June 1, 2024
Supply chain operations have a major impact on our planet, contributing to the greenhouse gas (GHG) emissions that directly lead to biodiversity loss. Both individuals and companies rely on a flourishing environment, which is why many organizations are taking steps to mitigate their supply chain’s negative effects on biodiversity, such as Kering’s pledge to restore one million hectares of its supply chain by 2025.
Beyond environmental impact, maintaining a sustainable supply chain is important for continued growth and success: 97% of investment managers review a business’ supply chain sustainability standards when determining where to invest. Furthermore, with the Securities and Exchange Commission’s (SEC) recently established sustainability reporting rules and consumers’ increasing commitment to sustainable lifestyles, now is a crucial time to implement or improve green supply chain practices.
What is supply chain sustainability?
Supply chain sustainability is the conscious effort to incorporate integrity-driven behavior and green initiatives into all aspects of operations.
Source: SAP
Industrial and systems engineers play a pivotal role in supply chain design and process improvements. In this article, we discuss how you can strengthen your organization’s supply chain and ensure it is environmentally and socially sustainable, including key strategies such as utilizing a systems thinking approach, digital twin technology, resilience planning, and artificial intelligence and metaheuristics.
Systems Thinking
Systems thinking in supply chain involves considering the interconnectivity of the supply chain when analyzing and making optimizations, rather than focusing on each piece individually. For example, one area of a company may be working to reduce inventory levels to increase cash flow, while the goal of another department is to improve customer service. Since these goals are conflicting, it can be difficult to reach both, so they must be examined together.
By taking a look at the whole picture, companies can better understand their impact on the environment, take measures to prevent unforeseen outcomes, and brainstorm new ideas and processes.
One difficulty with the systems thinking approach is a lack of visibility. In some organizations, individuals may not have access to enough data to form a holistic view of their supply chain. In the 2024 Supply Chain Priorities and Challenges report, some of the top issues cited by respondents were a lack of cross-functional collaboration and poor data management.
“Every single company or organization needs employees with data analysis and optimization skills, whether it’s working on Wall Street, for a credit card company, or for telecommunications. This whole idea of optimizing a system or improving efficiency–who doesn’t want to do that?”
David Coit, Professor, Department of Industrial and Systems Engineering
Life Cycle Assessment
One example of systems thinking is life cycle assessment (LCA), which involves calculating the ecological footprint of a product or service from production to disposal. By completing a life cycle assessment, you can identify ways to make your offerings more sustainable.
The full product life cycle, also known as cradle-to-grave, consists of five phases:
1. Raw material extraction
2. Manufacturing and processing
3. Transportation
4. Usage and retail
5. Waste disposal
Source: Ecochain
To conduct a life cycle assessment, you’ll work through the following steps:
1. Objective and Purview: determine what you’re trying to glean from the assessment and how much data you’ll collect.
2. Life Cycle Inventory Analysis: collect the data you need for your analysis.
3. Life Cycle Impact Assessment: measure impact in selected categories.
4. Life Cycle Interpretation: evaluate your study, draw conclusions, and make recommendations.
Completing life cycle assessments manually can be time-consuming, but there are existing tools and software options to make it easier.
Completing life cycle assessments manually can be time-consuming, but there are existing tools and software options to make it easier.
Digital Twins
A digital twin is a virtual recreation of a physical process. Since the invention of the concept in the 1960s and its popularization in 2002, digital twin technology has been used in fields like healthcare, urban planning, and even aerospace engineering.
Now, companies are seeing the value of digital twins in the supply chain. This technology enables organizations to test various hypothetical situations and monitor their effects, allowing them to predict disruptions and utilize a centralized platform to make business decisions.
Digital twins can help identify opportunities to make your supply chain more sustainable, including:
- Reducing greenhouse gas emissions in facilities and transportation
- Cutting back on waste
- Improving water efficiency
- Making forecasts and data-driven decisions
Resilience Planning
Supply chain disruptions are on the rise. Companies should anticipate disturbances lasting one month or more every 3.7 years, making resilient system design increasingly important.
Diversifying suppliers is one way to improve resilience. Instead of relying on just one supplier, having a variety of options to fall back on can help in the event of a disruption. This practice also gives companies the opportunity to select the most eco-friendly suppliers.
Another approach is nearshoring, which involves a company moving its operations or manufacturing closer to their main markets as a way to reduce costs, streamline production, and enhance market potential. By shortening the supply chain, companies can build resilience and react more quickly to changing conditions.
In 2022, international shipping emissions reached a new high of 710 million metric tons. Nearshoring makes the supply chain more sustainable by cutting back needless waste and excess transportation, which reduces carbon emissions. Additionally, smaller, localized facilities are typically more environmentally friendly. Nearshoring can also contribute to a circular economy and a more collaborative business model by acquiring materials from nearby sources.
Gartner’s Supply Chain Top 25 list for 2024 features the best supply chains based on financial information, corporate and social responsibility measures, and public consensus. Among the focuses for these companies is going a step beyond resiliency, and taking measures to make their supply chains “antifragile.”
Artificial Intelligence and Metaheuristics
AI is a major force in supply chain, which companies are investing in so they may optimize and innovate their operations, and become more sustainable. Coca-Cola has entered a $1.1 billion partnership with Microsoft to utilize its strategic cloud and AI platform to revamp its supply chain operations. Environmental goals from this collaboration include waste reduction and minimized ecological effects from supply chain activities.
Generative AI can assist with sustainability efforts by proficiently pulling and examining data to find trends and inconsistencies. It can also help companies choose sustainable suppliers, prepare for disturbances, and enhance product design.
Metaheuristics, or optimization algorithms, can be useful in enhancing sustainable supply chain management due to their ability to solve intricate problems and achieve a state where operations are both eco-friendly and lucrative. Algorithms can be used to inform sourcing decisions, manage logistics, oversee stock, reduce energy consumption, and more. Some of the ways that metaheuristics are being used in sustainable supply chain management include:
- Utilizing hybrid algorithms to solve complicated problems
- Combining metaheuristics with the power of blockchain and the Internet of Things (IoT)
- Accounting for unpredictability
- Building algorithms to support synergism between all components in the supply chain
The steps businesses take today toward green supply chain management will not only protect our environment and future, but strengthen operations. Organizations still have a lot of ground to cover in executing sustainable supply chain practices, but taking advantage of some of the tools and processes we’ve discussed can help.
Prepare for the Future of Supply Chain
Students in the 30-credit Rutgers University online Master of Engineering in Industrial and Systems Engineering build skills in data science, optimization and AI, probability and statistics, logistical systems and supply chains, engineering project management, and sustainable systems.
“By taking a systems approach to analyzing and solving problems, and strengthening students’ knowledge of AI, data science, additive manufacturing, and optimization the degree program provides critical skills for those working within the supply chain,” says Mohsen Jafari, Rutgers Engineering professor and chair of the Department of Industrial and Systems Engineering.
The program includes a technical elective, Supply Chain Engineering, which focuses on operations research and its applications in the design and analysis of marketing and distribution systems, including sales forecasting, inventory optimization, and logistics management.
About Rutgers University School of Engineering
Rutgers School of Engineering is a place of possibilities—for students seeking success, for researchers seeking to create new technologies, and for faculty members and industry leaders seeking to form powerful and productive partnerships.
Rutgers University’s School of Engineering is a vibrant academic community whose richly diverse students and faculty are committed to globally sustainable engineering. Its mission is built on a commitment to fostering the integration of education and research to achieve transformational innovation that is ethically responsible and sustainable.