How 3PLs Are Critical Partners in Supply Chain Sustainability
3PLs are implementing supply chain sustainability management systems to improve global supply chains and the environment
Supply chain sustainability is not only good for business, but also good for the planet.
Supply chain sustainability is quickly becoming essential to the success of businesses around the globe. The ability to help save money, strengthen business relationships, and improve the environment are only a few of the benefits that come with supply chain sustainability. However, many businesses do not value these benefits. A recent MIT study found that current supply chains are operating according to sustainability guidelines, however only five percent of companies are actively addressing the impact that their supply chain has on the environment.
Many experts feel that supply chain sustainability extends beyond going green. While environmental responsibility is important, supply chains that implement sustainability programs can enhance their business operations as well as brand image. This can lead to improvements in a business’s reputation as well as its productivity and cost-effectiveness.
By implementing sustainable practices, businesses can increase the efficiency of their supply chain and logistics services while reducing costs. For example, athletic apparel company Nike altered its shoe manufacturing process and not only reduced labor costs by nearly 50% but also material use by 20%. As a result, Nike realizes a .25% increase in their profit margin year after year.
73% of Gen Z consumers were willing to spend more on sustainable products.
What is a Sustainable Supply Chain?
Sustainable supply chains are developed by implementing ethical and environmentally responsible practices throughout a business’s operations. These types of supply chains move products and raw materials quickly in the most cost-effective manner possible while reducing or altogether eliminating negative environmental and social impacts.
For a supply chain to be fully sustainable, it should have end-to-end supply chain transparency and visibility. The sustainability initiatives that businesses implement must go from sourcing raw materials all the way to last-mile logistics. Many experts feel that truly sustainable supply chain practices extend all the way to reverse logistics and recycling processes.
Environmental, Social, and Governance Reporting and Score
Environmental, Social, and Governance (ESG) reporting refers to the disclosure of information to investors, consumers, and regulators. This information typically involves a business’s governance structure and its supply chain strategy for handling negative environmental and social impacts. This can include:
- Greenhouse gas emissions
- Gender equality
- Income equality
- Human rights abuses
The sustainability of a supply chain is crucial to improving a company’s environmental, social, and governance score. This score can impact a company’s ability to attract and retain customers, investors, and business partnerships.
According to a recent survey, almost 40% of businesses struggle to identify and reach ESG goals to improve supply chain sustainability. In addition, 60% of supply chain executives find it difficult to understand the financial and environmental performance of supply chains due to a lack of end-to-end supply chain visibility.
Third party logistics providers play a vital role in supporting supply chain sustainability efforts.
3PLs support ESG efforts in several ways, including:
Fair labor practices
Three Elements of Supply Chain Sustainability
One reason supply chains are transforming is because supply chain executives feel that people, planet, and profit are key elements to supply chain management. They are now understanding that for a supply chain to be truly sustainable, it must meet three responsibilities: social, environmental, and financial. These elements help to promote sustainability throughout supply chains.
A Georgetown University study recently found that Millennials and Generation Z will pay more for products from companies that share their values. According to IBM, over 57% of consumers are willing to change their buying habits to improve sustainability. By considering people, businesses can come up with measurable goals that can increase profitability as well as improve their brand image. This can help maximize positive social impact.
When businesses consider “people” in their implementation of supply chain sustainability practices, they not only include employees and their customers, but also the communities in which they operate. Respect for human rights and shared values are hallmarks of a socially sustainable supply chain.
Many experts feel that the supply chain begins with suppliers and the production cycle. Socially sustainable supply chain management means that businesses ensure they are working with suppliers and vendors who carry out fair labor practices as well as meet safety and health regulations. This can include limiting pollution in the communities in which they operate.
The UK Modern Slavery Act was established in 2015 and sets legal requirements for companies to identify, prevent and mitigate modern slavery in their own operations and supply chains
Environmental concerns in the supply chain can make achieving environmental sustainability challenging for most businesses. The more complex a supply chain is, the more difficult sustainability is to achieve.
A sustainable supply chain should release as few greenhouse gas emissions into the environment as possible. A recent study found that 80% of the total greenhouse gas emissions for businesses are related to current supply chains. Because of this, measures to gauge the emissions and waste supply chains that are produced as well as water and energy usage should be incorporated into sustainability practices. Many businesses are also requiring their supply network to utilize recycled materials for their packaging to reduce their respective carbon footprint.
A carbon footprint is the measurement of carbon dioxide being discharged in the environment.
According to Deloitte, climate change and protecting the environment are the number one concern for Generation Z.
While supply chain sustainability revolves around improving people’s lives and the environments in which they live, profit is also a focal point. To this end, the supply chain sustainability should be utilized to:
- Lower costs
- Improve efficiency
- Maximize profitability
- Reduce supply chain risks
- Improve brand image
Why 3PL Supply Chain Sustainability Matters
Very few businesses have direct control over their supply chain processes from manufacturing to warehousing to last-mile delivery. Many businesses partner with third party logistics providers to provide supply chain and logistics management solution. Therefore, it is essential for 3PLs to become as environmentally conscious as possible to reduce their carbon footprint.
Let’s look at some ways that 3PLs can contribute to supply chain sustainability.
Due to consumer and government demands for a commitment to sustainability, 3PLs are utilizing less carbon-intensive transportation solutions. These solutions can include low-emission fuels such as liquified natural gas as well as smart technology like electric autonomous vehicles.
Another way that 3PL providers are promoting transportation sustainability programs is by utilizing digital technologies and a data-driven approach to supply chain and logistics management. This approach enables 3PLs to optimize each operational process in the supply chain. For example, 3PLs that can collect and manage transportation data can use it to monitor environmental performance, ensuring shipments follow location-specific regulatory standards before leaving ocean ports, rail yards, and warehouses.
