4 Reasons You Need to Reduce Supply Chain Waste

If the goal is to reduce waste in the supply chain, businesses must first consider their motivations and commitment. They must also establish their primary goals. Do these companies have the resources and time to dedicate to a full-scale overhaul of the supply chain, or would they rather take things more slowly?

While some organizations may not be able to fully implement every method to reduce supply chain waste, developing a plan for end-to-end supply chain efficiency can reduce a company’s long-term expenditures and resource investments.

Continue reading to discover where to reduce spending, reasons to reduce your supply chain waste, and how to implement these policies.

4 Areas to Reduce Waste

There are four primary areas businesses can reduce waste throughout their supply chain:

Administrative Processes

When evaluating supply chain efficiency, it may be easier to start close to home. Businesses should consider the administrative practices they use throughout each stage of the supply chain, including:

• Order processing
• Fulfillment
• Inventory management
• Accounting

Traditionally, these actions involve a long paper trail, including physical copies and multiple types of documents. A centralized enterprise resource planning system (ERP) can streamline these processes so everything happens within the same system, reducing the need for paper trails and eliminating issues with duplicate orders or missed payments.

Inventory and Raw Materials

Businesses can create significant waste in their inventory and raw materials management processes. Ordering too much inventory or raw materials can quickly lead to waste and loss of profits.

However, having total control of their inventory and raw materials makes waste management practices more feasible for businesses, including ensuring they use their merchandise and materials properly.

Transportation and Packaging

Many businesses are adopting more sustainable transportation and packaging methods to reduce waste. Using packaging that’s designed for the dimensions of a product can reduce waste, and investing in recyclable materials like corrugated cardboard will help keep packaging out of landfills.

Companies also have an opportunity to reduce waste through more efficient transportation methods. Sending orders in larger batches and fewer shipments reduces the amount of packing material needed and the emissions produced from the transportation of those goods. 

Returns

A comprehensive return policy can increase customer satisfaction and trust in a business, but it’s important to be careful with returns to prevent waste. Since 25% of returned items end up in landfills, managing returns can go a long way in reducing waste.

Clothing retailers, for example, can include accurate measurements of their items to reduce returns for wrong sizing. Many businesses also engage in the second-hand resale market to transform their returned goods into a profit.

Reduce Supply Chain Waste Today

How does reducing supply chain waste benefit businesses? Learn more with these four reasons to reduce supply chain waste:

1. Reduce Costs

One of the most compelling reasons for businesses to reduce their supply chain waste is cost savings. With practices like more efficient inventory and raw materials management, companies can significantly reduce wasted resources, optimize their supplies, and maximize their profits.

There are a few ways businesses can take advantage of cost savings from reduced waste:

• Better communication in the ordering process can reduce duplicate orders.
• Smaller packaging can increase available warehouse space.
• More efficient transportation methods can reduce fuel costs and emissions.
• ERP systems can eliminate printing costs and reduce time spent on administrative tasks.
• Repurposing returns lowers costs for product disposal.

2. Improve Return on Investment

Supply chain waste management practices may require businesses to make a substantial initial investment, but they can result in enormous returns. When a company evaluates its supply chain waste, it can create opportunities to implement meaningful and lasting organizational changes.

A full-scale overhaul of a business’s supply chain waste management pipeline is a gateway to generating feedback and experimenting with new ideas that benefit all areas of the company’s operations.

3. Manage Resource Scarcity

With supply chain issues still making headlines and likely to continue in the future, supply chain waste reduction can help companies manage resource scarcity. If products and raw materials are unavailable, more efficient inventory management processes and practices like closed-loop supply chains can ensure businesses have the materials they need, when they need them.

4. Minimize Environmental Impact

Less waste in the supply chain can have an important impact on the environment. Every year, tons of products and packaging enter landfills, contributing to issues like ocean acidification and microplastic pollution. Reducing waste minimizes the role a company’s supply chain has on pollution and climate change.

Sustainable practices are also highly valued by consumers, and 73% of consumer product companies are investing in sustainability throughout all stages of the supply chain.

How to Reduce Supply Chain Waste

To gain the benefits of reducing supply chain waste, try implementing some of the following practices:

• Evaluate customer satisfaction: Whatever moves a company makes to reduce supply chain waste should consider the impact on the customer. Consider consumer input to determine areas of focus for improvement and processes to eliminate.
• Look for bottlenecks in communication channels: Every business runs into communication problems, but these issues can result in significant waste throughout the supply chain. To reduce this waste, look for bottlenecks that unnecessarily complicate or prolong certain processes or lead to miscommunication between departments.
• Consider scrap material: The use of scrap material, either as a material allocation method on its own or part of a closed-loop supply chain, can also reduce waste. Reusing available resources from other items can combat material scarcity, reduce waste, and help businesses circumvent supply shortages.
• Conduct regular audits: Reducing waste is not a single process, but a continual commitment. Companies should conduct regular audits of their supply chain waste to evaluate the effectiveness of their new practices and identify areas for improvement.
• Set realistic targets: Rome wasn’t built in a day, and neither will a company solve their supply chain waste issues in one fell swoop. Realistic targets help companies stay on track and improve their likelihood of success in reducing their supply chain waste.

Building Waste Reduction Into Supply Chain Practices

Reducing waste in the supply chain requires companies to make a concerted effort to carefully consider their current practices. It also requires creative thinking and critical assessments on the part of business leaders to develop approaches that maintain customer satisfaction and product quality while reducing waste.

As supply chain issues persist, the world will see an increased emphasis on managing waste wisely in the supply chain, which will positively impact businesses, consumers, and the environment.