A guide to managing and minimising waste in your supply chain

Any analysis of your business operations and operations management will identify opportunities to enhance your profitability. However, while you may come up with initiatives that help drive sales or enable your procurement team to get a better deal from your suppliers, often the most significant opportunity is to reduce waste.

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Why look at minimising waste from your supply chain?

Making cost savings and improving your business’ profitability might stand out as the most significant reason. Still, there are many other reasons to pursue such a goal, including:

• Supply chain sustainability is becoming an ever more critical element of how businesses operate. Everything from how much waste you and your suppliers send to landfills to the environmental impact of sourcing your raw materials are in focus.
• For many businesses and supply chains, resource scarcity was once something to deal with due to periodic disruption, as we saw during the worst days of the COVID-19 pandemic. However, given how factors like climate change impact the availability of raw materials, particularly some natural resources, and the expected long-term impact of the Russian invasion of Ukraine, resource scarcity is likely to become a “new normal” for most supply chains. As such, businesses that can reuse resources within a circular economy model will gain a competitive advantage over those that do not.
• Supply chain networks that generate lower waste levels are more resilient when disruptions occur because there is very little “fat” to trim. This also helps you have better partnerships with your suppliers and other service providers, as you can be more consistent in what you order and how they work. In turn, they can have better employer processes and not have to make people redundant, for example, because they suddenly need to improve efficiency.
• More people will want to work with you if you actively work on reducing your carbon footprint and are committed to environmental protection. Whether you’re selling products to other businesses or consumers, people won’t want to work with or buy from you if your production processes create excessive emissions or otherwise damage the planet.

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Minimising and managing waste from your supply chain is very much a case of “fixing the roof while the sun is shining.” If your business has a clear set of sustainability goals and all stakeholders are on board with them, you should be minimising waste even when things are going brilliantly. However, if you only try to take action when disruption hits, not only will you need to reduce waste, but you’ll also find it challenging not to impact the things that are working well across your supply chains.

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The sooner you work towards having a sustainable supply chain with minimal waste, the better placed you will be to ride out any disruption while also maximising your bottom line when everything is going well.

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What are the different types of waste your supply chain produces?

When talking about supply chain waste, it’s easy to fall into the trap of thinking purely about waste materials in terms of what goes to landfills or is sent to an incinerator. However, the complex nature of supply chains means that every process is an opportunity for inefficiencies to occur and to generate waste.

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For example, your supply chain could be generating waste in the following areas:

• In the procurement process. The potential to generate waste starts way before your suppliers even think about sourcing your raw materials. For example, what management systems and methodology do your procurement teams use to help them make intelligent decisions around order volume and frequency? A poor procurement and sourcing process that leads to you ordering excess inventory, for example, can put your waste management efforts on the back foot before you even begin.
• When sourcing or creating raw materials. This could happen through suppliers recklessly harvesting natural resources and needlessly damaging habitats or having inefficiencies in the production processes of creating base materials that you use in your products.
• In manufacturing or production processes. You could be generating waste due to inefficient product design, through the methods themselves creating excessive waste, or even by using human labour for functions that a machine could perform to a higher standard.
• In your logistics and distribution frameworks. How do products get from your suppliers’ factories and warehouses into your own? What about from yourself into your stores or direct to your customers’ homes? The frequency of deliveries, how much of a shipment’s capacity you use at a time, and even the routing and method of transport for your deliveries can create a considerable volume of waste.
• When the product is with your customers. Just as your supply chain doesn’t start when your suppliers get to work, it doesn’t end when your customers make a purchase. For example, if a flaw in your product design leads to a significant defect rate, dealing with a significant returns volume is an inefficiency. In another context, selling products with a short life cycle, like fast fashion, can generate waste. Likewise, if you’re producing products that consumers cannot recycle when they reach end-of-life or use, you may create waste years after physically selling the product.

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What amounts of waste do global supply chains produce?

While we’re considering waste and inefficiency from a broader perspective in this guide, the reality is that the most significant opportunities for improvement within global supply chains are minimising physical waste generation and optimising waste disposal where it does occur.

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Consider these statistics around waste across global supply chains, from case studies produced by the UN Environment Programme and World Bank in the early part of the last decade:

• Global solid waste collection volume is likely to hit 2.2 billion tonnes by 2025, up from 1.3 billion tonnes at the start of the 2010s. Almost all of the increase will come from developing countries, where consumption is increasing and where a significant number of global suppliers are based.
• Recycling a tonne of aluminium saves around 16,000 litres of water, 37 barrels of oil and prevents the emission of 2 tonnes of carbon dioxide and 11kg of sulphur dioxide.
• In the food industry alone, around a third of everything produced for human consumption is wasted.
• Typically, a tonne of electrical waste contains as much gold as up to 15 tonnes of gold ore, as well as significant volumes of copper, aluminium, and rare metals.

