Gartner: CSCOs Must Adopt Resource
March 25, 2022
inflation and supply shortages are projected to continue, chief supply
chain officers (CSCOs) must adopt resource conservation strategies to
mitigate risks to their organizations, according to Gartner.
“CSCOs foresee that the anticipated increases in inflation and ongoing
supply shortages will lead to further production challenges and shipping
Sarah Watt, senior director analyst with the
Gartner Supply Chain practice. “These constraints are not
short-term, and the underlying trend is that demand for goods is rising,
while supply is increasingly scarce.”
Additionally, CSCOs face pressure from internal and external
stakeholders to make their networks more sustainable. According to a
Gartner survey of 983 supply chain professionals from August 2021
through October of 2021, 67% of respondents said they were investing in
including environmental and social sustainability metrics as KPIs for
supply chain leaders.
Resource conservation is a key factor in mitigating these challenges.
Gartner suggests three strategies, CSCOs can deploy.
Slow Down Primary Consumption by Employing Circular Economy Models
So far, economic progress has been
based on linear consumption - take, make, dispose. However, there’s a
slow, but steady shift towards circular economy models. “The circular
economy provides an opportunity to decouple raw materials from growth.
Circular economy activities range from as-a-service models to
incentivized return and collaborative consumption,” Watt said.
Another important aspect is the ownership of end-of-life materials,
especially if they contain valuable raw material. If companies manage to
close the loop, they can become more resilient against supply shortages.
“Essentially some suppliers are using “end-of-life” materials as a hedge
against inflation and availability concerns,” Watt said.
Before embarking on a circular economy strategy, Watt recommends that
both environmental, financial, and societal impacts are assessed at a
product and service level. “The circular economy choice may also come
with unintended consequences. CSCOs need to define the best candidates
for circularity, or they may end up creating increased environmental
burden rather than reducing it.”
Treat Waste Like a Value-Based Asset
In an environment of constrained
supply, CSCOs must capitalize on the potential value of waste and see it
as an asset. Capitalizing on value can be achieved by building ecosystem
partnerships with waste contractors, suppliers and innovators. With new
legislation being passed around producer responsibility and changes in
waste regulation, waste will be increasingly seen as a liability – when
it could also be a resource. CSCOs need to shift their strategies to
encompass waste streams, and gain control so that waste materials can be
Joe Marcaurelle, Inmar Intelligence Director of
Product Strategy - Supplytech explained," One of the greatest
waste generators in supply chains are product returns – or supply chain
speak – reverse logistics.
Last year, approximately five billion pounds of returned goods ended up
in landfills. However, achieving a landfill diversion rate of 99% is
possible with end-to-end returns platforms. These types of comprehensive
solutions increase sustainability by keeping returned goods in commerce
and out of landfills.
returned goods in commerce can take several paths, including
return-to-stock, return-to-vendor, refurbishment, and liquidation.
Donation is also a viable alternative. While it doesn’t put goods back
into commerce, it does extend the life of discarded items and averts
landfills, while helping those in need.
As Ms. Watt points out, end-of-life materials can still add value. For
example, electronics can be “parted-out” for component repairs and
warranty claims. Precious metals such as gold, silver, platinum, and
palladium can be extracted and resold, while the remaining components
get recycled. Companies like Best Buy and Staples offer electronics
recycling services. The
EPA also has programs for donating and
Items not managed in the processes mentioned above are sent to an
energy-from-waste provider, where waste is converted to energy through
steam-generating combustion chambers. Steam from the process is
condensed back into water and used again, making the entire closed-loop
process very efficient and sustainable. To put this in perspective, If
the five billion pounds of returned goods that ended up in landfills
were converted to energy, it would produce enough electricity to run
315M homes for an entire year. Note: Each ton of waste generates 550-700
Preserve Natural Capital
Natural capital is the stocks of
geology, soil, air, and water that organizations rely on for production
of materials. Without stocks of natural capital, supply chains would not
function. However, natural capital is viewed as an externality - no one
pays for it.
CSCOs must shift their relationships with natural capital and focus on
activities such as reducing biodiversity loss, fighting deforestation,
or exploring regenerative agriculture. “The risk today is that CSCOs are
spending the feedstocks more quickly than they can regenerate, and
supply chains must make sure that they don’t destroy the very base of
their business,” Watt concluded.
Duane Paul, the General Manager of SmartSolve
said, "The three strategies highlighted here are insightful,
especially around assessing the environmental, financial, and societal
impacts at a product and service level. Coincidently, SmartSolve
materials go beyond recycling. We work closely with our customers to
help meet the environmental, and societal impacts at the product and
service level for their businesses."