Six Steps to a Sustainable Supply Chain
Calls for companies to embrace Circularity and become Regenerative
In recent years, global supply chains have met with unprecedented levels of disruption in virtually every facet of their businesses and operations. Such factors have caused the supply chain to grow ever-increasingly more complex. This is felt most keenly within the logistics industry sector.
This has necessitated the need for the industry to adapt, to find the most efficient ways for importers, manufacturers, and distributors alike to get goods into the hands of consumers.
To stay in business, an awareness of how logistics are reshaping is essential. This includes approaches to both technology and organizational management, namely, what the future holds.
It’s for this reason that we invited Sergio Maccotta and Ahmed AlFaifi, two Senior Vice Presidents from top global technology titan SAP, and regular contributors to Global Supply Chain, to each author a first-person article as they see fit to effectively synopsize and assess their take on the challenges on hand and offer real-time technology solutions to counter these—Editor.
Part 1:
Six Steps to a Sustainable Supply Chain
With 93% of companies in the MENA region recognizing sustainability as an important business objective, digital transformation in the supply chain allows you to meet and exceed sustainability benchmarks while also innovating and growing your business, affirms Sergio Maccotta, Senior Vice President for SAP Middle East Africa–South.
The effects of companies neglecting to adopt more sustainable business practices are becoming more and more visible. Customers, employees, and investors are increasingly rejecting those falling behind in establishing sustainability goals.
The United Nations declared the 2020s the ‘Decade of Action’. Companies across the Middle East are increasingly focused on sustainability and raising awareness by hosting COP 27 in Egypt and COP 28 in Dubai (2023).
Climate change, circular economy, ESG (Environmental, Social & Governance), and sustainability have become business priorities. Global supply chains are front and centre to these challenges but also present many opportunities for innovative solutions.
The good news is that businesses in our region are noticing the many opportunities and taking action. A recent YouGov survey of companies in the MENA region commissioned by SAP showed a strong commitment towards sustainability and a willingness to invest in technology to achieve these goals across the MENA region.
Important business objective
Over 90% of companies surveyed viewed sustainability as an important business objective within their organization, with 47% saying it was vital to their success—similarly, 94% viewed technology and innovation as essential to achieving their sustainability goals.
Interestingly, companies also recognized the financial implications of sustainability policies. More than 90% expected their organization’s financial performance and sustainability strategy to connect in the coming 12 months. With SAP, the same processes for managing financial transactions can effectively measure and manage a company’s carbon footprint.
In the Middle East, for example, SAP has been working with customers such as GWC and other leading names in the logistics trade to ensure they meet their sustainability objectives and those of their partners and customers.
It is never too late to embark on a sustainability journey or to deepen a company’s commitment to saving the planet. There are six actions companies can take today to achieve a sustainable supply chain.
1. Establish a Sustainable Business Strategy
Sustainability must be central to companies’ overall business strategy in the Middle East.
Business leaders need to examine their business network’s functions and identify sustainability weaknesses within and outside their organization.
For example, supply chains are a major contributor to waste carbon emissions and are, therefore, a significant area of opportunity for improvement. Creating measurable goals to improve a company’s supply chain can restore the confidence of customers, investors, employees, and other stakeholders that the organization is taking action to become more sustainable.
An example of a measurable goal is ‘to become carbon neutral by 2030’ or ‘to eliminate the use of single-use plastic across all operations in the next 18 months’.
2. Embed Sustainable Data into Business Processes and Networks
Step two is for business leaders to refine their operations by measuring their performance and capturing data across the supply chain.
Sustainability must extend from the design to the end of life of a product: from the initial design to the sourcing of raw materials, and manufacturing of goods, all the way to last-mile logistics and even to product usage, returns, and recycling processes.
Having sustainability data from within an organization and across the network of partners will also help keep companies accountable, as it is easily sharable with suppliers, shareholders, industry associations, regulators, and customers to ensure they are meeting the sustainability goals they’ve set forth.
