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The Supply Chain May Be the Key to Resilience

As a key manufacturing and supplier base, India is a microcosm of the challenges that pose a significant risk for international organizations. Infrastructure, transportation and environmental shortcomings can become bottlenecks to market advancement, and place pressure on companies that rely on Indian suppliers for goods and services.

But India is just one of the more prominent examples. Uncertainties, unpredictability and the general unknown in different geographies can result in incidents that may negatively impact the core business and supply chain itself. As a result, it is vital for organizations to develop engagement strategies that enable the entire continuum to be resilient and flexible enough to react to disturbances that may affect the flow of materials, products, information and money.

Engaging suppliers is never a one-way street. When done properly, it helps improve trust, and overcome barriers between partners, internal teams and customers. In the energy and sustainability realm, for instance, close collaboration increases bilateral exchange of data, which is essential to every organization’s non-financial reporting.

Crucial to developing a two-way, mutually beneficial avenue is understanding regional nuances and circumstances, which helps tailor programs to protect suppliers in key geographies from challenges that could impact raw material costs, production capabilities and quality. Taking this step not only improves business resilience of the “parent organization”, but also the efficiency and reliability of its supply chain.

Ultimately, empowering partners to build resilience fuels sustainable progress in the face of climate change and evolving energy markets and improves accuracy in longer-term financial planning.

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Case Study: Companies Take Action in India

Reform of India’s supply chain is becoming a focus of recent government agenda. Several new federal and state-based schemes and incentives, including the Goods and Services Tax, liberalizing foreign direct investment rules and increased government infrastructure spending have helped to push India closer to its goal to become a global manufacturing powerhouse.

However, the more pressure placed on Indian suppliers — to produce more, sell more, ship more — the more associated issues arise. Aside from government initiatives, companies have the power to act and alleviate threats to supply chain sustainability.

  1. Water scarcity 

Competition between companies, farms and people for water resources in India is extremely high. Water resource concerns translate into social issues that extend far beyond availability of water for production and manufacturing. This stress has serious implications on quality of drinking water for domestic use.

Companies with supply chains in India must remain vigilant of these externalities of their operations. As a starting point, the World Resources Institute (WRI) has developed a tool to help companies identify their most pressing challenges related to water risk in India. There are also innovations emerging in water management.

For example, one multi-national company installed innovative technology for cleaning equipment that uses high-pressure and low-volume to decrease water use by up to 90 percent, all while improving operation and maintenance planning, reducing production cost and decreasing stress on local water supplies.

A key step to achieving these results is knowledge exchange between regional suppliers. Learning best practices in the region, conducting site visits and engaging with local organizations can help companies better understand how to manage water supplies in India

  1. Energy security

The Indian National Grid is heavily reliant on fossil fuels, with coal making up 60 percent of the country’s electricity production. This production mix has a long-standing track record of being the major cause of air pollution. Companies with energy-intensive supply chain operations in India will be increasingly pressed to take actions that reduce carbon intensity.

Despite this entrenched dependence on coal, India has one of the strongest and most rapidly developing solar PV markets worldwide. Ambitious national goals for renewable energy capacity additions and new electricity regulations in certain regions are expected to open the market for companies and their supply chain partners to procure renewable energy, reduce carbon emissions and realize significant cost savings. A strong focus on promoting and supporting energy efficiency initiatives also goes a long way in addressing energy security issues in this market.

  1. Waste Management & Resource Efficiency

In a world that is creating waste exponentially faster than natural resources develop, waste management and resource efficiency are spotlight issues. Sustainable economic growth (and not to mention local workforce health and safety) relies on businesses to better utilize materials in a way that is sustainable for the long-term. And with the cost of raw materials becoming an increasingly significant business risk, companies should be motivated to reduce, reuse and recycle wherever possible.

One potential solution showing promise in India and beyond is for businesses and supply chains to adopt the principles of a circular economy. Shifting from a linear economy, rooted in the take-make-dispose model, to a circular economy involves building resilience by designing products that can be ‘made to be made again’. Achieving this circular model requires deep collaboration with supply chains and fostering a culture of knowledge exchange with suppliers around innovative solutions.

Each of these examples have one management method in common: developing a strong corporate culture based on knowledge-sharing and improving information flow along the supply chain. Achieving resilience in the supply chain requires consistent communication and engagement with partners.

These strategies, as you might have guessed, are not limited to India geographically; water, energy and waste risks permeate most regions that are centers for supply chain operations, including China, Taiwan and Brazil. As a result, addressing one area of risk in one country often provides a template and tactics that help set the stage for improvements elsewhere. Likewise, these risk categories are interdependent, whereby reducing risk in one area, water for example, can result in additional improvements in another, such as energy.

When developing risk and business continuity strategies, many organizations still do not consider the importance of an efficient, sustainable and resilient supply chain1. Building strong links across the chains leads to greater business certainty and performance — and, in the end, profitability. Organizations implementing any of the above management strategies, in any region of the world, will be well-positioned to bounce back and start operations in the shortest possible time after any disruption.

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Contributed By: Ekaterina Tsvetkova, Head of Sustainability Consultancy, Schneider Electric ESS

 1. Christopher, M., Peck, H., 2004. Building the Resilient Supply Chain. International Journal of Logistics Management, 15, pp. 1-13.