An era of sustainable supply chain planning with artificial intelligence is in its nascency. Networks of supply chains—those between a company and its suppliers—are making organizational decisions today that are affecting the global economy in profound ways. And revenues are expanding at prolific rates.
At the same time, many organizations—especially those operating at a global scale—are feeling social, cultural, and political pressure to become more sustainable. This complicates the fundamental economics of supply chain planning for many companies. According to Verónica H. Villena and Dennis A. Giola with Harvard Business Review, many “multinational corporations have pledged to work only with suppliers that adhere to social and environmental standards.” Plans are ambitious, but necessary from a public relations standpoint. It is no secret that consumers are growing increasingly anxious about climate change. Increasingly, these customers are expecting the brands with which they do business to comply with more rigorous sustainability practices than they have in the past. This risks putting considerable strain on the supply network.
Problems in Sustainable Supply Chain Planning
Problems persist, however, because of counter-productive demands on efficiency, speed, and capacity—both by multinational corporations (MNCs) and consumers. Villena and Giola emphasize four steps to promote sustainable supply chain planning.
First, responsible MNCs “have established long-term sustainability goals.” It is imperative that organizations make rational, predictable, measurable standards when it comes to sustainability, rather than taking a myopic and reactive approach. Second, these MNCs demand that their suppliers also set long-term sustainability agendas. It does little good to operate with long-term planning in mind without equally responsive partners. Third, “they include lower-tier suppliers in the overall sustainability strategy.” This is an extension of the previous point, but it demonstrates how an organization’s ecosystem must develop wholistically to meet sustainability standards. Finally, there must be a dedicated staff ensuring that partnerships adhere to best sustainable practices and that advancements are constantly being implemented to scale. Without these four measures, no sustainable supply chain plan can be successful.
In thinking beyond these basic strategies, organizations of all sizes must be cognizant of the social and environmental requirements they are developing. They must also be nimble and meet shifting environmental demands with equally shifting practices.
Sustainable Supply Chain Planning and AI
So where does artificial intelligence fit into this picture? With consumers that are increasingly concerned about the environment—but also more demanding of organizational speed and efficiency—supply chain planning cannot survive in today’s economic paradigm. These competing demands will rely more heavily on artificial intelligence to meet all of these increasingly complex consumer needs. Predictive analytics must be utilized to more efficiently address organizational capacities, to meet tight deadlines on a growing scale.
AI can also improve international shipping by optimizing routes using largely autonomous vehicles and ships. Reliance on these transportation modes and models will become increasingly more common as businesses shift their practices to become more sustainable. It is both an inevitability of consumer demand and good business. Business will need to become more sustainable and more reliant on AI to survive, and the most far-sighted of these companies stand to thrive. McKinsey recently reports that “Supply-chain management solutions based on artificial intelligence…are expected to be potent instruments to help organizations tackle these challenges. An integrated end-to-end approach can address the opportunities and constraints of all business functions, from procurement to sales.” Companies should be paying attention to trends as they develop and consider the potential ramifications if they do not. Supply chain planning will require long-term thinking and will depend heavily on AI solutions.
How have you adopted best sustainability practices? Do you have a long-term sustainability plan, especially in your supply chain?