Circle of sustainability

Supply chain optimization, sustainability are blending together

Large enterprises are increasingly connecting the dots between supply chain optimization and sustainability with the two specialties likely blending together over time.

In my rounds with Celonis customers, I often ask whether sustainability and supply chain transformation are going to merge. The reply goes like this: For now, supply chain and sustainability are two distinct initiatives within companies. In two years, they'll be under one roof. Inflation may accelerate the combination as sustainability becomes operationalized.

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The prediction is likely to be on target judging by recent comments from CEOs, CFOs and CTOs on earnings conference call. One example of the supply chain-sustainability intersection came from Fiona Tan, CTO of online furniture retailer Wayfair.

Tan, speaking on Wayfair's first quarter earnings conference call, outlined Wayfair's technology team of 3,000 software engineers, product managers, data scientists and designers that keep Wayfair running. Tan also noted that a team of 200 quantitative marketers, engineers and data scientists drive billions of customer interactions every week with the help of automation.

According to Tan, machine learning is deployed to drive search keywords as well as create more efficient logistics. Tan said:

One last area to highlight is how we are applying machine learning into our logistics network. We are dynamically curating customer search to show products that not only fit the parameters of their search but are also located in fulfillment centers closest to them. Doing so can significantly cut the distance products travel, lowering costs and prices, reducing damage and driving higher conversion.

Tan didn't mention sustainability directly, but more efficient logistics is obviously a win-win for business and Earth. The International Transport Forum (ITF) estimates that international trade-related freight transport currently accounts for around 30% of all transport related CO2 emissions from fuel combustion, and more than 7% of global emissions. Supply chains have become a boardroom issue as macro-economic conditions (inflation), geopolitical uncertainty and Black Swan events such as the COVID-19 pandemic have converged to disrupt networks.

When you think about sustainability you can't help but think about supply chain related processes that include the following:

  • procurement;

  • production and the energy and water consumption required;

  • intercompany and partner shipping emissions;

  • and inventory and order management.

  • Improve any of those aforementioned processes and you'll make sustainability progress too. 

Other enterprise leaders are also adding sustainability to their broader transformation efforts. An IBM-Celonis survey found that Chief Supply Chain Officers are planning to meld process excellence with sustainability initiatives with 71% reporting that their organizations plan to aggressively move to carbon neutral.

For instance, Albertsons CEO Vivek Sankaran said on the company's earnings conference call that the grocery giant was focused on "modernizing our capabilities in part through an improved supply chain, enhanced data and data analytics and ongoing productivity, all built on the foundation of being locally great and nationally strong; and finally, further embedding ESG throughout our operations."

Baker Hughes CEO Lorenzo Simonelli said on the company's first quarter earnings conference call that 2022 will feature the "the most challenging supply chain and inflationary environment we have seen in several decades."

That challenging environment may just accelerate sustainability efforts as supply chains pivot to focus on energy security, reliability and diversity.

"We think the current environment will actually accelerate clean energy initiatives, particularly for fuels like hydrogen, which EU is making a large part of its long-term energy plan," explained Simonelli. "What we're seeing from the current situation is that you cannot become too reliant on one country or one source of energy. So, diversity of supply is critical."

Larry Dignan mugshot 2022
Larry Dignan
Editor in Chief (former)

Larry Dignan is the former Editor in Chief of Celonis Media. Before joining Celonis, he was Editor in Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in, Inter@ctive Week, The New York Times, and Financial Planning magazine.

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