In the article for MHD, Sean Mitchell, Associate Partner, Argon & Co Australia, explores the critical role of sustainability in reshaping supply chains.
Next year, we are at the mid-point between the Sydney Olympics and the 2050 net-zero goals, so sustainability is no longer a buzzword—it’s a necessity. Sustainable supply chains aren’t just about meeting environmental regulations and/or using renewable energy; it’s about reshaping how we approach every aspect of the supply chain to build a competitive edge.
A sustainable supply chain (to borrow loosely from the OECD), involves creating products through processes that minimise environmental impact, conserve energy, and use resources efficiently. Beyond environmental benefits, sustainable practices can significantly enhance operational efficiency, reduce costs, and improve brand reputation. For operations leaders, this means embracing a holistic approach that aligns economic goals with environmental stewardship.
A successful transition to a sustainable supply chain starts with cultivating a culture of sustainability within the team, which begins with a clear mission and vision that prioritises sustainability (in the broader definition above), coupled with a commitment to training and empowering employees. Richard Branson’s words resonate here: “Train people well enough so they can leave, treat them well enough so they don’t want to.” By fostering a workplace where sustainability is a core value, employees become active participants in the journey.
It’s a journey
Transforming your supply chain into a sustainable powerhouse planning and execution, typically across 4 stages:
- Stabilise: Address immediate safety, quality, delivery and reliability concerns. Implement basic systems to manage these areas and start fostering a culture that values continuous improvement.
- Control: Establish systems-driven improvements in planning and execution and develop a proactive safety, quality and service culture. Begin to integrate sustainability methodology into your daily operations using TIMWOOD framework to address all types of waste – Transport, Motion, Waiting, Overproduction, Overprocessing and Defects. Ensure this thinking is consistently applied across the team – design, planning, procurement, manufacturing and logistics.
- Improve: Invest in targeted improvements, such as energy management and process streamlining. Focus on building a knowledge base within the organisation, ensuring that best practices are documented and shared.
- Differentiate & Disrupt: This is where the real action happens. Leverage digitisation and automation to drive predictive maintenance, real-time analytics, dynamic planning and continuous process optimisation. By now, sustainable practices are deeply embedded in every aspect of operations, from product design to final delivery.
Making progress
Benchmarking is essential to track progress and ensure that your initiatives are delivering tangible results. Here are some key benchmarks to consider:
Safety Performance: Safety is a non-negotiable benchmark. Leading operations focus on lead indicators such as risk identification & reduction, shopfloor interactions, near-hit root cause investigation and others. This will raise the culture and a 50 per cent reduction in lost-time injuries within the first year would be a good start, progressing towards zero harm.
End-to-end Customer Service: Integrate all elements into your customer service metric such as OTIFNE – On Time (delivered, not despatched), In Full, No Errors (quality defects, invoicing errors). Once the measure is in place, aim for a 10 per cent YOY improvement aiming for a target of 97 per cent be in the top tier of performance (Think of the process overhaul opportunities this will offer).
Energy Efficiency: Measure the reduction in energy consumption per unit of output. An efficient operation should aim for at least a 10-20 per cent reduction in energy use within the first year of implementing sustainable practices.
Labour utilisation: Productivity is on the national agenda and should be at the heart of the drive to building a sustainable operation. Track the amount of labour per unit of output (rather than simply focussing on variances to standard), targeting a 10-12 per cent improvement each year through process improvement and increased volume from an improved OTIFNE.
Waste Reduction: Track the amount of waste generated per unit of output. A world-class operation could target a waste reduction of 30-50 per cent over a 2-3-year period, with a long-term goal of zero waste to landfill.
Water Usage: Monitor water consumption and aim for significant reductions. Benchmarks might include a 20-30 per cent reduction in water use within the first two years, particularly in water-intensive industries.
Productivity and OEE (Overall Equipment Effectiveness) and OOE (Overall Operational Effectiveness): OEE is a key measure of operational efficiency (of the composite of individual operations and an OEE of 85% or higher), which is considered world-class. This involves reducing downtime, improving speed, while ensuring quality. OOE measures the broader operational efficiency and will take into account your bottlenecks, under-utilised lines etc. Once in place, aim for an 7-10% YOY improvement
Carbon Footprint: Track your plant’s carbon emissions per unit of output. An ambitious benchmark would be to reduce carbon emissions by 20-30 per cent within five years, moving towards carbon neutrality.
Continuous improvement should be the mantra, with a focus on refining processes, adopting new technologies, and pushing the boundaries of what’s possible. Regularly revisit your benchmarks to ensure they align with your evolving sustainability goals and market demands.
The shift to sustainable manufacturing is not just about compliance or corporate responsibility—it’s about ensuring long-term success and resilience. By embracing sustainability and setting clear benchmarks, you’re not only protecting the environment but also future-proofing your operations.
For more information, contact Argon & Co here
