In today's global economy, companies are looking to reduce costs and increase efficiency in their supply chains while simultaneously becoming more environmentally sustainable. Sustainability is no longer just a "nice-to-have" for companies but is becoming an essential part of their business strategy. However, the challenge is to achieve these sustainability outcomes without significantly impacting cost and efficiency outcomes. In this blog post, we will explore how companies can achieve sustainability outcomes in the supply chain through stealth, all while targeting cost and efficiency outcomes.
Transport Cost Reduction
In Australia, the transport industry contributes to 17% of the country's greenhouse gas emissions. Therefore, optimising transport costs is a primary area where companies can achieve sustainability outcomes. According to a report by the Australian Department of Environment and Energy, road transport accounts for 90% of transport emissions. To reduce their carbon footprint, companies can collaborate with strategic partners to share transport services, reduce empty runs, and consolidate loads. This will minimise the number of vehicles on the road and reduce fuel consumption. The report also highlights the importance of network design and transport optimisation, which can reduce transportation costs by 5-25% and reduce greenhouse gas emissions by up to 30%.
Inventory and Working Capital Optimisation
In Australia, the average retailer's carbon footprint is 16 times more significant than the emissions from their own operations. This highlights the importance of inventory optimisation for achieving sustainability outcomes. By accurately forecasting demand and demand planning, companies can optimise their inventory levels and minimise overproduction, reducing waste and greenhouse gas emissions. According to the Australian Institute of Packaging, up to 10% of food waste in Australia is due to overproduction, which results in 7.3 million tonnes of greenhouse gas emissions annually. By optimising inventory levels, companies can reduce waste, lower storage costs, and free up cash tied up in inventory.
Working capital optimisation is essential for any business strategy, and it can also contribute to sustainability outcomes. According to the Australian Financial Review, the top 200 Australian companies have potentially over $76 billion of working capital tied up in their supply chain. By working with suppliers to optimise inventory levels, companies can free up cash for investment in other areas, such as research and development, innovation, or sustainability initiatives. This will reduce the environmental impact of the supply chain while also generating increased profits.
Achieving sustainability outcomes in the supply chain through stealth is crucial for companies in Australia.
Transport cost reduction, inventory optimisation, and working capital optimisation are the primary areas where sustainability outcomes can be achieved. Companies can use data and statistics to identify areas for improvement and collaborate with strategic partners to optimise transport costs, inventory levels, and free up cash tied up in inventory. By embracing innovation and change, companies can achieve their sustainability goals while also generating increased profits. The Australian government has set a target to reduce greenhouse gas emissions by 26-28% by 2030, making sustainability outcomes a top priority for all companies operating in Australia. By taking a proactive approach to sustainability, companies can create a more sustainable future for all.
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