It can be challenging to understand what environmental Supply Chain sustainability is all about.

Sustainable Supply Chain management starts with being aware of your company’s environmental, social, and economic impact and, most importantly, making the necessary changes to lessen it. The process can involve everything from a warehouse’s source of power to transporting goods and beyond—recirculating components or ensuring that the biodiversity stays intact. The specter is, so to say, broad.

We define Supply Chain Sustainability as:  

“Efforts to consider the environmental and human impact of their products’ journey through the Supply Chain. From raw materials sourcing to production, storage, delivery and every transportation link in between”.

Environmental Sustainability
Environmental Sustainability aims to improve human welfare by protecting natural capital (land, air, water, minerals, etc.). Initiatives and programs are defined as environmentally sustainable when they ensure that the population’s needs are met without the risk of compromising the needs of future generations. Environmental Sustainability emphasizes how a business can achieve positive economic outcomes without doing any harm, in the short- or long term, to the environment. An environmentally sustainable business seeks to integrate all three sustainability pillars, and to reach this aim, each one needs to be treated equally.

Climate change refers more specifically to anthropogenic climate change, meaning the rapid rate at which the temperature of our planet and its atmosphere has increased over the past century due to human activity and can result in large-scale shifts in weather patterns. Some gases in our atmosphere make it work like a greenhouse, and we call them greenhouse gases (GHG). The higher their concentration, the more they trap heat. The greenhouse includes carbon dioxide, methane, ozone, nitrous oxide, etc.

Decarbonization in the Supply Chain
Since the industrial revolution, we have been burning fossil fuels such as oil, coal, and natural gas; therefore, our human activities have contributed to a 45% increase in the atmospheric concentration of carbon dioxide. There is a correlation between CO2 concentration and temperatures – when the CO2 emissions increase, so does the global average temperature on earth.

For many, environmental Supply Chain sustainability is primarily about the use of natural resources and the climate impact of the company’s actions. As a rule, it is not enough to look only at one’s value creation. After all, a typical consumer-goods company’s Supply Chain generates far greater environmental costs than in-house operations: for instance, it is responsible for more than 80 percent of greenhouse-gas emissions and more than 90 percent of the impact on air-land, water, biodiversity, and geological resources.

The term decarbonization of the Supply Chain means the reduction of carbon. It is the conversion to an economic system, a new way of operating, which sustainably reduces and compensates carbon dioxide emissions (CO₂).

Green House Gas emissions are divided into three scopes:

1. Scope 1: Direct emissions resulting from vehicles, fuel use, and/or chemical leakage

2. Scope 2: Indirect emissions resulting from bought electricity, cooling, heat, and/or steam

3. Scope 3: Other indirect emissions that occur in the value chain of a company and are not already included within scope 2 (such as emissions resulting from purchased goods and services, transport, or business travel)

According to Normative, 90% of a company’s emissions are in scope 3.

The role of the Supply Chain going forward
Companies face a huge environmental challenge if they intend to meet the current EU climate targets; they will have to more than halve their greenhouse-gas emissions by 2030.

Given that prosperity and consumption will continue to grow in the coming years, a fundamental change in thinking is required; new business models—especially those relating to the circular economy—will have to gain an increasingly firm footing.

It is essential to understand where emissions come from to figure out how a company can most effectively reduce emissions and which ones can and can’t be eliminated with the current approach and activities. Today we know that emissions come from many sectors, and we need many different solutions to decarbonize the economy. 

Supply Chain decarbonization is a multi-faceted challenge which means working closely with the suppliers. There is an urgent need to change how companies work with their suppliers to lower the carbon impact and improve the operational implications.

The task is hence to:

  • Create an environmental data baseline (including GHG scope 1, 2, 3)
  • Engage the suppliers in the action’s
  • Perhaps redesign the Supply Chain network, which could potentially also mean the flow of goods

Today’s challenges in production companies

The typical business or Supply Chain operates in a world where the “new normal” is increased instability, brought about by a multitude of causes. Supply Chains must become more agile, resilient, automated, and efficient. This is also true within production. 

Do you encounter the following challenges in your production?

  • Are your service levels low?
  • Do you have a high inventory and capital tied up in stock
  • Is it cumbersome to reschedule the production plan?
  • Do you have a low level of automation in your processes?
  • Are you lacking an overview and one joint production plan?
  • Are you able to simulate?

Where and how much to produce
It is essential for the business to address when, where, and how much to produce to maximize service levels and production efficiency while minimizing inventory and production costs. Effective plans are enabled with Supply Chain Production Planning technology. 