SAP has sustainability metrics built into many of its solutions and standalone sustainability solutions.
3. Manage Carbon and Climate exposure throughout the Supply Chain
After an initial data capture, supply chain leaders should ensure they are accounting for and managing climate-related emissions across all parts of their supply chain, including suppliers, contract manufacturers, logistics service providers, and other trading partners.
A lack of visibility across a company’s supply chain is typically why business leaders struggle to manage the total carbon footprint of products. By employing technology such as SAP solutions to provide the visibility they need across their supply chain, business leaders can then reduce their company’s end-to-end carbon footprint.
Making changes to the supply chain may seem like an enormous undertaking, but it will undoubtedly pay off in the long run with a more loyal customer base.
4. Embrace Circularity and become Regenerative
Technology can help companies reduce, reuse, recycle, and use reclaimed materials to minimize waste and ultimately adopt a circular business model.
To achieve circularity and become regenerative, companies must design products with their end of life in mind. R&D leaders and product designers should ask themselves questions, such as ‘How will the product be refurbished, repurposed, reused, or returned to the earth,’ and ensure that no non-biodegradable packaging materials end up in oceans or landfills.
Sensors can track which products are causing damage to the atmosphere and feed that back into the design process for future product developments to help meet our corporate commitments.
5. Prioritize people across the Supply Chain
When rolling out a sustainable business strategy, companies must have buy-in and support from the entire workforce. This starts with creating a diverse and safe space and placing emphasis on human rights, equality, environmental health, and safety while providing professional development opportunities for talent, such as training and reskilling programs. Establishing partnerships with suppliers, contract manufacturers, and logistics providers that share these values will be essential for success – sustainability is a team effort.
We are at an inflection point, and business leaders taking steps to prioritize their green line just as much as their bottom line will ultimately go a long way in addressing the world’s greatest environmental issues.
6. Embrace the power of AI
Embracing the future by exploring and leveraging the full power of AI will be a competitive edge.
Executives across industries are exploring AI-enabled supply chain management to stay ahead of change and improve demand forecast accuracy.
AI can manage and analyze large amounts of supply chain data, identifying trends and making predictions about future concerns. AI solutions are fast, efficient, and tireless, improving efficiency in a supply chain.
AI capabilities embedded in SAP solutions enable increased visibility, control, and quick actions toward prevention with predictive emissions forecasting.
PART 2:
Leveraging digital logistics technology to build resilient and sustainable Supply Chains
To thrive in today’s volatile business environment, supply chain resilience is key. Here, Ahmed AlFaifi, Senior Vice President and Managing Director, SAP Middle East Africa-North, details how SAP’s focus on integration, end-to-end support and leveraging the power of AI is helping companies in the Middle East establish agile and robust supply chain processes.
In unpredictable business environments, the supply chain is a key differentiator that can help companies in the Middle East achieve a competitive advantage.
To build a resilient supply chain that enables successful navigation of volatile markets, companies need to hedge risk and flexibly engage external resources by operating highly responsive supplier networks. They also need to increase operational efficiency by optimizing the flow of goods and increasing asset and warehouse utilization.
Delivering better customer experiences is key, with streamlined logistics execution crucial to helping regional companies fulfill the promise of omnichannel commerce.
In addition, companies must work toward sustainability objectives by providing supply chain planners with insights into environmental and social impacts as well as emissions reporting and analytics. Companies in the Middle East are realizing this, with a recent YouGov survey commissioned by SAP finding that 62% of companies in the region had planned to address sustainability in their supply chain as a specific sustainability goal over the next 18 months.
Governments in the region are also turning their attention to supply chains. Saudi Arabia’s Ministry of Transport & Logistics Services recently laid out an ambitious strategy to grow the kingdom’s logistics sector market size to US$ 15.4bn by 2030 and position it as a global logistics hub, for example. Similarly, the Global Supply Chain Resilience Initiative (GSCRI) was launched last year to attract local and international investments in the supply chain sector.
