The Dynamics of Sustainable Supply Chain Planning

Sustainable supply chain planning is a strategic approach that integrates environmentally and socially responsible practices into the entire supply chain lifecycle.

A call for action

Who has not seen this announcement in the bathroom of a hotel room?

“Dear Guest, every day, in hotels all over the world, millions of gallons of water are used to wash towels that have only been used once. You can make the difference: a towel hanging up means ‘I will use it again’ and a towel on the floor means ‘please replace.’ Thank you for helping us conserve the earth’s vital resources.”

You leave the towels hanging at the rack in your bathroom when you step out, as the sauna has its own stock of towels. You still have a couple of hours to enjoy the hotel’s wellness center before you fly home after the 3-day business trip. Fortunately, the environment has been saved. Do you agree or do you think that hotels have only massively adopted this policy because it has saved them lots of money? Do you think that by adhering to this policy, your environmental conscience has been cleared?

The impact of supply chain planning on sustainability

According to Wikipedia, “sustainability is a societal goal that relates to the ability of people to safely co-exist on Earth over a long time.” This means we need to carefully plan our usage of scarce resources: the use of land and water to grow food; the use of space to live, commute, entertain, sport, relax; the use of clean flowing water to clean or dispose; the use of fossil fuels to drive our cars, fly our planes and to generate electrical power. In all cases, it is about managing Earth’s scarce resources so that in principle, countless future generations can enjoy life on our planet with the same quality as we can.

Many of Earth’s scarce resources are consumed by industrial processes and transport – which are the building blocks of today’s supply chains. According to the IPCC, about one-third of the global CO₂ emissions are linked to industry, and 15% to transport – together this is almost half of the total CO₂ emissions. The emissions that are generated to produce or transport, can be greatly influenced by the way supply chains are planned. For example, a route that is optimized such that a truck needs less traveled distance to deliver the same number of packages, or a production system that saves energy by more efficient batching of products in furnaces. Therefore, supply chain planning has huge potential to reduce the environmental impact of production and transportation, and DELMIA Supply Chain Solutions play a pivotal role in making this happen.

Four levels of maturity

Level 1: Sustainability as a spinoff from supply chain improvement

The good news is that in many cases, better supply chain planning has a beneficial effect on sustainability targets such as the use of energy, raw materials, and the emission of CO₂. Supply chain planning projects usually aim for increasing supply chain effectiveness, like delivery reliability and improving efficiency—often achieved by reducing stocks, production costs, and raw material usage.

There are many links between supply chain planning and sustainability goals, as illustrated by the following examples:

1. The process of Sales & Operations Planning (S&OP) aims to align demand and supply for the complete supply chain. This means that decisions are made about when and where to produce what products in the most efficient way. Optimizing this plan can have a positive impact on CO₂ emissions;
2. The process of Master Production Scheduling (MPS) allows for choosing the resources that can produce in an energy-efficient manner when a choice is available. It can also ensure that perishable products are processed on time to avoid waste;
3. The process of Production Scheduling can be used to avoid setup or cleaning between different products, to save energy and cleaning liquid;
4. The process of Logistics Planning enables companies to optimize routes and the loading of means of transportation (e.g. trucks).
   

Level 2: Measure sustainability KPIs

“To measure is to know,” and “If you cannot measure it, you cannot improve it” are the words of Lord Kelvin. Improving sustainability of a process starts by quantifying and measuring indicators, for example the amount of CO₂ emitted. Already more than 10 years ago, a producer of candy bars decided to print a transport’s CO₂ emission on the packing slip, to make customers and suppliers more aware of the environmental impact.

Although this initiative is welcomed, making a figure available by itself will not enforce any change in decision-making. Packing slips are probably only read by employees that are working in warehouse operations, who do not have any decision-making power over the transports that are handled by the warehouse. Similarly, a key performance indicator (KPI), showing CO₂ emissions on the screen of a planner, does not guarantee that the planner will actually try to influence this in a positive way when the management is only interested in efficiency and timeliness of production. Hence, making the sustainability KPIs available is necessary, but not sufficient.

