From Resources to Retailer: Sustainable Transformation is Driving Profitable Supply Chains

By: Stephanie KrishnanAssociate Vice President

Introduction: The Importance of Sustainability in Asia/Pacific Supply Chains


The importance of the supply chain has grown over the past 5 years, with continued emphasis on integration between supply chain partners. The significance of this was thrown into sharp focus due to COVID-19, with organizations seeking to increase visibility and agility in daily supply chain operations to increase speed, reliability, and responsiveness. In addition, sustainability has grown in significance as both the requirements and the benefits of sustainable supply chains are realized.

A survey conducted earlier this year, by IDC Manufacturing Insights, across Asia Pacific Manufacturers found that organisations are currently focused on the following for environmental sustainability(1):

 

  1. Energy efficiency requirements of products and operations
  2. Incorporating circular economy principles throughout, from source to disposal
  3. Reduction in waste and driving cost efficiencies
  4. Incorporating responsible sourcing principles into the supply chain 

 

 

To deliver on these requirements organisations are investing in foundational technologies that provide a system of record to supply the traceability required, dashboards and analytics to optimize the use of resources, and product innovation platforms to incorporate closed-loop design principles. 

 

From Digital Transformation to Sustainable Transformation


Manufacturers digital transformation (DX) efforts are typically focused on driving efficiencies, quality, and innovation. However, with awareness of the impact of supply chain activities on the planet, government regulatory requirements, consumer pressure, and employee engagement needs have widened transformation efforts to extend to sustainability. As a result, manufacturing organizations have now realized that efforts to improve productivity, quality, and innovation are closely linked to the outcomes required by sustainability.

How sustainable transformation is changing supply chain processes and creating competitive advantage


Sustainability initiatives require organizations to assure transparency and traceability, and the systems that support this lay the foundations for deeper insights and new opportunities. For example, with 35% of Asia/Pacific industrial organizations prioritizing servitization revenue models by 2024, there is a recognition that additional services can be offered that support efficiency and environmental outcomes. As-a-service business models can support sustainability initiatives, for example, by producing intelligent sensor-enabled equipment. Operational insights from continued services offer ensure uptime and increase efficient energy use, reducing energy costs.

Guidance & Conclusion


Organizations are increasingly required to report on environmental, social, and governance (ESG) efforts and increase transparency across the supply chain. Investment in these initiatives results in positive outcomes beyond traditional business outcomes, including risk mitigation, attracting and retaining talent, improvement of customer perception, and, based on IDC research, organizations that embrace sustainability and DX are outperforming their peers when it comes to revenue and profitability. 

Environmental sustainability efforts vary, including increasing efficiency in energy usage optimization, adhering to regulatory compliance, emissions tracking, and supplier visibility. Organizational journeys often start with efficiency but extend to integrate sustainability from raw material to the final product. Systems such as product lifecycle management to support closed-loop design principles reap sustainable benefits, through a digitalized, connected platform approach, including managing products to increase efficiency, reduce energy consumption, and increase longevity. 

This is a journey that occurs over time. Still, with more than 50% of manufacturing organizations investing more than 10% of their IT budget on sustainability-related investment, that time has started. Moreover, with changing sentiment across the region and globally, we can expect this trend to continue as organizations recognize that sustainable transformation investment over time helps achieve maximum sustainability, revenue, and profit outcomes. 

*Excluding Japan
(1) IDC 2021 APeJ Manufacturing Insights Survey, n=947

Supply Chain Technology Insights and Advisory


Theresa Rago

AVP, Sales and Marketing for IDC Asia Pacific