Is digital tech the solution for supply chain sustainability?

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In the supply chain there exists a conflicting cohabitation of both the greatest opportunities and the most concerning risks for sustainability. Digital technologies promise to deliver stronger visibility to address those risks, but relying on data in a globalised world is increasingly challenging for operators. Alexandra Leonards reports.

The supply chain is a paradox – its complexity and magnitude mean it has both the ability to improve to the world, and the capacity to stimulate social and environmental problems.

The supply chain delivers humanitarian aid and creates opportunities for developing countries. But it’s also responsible for 25 million victims of forced labour across the world, according to the International Labour Organisation. The supply chain also produces five and a half times more greenhouse gas emissions than those created by direct company operations, research by CDP has found. It’s no wonder the supply chain is at the heart of most sustainability debates.

In an increasingly globalised world, where outsourcing to Africa or the Far East is commonplace, suppliers are often out of reach and difficult to trace. From product design, to manufacturing and distribution, the supply chain can be a fragmented place. Digital technologies can aid the relinking of all the different elements of the supply chain, ultimately improving sustainability and efficiency. But, as many of the latest innovations rely heavily on large sums of data, obtaining information from supply chains that are spread out across a number of countries or continents, can be a real challenge for operators.

“If you think about the variety of suppliers at first tier, then multiply that by the complexity upstream, you can understand the potential amount of human rights, labour rights, environmental, governance and other issues we are talking about,” says Tara Norton, managing director supply chain sustainability, Paris, at BSR, the business network for sustainability. “If you look at the UN’s 17 Sustainable Development Goals, you’ll see that most supply chains could touch a number of those issues.”

Daan de Vries, chief innovation and technology officer at the Rainforest Alliance, says that a drive for transparency in the supply chain makes sense for every business, for a number of reasons, “commercially to avoid waste, socially to address the rise of consumer activism and lastly to ensure food security as the impacts of climate change start to become a serious threat to global supply,” he says. Modern technology and software are being used to make it much easier to address issues like these.

For the majority of us, the only time we get to see ourselves is in a mirror. But twins, they get to see an exact duplicate of themselves, a true-to-life reflection. ‘Digital supply chain twin’ technology, loosely based on the concept of identical twins, could completely revolutionise end-to-end decision making in the supply chain.

A digital twin mimics a real-world system or entity. It’s a real time and time-phased representation of a physical process or asset; it uses data across operations and the wider supply chain to reflect reality.

Digital twins have been used in applications to improve supply chain visibility by creating a higher resolution model of the physical supply chain. This enhances end-to-end visibility and situational awareness. The technology can also be used by Artificial Intelligence platforms which extract source system data and replicate a digital representation of the relationships between that data.

“This allows a company to get improved alerting and action recommendations to shore up its legacy supply chain decision making, which will be use a poor and inaccurate model as the basis for its decision making,” says Sarah Watt, senior director, analyst at Gartner, the global research company. “Note that, certainly, there is a cost associated with gathering and processing the data, which must be balanced against benefits — like with any technology.”

BSR’s Tara Norton identifies the technology as the biggest opportunity for the supply chain. “Whatever happens in the digital supply chain needs to reflect reality,” she explains. “In fact, probably the number one risk that people talk about when it comes to using blockchain for supply chain sustainability is solving the “garbage in – garbage out” problem.

“How will we know that our blockchain-enabled, traceable sustainable chain is a true reflection of the physical one?”

Blockchain is a new-ish digital technology designed to share information. It certainly hasn’t experienced a widespread roll-out just yet. But it is becoming an increasingly familiar word for operators in the supply chain, and pilots of blockchain are becoming more commonplace. Its format, a shared database where various parties can input and verify information, has a lot of promise when it comes to improving traceability in the supply chain.

“Blockchain can guarantee hand off points of suppliers for industries that need traceability,” says Andy Bell, chief technology officer at Edenhouse Solutions. “Take pharmaceuticals for example, many drugs companies are taking a serious look at blockchain to ensure all components and raw materials are sustainably sourced and validated.”

Blockchain also seems to be making its mark in food supply chains. UK start-up Provenance for example uses blockchain to trace the origins and journey of products such as tuna and coconuts. Blockchain appears to be an important trend for the supply chain. However, there are doubts about whether the hype around the technology is justified.

“Blockchain is an exciting technology but use cases are still being sought out to bring this to life,” says Bryan Nella of Infor. “Our stance on blockchain is to continue to evaluate the market, look for compelling opportunities in the space, but not to be overzealous in this search.

“Blockchain projects should be pursued because the technology is a good fit for the problem, not because blockchain is an “of-the-moment” technology.”

But there is an argument to say that teaming blockchain with other digital technologies can be a really effective way of achieving complete transparency in the supply chain. “Artificial Intelligence and blockchain technology are playing a significant role in the supply chain, particularly when it comes to monitoring and highlighting sustainable practices,” says David Griffiths of Adjuno.

“The introduction of blockchain will provide companies with the ability to fulfil vital parts of a product’s journey; this will give them the insight needed to deliver an immutable, reliable record.”