In the mid-to-long-term perspective, a feasible and leveled production plan supports production management for capacity/manning decisions and the requirements of purchase materials. In the short term, a realistic production schedule is created to support production supervisors/operators in producing the right order at the right time, ensuring high service levels and minimized set-up times.

Real-time simulations
In other words, a Supply Chain Production planning solution helps effectively and timely govern the core processes of advanced planning, scheduling, and manufacturing execution. The lean, flexible and interactive tool is designed to run real-time simulations and thoroughly analyze results, following intuitive and streamlined workflows.

At Optilon, we can help you implement effective processes through cutting-edge technology to:

  • Obtain a high degree of automation and reduce manual work for planners
  • Reschedule plans faster when prerequisites changes
  • Obtain higher service levels and reliability of promised delivery time
  • Get a lower inventory and capital tied up in stock
  • Minimize set-up time and production costs – and increase resource efficiency.
  • One common plan. Better overview and company-wide decision and communication platform.
  • To be able to work more proactively and see future problems in advance.

The typical business or Supply Chain operates in a world where the “new normal” is increased instability, brought about by a multitude of causes. Supply Chains must become more agile, resilient, automated, and efficient and this is also true for the production. environment.

Many companies are challenged by cumbersome processes to reschedule production plans, high inventory and capital tied up in stock, low level of automation, no simulation possibilities and a lack of overview and a lack of one common production plan.

Cases

Absolut company
An increased production complexity made The Absolut Company look for a better and more efficient way to manage the production of the most exported food and beverage product in Sweden. With the purchase of the company from the Swedish government in 2008, Pernod Ricard initiated a transformation of the brand. This had a large impact on the manufacturing process. Check out the case here.

Orthex company
Orthex  Group,  a  leading  manufacturer  of  household  products  in  the  Nordic, operates in a sector where the customers have high demands on short lead times and on-time delivery. When unexpected large orders are common and the company growth  increases Supply Chain complexity, it puts pressure on the production planning process and the planners involved. By implementing technology Orthex has been able to take a big step towards 100% planning control Check out the case here.

Understanding inventory optimization is key if you want to optimize your Supply Chain with technology. In this blogpost we will look into the details.

Today’s consumers demand more options and greater variety. Trends change quickly. The result is that companies are carrying more slow-moving items with irregular, intermittent demand patterns. Traditional ABC inventory planning, developed in the 1950s, just doesn’t work in this world. Instead, we suggest to use inventory optimization software. It should use self-adaptive demand and inventory models to automatically define the optimal mix of inventory across the multi-echelon Supply Chain. That way you can achieve aggressive service level targets while minimizing inventory and reducing costs, at the same time. As a company you are able to manage slow-moving and intermittent demand items more effectively.

The model is highly reliable because of the proprietary analytical relationships between inventory and customer service levels, even for very slow moving and intermittent demand items. This allows the system to optimize even very large assortments, including products in the “long tail”, balancing inventories across different locations and different levels in the bill of materials (BOM).

Meet high service levels while minimizing inventory
Instead of creating a “one-size-fits-all” inventory mix within item groups defined by rudimentary classification criteria, the inventory optimization approach differentiates service and inventory targets across products, bill-of-materials levels, and distribution network locations to most efficiently meet desired customer service level objectives.

Free up working capital
By applying advanced modeling and artificial intelligence (AI) to optimize inventory at the individual SKU and location level, you are typically able to reduce overall inventory levels by 10-30%. Less money tied up in inventory means you have more cash available for better uses.

Inventory modelling
The inventory modeling technology is capable of eliminating the gross approximations of traditional inventory management, creating very reliable relationships between average inventory and service levels for each SKU and location. This allows the inventory optimization solution to define the optimal inventory mix across products and network to meet service targets at the lowest cost.

Service-driven optimization
Unlike ABC inventory planning, which has an operational perspective, service-driven inventory optimization centers on sales, marketing, and customers. It uses categories called “service classes” that sales and marketing people can easily relate to. Then it optimizes every SKU-Location against a target service level for each service class. The end result is an aggregated service class goal with the lowest possible stock investment.

Multi-echelon inventory optimization (MEIO)
To truly serve the end customer, the entire network–from raw materials suppliers and factories through distribution centers and wholesalers–needs the right items in stock. The technologies which we favor suggests optimal inventory levels at each stage of the supply chain, simultaneously balancing across multiple echelons, locations, and different Bill-of-Material (BOM) levels. It finds the most globally efficient balance between upstream and downstream inventory while optimizing safety stocks. It supports centralized demand planning, lowers costs across the Supply Chain, and streamlines operations.

