Sustainable, green supply chains; A manufacturer’s new reality

A Q&A with Vincent de Montalivet, Principal, Data for Net Zero offer leader, and Christopher Scheefer, Vice President, North American Lead for Intelligent Industry at Capgemini

The world’s manufacturers are more connected than ever, and they simply cannot afford to be at the mercy of unreliable, insecure supply chains. Yet supply chains are among the business operations most vulnerable to outside forces and the cost can be significant, ranging from lost sales and production time to lower brand image and increased difficulty in raising capital.

Insights derived from top-quality data can help manufacturers avoid disruptions in their supply chains – or at least mitigate the effects of climate change – by making these vital operations more sustainable.

Capgemini’s Vincent de Montalivet and Christopher Scheefer talk about how they help manufacturers leverage data to transform their operations. Here, they explain how the sustainable supply chain creates financial and operational advantages even as it reduces environmental impact and mitigates risk.

What is a sustainable supply chain? Is it one that’s environmentally responsible?

Vincent de Montalivet: Environmental excellence is certainly an important part of it. Consumers, investors, and regulators are increasingly concerned about carbon emissions and other environmental issues, and companies must respect and respond to those concerns. Green supply chains are particularly important as companies make net-zero commitments and need to track their emissions across their ecosystem and the life cycle of their products. But sustainability is more than just being green. What we’re really talking about is the transformation of the supply chain beyond its traditional role in which partners work with an enterprise to design and manufacture a product and then bring it to market. The sustainable supply chain encompasses that, but then expands to cover the entire lifecycle of the product in a way that reduces that product’s impact on the environment and minimizes risks to the business. It accounts for how a manufacturer’s decisions and activities impact climate change, but also how climate change impacts the organization – in terms of both financial and organizational risks.

Can you provide an example?

Christopher Scheefer: Sure. A manufacturer buys from a partner in its supply chain that experiences a chemical spill and has to suspend business while it addresses this. From an organizational perspective, the manufacturer needs to find a new source for that chemical so it can continue to operate. But that spill could also negatively impact the manufacturer’s brand because the manufacturer is associated with that supplier. It could also have financial implications – both in terms of sales but also in the form of making it harder to attract capital from investors who are increasingly concerned about environmental, social, and governance (ESG) issues. So it’s absolutely paramount that organizations include sustainable risk analysis in their network.

That’s a greatly expanded role for the traditional supply chain, isn’t it?

Scheefer: Absolutely. A supply chain has traditionally been treated as a means to manage disruptions – for example, those caused by the COVID-19 pandemic or by international conflicts – and, in legacy supply chains, the chief procurement officer would rank members of their network primarily on time, quality, and cost.

de Montalivet: We call those the currencies of a supply chain: they’re the main criteria that companies consider as they make decisions. Now, manufacturers need to add carbon as a currency. We’re witnessing increasing risks to supply chains arising from climate catastrophes and, as we look ahead, extreme weather events are only expected to grow more frequent and more severe. So there’s a real need for companies to make their supply chains more sustainable because that also means making them more resilient.

Scheefer: In the modern business environment,manufacturers must also deal with the rise of the circular economy. Chief procurement officers now must also manage reverse logistics – for example, they must figure out how to bring a product back into the company for reuse, refurbishment, or remanufacture after the customer is finished with it. And once the product has reached its end of life, companies must be able to determine its ultimate waste footprint in order to report on its environmental performance to shareholders, potential investors, and regulators.

Those are significant changes and the supply chain of today must look very different from those of the past. What does today’s supply chain look like?

Scheefer: From a technology perspective, a modern, sustainable supply chain is intelligent and connected. The intelligence provides the manufacturer with the ability to track the priority, the commitment, and the execution of sustainability for all its suppliers, globally, at any given time. In the past that would have been impossible – but now we can apply advanced, data-driven solutions employing artificial intelligence and other leading-edge technologies to the problem. It’s still a challenge – especially for enterprises that rely upon a globe-spanning network of suppliers and sub-suppliers, distributors, and other partners. But data mastery makes it viable.

de Montalivet: Connectivity is also important. It enables the manufacturer to manage the business in a way not previously possible. For example, the supply chain can now be connected to research and development, to ensure new product designs are more sustainable. It can be connected more deeply into manufacturing, where it will have an effect on new methods, new systems, and new machinery. And connectivity enables more sustainable sourcing through marketplaces that provide a true view of the supply chain network and a true view of the organization’s exposure. AI and analytics play huge roles in this because they’re critical technologies for assessing risk on the scale we’re describing. As an aside, it’s why AI is playing an increasingly vital role in the insurance industry as that sector comes to grips with the risks associated with climate change.

Can you provide some examples of how AI enables or enhances the sustainable supply chain?

de Montalivet: The Capgemini Research Institute has identified more than 70 AI-enabled use cases related to climate action. It focused on some of the top use cases for its report, Climate AI: How artificial intelligence can power your climate action strategy. For the manufacturing sector, these include tracking greenhouse gas emissions and tracing GHG leaks at industrial sites, and improving the energy efficiency of manufacturing facilities and industrial processes. Capgemini researchers also cited a number of use cases that have direct implications for the sector’s supply chains – including designing new products that reduce waste and emissions during prototyping, production, and use, improving demand planning, reducing the waste of raw materials, and route optimization and fleet management.

Scheefer: AI-derived insights are giving decision makers the information they need to transition manufacturing away from “make to stock,” in which a company creates products and warehouses them on the assumption that a customer, eventually, will want them. It facilitates “make to order,” in which the product isn’t produced until there’s a customer for it. This confers several advantages – including eliminating waste, reducing warehousing space, and making better use of a company’s workers. At the same time, better management allows the organization to reduce water use, energy consumption, and associated emissions. All of this has implications for the supply chain as well.

How are successful companies enabling their supply chains to become more sustainable?

de Montalivet: It may sound obvious, but if an organization can’t see all of the parameters across its supply chains in real time, it’s almost impossible to optimize them in a sustainable manner.So companies that already employ a logistics control tower are off to a good start. The control tower isn’t a new concept – it’s been around for years – but it’s essential to incorporate sustainability data into it.

Scheefer: Successful companies also recognize this is a journey. Once they’ve defined and implemented a sustainable supply chain, they can then start to apply data and analytics to continuously improve it. Capgemini offers solutions that help with this. Our Data for Net Zero solution enables organizations to master data from different sources and suppliers, then share it across their business functions and value chain. Meanwhile, our Sustainable AI solution ensures that employing the computational power of AI is itself accomplished in the most energy efficient, sustainable way possible.

You obviously believe a sustainable supply chain is essential. Why?

Scheefer: We do, because the supply chain is linked to so many other aspects of a business. Well-managed, sustainable supply chains have become a transformational agent and a necessary capability. It’s absolutely essential that a company has a sustainable supply chain strategy. If the chief procurement officer is not making their supply chains more sustainable, they’re losing out. Increasingly, it’s a license to operate and should be a corporate imperative.

Continue the conversation, get in touch with us:

Vincent de Montalivet, Principal, Data for Net Zero Offer Leader

Christopher Scheefer, Vice President, North American Lead for Intelligent Industry at Capgemini