More than Half of Chief Supply Chain Officers Surveyed Would Sacrifice Profit for Sustainability
Leaders determined to make supply chains more sustainable and resilient; turning to data and new technologies to achieve it
More than half (53%) of surveyed CSCOs say their digital supply chain transformation will be the most significant area of competitive advantage in the next three years
Nearly three-fourths (74%) of surveyed CSCOs say hybrid cloud integration is crucial to accelerating and enabling the digital transformation of supply chains
According to the results of a new study from IBM and Celonis on supply chain resiliency, Chief Supply Chain Officers (CSCOs) recognize the critical role that hybrid cloud, AI, process mining and execution management play in helping them overcome the disruptions they’ve faced over the last two years. In fact, 72% of CSCOs surveyed expect their processes and workflows to be automated over the next three to five years—and 69% plan to accelerate cloud adoption to enhance real-time data access.
The study, The resilient digital supply chain: How intelligent workflows balance efficiency and sustainability, conducted by the IBM Institute for Business Value (IBV) in cooperation with Celonis and Oxford Economics, surveyed almost 500 CSCOs across 10 industries including banking, consumer products, manufacturing and automotive. The study findings indicate that organizations are searching for ways to modernize their supply chains by embracing data and hybrid cloud strategies as well as prioritizing sustainability.
See related article: IBM looks to sustainability with acquisition of emissions data company Envizi
“The Confluence of post-COVID-19 challenges, inflation and supply issues, security, and sustainability has led to the most complex operating environment in modern business. This has forced organizations to rethink and rebuild their supply chains to be more agile, efficient, and sustainable,” said Jonathan Wright, Managing Partner, Finance and Supply Chain Transformation, IBM Consulting. “Technology and data-fueled automation and intelligence are key to not only evaluating current workflows and inefficiencies, but in identifying new opportunities as well.”
The survey of CSCOs reinforced this:
The top challenges CSCOs are facing
- 80% of CSCOs said that demand volatility is a top challenge, while 77% mentioned the increased cost of transportation and logistics.
- Cost aside, 76% cited the availability of transportation and logistics as a top challenge.
- These challenges lead to missed opportunities: 71% said lower inventory for raw materials and finished goods has led to stock-outs and lost sales. And 60% have had to expedite products for customers, leading to higher transportation costs.
Hybrid cloud, execution management, AI and automation can help CSCOs seize opportunities
CSCOs are pursuing aggressive data-backed strategies to build smarter, more agile supply chains that can help improve resilience and sustainability. In fact:
- Almost nine-in-ten (87%) CSCOs are implementing execution management and 77% are implementing process and task mining to modernize their operations.
- By 2025, 83% of CSCOs plan to introduce AI-enabled real-time inventory management.
- 74% of CSCOs say hybrid cloud integration is crucial to accelerating and enabling the digital transformation of supply chains.
- 81% are looking to AI-enabled processes and workflows for real-time demand sensing.
- Some 72% expect most of their processes and workflows to be automated in the next three to five years, while 27% expect their workflows to be AI-enabled in the same timeframe – increasing to 33% by 2030.
Putting sustainability over profit
66% of surveyed CSCOs said sustainability is a core element of overall business value. More than half (51%) of CSCOs surveyed said they would be willing to sacrifice profit—on average 5% to improve sustainability outcomes—equating to $22bn for US Fortune 500 companies in one year.
To that end, CSCOs identify several specific actions they plan to take over the next three years in pursuit of circular economy goals:
- 47% are initiating full lifecycle design of their materials and products to expand re-use of materials and reduce waste.
- 44% plan to improve energy efficiency of their products and services.
- 35% plan to develop new products and services based on renewable energy componentry, and 30% expect to engineer new zero-waste products and services.
The top three expected benefits of sustainability initiatives were: complying with environmental regulation, reducing reputational risk, and driving new innovation areas. These gains cannot be realized without a meticulous process of monitoring a distinct set of sustainability targets. Some 55% of CSCOs said in the next three years they expect to incorporate real-time monitoring and reporting on environmental and social sustainability. In fact, the SEC recently proposed a rule change that would require public companies to disclose climate change risks to their business, which, if passed, could accelerate the need for operational climate change data.
“Eliminating inefficiencies from core supply chain processes represents an enormous opportunity for reducing carbon emissions at scale,” said Janina Nakladal, Global Director of Sustainability at Celonis. “Chief Supply Chain Officers know they need to adapt, and in many cases are, but they often don’t have the insight they need to truly understand where changes need to be made—and lack the toolset to drive the change. Our research shows that currently-available technology—process mining and hybrid clouds—can give CSCOs this insight to wholly transform their supply chains.”
The study revealed that CSCOs can take actionable steps to develop and operate data-informed and sustainable supply chains. These steps include:
- Explore new business models that amplify resiliency – deploy AI and machine learning to allow better pattern recognition, workflow optimization and solution gathering. Also rely on an open, secure, hybrid cloud model to smooth and speed extended intelligent workflows.
- Invest consistently in the near- and long-term potential of automation – develop robust AI and automation capabilities to speed insights and decision making. Leverage co-creation, co-execution and cooperation to accelerate idea development.
- Make sustainability one of your most important business priorities – operationalize a full set of ESG initiatives and mine data across your supply chain processes.
The IBM Institute for Business Value, in collaboration with Celonis and Oxford Economics, surveyed 500 Chief Supply Chain Officers across industries to gain an in-depth understanding of how recent disruptions in global supply chains are affecting their short-term tactics, longer-term strategies, and performance. 10 industries are represented: banking, consumer products, healthcare, electronics, telecommunications, insurance, industrial products, manufacturing, automotive, and life sciences, each comprising 5%-15% of our total sample.