Business management

How to build a responsible supply chain

Supply chains are complex – and guaranteeing that they're sustainable can be a challenge. Here, experts share their advice on how SME owners can be more responsible.

However, business owners are far more likely to buy into sustainable practices and activities (such as measurements, certificates, sourcing raw materials) if the decision is one that they make themselves, says Jens Roehrich, professor of supply-chain innovation at the University of Bath School of Management.

“Business owners who are being controlled with the use of contracts or threatened with penalties will quite often react with ambivalence.”

When it comes to driving good supply-chain management, he says, collaboration beats enforced contracts.

Set goals and monitor performance

SMEs should set meaningful and measurable goals and track performance, says Roehrich. By gleaning insights into how well the business is doing, they can then identify areas where they can deliver greater value to other stakeholders and customers.

To track performance successfully, Roehrich recommends real-time corporate social responsibility (CSR) reporting software. “With software becoming more sophisticated thanks to artificial intelligence, businesses can quickly and efficiently obtain greater insight through richer data analysis,” he says.

The main things to consider when researching and selecting the right CSR software are whether it has a user-friendly interface – if it doesn’t then using it will likely be a frustrating experience – and whether the company selling it offers an after-sales service and support.

Automate purchasing

Given how complex supply chains are, it’s inevitable that there will be choke points, yet one area SMEs can use performance monitoring to improve is the sourcing and buying of materials and services. Ultimately, a reduction in cost can allow companies to competitively price their products.

Damien Marmion, director of digital healthcare consultancy Augment Healthcare, advises automating the purchasing side of business.

“Manual approaches to procurement and supply-chain management that are highly reliant on manpower can hold SMEs back,” says Marmion. “Automation allows businesses to manage resources more efficiently and ensure they’re purchased at the right price, at the right time.”

Source the best materials possible

Knowing which goods and materials to source and where from can be a challenge in itself. Information can often be unavailable due to a lack of transparency, and any concerns can be difficult to verify due to the myriad stakeholders in a supply chain.

There are things SMEs can look out for: product identification tools, including barcodes and radio-frequency identification (RFID) labels, may be used by stakeholders further up the chain to demonstrate the flow of materials and goods from their point of origin and that they have complied with quality standards.

Manual approaches to procurement and supply-chain management that are highly reliant on manpower can hold SMEs back. Automation allows businesses to manage resources more efficiently

Damien Marmion
Director, Augment Healthcare

Meanwhile organisations like Provenance are building digital platforms that allow businesses – in the food industry, for example – to make themselves traceable. In the case of Provenance, the start-up is using blockchain to help business owners validate the authenticity of goods and create digital passports for every product.

“The potential benefits of blockchain are that it will reduce inefficiency, fraud and any unethical practices by offering even greater transparency, particularly with regards to production and shipping and transportation,” says Roehrich.

Consider certification

Once a company has shored up its supply chain, the challenge is to communicate this to the stakeholders further downstream and, eventually, potential customers and end users. One way of achieving this is through certification.

“Certification provides an internationally accepted framework for sustainable practice, which is regularly updated to incorporate new science and any supply-chain concerns,” says Sophie Persey, senior programme manager for the Rainforest Alliance’s LandScale initiative.

“In the case of the Alliance’s green frog seal, it connects customers [and stakeholders] and businesses that are committed to making responsible purchasing decisions with farms that have been independently verified to meet these standards,” she says.

By displaying a certification logo on packaging and marketing materials, SMEs can also strengthen their brand and create new market opportunities for themselves.

Stay secure

An issue often overlooked in less-digitised industries such as agriculture is cyber security: a responsible supply chain should also be a protected one.

Two thirds of companies have experienced a cyber attack on their supply chain software, according to a survey by security firm CrowdStrike.

Duncan Sutcliffe, director of Sutcliffe & Co Insurance Brokers, says: “GCHQ recommends all businesses achieve a cyber essentials certification as a minimum – this will give them a good baseline of cyber hygiene. GCHQ believes it will stop 80% of threats, while Lancaster University has published research suggesting it could reduce the risk by up to 99%.

“The likes of farming SMEs may soon be told to get certified if they’re to retain or win supply contracts.”

Share information with stakeholders

Any uncertainties business owners may have about what’s required of them or other supply-chain stakeholders can be alleviated through honest and open discussions.

“I’d advise that business owners hold both formal meetings and informal ‘relationship away days’ to meet with supply chain partners to exchange information, air problems and challenges, and then jointly develop solutions to address them,” says Roehrich.

Sharing information is fundamental – yet, as has been seen in the past with events like the horsemeat scandal, often an issue only becomes actioned once a problem has arisen in the supply chain.

“In order to mitigate any risks, SMEs need to share information regularly,” Roehrich adds. “This will help ensure that the supply chain is healthy and sustainable.”

Five quick tips for sustainable supply-chain management

  1. Map your supply chain, so you understand the challenges you and your suppliers face.
  2. Collaborate with other stakeholders, so you can work together to address any concerns or areas that need improving.
  3. Communicate your vision and establish goals – monitoring performance will ensure you stay on track to meet the targets set.
  4. Invest in software to automate the purchasing side of the business. This will help save you time and money in the long run.
  5. Remember certification – it’s one of the best ways to demonstrate to stakeholders and customers that you’re committed to sustainability and being environmentally responsible.

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