Artificial intelligence has the capacity to process huge amounts of data. Pairing this capability with the important information successful blockchain systems can provide, can help solve some of the issues associated with disjointed supply chains.

“[There is a] …growing recognition that supply chain visibility by itself brings limited value,” says Bryan Nella of Infor. “The greater value comes from being able to take action.

“And this – what we refer to as actionable intelligence – is being delivered through AI, advanced analytics and some of these other technologies.”

If blockchain and artificial intelligence are paired with visibility software, retailers can begin to close the loop on the entire product lifecycle, maintaining every touch point in the supply chain. “Should a product be unearthed that isn’t as ethical as first thought, not only will headlines cost retailers consumer trust and potential revenue, but there will also be the time costs for the team charged with the weeks or even months spent tracing the problem back to the source, and then resolving the problem,” says Griffiths.

“With transparency, retailers can mitigate occurrences and should the worst happen, know that they have all the information needed to show prior knowledge and the processes they have in place to minimise risk.”

Process mining is a type of big data analysis which uses machine learning, a form of AI, to help organisations bring anomalies in data to the surface. In turn, inefficiencies within core operations, like purchasing, logistics and productions, can be identified.

“This technology analyses the digital traces left behind by every IT-driven activity, reconstructing logs in a visual representation of how each task is being executed,” says Alex Rinke, co-founder and co-chief executive of Celonis, the process mining specialist. “It provides proactive recommendations for improvement, empowering organisations to provide better visibility into the entire supply chain.

“By focusing on specific processes rather than the data produced by them, businesses can see how efficient (or inefficient) their distribution network is and identify any causes of delays.”

Digitised data is being used in a wide variety of formats to help ensure sustainability is a priority for the supply chain. Mobile applications and drones, for example, are making it much easier to better understand sustainability challenges and address them in a more targeted way. “At the Rainforest Alliance, we are piloting the use of drones to collect additional information on farming landscapes and to compare data from third parties with the data gathered by these drones,” says de Vries.

Digital technology can also be used for training and raising awareness among producers in the supply chain. The Rainforest alliance has launched a farmer training app which gives farmers across Africa, Asia and Latin America access to training modules and videos, and to connect with other farmers to share best practice.

These technologies are certainly paving the way towards a more sustainable supply chain. However, they rely heavily on data, and many products are sourced in countries with data-poor systems. Without solid information from those locations, there are gaps in the data. This leaves the supply chain’s visibility compromised, leaving room for bad practice to slip through the cracks. “Without significant buy-in from the governments concerned, it will be hard to implement some of these modern technologies,” says de Vries.

The issue of privacy also presents a significant challenge for a supply chain that depends on lots of data. “All data management must respect the personal details of individuals, the confidentiality of commercial data, and data security laws and best practices.”

Tara Norton of BSR, notes that digital technologies provide an opportunity for human rights issues, but at the same time risk infringing human rights.

Digital twins, blockchain, artificial intelligence and drones all have promise. But none of them are mainstream yet. Perhaps the very nature of the supply chain, with its capacity to both create and solve problems, alongside its reliance on data dependant technologies, have shaped an impenetrable barrier to social and environmental sustainability.

But with networks expanding, companies becoming more collaborative, and new technologies being developed all the time, we may still get the chance see a more connected and sustainable supply chain in years to come.

 

 

Digitalisation for a greener supply chain

Digital technologies are not only crucial to ensuring the supply chain is more transparent. Digital technologies are set to play a key role in maximising carbon efficiency and transforming the supply chain into a much greener space.

“The more we are able to use the tons of data that a supply chain produces every minute, to help an operator in making the right decision or even take that decision itself, the more we avoid inefficiencies, disruptions, and unnecessary waiting times, [which]saves resources and reduces environmental impacts,” says Markus Voss, chief operating officer and chief information officer at DHL Supply Chain.

DHL extracts the energy consumption data of each and every facility and truck that it owns or leases. This enables the logistics business to visualise sustainability performance data in its management dashboards, and also to make correlations between trends in its sustainability performance and operational performance.

“In the same way we collect consumption data we also take stock of the green technologies that our sites and transport operations have implemented,” explains Voss. “This allows us to monitor the impact of these on our energy consumption and to proactively engage our customers on concrete opportunities to upgrade facilities or fleets with green technologies where this is beneficial.”

Voss explains that sophisticated transport management systems can help optimise routes to reduce distance travelled and fuel used. These systems can also improve capacity utilisation of DHL’s vehicles which in turn reduces the number of vehicles on the road and the time trucks are waiting to be loaded or unloaded.

“But digitalisation has also found its way into our warehousing operations,” says Voss. “Predictive temperature controls allow us to manage cooling and heating energies in an optimal way by taking weather forecasts into account.”

DHL has also seen package waste reduced. “Where we replace the use of standard boxes (for our customer’s products going outbound) with a solution that scans the products that go into the box and then produces the box on the spot, we see the empty fill drop from more than 30 per cent to less than 10 per cent,” says Voss.

“This is not only reducing the amount of corrugated and void fill that needs to be used but as we reduce the cube, we also reduce the number of trucks that are needed to transport the same amount of product.”

 

This article first appeared in Logistics Manager, June 2019.

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