Regeneration: The Future of Supply Chain Management
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The growth of eCommerce has come bearing its own set of gifts – literally and figuratively. You open your door and there it is – a pile of cardboard patiently waiting for you.
With the amazing products and dopamine we get from online shopping, a mountain of boxes also piles up in every corner of the house. The trips to the garbage and recycling units have become a routine for most of us.
But where does it end?
While we keep talking about sustainability, our consumption pattern (and these mountain of boxes) point to something else entirely. Sustainability has just become the buzzword and a trend everyone wants to hop on to.
Let’s face it, sustainability is expensive & time-consuming. While baby steps towards establishing a more sustainable way of living and optimizing the logistics would yield fruitful and environmentally friendly results, it is a long-term process.
But what if there is still a way to give back to the environment more than we take, especially with supply chain systems? How? Regeneration.
Regenerative process aids in establishing sustainable ways to operate your supply chain systems, and it is a way forward that is leading the future of supply chain management.
“Regeneration” in Supply Chain Management
Supply chain systems have always come under scrutiny when it comes to adopting sustainable practices and is thought to be one of the top sectors to contribute towards environmental harm.
While sustainable practices have been vital, especially in supply chain management for most big and medium to small corporations, experts believe that just sustainability isn’t enough.
This is where “regeneration” comes in.
This concept emerges from the field of agriculture, which the National Institute of General Medical Sciences defines it as a “natural process of replacing or restoring damaged or missing cells, tissues, organs, and even entire body parts to full function in plants and animals”.
In supply chain management, the challenges and impact on the environment are being considered. With the regenerative approach, producers, manufacturers, shippers and distributors first eliminate their negative impact on the planet and the society by reducing waste and emissions and then take positive action to create a better impact on the environment and planet.
Challenges Faced by Current Logistics Networks
Before we discuss the advantages of adopting a regenerative approach towards supply chain management, it is vital to look at the challenges faced by the logistics networks of organizations.
Shekar Natarajan, EVP of AMERICAN EAGLE OUTFITTERS INC., identifies three major challenges that brands face with their logistics or supply chain systems:
Brands are constantly fuelled with the idea of replicating and owning their supply chains. This is resulting in increased vertical pipelines that replicate resources across the board.
While this allows organizations to control their supply chains completely, it also increases the amount of carbon footprint of the organization and the customers. Vertical integration might be profitable for the company, however it isn’t the most sustainable way to operate.
We all think owning the supply chain is the answer to the problem because we want to own the customer experience. There is no control anywhere, and putting more resources and more assets on the ground is going to make things worse
Brands or major organizations are directing their efforts to create a more sustainable supply chain management. This brings them to the challenge of interoperability – “How do you move from one mode of transport to the other without expending many resources?”
When it comes to global logistics, the lack of an interface poses a huge problem. With a lack of digitization comes a lack of communication and coordination, where one shipping company’s system doesn’t talk to another shipping company’s system, and one consolidation company doesn’t talk to another consolidation company.
This results in no mode for exchanging information, exacerbating the problem further.
By the end of 2030, the world will put 7.2 million last-mile delivery trucks on the road. And the number of FedEx, Amazon, DHL, and other vans showing up at your doorstep on the same day will increase drastically.
Regenerative Approach – Future of Supply Chain Management
While the challenges may seem grave, these can be tackled by incorporating regenerative practices.
One such practice would be to create a more circular supply chain where brands reuse or repurpose waste and returns into recycled, refurbished or new products. A circular supply chain economy is at the very core of Intel. Greg Skrovan, the supply chain manager of Intel says that “the new focus is transforming the company’s reverse logistics supply chain, making it a “circular economy”.
Creating a network of small scale supply chain management services to work with in collaboration to increase interoperability while reducing costs and being sustainable helped American Eagle tackle their logistics issue.
Brands focus on creating a linear supply chain system, whereas to be regenerative and sustainable, it is vital to look at cooperation and not competition. Encapsulation method of consolidating the multiple different packages coming to one address and delivering it at once by a logistic provider would not only reduce cost but also save time and result in greater sustainability.
Speaking about coopetition (cooperation + competition), many might think it’s a violation of anti-trust laws. But that’s simply not the case. Coopetition is not an issue if
(a) it is not related to price fixing or
(b) there is no harm to consumer welfare (e.g., loss of options or higher prices).
On the other hand, it actually helps in minimizing customer and shipping costs as well as time.
Finally, it is important for brands and organizations to understand that adopting a sustainable and regenerative approach is the future of supply chain management. It requires a significant shift in the mentality of moving away from competing on labor and supply chain, and natural resources and focusing on providing a better customer experience and being sustainable through regenerative practices.
Today, the U.S. population is growing at 0.1% per census, and eCommerce is growing at 10%. eCommerce packaging alone contributes to 30% of solid waste generated in the U.S. If you add these numbers up, the future looks bleak.
At the end of the day, we all owe it to our kids and the future generation to live on mother earth and make this place a better place. We can try to make our earth a better place through sustainable and regenerative supply chains and give back more than we take.
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