Probabilistic forecasting
The probabilistic forecast provides the foundation for inventory planning, and helps manage the risk that comes from demand volatility by providing a range of possible values with their probability of occurrence. Advanced machine learning enhances traditional demand forecasts by modeling internal sources of noise and incorporating the effect of external data.

Understanding inventory optimization is key if you want to optimize your Supply Chain with technology.

If you want to know more about Supply Chain from an end-to-end perspective then you can always check out this online-brochure or download our whitepaper via the below link. 

 

Download now

1. Getting started with a modern approach to end-to-end planning

Understand the basics of end-to-end planning (whitepaper)
End-to-end Supply Chain planning is about bridging the gap between operations and business plans. It is also about staying in control. Check out and download the whitepaper right here. 

You can also read a shorter blog post on what Supply Chain planning is right here.

Do you also have unnecessary items in stock? (Trend report)
Did you know that every fifth item in stock is unnecessary? We made a report based on the 400 largest companies in the Nordics. Learn more about our findings and what you can do to ensure that this is not your company. You can download the report here.

2. Understanding more about the details

Understanding inventory optimization (blog post)
You can achieve aggressive service level targets while minimizing inventory and reducing costs simultaneously. Learn more about how right here.

How an end-to-end Supply Chain planning approach can benefit the business
Having an end-to-end Supply Chain planning approach can turn out to be a competitive advantage in the market. Though, to leverage your Supply Chain for a competitive advantage, it is important to utilize technology to add business value. In this blog post, we will share how it can benefit the business strategy.

Are you going to use a digital twin? (blog post and webinar)
Looking to learn more about a digital twin and how it can help you on your end-to-end Supply Chain planning journey? Check out these resources on the digital twin right here. You can also watch a webinar and read about SKF, who made a digital twin part of their core journey and won the Gartner Chainnovator Award in the Industrial Segment. Optilon supported them all the way – and still do.

Why ABC inventory classification is old school and not optimization (blog post)
ABC inventory classification has been around so long that most planners assume it’s the only way to segment inventory. In fact, it’s not. And it’s not even nearly the best way. Read more in this blog post.

Is the working relationship between operations and marketing an area for optimization? (blog post)
In many companies, the working relationship between operations and marketing is challenging. This is where technology within promotions planning can help.  Promotions planning is about bridging the gap between operations and marketing. Read more in this blog post. 

3. Check out these great cases:

 4. Get a brief product demonstration right now

This brief product demonstration explains the core capabilities of the service-driven planning software we provide with our partner ToolsGroup. The video also describes why it’s different and better than traditional planning solutions. 

It covers:

  • Demand modeling and forecasting
  • Promotions planning
  • Multiechelon inventory optimization
  • Replenishment
Get the product demonstration right now

5. Finding the right partner

Supply Chain organizations must rapidly assess new digital strategies and Supply Chain planning technology solutions to accelerate digital business. At the same time, they need to evaluate and identify automation opportunities while supporting organizational change. How do they stretch their organization’s current way of thinking and operating while simultaneously delivering on speed and flexibility? Get some fruitful advice in this blog post.

We are here to help you choose the right journey
Our engagement model shows you how we work together with our clients. We want to ensure that you get a humble, engaged, and committed solution delivery that solves your business challenges. Learn more about how we work right here. 

Are you heading out on your Sales and Operations Planning journey or have you already embarked on it? This ressource will provide you with lot’s of great content which hopefully can inspire you, to take your Sales and Operations Planning approach to the next level.

1. Getting the journey started

The basics of S&OP
Everyone has probably heard about S&OP, but do you really know what it is? In this blog post we provide you with the basics on S&OP. Read more here.

What value do you get from S&OP?
Like any other business initiative S&OP should be challenged on value impact. In this blogpost we would like to provide you with some insights. Read more here.

Digitalizing the S&OP process untaps further potential
The digitalized version of the S&OP process is recognized to further increase forecast accuracy, as well as reduced inventory investment and stable/increased service level. Read more here.

The myths and realities of Sales and Operations Planning
Chekcout this webinar which is a dynamic discussion of what S&OP is and is not. Listen or watch it here.

2. The details

Bring strategy back into S&OP
It is time to bring strategy back into S&OP. But how? Learn more in this webinar.

All things supply chain.

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