How manufacturers can adopt a sustainable supply chain

(reposted from SYSPRO USA)

Due to increasing pressure from various stakeholders, many companies are turning their focus to ensuring that their supply chains are sustainable. Some people see the concept of a sustainable supply chain as being pushed on them, but there are good business reasons why companies should implement sustainable supply chains — it’s not just social or environmental consciousness.

What is a sustainable supply chain?

A sustainable chain involves implementing sustainable practices at each stage of the supply chain, from raw material sourcing and production to transportation, distribution, and end-of-life disposal. The aim is to minimize the negative impact on the environment and society while maximizing the economic benefits.

The World Economic Foundation [] have produced reports to show the economic benefits of adopting a sustainable approach, for example:

  • Beer packaging, processing, distribution: costs reduced by 20%
  • Mobile phones: remanufacturing costs reduced by 50%

Benefits of being sustainable

Sustainable supply chains may be part of a larger ESG (environmental, social, and governance) program. A recent report by the IDC noted some benefits of these programs.

  • Companies with successful ESG programs can improve their market position and brand strength
  • ESG initiatives can help improve overall financial performance
  • Customers are often attracted to companies that apply ESG considerations
  • Companies with ESG strategies can more easily adapt to changes in regulatory and legal requirements

As a business driver, companies that have incorporated sustainability initiatives have reduced waste, improved cost-effectiveness and efficiency in operations, created new revenue streams, and enabled product innovation.

Process changes to improve sustainability

What sort of process changes should manufacturers be looking at to improve sustainability?

  • Product design – use of appropriate materials; design the product for extended future use.
  • Use digital technology – monitor resource and equipment use; use online platforms to connect with supply chain partners.
  • Extend what is already made – repair and maintain products to maximize their lifetime; implement a return strategy when applicable.
  • Adopt regenerative processes – ensure renewable, reusable materials are used in an efficient way.
  • Re-use waste – recover waste for reuse and recycling into other products.
  • Collaborate with partners – work together with supply chain partners to identify areas for improvement and to create joint value.

How can your ERP help with a sustainability program

An ERP system has several tools that support sustainability.

Engineering Change Control

Engineering Change Control allows a manufacturer to plan and check the items that constitute a product during the development phase, and how best to incorporate pre-used parts and recycled materials. If a recycled component is found to be defective, a capability like a ‘where-used’ search can be used to identify all of the parts or products that might be affected and quickly mitigate any risk of further problems.

Bill of Materials

Manufacturers looking to incorporate recycled material in their production process, without compromising the final product, should be updating their Bill of Materials (BOM). The BOM ensures there is full control of the quantity, quality, and cost of the materials, and controls the hierarchy of the resources, items and parts that comprise a product. Information from the BOM can help companies trace and report on the percentage of recycled materials that make up the final product sold to customers.

Inventory Management

Excess stock is one waste companies can avoid, but if some stock has an expiry date, it is important to make sure the items are used in time. An inventory management system that logs and tracks these criteria, through accurate stock control and integration with sensors, provides the assurance that there is no excess stock and items are used before expiry.

Supply chain management

By using a web platform that enables online transactions with supply chain partners, manufacturers can improve collaboration with them. For example, ensuring that if a BOM is changed to include recycled material, the change of requirements is seamlessly passed on to suppliers. In the other direction, suppliers can provide input into the design of a BOM to include more sustainable parts and materials.

Managing by-products

Managing by-products opens the opportunity to reuse materials in the production process and reduces waste. Manufacturers can generate new revenue streams by selling by-products into the market or to other organizations that can use them.

Big data management

Manufacturers can now offer services to customers to provide on-site notification of potential problems and pre-emptive maintenance, and therefore extend the usefulness and life of a product. This requires an ERP system that can handle large volumes of data from sensors that monitor the status of components.

Returns management

Enabling returns is crucial for customer retention, and it is important to optimize the way returns are managed. Returns management allows manufacturers to oversee a product’s life cycle from its purchase to its return by a customer for disposal or resale. With returns management in their ERP system, manufacturers can identify if the returned item should be sent back to a supplier, can be refurbished, or should be disposed of.

The drive for sustainable supply chains

The Governance & Accountability Institute has reported that sustainability reporting is being adopted by a huge number of companies. Having a sustainable supply chain is therefore not just a minority view. By creating a sustainable chain, manufacturers can improve their reputation, reduce costs, and increase efficiency, apart from contributing to a better society and environment. Customers and stakeholders are increasingly demanding sustainable products, and a sustainable chain can help meet these demands while also creating long-term value.

Four ways Cloud is changing the ERP channel landscape

(reposted from SYSPRO USA)

The ERP channel landscape is transforming. While on-premises ERP deployments are still more common than one might think among mid-market manufacturers and distributors, Cloud ERP deployment has rapidly accelerated. According to Panorama Consulting’s ERP Report, in 2019 44% of companies deploying ERP chose the cloud but by 2022 this increased to 65% choosing a cloud model.

These rapid changes have enormous implications for the channel. ERP vendors and customers still need the expertise of Value-Added-Resellers (VARs) and other channel partners, but these partners will need to adapt to this uptake in cloud models.

Here’s how cloud is changing the ERP channel landscape:

New business strategies

The Cloud ERP model is fundamentally altering what manufacturers and distributors buy, as well as the role of the partners they buy from. These changes are bringing both challenges and opportunities for partners. The scope of what they do is much broader and more strategic: they’re becoming agents of change and driving the digital transformation of their clients. With cloud, forward-looking partners are going far beyond merely implementing a vendor’s software. They’re helping their clients decide how to implement a range of technologies – like AI, IoT, and automation to advance and transform their businesses.

A shift in skills

According to the Wall Street Journal, cloud computing jobs grew 94% from 2017 to 2020, compared to 20% growth for tech job postings in general. In addition to the traditional hardware, software and networking skills needed for on-premises ERP, there is now a need to add cloud infrastructure, cloud security and privacy management.

In a labor market that’s already tight, hiring cloud specialists will be especially hard. As a result, channel companies will need to upskill their current employees. Solid training programs are now table stakes to remain competitive. There is an opportunity for ERP vendors to incentivize partners to stay abreast of technology developments. Along with incentives, ERP vendors need to continuously update materials and training resources to empower channel partners.

Redefined revenue models

ERP channel companies have long built their businesses on up-front licenses complemented by ongoing support fees. In this newer world of cloud ERP, licenses are replaced by subscription models. This change should make revenue more predictable, ultimately providing a stabilizing effect. While revenue profiles of partners are changing, their costs are also reducing, as implementations are getting easier since they can now be done remotely.

A new definition to partner success

As the role of partners evolves with cloud to be strategic business partners, it will be crucial for ERP vendors to evolve too. Partnership structures need to be geared more around achievement of client success, satisfaction, and engagement. Partner competencies need to be fully certified, and tiering should reflect the partner’s investment in joint business development initiatives.

ERP is a long-term play because it’s a core platform on which manufacturers and distributors build their business operations. As ERP continues to move to the cloud, it will open up new opportunities for the channel. So long as they work together, vendors and their channel partners can forge a new model that works for everyone.

We are committed to helping our partners transform their businesses to succeed as the market changes. If you’re looking for industry specialists who know manufacturing and distribution and are committed to the success of the channel, get in touch. We’d love to talk with you about the opportunities ahead.