Retail Supply Chain: How Sustainability Can Be Eco-Friendly & Profitable

Sustainability has become a big concern for retailers, and for good reasons. The effects of human activities on the environment are undeniable, and the need to shift toward more sustainable practices is pressing.

I held a panel conversation with Ann Ruckstuhl, SVP, CMO, Manhattan Associates; Michael Relich, Co-CEO, PacSun; and Anna Vinogradova, Head of Global Sustainability, Wayfair at the Manhattan Associates Momentum conference last month. This wrap-up gives insights into why sustainability is essential and how retail supply chains can play a substantial role.

Key Insights:

• According to Ruckstuhl, supply chains contribute to 60% of global emissions, and the “data nerds” are the most able to reduce that.
• The emergence of cutting-edge technologies like artificial intelligence (AI), the Internet of Things (IoT), and robotics presents an unprecedented opportunity. These technologies enable greater visibility and control over the entire supply chain, from sourcing raw materials to delivering final products. Leveraging these technologies can enhance efficiency, reduce waste, and lead to more sustainable practices.
• The younger generation's fervor for combating climate issues increases momentum. Their increasing awareness and concern for the environment make them more inclined to support companies prioritizing sustainability, pushing retailers to become more eco-friendly.

However, the path to sustainability isn't always straightforward and presents its unique challenges. A critical challenge lies in the paradox of consumer behavior. While consumers have a growing interest in sustainability, their purchasing habits seem to contradict this concern.

The surge in online shopping, the demand for fast fashion, and the desire for quick deliveries place considerable strain on resources and contribute to environmental degradation.

>> You can watch the full interview below<<

Sustainability is about more than just recycling or using eco-friendly materials.

It's about rethinking and redesigning the business supply chain model to minimize environmental impact. For instance, one crucial aspect involves reducing drive miles in transportation networks - a significant contributor to carbon emissions.

Implementing a more sustainable approach to supply chains can reap substantial benefits, as shared by PacSun's Co-CEO, Michael Relich:

• Traditional supply chains often transport goods across vast distances, including transcontinental shipments. This approach is not just environmentally harmful due to the substantial carbon emissions from transportation but also inefficient and expensive.
• As a solution, American Eagle adopted a smarter approach by purchasing a company called Quiet Logistics. With its seven distribution centers nationwide, this company employs machine learning to split and distribute orders efficiently. This strategy results in faster deliveries, reduced shipping costs, and less environmental impact due to reduced transportation requirements.
• Additionally, the company can replenish its stores within a day, ensuring that goods are where they need to be when needed. This results in less waste, higher profits, and greater customer satisfaction due to better service.

Relich underscored an essential point that often gets overlooked in discussions about sustainability: it's not about choosing between profitability and environmental responsibility. It's about recognizing that the two can go hand in hand. Sustainable practices can lead to cost savings, operational efficiency, and a competitive edge while contributing positively to the environment.

Sustainability is more than just recycling; it involves numerous tiny moving pieces. Prevention is a key component for companies looking to minimize waste and inefficiencies.

Anna Vinogradova elaborated on this concept using Wayfair as an example. She explained how her company implements measures to prevent waste across its supply chain. This includes introducing programs like better inventory control and damage prevention through improved transportation and storage, which can save significant money. One instance of this is Wayfair's Replacement Parts program, which aims to reduce returns by ensuring customer satisfaction with their orders.

Another aspect she discussed was “shipping air,” which refers to underutilized shipping containers or packaging. Most companies import goods in large containers, which are not always filled to capacity due to supply and demand timelines. This underutilization leads to economic losses and unnecessary environmental impacts. Anna explained how strategic planning and 3D modeling are employed to optimize container and warehouse space, making the shipping process more efficient and cost-effective.

As the conversation moved toward customer behavior, the panel discussed “delayed gratification.” Surprisingly, about 85% of consumers don't immediately open their delivered packages, indicating that next-day or two-day shipping might not be necessary. To promote sustainability, companies could provide options displaying each shipping method's carbon footprint, encouraging customers to choose the most eco-friendly and cost-effective option.

The panelists also highlighted the potential benefits of onshoring in response to the high costs and delays experienced during the pandemic. This involves sourcing products from nearer locations, reducing shipping times, and allowing companies to react swiftly to market demands. Even though the initial costs might be higher, the improved margins can compensate for these expenses.

Anna shared a successful initiative from Wayfair that supports sustainability and profitability - partnering with non-profit organizations to donate items that cannot be resold, preventing them from ending up in a landfill. This practice also enhances the company's image in the eyes of consumers who appreciate ethical business practices.

Finally, the panel addressed the retail trends and the problem of costly returns. Some strategies suggested to tackle this issue are implementing technology that improves product fit and encouraging store returns. Retailers are increasingly charging for returns to dissuade customers from unnecessary purchases.

The conversation concluded with a call to action for all employees and individuals to consider sustainability in their everyday roles and decisions, thus contributing to broader organizational and societal goals.

Key Takeaways:

1. Sustainable practices in supply chains can significantly boost operational profit.
2. Preventive measures, such as efficient inventory control and damage prevention, can save money and reduce waste.
3. Strategies to optimize shipping space, like 3D modeling, can help avoid shipping air.
4. Encouraging customers to choose eco-friendly shipping options can contribute to sustainability goals.
5. Onshoring can mitigate the high costs and delays in offshore sourcing.
6. Partnering with non-profit organizations to donate unsellable items can enhance sustainability and brand image.
7. Bring your environmental scorecard not only to the shareholders but the frontline.
8. Employing technology to improve product fit can reduce costly returns.
9. Charging for returns can deter unnecessary purchase behaviors.
10. Individuals can make a difference by integrating sustainable behaviors into their roles and decisions.

With increasing weather challenges and dwindling resources, sustainability in retail supply chains is an area ripe for innovation and improvement. It's about making the most of technological advancements, understanding and navigating the complexities of consumer behavior, and seeing the big picture that includes environmental and economic considerations.

By doing so, businesses contribute to a healthier planet and enhance their profitability and customer satisfaction.