GoodOps’ “Transforming Supply Chains with Cleantech and Innovation” panel during SF Climate Week explored the strategic imperative for adopting the “Supply Chain Climate Stack” in enterprise operations. Companies powered by these technologies will be the most successful in building long term resilience, improving risk mitigation, increasing productivity, and reducing costs in an uncertain future. Our CEO & Founder panel from Mango Materials, Skyven Technologies, Artyc, and GlacierGrid illustrate the future we need to build:
SOURCING | Mango Materials | Molly Morse, CEO & Founder
Mango Materials transforms methane emissions, a potent greenhouse gas, into biodegradable polymers. By disrupting the conventional plastic supply chain, Mango Materials not only mitigates environmental harm but also fosters resilience by diversifying feedstock sources. Their innovative approach underscores the importance of sustainable sourcing in building a robust supply chain foundation.
MANUFACTURING | Skyven Technologies | Arun Gupta, CEO & Founder
Skyven Technologies, who just received $145M from the DOE, contributes to another layer of the Supply Chain Climate Stack by offering solar-powered solutions for industrial heating. By harnessing renewable energy, Skyven reduces reliance on fossil fuels, enhancing manufacturing sustainability and resilience. Their integration into the supply chain climate stack demonstrates how manufacturing can align with environmental goals to mitigate climate risks.
LOGISTICS | Artyc | Hannah Sieber, CEO & Co-Founder
Artyc plays a pivotal role in the Supply Chain Climate Stack by optimizing cold chain logistics with AI-driven temperature monitoring and control. By minimizing temperature excursions and food waste, Artyc enhances supply chain resilience while mitigating climate-related risks. Their solution underscores the importance of climate-conscious logistics in safeguarding perishable goods and ensuring supply chain continuity.
SITE OPERATIONS | GlacierGrid | Manik Suri, CEO & Founder
GlacierGrid ascends the top layer of the Supply Chain Climate Stack by optimizing data center cooling with thermal energy storage technology. By reducing energy consumption and enhancing resilience to climate events, GlacierGrid strengthens the sustainability of site operations. Their contribution highlights the critical role of sustainable infrastructure in building climate-resilient supply chains.
The Supply Chain Climate Stack – A Business Imperative
As companies confront the uncertainties of a changing climate, embracing the Supply Chain Climate Stack is imperative for building resilience and risk mitigation. Startups like Mango Materials, Skyven Technologies, Artyc, and GlacierGrid exemplify the integration of sustainability into each layer of the supply chain. By adopting innovative solutions and collaborating across industries, businesses can navigate climate challenges while driving environmental progress. As we ascend the Supply Chain Climate Stack, let us forge a path towards a future where sustainability and resilience are synonymous with business success.
Microsoft launches initiative to counter 30% rise in Scope 3 emissions since 2020
The company’s carbon footprint is growing because of demand for its new data centers.
Microsoft has adopted more than 80 measures to counteract a 29.1 percent increase in its greenhouse gas emissions since 2020, predominantly driven by its new data centers.
The company‘s Scope 1 and 2 emissions — those closely tied to the company’s operations, manufacturing and use of power — have decreased 6.3 percent since the 2020 baseline. However, its Scope 3 output (indirect emissions from customer purchases and other supply chain categories) climbed 30.9 percent in the same period.
The company’s emissions rose 3.8 percent year-over-year in fiscal year 2023. It was the third consecutive increase since the world’s largest software company announced a 2020 goal to become “carbon negative” by 2030, Microsoft disclosed May 15 in its FY2023 environmental sustainability report. That goal commits Microsoft to canceling out the effect of its carbon dioxide, water consumption, waste production and land use by the end of the decade.
For the year ended June 30, 2023, Microsoft reported 17,162,000 metric tons of carbon dioxide equivalent emitted, compared with 16,538,000 in fiscal year 2022. As was the case for the past three years, all of that increase came from Scope 3.
The weight of concrete, steel and IT equipment
Microsoft executives attribute the increase primarily to its new data centers.
“Our challenges are in part unique to our position as a leading cloud provider that is expanding its data centers,” said Microsoft President and Vice Chair Brad Smith and Microsoft CSO Melanie Nakagawa, in the foreword to its environmental report, published May 15. “But even more, we reflect the challenges the world must overcome to develop and use greener concrete, steel, fuels and chips. These are the biggest drivers of our Scope 3 challenges.”
Microsoft rivals Amazon and Google aren’t due to publish their next environmental progress reports until July. Both made methodology updates that affected their last reports that make exact comparisons difficult, but they also have pointed to data center construction — accelerated by demand for artificial intelligence services — as a growing challenge to energy, waste and water goals. Google would have reported no change in Scope 3 emissions for fiscal year 2022 in the absence of its methodology change. Amazon reported a 0.7 percent decrease for Scope 3, citing its ability to reduce construction emissions.
