December 7, 2021 From Resilient Supply Chains to Sustainable Growth

A look at how a resilience framework provides a roadmap towards a sustainable future, starting with resilient supply chains. 

In June of this year, the German parliament passed the Supply Chain Due Diligence Act that obliges businesses to have transparency into supply chains around social and environmental standards, in particular human rights abuse. Similar acts have already been enacted in USA, UK and France, and there are many similar initiatives at draft bill stage across the world. The goal of these global acts is about the elimination of social inequalities in the supply chains. The spirit and trajectory of these acts however is also about the elimination of waste and greenhouse gases from our planet.

Transparency into the supply chain alone will not eliminate these challenges, it requires corrective action based on a foundation of mutual respect, trust and willingness to adapt to the change. Against a backdrop of the pandemic, where the world has been on pause whilst trillion of dollars have been spent; Business, Government and Society also requires the capacity to bounce back and thrive into a new norm. The common thread that ties transparency, agility and capacity to recover is resilience. Resilience leverages transparency to understand the nature of the challenge, the risk and consequential impact. It provides the ability to adapt, course correct and respond in a manner that is time sensitive. At the same time, resilience provides the capacity to draw on the knowledge, skills and wisdom to navigate both chartered and uncharted territories to the next norm whilst achieving sustainable growth.

In this piece, we’ll look at how a resilience framework provides a roadmap towards a sustainable future starting with resilient supply chains. 

A key challenge many organizations have with respect to resilience in their supply chains, is a lack of visibility into their supply base. Transparency throughout the supply chain allows organizations to identify risks and find alternate sources of supply to avoid violations and consequential supply chain disruptions. Organizations need access to a multitude of trusted and reliable data sources, both internal and external, with reliable information about the current supply market. By embedding this type of data into a holistic risk process, businesses are enabled to make informed decisions about potential violations and possibilities of switching suppliers. 

Ensuring the quality of goods and services meet the end-customer’s expectations now also means understanding the ethical origin and environmental consequences of the goods and services purchased. It requires oversight and governance on the extended supply chain and trading partners who are in agreement and committed to abiding by ethical sourcing throughout the process. In many cases transparency at a supplier and the broader trading partner community is not granular enough, and to be meaningful there is a need to have oversight at an item level as well. 

This complexity is further compounded by how far up the supply chain with the different trading partners you need transparency. The direction of the acts mentioned goes beyond tier two and all the way to the original source, whether it is a mine, farm, mill or satellite factory location to understand the labour conditions where they were produced. From an environmental standpoint, it requires an understanding of the raw materials’ carbon footprint throughout its journey from the mine it was extracted, across the seas from where it was shipped to the factory it was transported to. To truly stand behind a promise of environmental sustainability and fair labor practices, logistics must also be part of the picture.

Switching sources of supply based on potential reputational damage associated with unethical practices requires transparency into the supply demand impact. For example, organizations must be able to answer the following questions: What is my existing contractual commitment to this trading partner? Do I have alternative supply options? Does this supply problem present a competitive opportunity or risk? Do I have the right workforce if I was to switch supply? etc. These answers will help the organization evaluate the price of their actions. While it is important to have transparency into supply chains to ensure social and environmental standards are met, it is also crucial to ensure the supply can be fulfilled to an increasingly discerning consumer at a price point that is practical.  

Whenever there is such complexity, there is often risk that the end goal, in this case ethical practices in the supply chains, will not be fully achieved. Ensuring this level of transparency requires a level of trust between all parties along the value chain. Trust comes from relationships between trading partners built on a foundation of reliable data and demonstrated through their willingness to share information. These interconnected relationships driven by a common purpose provide both the basis to establish trust and the mechanism to minimize risk and scale capabilities in a manner that is also viable.

The global acts and bills are based on principles of social justice, elimination of waste and reduction of global emissions. Transparency is undoubtably the first step; however, information is useless unless it is actionable. By leveraging insights drawn from knowledge, skills and learnings, organizations can utilize this added visibility to not only protect society, but also further their business. This framework for resiliency provides the starting point on the journey to a more sustainable future. In the second article, we will explore how customers can move from this point of resilient supply chains to the next phase of re-balancing their business operations as the pre-cursor for sustainable growth.

About the Author:
Tahir Virk, Director, Global Strategy & Innovation, Intelligent Spend Management, SAP, is a subject matter expert in supply chain, procurement and enabling technologies. With over 25 years’ experience across multiple global organizations, he has held various roles from strategy to leadership and innovation to operations.

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