Rethinking Resilience: Toward Sustainable and Adaptable Supply Chains

In the aftermath of two post-pandemic years, the resilience of the global supply chains faced intensified scrutiny due to the unpredictability between supply and demand, prolonged lead times, escalating costs and sustainability concerns.

These challenges in supply chain systems lead to inflexible responses to customer demands, fragmentation hindering seamless operations, prolonged delays in container yards, a deficiency in digitization leading to intuition-based decisions and inadequate data standardization fostering opacity and prioritization of cost efficiency over quality, adaptability and sustainability.

This challenging landscape prompted a thorough reevaluation of existing supply chain structures, with trends shifting towards deglobalization and localization. Acknowledging the pressing need to prioritize sustainability, businesses are also progressively incorporating environmentally conscious practices into their supply chains, focusing on enhancing resource efficiency, minimizing emissions, and promoting ethical sourcing.

The intricate nature of supply chains historically hindered digital transformation. However, with applications like IoT and blockchain, technology is reshaping these networks for improved efficiency, visibility, and sustainability. Venture capital firms, recognizing the transformative potential, invested $69 billion globally in 2021, indicating a growing belief in the role of technology in revolutionizing supply chains. Emerging markets, like the Middle East and Africa, also experienced significant funding growth, reaching $3.28 billion in 2021 from $360 million in 2017, according to Pitchbook.

The sustainability imperative

Sustainability is a key factor to consider when conceptualizing and building the future of supply chains. A study by BCG has revealed that eight global industry supply chains - including food, construction, fashion, fast-moving consumer goods (FMCG), electronics, automotive, professional services, and freight -collectively contribute to over 50% of greenhouse gas emissions. Simultaneously, high-profile scandals like the Nike sweatshop incident significantly heightened awareness among consumers and businesses about ethical labor practices throughout the supply chain.

A sustainable supply chain represents a comprehensive system of interconnected organizations, resources, and activities encompassing goods and services' production, distribution, and consumption. It is a proactive effort to curtail detrimental environmental effects while maintaining a steadfast commitment to social responsibility throughout the entire lifecycle.

As anticipation builds for COP28 UAE , the global spotlight intensifies on how businesses address sustainability, with a dual focus on environmental and social considerations.

Shifting behaviors and corporate priorities

Consumers are now more aware of how their purchases impact communities and the environment. Supply chains are adapting to prioritize sustainability in sourcing, manufacturing, distribution, sales, consumption, and product disposal. For many businesses, this is not merely about meeting stakeholder demands — it is becoming a legal requirement in various jurisdictions, whether they operate in B2C or B2B markets.

Research by the MIT Sloan School of Management indicates that consumers in certain markets are willing to pay 2 to 10% more for products from companies that demonstrate accountability and traceability in their supply chains.

Globally, an increasing number of conscious customers are seeking information about product ingredients, sources, and manufacturing conditions, covering both environmental and social concerns.

Multinational companies (MNCs) are now considering more than just profits when making supplier decisions. Alongside financial considerations, MNCs are giving importance to non-financial factors in crucial business choices.

Environmental, social, and governance (ESG) metrics are gaining traction as a serious evaluation of how MNCs integrate environmental and social factors into their operations. A survey by Economist Impact with 200 global executives across the UK, European Union, US, UAE, Turkey, India, and Pakistan highlights key ESG priorities, with sustainable raw material and sourcing ranking second, and supply chain traceability holding the fourth position.

The efficient and sustainable way forward

Technology can tackle inefficiencies in ways that meet the demands of an increasingly conscious consumer base and price-sensitive businesses. The global emphasis on sustainability is gradually influencing the supply chain industry, resulting in the embrace of manufacturing and supply models that are more efficient in their use of resources.

Startups can significantly impact traditional supply chain components by aligning production with customer demand, minimizing waste, and optimizing inventory management. Additionally, they play a crucial role in establishing digital infrastructures that centralize diverse data sources, streamline workflows, automate operations, and enhance the functionality of legacy systems for more comprehensive cross-nodal engagement.

Digitized supply chains to avoid overproduction and resource-related disruptions

The trajectory of sustainable supply chains is leaning toward precision and efficiency, presenting solutions that align with environmental concerns and cater to the economic sensitivities of price-conscious businesses.

