Companies understand the critical role that emerging technologies play in implementing a cyclical approach to manufacturing operations. However, the industry has more to do when it comes to adopting the technology.
Sustainability is becoming more and more non-negotiable for modern manufacturers and distributors. While business goals remain a priority, the industry recognizes the importance of bringing environmentally focused goals into the mix as part of environmental, social and governance (ESG) programs.
The circular economy is a game-changer. Manufacturers’ commitment to eliminating waste through a cyclical model of “make, use, reuse, redo, recycle” is already paying off with real rewards. Yet despite a widespread understanding of the benefits, many manufacturers and distributors are struggling to transition to a sustainable circular economy strategy as they face major industry challenges. The immediate need to deal with higher costs, supply chain disruption, the shift to “just in case” inventory strategies and changing customer demands is hampering companies’ ability to focus on sustainability.
Sage and Deloitte have discovered that momentum is the key to unlocking the full potential of circular economy initiatives. New research from Sage on the state of the circular economy in manufacturing and distribution reveals that organizations can indeed thrive in the immediate, short and long term, if they have the right tools and the right approach. Here’s how.
Manufacturers and distributors continue to work under immense pressure, especially those navigating a transition to the circular economy. Of those surveyed by Sage, 72% said their organization was grappling with the immediate challenges of rising costs. Supply chain disruptions (71%) and changing customer demands (68%) are an additional challenge for the industry.
The pressure to deliver products and services to customers in difficult circumstances could easily put sustainability on the sidelines. The negative impact of this decision doesn’t stop at the environment: 46% of those surveyed by Sage said it could harm their brand perception and reduce long-term profitability (also 46%).
How can businesses survive and thrive, sustainably? A solution to overcome these obstacles is also the solution to launch a great circular economy: agility.
Agility starts with cultural change supported by the right technologies. When it comes to technology, embrace platforms that drive efficiency and innovation. These will help drive the reuse and recycle momentum, as they give leaders the opportunity to examine existing assets, consider solutions, and make data-based suggestions that could be much greener. For example, suppose an outage next week prevents one of your suppliers from delivering parts. Technologies such as advanced ERP can quickly suggest new options, reduce losses from this event, and recover costs down the line.
Such knowledge fosters a culture of flexibility and agility that provides the ideal foundation for the circular economy to thrive.
Eighty-four percent of senior leaders say developing and implementing a circular economy strategy is now part of their role. This is an extremely positive first step, but action must follow – transformation of operations is also vital.
A data-driven approach is essential for this and should replace the current system of simply listening to the floor manager for advice on how to make operations smoother, as digital transformation expert Isaac Sacolick comments. , chairman and founder of StarCIO, in the Sage report. . When you integrate data capture, analysis, and insights into your workflows, the results can dramatically streamline processes, reduce waste, and increase efficiency.
For example, ARA Foods was able to reduce raw material waste by 1.5% in six months by simplifying workflows. The snack maker, which is a make-to-order company, deployed an enterprise resource planning (ERP) system that allowed it to better track processes in real time. It allows ARA to optimize the use of raw materials, better manage seasonal variations and reduce the time between ordering and shipping.
The Internet of Things (IoT) is another way in which technology can improve manufacturing and distribution efficiency. When devices such as sensors are included in your processes, the insights can proactively indicate where there are reductions in operational equipment efficiency (OEE) metrics that impact efficiency or when you need to replenish inventory, or blockages that could be costly later.
Businesses now understand the critical role emerging technologies play in helping leaders navigate turbulence and implement a circular economy strategy. However, the industry has more to do when it comes to technology adoption.
Sage research found that manufacturers and retailers ranked cloud applications (74%), data analytics (68%) and automation (67%) as the most important technologies for running a more sustainable way. Although 61% cite cloud applications as useful for collecting, analyzing and reporting on their CE capabilities, public cloud usage is far from universal among manufacturers and retailers, according to the research. In fact, only a minority of respondents say they use the public cloud for core applications such as supply chain (39%), CRM (38%) and business intelligence (35%).
It is only with the visibility offered by cloud-based applications that companies can truly prove the value of circular economy initiatives internally and externally. A cultural shift towards sustainability voluntarily adopted by all stakeholders will unlock the long-term benefits of the circular economy: 50% of respondents said it improved reputation, followed by the claim that it increased energy efficiency (47%), increased business resilience (46%) and reduced environmental impact (46%).
With the right cloud-based tools to analyze performance, the momentum of companies starting to think with the “make, use, reuse, redo, recycle” model at the heart of their planning will increase.
The benefits of fantastic agility and strong data insights don’t stop with hitting your sustainability KPIs. One of the greatest assets of an effective circular economy strategy is the time it takes to think creatively about other goals of reduction, refurbishment/reuse, recycling and recovery, creating a cycle of sustainability. which continues.
With a commitment to embrace the circular economy, manufacturers and distributors have a huge opportunity ahead of them. By harnessing agility to overcome today’s obstacles and data to make operations smoother, they will gain the momentum needed to succeed against their long-term vision.
Rob Sinfield is SVP Product, Sage X3 and Sage Intacct Manufacturing at Sage.
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