A global survey of supply chain decision makers reveals that economic performance is the top ranking corporate sustainability priority for the majority of organizations. However, when directly asked whether profitability or sustainability was more important, 60 percent gave equal priority to these objectives, with another 25 percent leaning towards sustainability.
Conducted by the Economist Intelligence Unit, the research and analysis division of The Economist Group, and sponsored by LLamasoft, a global leader in supply chain optimization software and solutions, the survey of senior executives in 250 manufacturing and retail organizations across the U.S., Latin America, EMEA and APAC regions set out to explore supply chain approaches and priorities in relation to business sustainability, defined as the process by which companies manage their financial, social and environmental risks, obligations and opportunities over time.
Jeremy Kingsley, Technology Editor with the Economist Intelligence Unit, said: “These findings are extremely interesting – on the one hand we see respondents possibly ‘saying the right thing’ when asked in the abstract about the relative importance of profitability and sustainability, but saying something quite different when it comes to specific organizational priorities. We also see a correlation between seniority and the relative importance of sustainability and profitability, with 67 percent of C-Suite respondents saying that sustainability comes first, compared to 55 percent of other respondents.”
When asked about what is driving supply chain sustainability in their organization, growth opportunities (36 percent), cost savings (34 percent) and the importance of responsible business practices (33 percent) were the top drivers. However, respondents were divided on whether supply chain sustainability has a positive or negative impact on cost, with increased costs being cited as the largest impediment to supply chain sustainability and responsibility by 38 percent of respondents, especially those representing smaller businesses. Difficulty in monitoring complex supply chains (29 percent) and organizational structures (24 percent) were also cited as barriers.
In North America, the survey found a marked shift in priorities looking ahead to the next five years. When asked to consider their organization’s top supply chain management priorities over the last five years, American and Canadian respondents ranked reducing operating costs as the most important. Over the next five years, however, improving product quality was the number one priority. Reducing environmental impact is also viewed as being more important over the next five years, increasing from 12.9 percent to 19.4 percent.
“There are many ways companies can make their supply chains leaner and greener, but for organizations with potentially hundreds of suppliers, thousands of products and millions of customers, determining the best alternatives is far from straightforward, at times making sustainability and profitability an ‘either-or’ choice – but it does not have to be,” said Razat Gaurav, CEO of LLamasoft. “Making the right decisions that can accomplish these dual objectives requires both a big picture view and a granular understanding of the end-to-end supply chain. Global organizations must turn to technology to build ‘digital twins’ of their real world supply chain, providing a risk-free environment in which to play out many scenarios, from the expected to the unlikely, giving them the confidence that the changes they make will deliver the desired and expected outcomes.”
Full survey findings are available in a report entitled “Sustainability: The Missing Link?”, which can be downloaded here.
About The Economist Intelligence Unit
The Economist Intelligence Unit (EIU) is the research and analysis division of The Economist Group and the world leader in global business intelligence.
Created in 1946, EIU has 70 years’ experience in helping businesses, financial firms and governments to understand how the world is changing and how that creates opportunities to be seized and risks to be managed.
About LLamasoft, Inc.
LLamasoft supply chain design software helps organizations worldwide design and improve their supply chain operations. LLamasoft solutions enable companies across a wide range of industries to model, optimize and simulate their supply chain network, leading to major improvements in cost, service, sustainability and risk mitigation. Headquartered in Ann Arbor, Michigan, LLamasoft is a leader in supply chain excellence and innovation, advancing technology focused on continuous improvement of enterprise supply chains for the world’s largest organizations.