The world is focused on sustainability and supply chains are no different. Companies are now demanding that 3PLs offer sustainable options to meet the needs of consumers and investors.
Matt Waller, dean of the Sam M. Walton College of Business and a supply chain management professor at the University of Arkansas, recently talked in depth about supply chain sustainability in an interview.
“Business logistics is about managing the flow and storage of inventory such that total costs are minimized and customer service targets are achieved. These total costs include inventory holding costs, transportation costs, cost of poor service, material handling costs, labor costs, etc. Minimizing these costs while hitting various customer service targets did not use to be subject to the visibility of customers, but that is changing.”
“Now we cannot just minimize these costs subject to customer service targets, but we must also consider how the way we are trading off these costs against one another affects customer perceptions, such as preferences for certain types of sustainability and how customers perceive these to be good for the environment.”
“Everything will eventually become visible, and eventually more and more metrics will be measured and made public. The effect of all of this must be taken into account when setting various customer service targets and when trading off these costs.”
He goes on to state:
“To achieve a given fill rate, a firm can hold more inventory and use slower transportation, or it can hold less inventory and use faster transportation. Similarly, for a given level of inventory, a firm can use slower transportation and achieve lower fill rates.”
“Also, to achieve a given fill rate, a firm can hold more inventory and use less reliable transportation, or it can hold less inventory and use more reliable transportation. These are basic examples of such trade-offs. All of them will have different impacts on sustainability metrics.”
“As I mentioned earlier, business logistics is about managing the flow and storage of inventory such that total costs are minimized and customer service targets are achieved. Supply chain management is about integrating business processes between functions within a company and between firms in a supply chain.”
“Such integration includes things like sharing information, including information relevant to sustainability. So one of the most prominent aspects of sustainability that will be prevalent in the future will be metrics of sustainability and how those metrics are affected by decisions in logistics and supply chain management. In addition, systems theory will be critical to understanding sustainability and supply chain management.”
Clearly, in the coming decade, sustainability will continue to lead the way in innovations and impact how the supply chain functions and the expectations of clients, suppliers, shareholders, and others.
