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How to build and grow supplier engagement programs in order to meet your sustainability goals

Organizations are prioritizing supplier engagement programs as a response to external impacts to their product development process – but challenges still remain.

In “Transform Product Sustainability into Performance Initiatives with Product Lifecycle Intelligence”, our collaborative white paper with Forrester, we took insights from 493 product design and sourcing decision-makers in manufacturing. Our aim in commissioning the study? To redefine how businesses approach sustainability, and to map a path forward for those who are beginning to take on the challenge. 

We’re diving into a series of key takeaways from the report across a number of blogs. You can already read parts 1, 2 and 3, and below we’ll take a deep dive into our next takeaway: why organizations must seek to initiate – or expand – their supplier engagement programs to meet sustainability goals. 

Sustainability improvements already sit top of mind for the vast majority of manufacturing businesses. Whether driven by changing customer expectations, an increased emphasis on supporting a circular economy, a need for greater transparency in supply chains or a variety of other factors, the reasons for implementing a more sustainable approach to product design are numerous. 

But ‘being sustainable’ is not simply a case of ticking regulatory boxes and filing annual reports. Taking the next logical step when it comes to your supply chain can make a world of difference. A better functioning supplier engagement program will not only help with cost efficiency – enabling you to better manage bottom lines in a tightening and ever more competitive business environment – but it will also assist with business continuity, helping you to ensure the smooth running of day-to-day operations and minimizing disruptions that would otherwise result in lost production. 

Manufacturers who are quicker, smarter, and more sustainable will thrive. Those who are able to leverage better supplier intelligence will benefit from improved data visibility, which in turn will guide better design and sourcing decisions. They will enjoy time to market advantage over less mature competitors and have the opportunity to scale their scarce design and supply chain expertise over a wider range of product variants. 

More advanced organizations are defined, at least in part, by the structure of their supplier engagement programs. Hallmarks of a refined system include an ability to track the ESG status of approved-for-purchase suppliers automatically using software, a fully documented, centralized onboarding process that all suppliers must follow and a defined process where the sustainability credentials data provided by suppliers is verified by a risk management or supply chain certification platform. 

Without such processes in place, delays in the material supplies by the suppliers often lead to a change in plans which can have a serious knock-on effect on other areas of the operation. This is a scenario every manufacturer would like to avoid. 

What are organizations doing – and what challenges are they facing? 

The study results clearly highlighted an ongoing move towards the establishment and development of better supplier engagement programs, although there is still work to be done. 27% of respondents are prioritizing supplier engagement programs as a response to external impacts to their product development process, a sure sign that decision-makers in organizations realize how critical a step this is when it comes to taking action to balance sustainability, resilience, and top and bottom-line improvements. 

However, there are still challenges which remain more difficult to overcome. A full 50% of survey respondents face significant obstacles when it comes to obtaining funding and budget to obtain material, component, and supplier intelligence solutions. Governance issues are a prosaic but all-too-real issue for those seeking to implement better PLM practices within their organization. 

Stakeholders responsible for PLM are the strongest proponents of sustainability within their organizations, but the battle with resistance internally and an ongoing wrangle with people, process, and technology complexities can take its toll. 

53% of respondents struggled with securing executive support for incorporating sustainability in product lifecycle management processes, alongside the 50% we identified above who find it hard to obtain budget to gather material, component, and supplier intelligence which is integral to optimizing their product’s quality, cost, and sustainability.  

Furthermore, over half experience difficulties measuring and quantifying the environmental impact of their products which can be a factor for the lack of leadership alignment. These governance challenges are a manifestation of poor maintenance of availability, cost, sustainability, and performance data in manufacturer’s material and component libraries – an issue for 49% of decision-makers. 

Respondents find themselves in a scenario that underscores a critical juncture for decision-makers in product design and sourcing, one that urges a radical shift towards integrated, sustainable practices that meet the demands of a dynamic global market. The battle against overzealous governance practices is one well worth fighting. 

How can Makersite help? 

The differences between Advanced and Novice organizations when it comes to supplier engagement programs are stark. Where Novices struggle to track and verify the sustainability credentials of their suppliers, Advanced firms embrace more sustainable supply chains as a differentiator. We have seen that in practice with our own customers. 

Let’s take Schaeffler as an example. They want to achieve a carbon-neutral supply chain by 2040, but in order to do that, they need to reduce the carbon footprint of their raw materials by 25% by 2030. However, 90% of the raw materials used to make their electric motors are sourced from China with little-to-no deep-tier insight into emissions. 

Makersite optimized Schaeffler’s supply chain by detailing alternative sourcing options to China, from Australia to Canada to Norway. In a very short timeframe, we were able to implement new supply chains for neodymium, disposium and electricity. In doing so, we were able to significantly lower Schaeffler’s carbon footprint, particularly due to a better electricity carbon footprint in Norway. 

Consequently, they were able to test whether their new, optimized supply chain was greener and more sustainable than their existing model, and with Makersite’s help they were able to confirm their hypothesis, giving them confidence that the changes they were implementing would result in a demonstrable improvement. In the simplest of terms, we helped them to move from theory to practice. 

Their supply chain was greener, more secure, less prone to disruption and ensured – as well as enhanced – business continuity going forward. 

Additionally, in our work with Microsoft, we helped them to use LCA to identify where primary data is needed to drive and understand improvements, which in turn influenced how they work with technology and their suppliers – even at tier 3 or 4 – to collect that data and implement changes. 

As Microsoft’s Ecodesign Program Manager Xavier Vital has said: “Makersite includes an AI that was trained to read the bill of material and composition of our products and associate manufacturing processes. By not spending all this time on modelling, we were able to spend the time on getting data from suppliers.” 

“Makersite’s AI helped us improve the efficiency of the process and save a lot of time, meaning that we could use this data not only for ecodesign improvement, but for supply chain improvement. Without AI we would clearly not be able to do it with this level of detail today.” 

With our AI capable of the enrichment and intelligent mapping of both internal and external data sources and a data foundation that comprises the largest product and supply chain database with 36,000+ industrial processes, 600,000+ environmental impacts, and 100,000+ materials, and their physical properties, all in one system, Makersite is primed to not only solve but to evolve the nature of supplier engagement programs. 

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