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As we can see, a significant volume of this waste is avoidable. In addition, by better harnessing recycling and adopting robust solid waste management plans, there is an opportunity to massively reduce emissions, reuse materials, and increase profitability.

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What are the biggest challenges around physical waste management?

Of course, it’s easy to say that you should do more to optimise waste streams and reduce the waste our supply chains produce.

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We must also recognise that such issues already get significant focus from governments and the private sector. Private waste management companies already form an industry worth over $410 billion a year, and with consumption growing and more opportunities for waste creation, this number will continue to grow.

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But unfortunately, waste management companies are not always willing or able to deliver what communities need, while municipal solid waste services leave much to be desired in many locations.

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As a business looking to minimise waste and develop a sustainable supply chain, you should be mindful of the following issues and consider how you can help in mitigating these:

• Inadequate levels of service coverage to deal with waste. Of course, ideally, you want to minimise the waste you create. But where waste is unavoidable, you should look to optimise its collection and processing.
• Inadequate waste collection frequency, leading to potential environmental issues.
• Spillage from overfilled rubbish containers and where this ends up.
• A lack of knowledge among individuals about the impact of waste.
• A poor attitude among teams towards waste or people demonstrating an outright disregard for environmental issues when disposing of waste.
• Suppliers sending waste for incineration or direct to landfills without aiming to recycle.
• Your role within the communities where your suppliers are based and how these pressure local services like waste collection and landfill sites.

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10 ways to manage and minimise waste in your supply chain

As you might expect, when there are so many opportunities for waste and inefficiencies to occur within your supply chain, there are also many ways you can combat it. Here are 10 steps you can take to minimise waste and inefficiencies in your supply chain.

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1. Put your customers first

It’s paramount that whatever you do to eliminate waste across your supply chain network, at a minimum, maintains your customers’ or clients’ experience of dealing with your business. If you can eliminate significant inefficiencies, you will likely manage to improve their experience.

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The most vital thing to recognise is that some of the changes you make to your processes will only have an internal impact. However, you must pay close attention to anything that may influence the customer experience and think of ways to deal with this.

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For example, if reducing inefficiencies means you’re changing how you fulfil orders or stock your stores, could this lead to stockouts or delays in your customers getting deliveries?

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For many businesses, customers are an untapped resource when it comes to identifying supply chain waste. Run a survey to determine how well customers rate your products and delivery performance and how you compare to other brands they use. You could easily discover that you have inefficiencies in a particular process or that factories producing goods for sale in specific geographies aren’t doing so as well as other locations.

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2. Look at the reverse supply chain perspective

A fantastic way to increase your competitiveness both from an environmental and profitability standpoint is to consider what you can achieve from a reverse supply chain perspective.

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You can apply reverse supply chain thinking at any stage of your supply chain to reduce waste, and doing so may generate products you can put back into production processes or allow you to generate income from other channels.

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In essence, a reverse supply chain means you take waste products and either:

• Reuse them in the manufacturing process
• Recycle them
• Remanufacture them - possibly with a different product design or into something else
• Extract specific components, which you can then reuse or recycle

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Setting up systems to enable you and your suppliers to do this can incur an initial cost, but it will pay for itself in the longer term.

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3. Review the manufacturing process with relevant stakeholders

In the same way that you can learn much from your customers, your employees (or your suppliers’ employees) are your best resource for identifying waste reduction opportunities across your supply chain. Even the best managers in the world can’t see everything, and people who are performing key roles are in the best position to provide valuable insight.

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This doesn’t have to be a formal review, either. You can gain fantastic insight simply by producing a survey or asking simple questions. In fact, it’s often better to make it feel relaxed - people will tell you far more if they have an open forum and feel confident they can say whatever they want!

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Consider asking about:

• Processes that take too much time.
• Whether specific processes add value to a product or the customer experience.
• Waste management processes.
• What opportunities do they believe exist for reducing waste and recycling more.
• What ideas do they have for solutions to the problems they have identified.

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4. Invest in the locations where your suppliers operate

Think back to the issues we identified with physical waste management earlier. While it’s easy to dismiss these as things you cannot control - so not worth spending time in - the reality is the opposite.

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Say you choose to work with a supplier in a developing country who will manufacture most of the products you will sell to your customers. Your attitude shouldn’t be that you’ve chosen a supplier and invested in the local economy, so you don’t need to do anymore. Instead, you can have a more significant impact - both on the local region and on your overall reputation - by broadening your investment to the areas where your presence will have an effect.