Boosting supply chains
The private sector has also been focusing attention on boosting supply chains. Earlier this year, SAP announced the establishment of its global SAP Business Network within Saudi Arabia. The move will enable Saudi public and private enterprises to trade, buy and sell on the world’s largest business digital network in 190 countries, with millions of trading partners conducting transactions worth more than US$ 5trn annually.
There are three key factors to consider when employing technology to accomplish all the above objectives, namely, integration of logistics processes based on best practices; leveraging advanced technologies such as AI; and ensuring that the solution if fully comprehensive across all supply chain functions.
Integration for smooth execution
In terms of integration, SAP’s supply chain logistics and order fulfillment solutions support end-to-end logistics processes. They also combine Internet of Things–based technology, AI, advanced analytics, and blockchain to improve visibility, provide insights, and increase traceability of materials and processes.
Using SAP solutions, businesses in the Middle East can integrate processes in real time across warehouse management, yard logistics, transportation management, and logistics networks. They can also connect with global business partners for smooth logistics execution across modes of transport.
How SAP is leveraging AI in supply chains
AI-powered insights, recommendations, and automation built into SAP applications, alongside pre-trained AI models to address specific functional needs, empower organizations to transform every aspect of their supply chain faster and with less risk. With a connected design-to-operate business process, different functional teams can easily communicate and balance supply chain trade-offs.
To give an example, with visibility into planning, manufacturing, and logistics, it is possible for a company in the Middle East to use advanced analytics to simulate whether it is best to pay for overtime production at a given plant or incur transportation costs from different plants.
Additionally, supply chain planning and manufacturing can work together to model and refine actionable production and transportation plans that align schedules across business functions and with trading partners. Moreover, all business functions can gain greater visibility and foresight through an AI-powered supply chain control tower that detects and analyzes activities across the extended supply chain and takes preventive actions to mitigate bottlenecks.
The result is an efficient and collaborative effort across the enterprise that grows agility and resilience across the supply chain.
Comprehensive solutions in action
SAP solutions are also sufficiently comprehensive to provide end-to-end support for supply chain logistics in the region, as is evident if we consider each step of the process.
In terms of order promising, the SAP S/4HANA ERP solution for advanced ATP provides rich order-promising functionality, enabling companies to prepare for unexpected events and manage shortage situations quickly. They can manage business processes and improve service levels, lead times, and goods in stock with in-depth analytics and intelligence.
For warehouse management, the SAP S/4HANA Supply Chain solution for extended warehouse management enables companies to manage high-volume warehouse operations and integrate complex supply chain logistics with their warehouse and distribution processes. Furthermore, the solution helps companies achieve high levels of visibility and control. They can optimize inventory tracking, cross-docking, distribution operations, multichannel fulfillment and achieve warehouse automation and more – all in real time.
Efficient and profitable
Similarly, the SAP Yard Logistics application helps companies run more-efficient, profitable, and sustainable supply chain logistics by maximizing their visibility into yard processes. In addition, the application offers a range of visualization and reporting tools that enable them to accelerate their yard processes and use resources more efficiently with improved insight and control.
For transportation management, the SAP S/4HANA Supply Chain solution means companies can consolidate orders and maximize the return on their transportation spend. The solution enables companies to forecast demand and shipment volumes accurately and fine-tune transportation planning.
They can enhance freight, fleet, and logistics management to gain real-time visibility into global transportation and domestic shipping across transportation modes and industries while supporting sustainable logistics goals.
Another vital aspect of the SAP offer is that customers benefit from an open logistics network that connects business partners for intercompany collaboration and insights. SAP Business Network for Logistics provides a central entry point to manage logistics transactions, exchange documents with key business partners, and gain transparency across the value chain through an open, network-of-networks strategy.
