Supply chain traceability is key to sustainability and improved performance

This is an excerpt of the original article. It was written for the July-August 2022 edition of Supply Chain Management Review. The full article is available to current subscribers.

July-August 2022

In late May, I attended the Institute for Supply Management’s first live conference since 2019. The message from Tom Derry, ISM’s CEO, was simple: These are challenging times, but along with the challenges come opportunities for those of us who can step up and lead our organizations into the future. One area where supply chain will be tasked with stepping up to the plate is going to be ESG, the initialism for environmental, social and governance. It was a major theme of the conference, and while all of the reporting requirements are still being debated, there’s little question that supply chain will lead the charge in environmental initiatives…

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For more than a century, businesses have honed highly efficient, linear supply chains. Raw materials flowed in one direction, were transformed into a product, used and ultimately discarded in a waste heap. That approach now puts a firm’s competitiveness at risk.

To ensure supply in an increasingly volatile business landscape, companies need more resilient networks. Fast-changing consumer preferences and customization require increased flexibility and speed. And investors, consumers and governments expect more sustainable products and processes—with certifications to prove companies’ claims. Winning in the coming decade will require a transparent and circular value chain—one that reduces or reuses materials and remanufactures or recycles products—lowering cost and creating less waste.

It is a profound paradigm shift. And the technology is already available to trace each raw material that goes into a product and follow how a product is used and where it is discarded. In fact, digital traceability enables companies to meet and balance a broader set of business objectives, including efficiency, resilience, responsiveness and sustainability. It allows companies to redefine the boundary of operational excellence and set aspirational new goals.

How does it work? Traceability gives companies the ability to follow products and goods as they move along the value chain and to glean exact information about the provenance of inputs, supplier sourcing practices and conversion processes. With that data in hand, companies can make predictions, run scenarios and dynamically optimize operations. Leadership teams can serve customers better, identify unnecessary resource consumption, respond faster to changes in demand and fulfill orders more efficiently. They are also able to identify strategic value chain opportunities, innovate faster, minimize the impact of internal and external disruptions and certify sustainable processes and products.

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