Level 3: Involve sustainability KPIs in tradeoffs

As the examples in the first level illustrate, it often happens that companies get some sustainability effect ‘for free’ when focusing on ‘traditional’ supply chain planning objectives. However, in other cases, tradeoffs need to be made between the objectives, which makes the puzzle harder to solve. This is where DELMIA Supply Chain Solutions with its planning engines will help. Using sustainability KPIs that are added to the optimizer, it is possible to tradeoff against traditional KPI’s – such as delivery reliability or stock targets. It might mean that in some cases, a somewhat higher purchase price is accepted to save CO₂ emissions.

For example, a European steel rolling factory has the possibility to buy steel slabs from different suppliers. Some suppliers are in Europe, whereas some are in Asia. Suppose that for a specific type of slab, the purchase price from the Asian supplier is lower. However, transporting the slab will incur a larger amount of CO₂ emissions. Using the right weight for the mentioned KPIs, the planning application will suggest to source the slab from the European supplier.

Level 4: Set sustainability targets using standards

Coming back to our hotel room example: Is it enough to leave your used towels on the rack? Should you also skip your visit to the wellness center? You could even claim that making a 3-day business trip by plane should be avoided, and the meetings should be organized using videoconferencing. In sustainability efforts, it is often not clear what the objective should be. Should we sacrifice 10% of delivery reliability to avoid energy waste in the production process, or should we accept any deterioration for this objective, or should we stop producing specific products completely?

Repeating Lord Kelvin’s words: “To measure is to know,” Florence Verzelen, 3DS Executive VP Industry, Marketing & Sustainability, highlights the measurement of carbon footprint as number 1 action for companies to start walking the talk on sustainability. Once a company measures its carbon footprint, it can be mapped against standards like the GHG protocol. Ideally, companies set a target not only for the emission sources they control directly, but also for the ones they do not own themselves – e.g. suppliers. The Science Based Target Initiative (SBTi) can help companies setting such targets, for so-called Scope 1, 2 and 3 emissions, in line with the Paris Agreement.

Dassault Systèmes has its targets approved by SBTi, and in addition participates in a series of ESG (Environmental, Social, Governance) ratings to measure and benchmark its sustainability efforts.

How DELMIA can help companies in the sustainability journey

Regardless of the current maturity level of the company in sustainable supply chain planning, DELMIA supports companies to go further in the sustainability transition. If sustainability is still ‘hidden’ in supply chain planning, DELMIA Supply Chain solutions can help to make it visible by measuring the relevant KPIs, such as CO₂ emissions, scrap and raw material usage. In addition, a link to an environmental database makes it possible to compare these KPIs in terms of CO₂-equivalents and enables Life Cycle Assessment (LCA): the environmental footprint of a manufactured product can be measured taking into account the complete end-to-end supply chain (including Scope 3 emissions).

Once the improvement potential is clear and the companies’ sustainability targets are in place, the next step is to embed sustainability KPIs into supply chain planning decision-making. With DELMIA Supply Chain solutions, it is easy to make tradeoffs between ‘traditional’ KPIs and the ones for sustainability. Its planning engines work with a set of weighted KPIs, whereby the KPIs can be tuned in such a way that the right balance is found in order to meet the companies’ sustainability target. When a company moves to the level where sustainability efforts are benchmarked and can be used to generate plans that adhere to the target.

Becoming 100% sustainable is a utopia: sustainability is a journey rather than a destination. Nevertheless, DELMIA Supply Chain Planning and Optimization can make a huge difference in reducing the environmental impact of companies’ manufacturing and transportation operations.

Carlijn Goedhart earned her MSc degree in Operations Management and Logistics (healthcare track) from Eindhoven University of Technology. Supply chains and zero-waste principles are her biggest passions, which she prefers to apply in a social responsible context. Since 2021 she is Sustainability Lead for the DELMIA brand at Dassault Systèmes, responsible for defining the DELMIA sustainability mission in order to enrich the DELMIA solution portfolio that enables customers in the transition to become more sustainable.

Vincent Wiers received his MSc and PhD degrees from Eindhoven University of Technology (EUT) in 1993 and 1997, respectively. His research topic is the human factor in production control, and how to support human planners with advanced planning systems. Currently he is teaching the Master’s course on Advanced Planning & Scheduling at EUT. He is the author of several books on production control, including a textbook on implementing Advanced Planning & Scheduling systems.