Three ways shortages can be mitigated by conserving resources

1 April 2022

Supply chain professionals should be adopting resource conservation strategies in response to shortages and inflation, according to Gartner.

Gartner said supply chain executives were under pressure because demand for goods was rising as supply was shrinking, while internal and external stakeholders were demanding greater sustainability. 

Sarah Watt, senior director analyst in Gartner’s Supply Chain Practice, said: “CSCOs [chief supply chain officers] foresee that the anticipated increases in inflation and ongoing supply shortages will lead to further production challenges and shipping ineffectiveness.

“These constraints are not short term, and the underlying trend is that demand for goods is rising, while supply is increasingly scarce.”

Gartner recommends the following steps:

1. Switch to a circular economy

Historically supply chains have been linear, using a “take, make, dispose” model. Watt, however, sees the circular economy as an opportunity to “decouple raw materials from growth”.

“Circular economy activities range from as-a-service models to incentivized return and collaborative consumption,” she explained. “Some suppliers are using end-of-life materials as a hedge against inflation and availability concerns.”

Watt advised “closing the loop” on end-of-life materials, as they may contain valuable raw materials. Taking control of these materials can boost resilience against shortages.

Watt emphasises the importance of environmental, financial, and societal impact assessments at both product and service level, as there may be unintended consequences. “CSCOs need to define the best candidates for circularity, or they may end up creating increased environmental burden rather than reducing it.”

2. Treat waste like an asset

With supply constraints continuing to impact buyers, CSCOs should capitalise on the potential value of waste. 

To achieve this, executives should build ecosystem partnerships with waste contractors, suppliers and innovators. In light of new producer responsibility legislation and changes to waste regulation, supply chain professionsla should seek to gain control of waste streams to use these materials effectively.

3. Preserve natural capital

Organisations rely on natural capital – stocks of geology, soil, air, and water – to produce materials, but rarely see it as part of the value chain.

Watt views natural capital as a vital resource to take into account. “The risk today is that CSCOs are spending the feedstocks more quickly than they can regenerate, and supply chains must make sure that they don’t destroy the very base of their business,” she said.

In order to combat these risks and ensure the continuing function of the supply chain, CSCOs should focus on activities that will shift their relationship with natural capital. This includes reducing biodiversity loss, fighting deforestation, and exploring regenerative agriculture.

A 2021 Gartner survey of 983 supply chain professionals found 67% were investing in including environmental and social sustainability metrics as KPIs.

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