The two most important words in supply chain management for 2016
By Stowe Kintzinger February 12, 2016
When most people consider “geography,” they often think about state capitals, the longest river in India, and other trivia. Yet geography is at the forefront of driving a better, more sustainable business model for companies in the 21st century.
“Sustainability,” like geography, holds a broader meaning today as well: it is a critical component of reducing the burden human enterprise places upon the environment, as we all know, but it is equally important to improving the efficiency of a company’s supply chain, especially in the agricultural, food and beverage industries. The combination of reduced environmental impact and reduced costs for business leave little room for doubt that the concept of sustainability will only grow in prominence in the coming decades.
Understanding how to manage a supply chain network that ranges from a farm field in Iowa to a dinner table in Singapore, for example, requires appreciation of each country, community, and its unique role in the process.
For businesses involved in these complex supply chains, information about how products are handled, from origin all the way through to manufacturer, is a story that customers need to be aware of. For some innovative companies, the story of its geography is not limited to a journey from the farm field to the dinner table, but also adopting a responsible and sustainable business model that meets demands of consumers, while ensuring a minimal impact.
For example, as incomes rise across the Asia-Pacific region, people increasingly seek to emulate a Western diet, including eating more meat. This noticeable shift in consumer expectations has fueled a demand for soybeans – a key ingredient in animal feeds – among other commodities. Yet, with increased production needs, such demands also pose a potential risk to the state of our environment. As a result, understanding and leveraging knowledge of geography has allowed a small contingent of companies to meet this global need in a productive and sustainable fashion.
Understanding how to operate in geographies of surplus and deficit
Although some geographies are endowed with an abundance of water, fertile soil, and a climate that supports agriculture, others are not. This presents a challenge, considering that food and water are essential needs for all people regardless of geography.
As Dave Ward, a Cargill supply chain sustainability expert explains, this means “you have to make modifications based on understanding the unique environment. A company might have 1,200 sites, all of them use water, but some have an abundance of water, while at others there’s a water scarcity.” By understanding geography, companies are able to adjust their operations to benefit from abundances, avoid placing a burden on any community, and help the bottom line.
Understanding each country and its environment has allowed the emergence of innovative approaches to sustainable sourcing, ensuring companies can reduce the overall impact of their operations, while still increasing their output. As Paul Hillen, a vice president with Cargill explains, “In your supply chain, the more options you can build in geographically instead of just relying on a single source mitigates risk in your system.”
As a result, developing a network of sustainable sources requires building a broad system of suppliers across different regions of the world. For example, if you have two suppliers that are next door they could experience the same process disruption or the same supply chain disruption, but if you understand that sustainability helps you develop effective supply chains you can make better decisions about who you source that product from.
Addressing the knowledge gaps in geography and sustainability
Considering sustainability requires leveraging geographic knowledge to ensure each location operates with minimal impact upon our environment, many businesses lacking expertise on the subject find this a challenge.
Adding to this issue is that the current expectation among consumers is a full understanding of the supply chain process on the part of the business, including where a product comes from, and how it impacts the broader world we live in. Consequently, supply chain operators who are winning in the marketplace are doing a better job of demonstrating this knowledge and responsibility. This is why companies with experience operating across many geographies have demonstrated a unique ability to succeed in developing sustainable supply chains.
In a world with increasingly complex and interconnected supply chains, events occurring in one region will impact supply chains and related businesses in another. This also holds true when it comes to the state of our environment. Accordingly, companies like Cargill are working to share their knowledge of geography and sustainability with other businesses, to ensure consumer expectations can be met without environmental degradation.
This article first appeared on CargillVoice on Forbes.