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

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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. 

How to source materials more reliably, more efficiently – and more cost effectively

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In our collaborative white paper with Forrester – titled “Transform Product Sustainability into Performance Initiatives with Product Lifecycle Intelligence” – we take insights from 493 respondents, all of whom are product design and sourcing decision-makers in manufacturing. The overall aim of the white paper? To redefine how businesses approach sustainability. 

We’re diving into a series of key takeaways from the report across a number of blogs. You can read parts 1 and 2 in the series here and here, and below we’ll take a deep dive into the third takeaway: organizations must improve their materials sourcing reliability and efficiency. Let’s take a look at why. 

Sustainability remains a business priority. But it is not simply a case of ticking regulatory boxes and filing annual reports. A business equipped with a fully considered and smoothly functioning sustainable procurement plan will not only be able to maintain critical continuity – shielding itself against the impact of supply disruptions that would inevitably result in lost production – but will also be able to manage bottom lines in a tightening and ever more competitive business environment. 

Our report found that most manufacturers track product lifecycle management metrics regularly, although sustainability-related metrics are less automated. It goes without saying that stakeholders across product development, procurement, compliance, and sustainability need to collaborate closely to shorten product development cycles, reduce cost and risks in production, and lower environmental impact throughout the supply chain. However, this can only be done well with a finely tuned and automated data-driven approach. 

Although sustainability has an increasing number of champions with businesses, the lack of detailed, reliable data on materials, components and suppliers remains a critical hurdle that many still have to overcome. Harmonized access to a breadth of reliable data forms the foundation of efficient product design and sourcing, and organizations that are able to leverage granular product lifecycle intelligence in product development will enjoy competitive advantage against their peers with a faster time to market and more successful and profitable products. 

What are organizations doing – and how can they do it better? 

Despite the growing realization of the importance of sustainability metrics feeding into both cost efficiency and business continuity, it is clear that many organization’s sustainability activities remain primarily driven by regulatory obligations. The reality of incorporating sustainability in product lifecycle management is underpinned by the findings in the Forrester report. Ultimately, it comes down to data. Basic data usage is leaving a gap between vision and execution which is by no means insurmountable, but still some way from ideal. 

Sustainability metrics in product design and sourcing are inconsistently manually tracked. Over two-in-five of those surveyed confess to haphazard or nonexistent monitoring of critical sustainability metrics such as waste generation, Scope 1 and 2, and Scope 3 greenhouse gas emissions, and recycled or reused materials or components was either manual, ad hoc, or non-existent. Less than 35% of manufacturers boast fully automated, routine reporting for any specific metric and, perhaps most damningly from the perspective of the bottom line, 39% of respondents do not track change of materials cost (or, if they do, they track it manually). Just 32% have fully automated materials cost tracking. A manual approach is not only unreliable, but time consuming and a significant drain on resources too. 

From design, production, to maintenance, and end of life, sustainability across the product lifecycle is becoming business-critical and time-critical for manufacturers seeking to maintain a competitive cadence of successful new product launches. Stakeholders across functions must have access to granular, product-level data to rapidly and accurately make trade-offs as they design products, and source materials and components from suppliers. Those who don’t make this leap will be left behind. 

The issues surrounding data maintenance are one of the key issues for many companies experiencing a lack of executive-level support, as well as the struggle to raise required budgets. Difficulties maintaining data in material and component libraries make it harder to justify the impact of sustainability, despite access to that data remaining a top priority for many. 49% of those surveyed have the challenge of maintaining stock, cost, sustainability and performance data in their materials libraries, but they find themselves between a rock and a hard place. A lack of data means an inability to measure impact, which in turn means they lack funding and support in the areas of the business where it matters most. Only with access to the right data can that situation improve. 

As it stands now, data management challenges remain fundamental and acute. When asked which three challenges create the most profound impact, leaders hone in on their data shortfalls: one-in-five decision-makers rank maintaining libraries with up-to-date data as one of their biggest issues, and over half experience difficulties measuring and quantifying the environmental impact of their products, which in turn is a significant factor in 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. 

Ultimately, the equation is quite simple: better access to better data equals more support and more funding, leading in turn to enhanced cost efficiency and stronger business continuity. 

How can Makersite help? 

In a volatile business environment, putting steps in place to limit supply disruptions and minimize losses in production can make all the difference between success and failure. A more secure supply chain is less prone to disruption, and an ability to source greener alternatives not only aids the bottom line in the long run, but also helps to grow market share through an adherence to emerging regulations and through catering to new, sustainability-focused customer segments. We worked with German manufacturing giant Schaeffler to achieve a similar outcome. 

To achieve a climate-neutral supply chain by 2040, the company aims to reduce the carbon footprint of its raw materials by 25% by 2030. The problem is that 90% of the raw materials used to make their electric motors are sourced from China with little-to-no deep-tier insight into emissions. It’s a common challenge faced by many manufacturers today.  

With our help, they optimized their supply chain. We detailed alternative sourcing options to China, from Australia to Norway to Canada. In a very short timeframe, we were able to implement new supply chains for Schaeffler for neodymium, disposium and electricity. In doing so, we were able to significantly lower their carbon footprint, particularly due to a better electricity carbon footprint in Norway. 

Schaeffler wanted to test whether their new, optimized supply chain was greener, more sustainable and more secure than their existing model. With Makersite, they were able to confirm their hypothesis. As their Manager of Sustainable Products & Advanced Materials Dr. Michael Kobes noted: “By teaming up with Makersite, Schaeffler can run ad-hoc automated analyses of environmental impacts from various supply chains in scope, for example for the use of materials. Together, we are able to compare difference product scenarios from sustainability perspectives.” 

Validating their results and findings gave Schaeffler the confidence that the changes they were implementing would result in a demonstrable improvement, allowing them to move from theory to practice. 

With a tool like Makersite’s procurement dashboard, sustainable procurement best practice becomes a day-to-day reality. Procurement teams have access to the data they need to make better trade-off decisions, in turn helping their organizations not only to remain steadfast in strong regulatory and economic headwinds, but to thrive in markets both old and new.