In the 18th century, the industrial revolution began with an emphasis on productivity, due to mass production and standardisation. Hereafter, machines and skilled workers gained significance to improve the throughput rate of production leading to the search for new equipment and resources. Whilst this started the journey for technological advancements, new applications in production, and exploration of new energy sources; (Coal, electricity, gas, oil, and nuclear energy were discovered!) it also formed a scarcity of resources.
In today’s world, our generation experiences the fourth industrial revolution through the internet of things (IoT) and renewable energy while ensuring sustainability at any process. In these circumstances, perhaps the most critical objective is building a sustainable supply chain to contribute to our environment. The concept of Triple Bottom Line (TBL) is a fundamental component to establish a sustainable supply chain with its comprehensive approach to operations, considering three bottom lines; People, Planet, and Profit.
The initial step of TBL Approach is taking all stakeholders into the account from the People concept. A typical supply chain includes a significant number of people as the interest group of operations. Customers, employees, managers, shareholders, communities, and society are all included in this perspective. Henceforth, the organisation should define SMART (specific, measurable, achievable, realistic, and timely) goals to provide value to people. For instance, employee appreciation and fair working conditions can benefit the organisation to ensure the satisfaction of its employees and managers. Considering customers, the quality of goods and services could be the benchmark to please customers, therefore communities and society as a whole.
Much has been said about the scarcity of resources in our contemporary world. From that sense, TBL plausibly considers the planet in its philosophy. Each operation in the supply chain has an outcome on the planet that we live in. From inbound logistics to outbound logistics, there exists a consumption of resources. Consequently, a sustainable strategy should be implemented during these processes to save the environment.
From the aspect of inbound logistics, responsible sourcing could be the first step in procurement. Responsible sourcing includes the long-term supply of materials and services by practicing ethical and social consideration in procurement with professional standards.
Another critical component for sustainable procurement strategy is called Just-in-Time (JIT), which was first emerged in Toyota Production System. The technique asserts purchasing goods, just as they are needed to satisfy the customer demand. Once the customer order is received, purchasing is planned in Just-in-Time (JIT) methodology. Less inventory on hand is aimed in this strategy which means less holding and insurance costs. This approach especially becomes crucial when perishable items are stocked, e.g. food. Herewith, FMCG is one of the sectors in which Just-in-Time (JIT) becomes a prerequisite. The elimination of waste in inventory (especially for perishable items) and reduction in holding costs and insurance costs could make Just-in-Time (JIT) a competitive advantage in the market. Of course, there would be enough safety stock to meet the expected demand or elude unexpected circumstances, but the excess stock would be avoided to eliminate waste.
When it comes to manufacturing operations in a supply chain, Kaizen Philosophy, Lean Manufacturing, and Six Sigma have a crucial impact on efficiency and contributing to the planet. The process-oriented approach of Kaizen perceives employees as a resource and efficiently utilise their working hours through time and motion studies.
The 5S concept of Kaizen contributes to the planet through zero waste, zero defects, and full employee participation in the workplace. Six Sigma is the mathematical tool in this roadmap to measure the outcome of quality management to achieve zero defects and zero waste which are emphasised in 5S. In these processes, Lean is the methodology where value-added operations are maintained and non-value added operations are discarded.
Considering the evaluation of outbound logistics, route optimisation is a key for sustainability in a supply chain to save the environment. Considering the fuel consumption in transportation and carbon footprint, route optimisation is useful for a supply chain to drive a roadmap that brings fewer costs and impacts to the planet.
Economic sustainability is the original component of TBL since Profit should be the priority to finance organisational needs. From that sense, the company has to deliver value to its interest groups for achieving the economic sustainability. Product differentiation, great customer service, effective marketing, and advertisement could contribute to an organisation to generate the profit. Reduction in costs and aiming for productivity are indispensable notions for a supply chain’s profitability.
Sustainability is the problem of our age due to scarcity of resources, while Triple Bottom Line (TBL) is the approach to tackle it. In light of the UN’s Sustainable Development Goals, TBL should be taken into account in every stage of a supply chain since it provides a comprehensive approach to see the big picture. To provide a promising future to our next generations, sustainability should be the ultimate goal of the supply chain by taking people, the planet, and profit into account while assessing each operation or task.
Remember, there is always room for improvement!
Author: Yigit Kullah, Management consultant at Pollen Consulting Group