a bit about forecast accuracy. If we can rapidly respond to changes in market demand with minimal environmental impact, we can impact our sustainability goals. So, let's say we have a consumer electronics—a high tech company, that uses demand sensing to adjust production levels dynamically. We don't get an excess amount of inventory, which then becomes  obsolete and then has to be recycled. I think another element is the hot topic across supply chain and a lot of manufacturing : machine learning and artificial intelligence. And so, predicting and using machine learning to develop predictive analytics, to look at historical and real time data to forecast the future trends and demands of what might be. It's kind of a tie in with the forecast accuracy, if you like to see how we can be better, what we need to better produce. So for example, retailers use predictive analytics to anticipate seasonal demand spikes and that allows them again to reduce overproduction and unsold inventory. One key element of supply chain is that it's always a highly collaborative process involving lots and lots of different stakeholders and suppliers and partners as well. And so collaborative platforms is another key part of the critical technology footprint to allow and facilitate communication and collaboration between the different stakeholders in the supply chain so that they can align on those sustainability goals and work together versus working separately or against each other.

THERESE: Interesting. Adrian, is there anything else you would like to add that perhaps I may not have asked?

New ways to become more sustainable

ADRIAN: Well, I think it's always interesting to look at the future. This is a fast changing environment and world that we're in. Companies are increasingly adapting to find new ways to become operationally efficient and sustainable. I think there are a few areas that really stick out. Interesting in my mind. So we spoke about the virtual twin of the supply chain, but there's also a virtual twin or a bio digital twin  technology potentially so that we extend the concept of the digital twin, the virtual twin to include biological and ecological factors.

So we feed the models to better understand the environmental impact of their operations at a, at a more granular level, granular level, and that allows them to develop more sustainable. Business process and so an example of that might be introducing sort of molecular science into some of the products that we develop. As we develop them, we develop them for sustainable recycling and operations and biodegradable packaging and all that kind of good stuff. So incorporating all of that sort of science of the bio world into the supply chain plan would be a really interesting way to drive it—using AI to develop AI driven ethical supply chains. And so AI-driven audits that monitor and enforce fair labor practices, responsible sourcing, environmental footprints, capturing a lot of data, again, going on geopolitical information, weather data from around the world to pull in information that allows the AI to make even better decisions about how to develop supply chains.

Then I also think that there's a lot of additional information we can integrate into  the supply chain, especially from a food and beverage and agriculture, agricultural point of view. For example, imagine supply chain solutions that support regenerative agriculture so we coordinate our supply chain activities, our support, our sourcing. Our demand and supply that actually look at the biodiversity of the raw materials and increase soil health so that farmers who are producing raw ingredients have a better chance of a more sustainable business practice. So there's a lot of very interesting stuff involving a lot more science into the supply chain process involving a lot more oversight into the true ethical elements of supply chain and even back to the soil that the raw ingredients are being  developed in to, to enhance the overall process from start to finish.

THERESE: It's certainly clear to how technology plays such a pivotal role in sustainability. That's really good stuff. Great information, Adrian. Thank you so much for taking the time to speak with me today on sustainability and the supply chain.

ADRIAN: Thanks for having me. It was great to talk about how we can increase supply chain efficiency and profitability, while at the same time, nurturing a healthier planet for us all.

THERESE: Absolutely. Definitely a win-win. I now at this time want to thank our listeners for tuning in. To learn more about DELMIA and sustainability, click on the link where the podcast is hosted. I am your host, Therese Snow, and you've been listening to DELMIA's podcast, Global Operations on the Go.