Companies that foster corporate sustainability through digital transformation are likely to be tomorrow’s leaders. For example a range of technologies including cloud computing, smart devices, and 3D printers can be implemented to optimize supply chain operations and achieve dual transformation.
Although supply chain sustainability technologies are beneficial for businesses, some managers have a lack of information regarding their implementations. To close the information gap, in this article, we will explore top 6 technologies that supply chain executives can use to reduce their GHG emissions and social externalities, while increasing their operational efficiency.
1. Public-cloud Enterprise Resource Planning (ERP) tools
Sustainability-focused ERP systems enable executives to measure and manage environmental impact. In addition, running these solutions on the public cloud minimizes the company’s emissions thanks to the increased efficiency of large public cloud providers.
ERP tools help supply chain executives identify their existing pain areas by bringing together real-time financial and operational data on a single platform. Executives only need an internet connection to monitor supply chain operations.
Some public cloud ERP systems that specialize on environmental aspects automate calculating product and organizational carbon footprints. They immediately multiply the output of certain corporate operations by emission factors specific to those operations. As a result, they help firms quickly estimate each operation’s specific emissions component and identify areas that can yield the largest benefits.
For example, let’s assume that last month, the field sales team used 27,000 gallons of gasoline in their regular activities. This information is already in the ERP cloud system. If the tool has a function to calculate carbon footprint, it knows that the operation specific emission factor for consuming 1 gallon of gasoline is 8,887 times 0,001 metric tons CO2 (I assume ERP employs the US Environmental Protection Agency as a data source for operation-specific emissions factor). When the executive runs the function, she will find ~240 tons of CO2 emissions as a result of the monthly activities of the field sales team.
Similar logic can be applied to kilowatt hours electricity consumption for running the office activities, or cubic meter natural gas consumption for heating the warehouse etc.
Executives can design plans to minimize their environmental effect thanks to automated product carbon footprint estimation. If they believe their carbon score is good, they can also label their products’ carbon footprint. High product carbon footprint scores are associated with attracting creditors and increasing market share.
Where your ERP resides also matters since the software also has a carbon footprint. The issue is that on-premise installations are not as ecologically friendly as public clouds. According to Accenture, if all enterprises had used just public cloud systems, annual GHG emissions would have been decreased by the equivalent of removing 20 million cars from the road.
The below video shows how digital supply chains improve corporate sustainability.
2. Smart devices
Smart sensors, drones, telematics, and self-driving automobiles are or will be used to mitigate the environmental impact of supply chain operations:
- Smart sensors: Warehouses responsible for 13% of supply chain greenhouse gas emissions. A median warehouse, on the other hand, can lower its GHG emissions by roughly 30% by employing led lights, smart sensor based lighting, and smart HVAC (heating, ventilation, and air conditioning) systems.
- Drones: Last-mile delivery is a significant supply chain operation that has an impact on customer satisfaction, variable costs, and GHG emissions. A new study found out that, if there are more than 200 consumers in the area, drones can reduce both variable-total costs of last mile delivery and GHG emissions when compared to traditional methods. At the same time, drones can provide faster delivery. To obtain a competitive advantage, Amazon, for example, will deliver products using drones soon.
- Telematics: Telematics can be used to track the condition of a vehicle and the actions of its driver (for instance, driving with low rpm reduces fuel consumption). Transportation accounts for 29% of 2019 U.S GHG emissions. Any degradation on a truck’s tyres or engine might result in inefficiencies, resulting in increased fuel consumption. Supply chain administrators can significantly reduce oil use by watching trucks and drivers 24/7. The Michelin Effifuel project, for example, employed this method and reduced oil consumption over 2 liters per 100 kilometers.
- Self-driving vehicles: Since the driver compartment will be used as an additional storage area, self-driving vehicles will minimize GHG emissions by carrying more items per trip. Additionally, connectivity between these IoTs aids in route and traffic optimization. As a result, self-driving vehicles will save costs and GHG emissions.
Ubiquity of smart devices can also be used for more accurate environmental impact measurement. The environmental impact estimates that we mentioned in the ERP section can have significantly higher accuracy when field data is used to measure actual environmental impact.
