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.
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:
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.
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.
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.
For example, your supply chain could be generating waste in the following areas:
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.
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.
Of course, it’s easy to say that you should do more to optimise waste streams and reduce the waste our supply chains produce.
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.
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.
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:
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.
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.
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.
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?
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.
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.
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.
In essence, a reverse supply chain means you take waste products and either:
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.
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.
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!
Consider asking about:
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.
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.
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?
This is another area where you’ll incur a cost now but benefit immensely in the long run.
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.
The best thing to do here is to draw up a process map or flow chart detailing your communications and how they work.
Typically, the areas where you will find potential improvements will include:
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.
You may only need to look at a handful of things here, including:
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.
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.
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.
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.
As a minimum, you should look for your returns process to:
It is possible that your supply chain structure is the foundation of inefficiencies and waste production.
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.
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.
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!
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.
Use the below as a checklist to create a foundation for managing waste in your supply chain in the long term: