HOW TRANSPARENT VALUE CHAINS CAN HELP COMPANIES ACHIEVE SUSTAINABILITY GOALS
Investors, consumers and governments are calling for a new era of corporate responsibility, demanding that both products and processes become more sustainable. To compete effectively in this changing landscape, leadership teams in every industry must prioritize creating transparent and circular value chains, using digital traceability to drive improved economics while accelerating sustainable outcomes.
Digital traceability enables companies to meet their sustainability objectives and achieve a broader set of business goals, including efficiency, resilience and responsiveness. Having the ability to see and analyze data along the supply chain allows companies to quickly innovate, identify strategic value chain opportunities, minimize the impact of internal and external disruptions, and certify their efforts.
"The rewards of getting traceability right are substantial, allowing companies to deliver the right product to the right place at the right time competitively and with all the right certifications," said Hernan Saenz, the global head of Bain & Company's Performance Improvement practice.
"Traceability also helps companies predict potential threats and adapt faster to disruption, making companies more resilient in the face of supply and demand shocks."
Despite these benefits, new research from Bain & Company and the World Economic Forum shows that most companies are still at the beginning of their traceability journeys, with only 15% of companies delivering value at scale across multiple application areas. In part, the lack of progress stems from leadership teams' inability to agree on where and how to get started on their traceability transformations.
To address this gap, Bain & Company and the WEF have created a framework to help companies navigate their traceability journeys.
A source for sustainability and strategic differentiation: Trace-ability solutions can be deployed in many ways to bolster sustainability and strategic advantage. The first step—a vitally important one in defining a traceability strategy—is determining where tracing will generate the greatest value for the company, both today and in the future. Leadership teams that fail to focus their investments risk overwhelming their value chains with complexity. This task requires understanding the fundamental pressures for change, which can come from customers, investors, regulators and other stakeholders.
Connecting traceability to sustainability and business objectives: In this new research, Bain & Company and the Forum found that executives are relying on traceability to pursue multiple objectives related to value chain performance, with their number one priority being regulatory compliance. Nearly as important to executives are value chain reliability and digital engagement with customers in real time. Other application goals include efficiency, sustainability, resiliency and security throughout the value chain. As a result, the most powerful traceability applications support multiple objectives. Once executives specify their business objectives, their priority applications and use cases become clearer.
Understanding the key traceability enablers: Once companies prioritize their traceability goals, executive teams begin assessing, building and reinforcing key enablers: the operating model, cross-functional engagement, external collaborations, partner ecosystem, technology, data, standards and certifications. These enablers are critical to traceability, but each one presents its own challenge to the implementation process. For example, Bain's research shows that identifying the right technology type proves difficult for many leadership teams—46% of executives list this step as a key challenge. In addition, although most companies have launched active collaborations with their value chain partners, less than 40% describe the collaboration as highly effective.
From experimentation through to transformation: Traceability efforts often start with small, time-limited pilot projects focused on a specific material, product, supplier or geography. In Bain's experience, many traceability projects get stuck in pilot mode, losing momentum or failing to scale. To avoid this, companies and partnerships should prioritize planning to scale each of their pilots when designing and launching them. Otherwise, they risk facing challenges with the scaling of data, technology, operating model and growth in the ecosystem.
"The rewards of getting traceability right are substantial, allowing companies to deliver the right product to the right place at the right time competitively and with all the right certifications." - Hernan Saenz, Global Head of Performance Improvement Practice. Bain & Company
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