3. 3D printers
With 3D printing technology, goods can be manufactured wherever printers are located by using a digital file like CAD models. Thus, additive manufacturing offers several opportunities for supply chain executives in terms of lowering transportation costs, reducing GHG emissions, and saving time.
Companies can computerize their intermediate goods and recreate them in the next production location using digital code thanks to 3D printing. As a result, they don’t have to pay for freight or wait for goods to arrive from far away. You can think of this as sending an email and printing it on paper. You can save time, money, and reduce GHG emissions by using email instead of using the postal service.
3D printers, similar to email, are more environmentally beneficial when used in smaller quantities and across longer distances. Supply chain executives can identify the distinctive intermediary goods that come from far and in smaller quantities to maximize the benefits of additive manufacturing.
For instance, Anglo American, a mining business, collaborates with a 3D printing vendor to optimize their sustainable supply chain. They have digitized mining rock drill bits and transmit digital files to the mining field instead of real drills.
The video below illustrates how 3D printing can enhance your corporate sustainability.
4. Electric vehicles
Electric vehicles can drastically reduce GHG emissions without a negative impact on supply chain operations if the majority of the electricity in a location is generated by green energy sources and adequate charging infrastructure is in place.
Companies can replace traditional fleets and attract more investors with their greater ESG reporting scores. Furthermore, businesses do not need to consider how to organize charging activities. There are e-mobility tools that alert EV owners to charging stations that are ready to use, as well as EV owners to return their vehicle to a regular parking space after it is fully charged.
EVs are also effective in the last-mile of delivery. For instance, DHL has used EVs for last-mile delivery and already covered more than 100 million kilometers and emits tons of less CO2.
5. AI/ML models
AI/ML models are good at optimization and forecasting which are effective for reducing GHG emissions while enhancing operational efficiency. PwC approves this claim and predicts that AI/ML models will boost the world economy by 4.4% while reducing GHG emissions by around 4%.
The UPS On-Road Integrated Optimization and Navigation (ORION) effort is an example of how AI/ML models can help supply chains become more sustainable. By minimizing turns, the model optimizes the route to ensure the least amount of oil usage. UPS decreases its miles by around 8 for each route and reduces its annual carbon impact by the equivalent of eliminating 20 million cars from the road thanks to the initiative.
AI/ML models can also be used to forecast demand. By forecasting demand accurately, businesses can organize their warehouses in a more sustainable manner.
It is important to note that, companies do not need to develop their own AI/ML models, lots of cloud systems serve businesses with route optimizer, traffic optimizer and loading optimizer tools.
Blockchain technology allows transparent data flow between different parties, such as various suppliers and end users. Thus, blockchain can help companies assess:
- Product carbon footprint
- Circularity of their business
- Compliance with ESG standards and laws
- Social externalities and discrimination that occur through the value chain
- Product quality
For instance, Renault tracks its supply quality by extracting data from its suppliers via blockchain. Thanks to blockchain technology, Renault decreases cost of non-compliance 50%. Company also considers using blockchain to collect transparent data from customers to calculate circular economy metrics such as recycle rate.
To learn more regarding how blockchain technology transforms supply chains you can read our Blockchain in Supply Chain: 12 Case Studies article.
If you want to learn more about supply chain sustainability feel free to contact us:
Cem has been the principal analyst at AIMultiple since 2017. AIMultiple informs hundreds of thousands of businesses (as per similarWeb) including 60% of Fortune 500 every month.
Cem's work has been cited by leading global publications including Business Insider, Forbes, Washington Post, global firms like Deloitte, HPE, NGOs like World Economic Forum and supranational organizations like European Commission. You can see more reputable companies and media that referenced AIMultiple.
Throughout his career, Cem served as a tech consultant, tech buyer and tech entrepreneur. He advised businesses on their enterprise software, automation, cloud, AI / ML and other technology related decisions at McKinsey & Company and Altman Solon for more than a decade. He also published a McKinsey report on digitalization.
He led technology strategy and procurement of a telco while reporting to the CEO. He has also led commercial growth of deep tech company Hypatos that reached a 7 digit annual recurring revenue and a 9 digit valuation from 0 within 2 years. Cem's work in Hypatos was covered by leading technology publications like TechCrunch and Business Insider.
Cem regularly speaks at international technology conferences. He graduated from Bogazici University as a computer engineer and holds an MBA from Columbia Business School.
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