A Purpose-Driven Supply Chain Requires Redefining Key Performance Indicators

On 10 Aug 2019, the influential Business Roundtable announced a new purpose for corporations which addresses the responsibility of corporations in improving the future of our environment, the citizens, their employees and other business partners. Maximizing profits for Shareholders is no longer the only objective of corporations. Source: Business Roundtable, “Statement on the Purpose of a Corporation” https://opportunity.businessroundtable.org/ourcommitment/

How will this new-found purpose directly affect the way corporations run their business and their Supply Chain? Is this yet another fad to draw more millennials who are becoming less supportive of a capitalist system and more demanding of corporations to play their part in solving social issues like global warming and the widening gap between the super-wealthy and the working poor? Or, is this a genuine commitment to improve the ecosystem in which we all live, work, and operate?

If there is a true obsession of Supply Chain Management, that is to improve efficiency, reduce costs and working capital, and improve customer satisfaction through speed, agility, and customized/personalized offerings. Through Business 4.0 and the leverage of digital technologies, corporations are able to achieve just that. Yet, there is little heard on how corporations contribute positively and in a significant way to social issues.

Is there another version to the new Supply Chain which is more in line with the corporations’ new purpose?

In the below, I offer what I think could be the new Purpose-Driven Supply Chain, which describes:

1. Efficiency in the way we use and restore earth’s resources.
2. Cost-reduction in the way we design products that last longer, thus eliminating costs in producing, stocking, shipping, returning, disposing, and recycling.
3. Improving Customer satisfaction in the way that corporations treat Corporate Social Responsibility and Ethical Supply Chain Management as an integral part of their operations in line with consumers’ desires.

 

Efficiency: From Linear to Circular

We take resources from the ground to make products, which we use, and, when we no longer want them, throw them away: take-make-waste. This is what a linear economy looks like. However, there are only so many resources to be taken.

A sustainable Supply Chain transforms a linear economy to a circular one by keeping products and materials in use. For example, returning packaging to be re-used again so it does not end up in a landfill; and, reducing the usage of water and pesticides in growing of crops. Lastly, regenerating of the natural systems by returning valuable nutrients to the soil and other ecosystems.

 

Cost-reduction: From Quantity to Quality

“Consumerism” or “Materialism” is the backbone on which most industries make their money. When we start consuming less, our carbon footprint is inevitably reduced.

Instead of trying to improve our Supply Chain to ship more, faster, and cheaper to the consumers, corporations should place their focus on designing a product to last. By transforming their business models from “volume” to “quality” production, environmental costs and waste are reduced. Instead of doing that, companies are constantly competing with one another in pushing out newer or enhanced models at the shortest time possible, leading to poorer quality, shorter product lifecycles, greater costs, and increasing waste.

 

Improving Customer Satisfaction: From doing less bad to doing more good

To truly contribute to a better world, corporations need to treat sustainability as integral to operations. Sustainability issues should be considered with equal importance as issues such as delivery lead time. Instead of taking modest actions to treat sustainability issues, corporations can seek more holistic and structural approaches to do more good, rather than just doing less bad.

Continuing to package perishable food in recyclable plastics is an example of doing less bad. As facts have shown, less than 10 percent of the plastic waste produced between 1950 and 2015, was recycled.

Source: https://ourworldindata.org/faq-on-plastics#how-much-of-global-plastic-is-recycled

Doing more good would mean finding innovative methods to store perishables without the use of plastics.

 

Summary:

The truth is that more and more people are judging large corporations, not by how fast they can deliver products to our homes, but by how sincere they are in doing good. Doing good comes from a company’s commitment to solve major social issues. Sincerity arises when a company invests in Corporate Social Responsibility and Ethical Supply Chain Management and committing to measure success in a more purposeful way.