The importance of sustainable supply chains in manufacturing
Global giants Google and WWF turned heads this June after announcing the details of their , a joint initiative which aims to tackle harmful emissions and waste across fashion industry supply chains. This will allow fashion brands to source raw materials and track their sustainability, providing them with greater transparency over the environmental impact of their supply chains.
The same issues with unsustainable supply chains can be felt across every industry. For decades, major corporations have outsourced their environmental impact to other companies, and in some cases, other countries. Supply chain emissions are up to – but until recently, a lack of transparency and accurate data prevented us from seeing the full picture.
Now the tide is starting to change. In the UK, we are seeing pressure being applied across the supply chain by a growing number of companies, both big and small, as they align their business strategies with the nation’s . This has led to a radical shakeup of the traditional tender process, with many companies now listing sustainability, including the use of renewable energy, as a prerequisite for doing business. Suppliers with a poor environmental performance now risk being struck off in favour of competitors with greener credentials.
Take Sainsburys, for example, who this year in a greener future for the whole business. As well as reducing its use of plastic packaging, this also includes ensuring that its suppliers are committed to reducing their carbon emissions. Consumers are now directly influenced by a company’s sustainability policies and are aware of how this impacts their commercial performance. According to , a third of consumers now choose to buy from brands who they believe are doing social or environmental good. The research also found that ‘sustainable brands grew 46% faster than the rest of the business and delivered 70% of its turnover growth.’
Customers are also increasingly willing to do their own research, with data playing a greater role in consumer decision-making. Apps such as provide consumers with more transparency into the brands they are engaging with, giving greater insight into the products they are buying and their carbon footprint. Many of these apps give brands a rating based on their corporate responsibility, including how carbon conscious they are.
We are in the midst of a revolution in how we work, with more and more businesses now putting sustainability at their core. Despite great progress in recent years, the urgency for increased transparency in supply chain sustainability has never been greater. As countries around the world continue to wrestle with the financial and social impact of Covid-19, supply chains are becoming increasingly fragile. Widespread disruption to manufacturing and logistics has seen many companies rush to reroute or find alternative sources, running the risk of partnering with the wrong suppliers. On-site audits are being cancelled due to travel restrictions and quarantine rules, and so sustainability standards are now at a risk of being compromised to meet new demand.
Companies must be proactive in their due diligence and mitigation strategies to ensure that any progress made so far has not been in vain. At the same time, they must encourage/enact change across their operations and accelerate progress towards a zero carbon economy.
IHS Markit/CIPS: UK Manufacturing PMI near-record high
UK manufacturing trends
For the UK manufacturing sector, growth of output and new orders were both reported by IHS Markit and CIPS as among the best seen over the past seven years, which in turn has led to a strong increase in employment. Despite this, the sector continues to face supply chain delays and input shortages, which resulted in increased purchasing costs and record selling price inflation.
UK Manufacturing IHS Markit/CIPS Purchasing Managers’ Index® (PMI®)
Seasonally adjusted, IHS Markit/CIPS Purchasing Managers’ Index® (PMI®) rose to 60.9 in April, which was an increase compared to March (58.9) and above the estimated 60.7 for April.
Increasing for the eleventh consecutive month, the latest readings are the highest since July 1994 (61.0). The output growth for April has been attributed to the loosening of lockdown restrictions, improving demands and a rise in backlogged work.
“The manufacturing sector was flooded with optimism in April as the PMI rose to its highest level since July 1994, bolstered by strong levels of new orders and the end of lockdown restrictions opened the gates to business. It was primarily the home market that fuelled this upsurge in activity though more work from the US, Europe and China demonstrated there were also improvements in the global economy. This boom largely benefited corporates as output growth at small-scale producers continued to lag behind,” said Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply.
In addition to expanding production, total new orders rose for its third consecutive month, which was attributed to a revival of domestic market conditions, stronger client confidence, parts of the economy reopening and improving global market conditions.
While new exports rose in April, the rate was reported as weaker in comparison to new orders. “Companies reported improved new work intakes from several trading partners, including mainland Europe, the US, China and South-East Asia. Large-sized manufacturers saw a substantial expansion in new export order intakes, compared to only a marginal rise at small-sized firms,” said IHS Markit/CIPS.
UK Manufacturing’s outlook
Remaining positive at the start of the second quarter, 66% of companies forecast that output will be higher in a year's time, which is attributed to expectations for less disruption related to COVID-19 and Brexit, economic recovery, improved client confidence and new product launches.
“Further loosening of COVID-19 restrictions at home and abroad led to another marked growth spurt at UK factories. The headline PMI rose to a near 27-year high, as output and new orders expanded at increased rates. The outlook for the sector is also increasingly positive, with two-thirds of manufacturers expecting output to be higher in one year’s time. Export growth remains relatively subdued, however, as small manufacturers struggle to export,” said Rob Dobson, Director at IHS Markit.
Adding to comments from IHS Markit and CIPS, , Managing Director of Freight and Logistics at Accenture Global said: “While today’s figures are positive overall, the worsening supply situation is still a concern, with rates of both input costs and selling price inflation running far above anything previously seen. Shipping delays and material shortages are driving huge backlogs of uncompleted work and the surge in manufacturing orders is leading to many firms struggling to boost operating capacity to keep up with demand. With business expectations becoming even more optimistic as the economy rebounds, the big question will be whether firms will be able to cope with the surging inflows of new orders.
“As ongoing supply chain issues are still at large, companies with wide international footprints should look to reassess their logistics strategies by running supply chain stress tests and simulations in order to respond quickly to upswings and variability in demand. A flexible and resilient supply chain will be a key way for businesses to remain both competitive and stable as we emerge from the pandemic”