Research shows that the transportation of products by truck, car, plane, and rail are increasing carbon dioxide levels in the atmosphere. This in turn contributes to rises in global temperatures Advanced technology that measures greenhouse gas emissions can make it easier to track and manage the fuel efficiency and emission rates of 3PL transportation services. This data can help a company reduce its carbon footprint.
3PLs that focus on providing sustainable transportation solutions can reduce costs as well as align with customer demands for more sustainable supply chains.
Warehouses and distribution centers are typically large buildings that need lighting, equipment, and information systems. Due to this, these facilities consume an immense amount of energy and produce high levels of greenhouse gas emissions. 3PLs that invest in eco-friendly processes understand how their warehouse operations impact the environment. Many implement sustainable processes such as energy-efficiency floor designs, solar panels, and recycling programs to produce greener systems that do not negatively impact the environment.
Warehouse robots are also being used to improve supply chain sustainability. By automating warehouse processes, robots can do more than human workers at a lower cost. Robots are also being used to maintain clean energy infrastructure. Technology company Eccopia has developed cleaning robots powered by solar energy that clean solar panels on the roofs of warehouses and distribution centers.
Digital technologies powered by the Internet of Things such as cloud computing and supply chain control towers utilize artificial intelligence to enable end-to-end visibility throughout the entire supply chain process. By utilizing technologies, businesses can use data to make informed decisions that can positively impact warehouse processes. Data also enables 3PLs to optimize warehouse management systems, enabling more control over inventory management. This can reduce worker movement inside of the warehouse to improve order fulfillment and distribution. In addition, 3PLs can lower last-mile delivery distances and costs by storing inventory nearer to its intended destination. Lower delivery distances can lead to lower greenhouse gas emissions which can reduce a business’s carbon footprint.
To improve supply chain sustainability, 3PLs can offer packing and packaging solutions for the businesses they service. Packing and packaging materials were not always an environmental consideration. Traditional supply chains were concerned with packing and packaging products for their safe delivery, not the impact on the environment.
Today manufacturers and 3PLs collaborate on decisions to use eco-friendly packing and packaging materials. By developing relationships with their business partners, 3PLs can provide specialized or even one-of-a-kind packaging using a wide variety of materials. Many 3PLs are using paper-based choices for packaging such as cardboard and paperboard. Packaging made from these environmentally friendly materials are durable and fully recyclable. In addition, 3PLs can offer a valuable service to their business partners by collecting and disposing of wasted material in environmentally conscious ways. As e-commerce shipping continues to rise, it is important for 3PLs to keep up with environmental regulations which can reduce packaging and disposal costs.
Cartonization is an approach of supply chain management that is becoming more important to supply chain sustainability. The smart cartonization process evaluates the dimensions of all products in an order. This data is then used to determine the best packaging size for the products. The goal of cartonization is to pack finished product as tightly as possible with as little packaging as possible to:
- Reduce a businesses carbon footprint
- Improve customer satisfaction and meet customer expectations
- Utilize fewer delivery trucks
Combined, these benefits can lead to cost savings, reduced emissions, and faster delivery times.
Smart cartonization enables warehouse workers to choose the most efficient packaging solution to move products. Configured to a warehouse management system, cartonization not only informs the worker what packaging to use but also how the products should be placed inside of the packaging. In addition, automated cartonization systems can make it easier to consolidate loads onto pallets and into trucks for delivery to consumers.
Shipping and order fulfillment company Paccurate recently announced a $2.2 million round of funding to advance its cartonization capabilities. In March of 2022, the company assisted with the cartonization of 2.7 million shipments with retailers such as Dillard’s and Hunter Douglas.
Datex Fast Facts
European Union Packaging Directive
Initiated in 2001, this directive requires all countries in the E.U. to recycle 50% of their packaging waste or incinerate it to provide energy.
Japanese Recycling Laws
In Japan, businesses are responsible for recycling packaging materials into reusable materials.
California Recycled Content Laws
California requires manufacturers to recycle 25% of all plastic containers.
UK Landfill Directive
In 2007, an addition was made to this legislation that requires all UK-based companies to recycle or treat their waste products, regardless of their size or turnover.
From smart cartonization to last-mile delivery, traditional supply chain networks are transforming to improve supply chain sustainability. By implementing socially responsible practices that are good for people and the planet, businesses are building positive brand awareness, increasing their profitability, and gaining a competitive advantage.
The increased levels of visibility enabled with technologies such as artificial intelligence, data management, and advanced analytics are helping to gather and store valuable data. This data can be used to ease difficulties that supply chain managers and executives find when making their business operations greener.
Optimizing the supply chain is of major importance to businesses. Supply chain and logistics companies are utilizing digital technologies to enable this. By utilizing cloud technologies and the Internet of Things, businesses can gather and store data that can provide transparency in the supply chain from the beginning to the end.
More and more businesses are realizing the importance of supply chain sustainability. As current supply chains turn into future supply chains, 3PLs can provide effective supply chain management by implementing a sustainable supply chain strategy. 3PL providers help businesses mitigate their carbon footprint as well as improve efficiency in supply chain processes.
The 21st century is an era in which businesses operate complex global supply chains whose success is hinged on being lean, flexible, and sustainable. Implementing ethical supply chain practices and demonstrating social responsibility are becoming priorities for businesses. As pressure from governments and consumers to disclose supply chain information grows, the capabilities of digital supply chain technologies are proving to be vital to the advancement of supply chain sustainability.
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