The advent of increased digitalization within supply chains is paving the way for digital management systems. These systems play a crucial role in dematerialization, facilitating substituting material flows with information flows. This digitalization trend emerges as a sustainable and cost-effective solution by avoiding production and transportation before demand is accurately known. Unifying data sources becomes a pivotal enabler for creating more efficient supply chains, aligning businesses with the contemporary needs of a rapidly evolving and increasingly unpredictable market. Egypt-based Cartona and UAE-based Floranow exemplify the potential of vertical marketplaces, effectively managing diverse supply chain elements. By consolidating markets such as FMCG and fresh flowers, they ensure a smoother flow of information, leading to more precise inventory management.

The integration of robotics is also a growing trend in supply chains. These robotic systems either replace repetitive and labor-intensive tasks traditionally handled by workers or complement human efforts, enhancing supply chain efficiency and resilience, especially in the context of potential labor-related shortages.

Digital transformation streamlines processes and lays the foundation for more agile and responsive supply chain systems.

Enhancing sustainability through efficient additive manufacturing practices

Additive manufacturing and 3D printing transform production by enabling experimentation and flexibility in demand planning. Unlike subtractive methods, it excels in smaller lot sizes and rapid prototyping, eliminating the need for physical storage and cutting inventory costs across the supply chain. This on-demand capability reduces lead times and downtime costs, making it invaluable in an industry where mistakes are costly, and time-to-market is traditionally lengthy. Its adoption is expected to accelerate in a deglobalizing world.

Going beyond enhanced efficiency, additive manufacturing enhances supply chain sustainability by minimizing material waste through precise production and enabling localized, on-demand manufacturing, reducing the environmental impact of transportation. Additionally, 3D printing promotes customization and lightweight designs, contributing to resource efficiency and a more environmentally conscious production process.

Dubai-based Immensa uses additive manufacturing to transform physical spare parts into a digital, on-demand format. With its recently launched AI-enabled software, it assists energy companies in creating efficient, sustainable, and resilient supply chains.

Demand for traceability solutions and price transparency

This shift towards efficient models is coupled with a crucial focus on traceability, requiring complete transparency throughout the product journey.

In response to this imperative, startups are harnessing the power of digital tools such as geolocation, barcodes, RFID, and ledger systems. These tools act as data collection points, funneling information into a centralized platform, thereby establishing a comprehensive and verifiable record of a product's journey. One notable example of a startup offering Traceability-as-a-Service is Verofax. This UAE-based traceability platform not only tracks the movement of products but also facilitates the verification of sustainability credentials. By leveraging advanced digital technologies, startups in this space contribute to a traceable supply chain ecosystem, fostering consumer trust and meeting the growing demand for transparency in today's market. Seafood Souq is another example of a digital ecosystem and network orchestrator for global fish trade that disintermediates the opaque seafood supply chain by connecting fisheries and buyers.

Reverse Logistics enhancing supply chains’ environmental sustainability

In the paradigm of modern supply chains, the concept of reverse logistics plays a pivotal role in fostering environmental sustainability. Reverse logistics involves the intricate processes of return, recovery, and recycling of products, with a focus on reducing waste and maximizing the lifespan of materials. This approach aligns with the broader goal of creating a circular economy, where resources are efficiently used, reused, and repurposed.

The environmental impact of reverse logistics is particularly significant as it addresses several facets, including processing returned merchandise due to damage, seasonal inventory adjustments, restocking efforts, salvage operations, recalls, and managing excess inventory. By effectively managing these aspects, companies contribute to minimizing the environmental footprint associated with the disposal of goods.

Cartlow is a notable example offering a suite of reverse logistics solutions to both e-retailers and consumers. This includes returns management, warranty management, buy-back, and trade-ins. By embracing these services, Cartlow streamlines operations for e-retailers and embodies a commitment to sustainable practices. Another example is Zension, a platform that brings together the consumer tech ecosystem, building a circular economy model where users can reuse, resell, and recycle their devices.

A fundamental shift in supply chains is underway, propelled by innovative technologies introduced by startups.

These solutions, designed for efficiency, decentralization, traceability, and sustainability, are steering supply chains toward a future characterized by simplicity, self-sufficiency, and sustainability. Venture capital has played a pivotal role in propelling these transformative technologies forward, and its continued influence is crucial as supply chains continue to evolve.