Why Supply Chain Will Further Prioritize Sustainability in 2021
Consumers are demanding businesses go green, which has pushed many industries to adopt more sustainable practices and operations. This has certainly been the case within the supply chain.
In fact, according to a recent study, 81% of supply chain professionals said their companies were more focused today on sustainability than three years ago. The survey also revealed 61% of consumers were willing to wait longer for delivery of their purchases if they knew it’s better for the environment. Therefore, there’s a huge opportunity for members of the supply chain to prioritize these initiatives early on to meet the evolving expectations of their customers.
Today’s supply chain professionals play a central role in developing and executing a company’s sustainability initiatives. They are tasked with finding smarter ways to reduce waste — not just cost, but also empty miles and emissions. For example, one major American brewing company eliminated 900,000 empty miles in one year alone by sourcing consistent backhaul opportunities, which offset their fleet costs with additional revenue while reducing waste.
How Shippers Measure Performance
According to the study, 98% of global shippers now have at least one team member dedicated to green initiatives. But how are they being measured? According to the survey, shippers evaluate cost savings generated, impact on reputation, reflection of industry leadership and customer requirements or feedback.
This is making its way into the RFP process, too, as 70% of shippers note they consider sustainability within their RFPs. However, only 25% go a step further and require information on sustainability metrics through the process.
Based on the findings, global shippers measure the following key performance indicators (KPIs) to track the overall effectiveness of their sustainability programs:
- Fuel efficiency (69% of respondents)
- CO2 emissions (60%)
- Alternative fuel use (52%)
- Personnel skills related to sustainability (48%)
- Fleet age (46%)
Carriers that report around these indicators can better align with shippers’ priorities to best compete during bid season.
Carrier Align to Shippers’ Initiatives
As shippers reevaluate their supply chain operations to better align with the increased consumer focus on sustainability, they will likely hold the carriers they work with to similar standards. The study found that 22% of shippers selected “working with green carriers” in their top two tactics with the highest return on investment for shippers within their sustainability initiatives.
Given how profitable it can be for shippers, carriers should take note and prioritize sustainability within their operations to build and retain a competitive advantage. Several ROI advantages for shippers directly benefit carriers as well when it comes to reducing transit times, inventory forecasting, route optimization and more. Minimizing idle or wait times (23%), programs to utilize assets better (21%), inventory forecasting (19%) and programs to optimize routing/moves (16%) were among the top eight ways to track the effectiveness of their sustainability program.
Both Sides of the Market Prioritize Sustainability
Many shippers have begun to implement optimization efforts in their private fleets and track which initiatives provide the greatest ROI as they work to reduce their carbon footprint. For carriers starting their own sustainability programs and seeking optimal areas to invest, this is great news. Now, carriers can observe what is working for shippers’ fleets and skip some of the guesswork when getting started.
Areas where shippers find the greatest ROI on sustainability spend include:
- Optimizing fuel consumption
- Minimizing idle times
- Working with green carriers
- Alternative fuels
- Inventory forecasting
As carriers develop their sustainability initiatives, they should consider using these key components as a guide to determine what will deliver the most advantageous return.
Most shippers are setting goals that are longer-term. Their plans are more likely to span four to five years rather than a matter of months since sustainability is often a new variable for professionals in the industry. But, there is no time like the present to get started.
Sustainability relies on collaboration. Shippers and carriers alike should prioritize implementing sustainable practices to get the highest return on investment and retain increasingly eco-focused customers.
As the supply chain moves to further prioritize sustainability, businesses that don’t incorporate green initiatives may fall behind. With most consumers now factoring sustainability into their purchasing decisions, we’ll see continued prioritization around sustainability initiatives and practices within the supply chain. Doing so will allow carriers and shippers to win business and witness long-term resiliency in their operations.
Mike Sinkovitz is the senior vice president of Coyote Transportation Management (CTM) at Coyote Logistics.