Cost is biggest barrier to supply chain sustainability

Will Green is news editor of Supply Management
15 January 2019

Increased cost is the main barrier to firms adopting a strategy around supply chain sustainability, according to a survey.

Research by the Economist Intelligence Unit (EIU), sponsored by software provider LLamasoft, found 38% of companies cited higher costs, followed by difficulty in monitoring complex supply chains (29%) and organisational structures (24%). Lack of customer interest (20%), lack of internal expertise (18%) and lack of top management support (18%) came next.

The survey, of 250 senior executives at manufacturing and retail organisations across the US, EMEA, APAC and Latin America, also found 34% of respondents expected a more sustainable supply chain to cut costs. Other top drivers included growth opportunities (36%) and the importance of responsible practices (33%).

A majority (60%) of respondents saw sustainability and profitability as equally important, though supply chain sustainability was “ranked relatively low among business’s corporate sustainability priorities”.

Jeremy Kingsley, technology editor at the EIU, said: “These findings are extremely interesting – on the one hand we see respondents possibly saying the right thing when asked in the abstract about the relative importance of profitability and sustainability, but saying something quite different when it comes to specific organisational priorities.

“We also see a correlation between seniority and the relative importance of sustainability and profitability, with 67% of C-Suite respondents saying that sustainability comes first, compared to 55% of other respondents.”

The survey found a shift in priorities was taking place in Europe, with respondents saying reducing operating costs was the top priority over the past five years but reducing environmental impact would be over the next five years.

Razat Gaurav, CEO of LLamasoft, said: “There are many ways companies can make their supply chains leaner and greener, but for organisations with potentially hundreds of suppliers, thousands of products and millions of customers, determining the best alternatives is far from straightforward, at times making sustainability and profitability an either/or choice – but it does not have to be.

“Making the right decisions that can accomplish these dual objectives requires both a big picture view and a granular understanding of the end-to-end supply chain. Global organisations must turn to technology to build ‘digital twins’ of their real world supply chain, providing a risk-free environment in which to play out many scenarios, from the expected to the unlikely, giving them the confidence that the changes they make will deliver the desired and expected outcomes.”

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