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So, instead of starting a partnership with a supplier and blaming local waste management companies for issues with managing your waste, why not partner with one of these companies yourself? Or, better yet, invest in technology that will help your suppliers - or another business in the same location - recycle the waste produces your suppliers generate and help to reduce your carbon footprint?

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This is another area where you’ll incur a cost now but benefit immensely in the long run.

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5. Review your communication channels

Moving away from physical waste, optimising your business communication is one of the quickest ways to eliminate inefficiencies within your supply chain network. While it sounds simple, knowing how data and instructions flow from your procurement team through to your suppliers and logistics teams can give you a significant opportunity to identify improvements.

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The best thing to do here is to draw up a process map or flow chart detailing your communications and how they work.

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Typically, the areas where you will find potential improvements will include:

• Having unnecessary loops in the flow of information.
• Multiple people receiving and reviewing data, even if the responsibility for sign-off sits with one person.
• Bottlenecks where large amounts of data require review, and you’re not using automation.
• Communication gaps and dead ends - often when it’s unclear what an action is or who is responsible for it.

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6. Review your logistics operations

Logistics operations are often the source of many “hidden” inefficiencies within your supply chain. However, focusing on these can give you a quick win and instantly eliminate a significant source of waste.

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You may only need to look at a handful of things here, including:

• Products damaged or broken in transit, and what happens to these.
• How much of your shipping capacity you use per journey.
• The effectiveness of your inventory pooling.
• Time wasted in double-handling products, and whether this impacts on breakage rates.

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As you start looking at these, you will likely find other opportunities to drill down and further optimise the logistics side of your supply chain.

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7. Consider using external resource

If you’re struggling to solve an inefficiency or even identify the source of a problem in the first place, don’t be afraid to consider using an external resource.

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A consultancy company’s day rate might leave you facing a conversation you’d rather not have with your finance director, but the longer-term savings, if they can find you a solution, will return that sum several times over.

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8. Review your returns policies and processes

Dealing with returns is, by nature, an inefficient process, but due to the continuing growth of eCommerce, it’s something we all have to factor into how we work. What’s vital is that we minimise how returns impact our processes and maximise the efficiency of how we deal with them.

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As a minimum, you should look for your returns process to:

• Return products fit for resale into your inventory as soon as possible and for your inventory systems to be notified so you don’t overorder unnecessarily, creating another opportunity for waste to occur.
• Enable defective products to be returned to your suppliers while tracking longer-term defect rates and ensuring suppliers receive this feedback. Remember to encourage your suppliers to use reverse supply chain thinking so defective products don’t just go to the landfill!
• Have a process for quality checking returned goods. The worst thing that can happen from both an efficiency and a customer satisfaction perspective is that you return defective goods to inventory, which you then sell and ship to customers, thus necessitating the returns process to start once more.

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9. Review your supply chain model

It is possible that your supply chain structure is the foundation of inefficiencies and waste production.

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Review whether your supply chain model is the right one for your business and products, and make any changes accordingly. Learn more about reviewing your supply chain model.

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10. Review your inventory control processes

It’s easy to obsess with waste from the perspective of what happens in your suppliers’ factories. Yet, if you’re ordering too much product, you’re creating additional opportunities to generate waste within your manufacturing process, while also increasing the likelihood of having to find ways to deal with unsold inventory.

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Better inventory control procedures mean you will have only what you need to fulfil customer demand and reduce the risk of unnecessary processes creating even more waste. In addition, not ordering unnecessarily will save you a significant amount of time and money, too!

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Making this happen within your broader supply chain management strategy

While there is much to consider and review when aiming to minimise waste in your supply chain, you can include most of these elements in your broader supply chain management strategy and within your supplier risk assessments.

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Use the below as a checklist to create a foundation for managing waste in your supply chain in the long term:

• Revisit your supplier contracts and service agreements, and ensure you include clauses around waste management and sustainability if you haven’t already done so. You can either create an individual section relating to waste management or tie such clauses into your supplier code of conduct, which you may already have to ensure your suppliers are following ethical practices throughout their operations.
• Lay out metrics and reporting methods for measuring waste at every point of your supply chain.
• Plan an education program for new and existing suppliers, led by your internal teams, to consider everything from waste management to how you can reduce your carbon footprint through cleaner production processes.
• Make sustainability and waste management part of every supplier meeting agenda or discussion.
• Commit suppliers to being transparent around disclosing sustainability and waste management data. Make them aware you’re their partner on this, and you aren’t just there to measure them.
• Give responsibility to your procurement teams for considering waste management within sourcing processes.
• Provide incentives to your suppliers around meeting the waste management and reduction goals you set.