Microsoft’s Scope 3 accounts for about 96 percent of its total emissions. Of that, three-quarters are related to purchased goods, Nakagawa told GreenBiz in an interview. “I think it’s important to highlight, we are very aware of what our challenges and opportunities are,” she said. “We’ve started to put in place initiatives and efforts to get our hands around the size of the challenge we have before us, and what the opportunities are to turn that emissions curve down across our suppliers and value chain.”
The company launched a company-wide initiative to reverse that trend, Nakagawa said. That strategy includes more than 80 “discrete and significant measures,” including a new requirement that requires “high volume” suppliers — those with which it most frequently does business — to use carbon-free energy by 2030. It previously required them to reduce absolute emissions a minimum of 55 percent by that timeframe.
Microsoft adopted stricter emissions disclosures by certain suppliers in the summer of 2023. (Amazon is embracing similar measures.) Emissions data is also part of Microsoft’s procurement criteria — division heads are charged an internal fee for emissions, including those of their suppliers. “The more that they can make informed decisions that are lower-carbon, the better off they will be in terms of the fee impact they’ll see on an annual basis,” Nakagawa said.
The 80 initiatives are spread across five priorities set by the Microsoft Climate Council. The group is chaired by Smith and includes Nakagawa and business leaders from across the company. The priorities are:
Use digital technology, including artificial intelligence, to gather insights and automate the management of electricity and water consumption. For example, Microsoft is an investor in LineVision, which makes software that helps free up electric grid capacity.
Increase the efficiency of data centers’ use of water.The company’s massive new data center in Wisconsin, for example, will be cooled with a closed-loop, water recycling system that uses new water only in rare circumstances.
Use its purchasing power for new solutions, including lower-carbon computer servers, steel, electricity and concrete. In April, for example, Microsoft put more money into LanzaJet, which makes sustainable aviation fuel, through its $1 billion Climate Innovation Fund.
That’s more than five times the carbon removal offsets Microsoft bought in fiscal year 2022. It could match that amount during the current fiscal year: Microsoft signed its largest carbon removal deal to date in early May with Stockholm Exergi. It covers 3.33 million metric tons of carbon removal for 10 years starting in 2028.
For accounting purposes, carbon offsets are retired as they are generated. For fiscal 2023, Microsoft retired offsets related to about 605,000 metric tons of CO2 equivalent, which enables the company to claim it is carbon neutral.
GoodOps kicked off SF Climate Week with our Supply Chain Salon for Climate Action. Over wine tasting and fire pits, leading climate investors, founders, and corporate leaders explored decarbonization, waste reduction, and AI in the supply chain.
Participants included leaders at the forefront of climate, including Apple, Tesla, Flexport, Amazon, Mainspring Energy, Planet FWD, Mill, Dell, Salesforce, UN Global Compact, Google, Cathay, Nissan, EcoVadis, Telo Trucks, Toshiba, Skyven, GlacierGrid, and more.
The passion, enthusiasm, and promise for solutions in this space is mounting and we are thrilled to be at the center of it.
GoodOps‘ all-star startup panel at SF Climate Week delivered an insightful roadmap for transitioning supply chains into climate-responsible operations. We explored cutting-edge advancements, including next-gen materials derived from methane gas, the adoption of Energy as a Service (EaaS) in industrial manufacturing, innovations in temperature-controlled cold chain logistics, and the integration of AI-driven site operations.
Additionally, we underscored the importance of considering the entire supply chain climate stack, from solutions’ origins through to end customers, to ensure comprehensive environmental accountability. The possibilities for investment, development, and collaboration in this space are boundless, and we are thrilled to be at the forefront of driving this critical conversation.
Our esteemed panel of CEOs & Founders are the visionaries shaping the new paradigm for how the world sources, manufactures, transports, and operates its goods.
Thank you also to our moderator Dasha Shunina from Women Tech Meetup for helping to guide our conversation. And, to Werqwise who graciously hosted our event in San Francisco.
Ecovadis: The Sustainable Value Chains Podcast series features senior sustainability experts and executives who explore a wide range of environmental, labor and human rights, ethics, and sustainable procurement issues and looks at how companies can develop more sustainable value chains.
In this episode of the Sustainable Value Chains Podcast, Divya Demato, CEO and co-founder of of GoodOps outlines a clear perspective on what sustainable leadership means today – and how it has changed since the pandemic.
Sustainability Leadership Today: Going Beyond the Basics
In our rapidly changing world definitions and expectations are also subject to major shifts. Gone are the days when merely announcing a commitment to reducing water usage or ensuring fair wages made a company a leader in sustainability. Today, true sustainability leadership demands more. It’s about embedding environmental and social initiatives deeply within the core business, moving beyond CSR to integrate these values across the entire value chain.
So, how exactly has sustainability leadership changed over the past few years? Divya explains that before the pandemic we saw a deluge of corporate sustainability reports, but the post-pandemic world demands these environmental and social commitments be deeply woven into the business fabric, going beyond mere Corporate Social Responsibility (CSR). As a result, companies that were once at the forefront, those who made early commitments to reduce water use, pledge net zero, or ensure fair wages, now blend into the mainstream. Today’s sustainability leaders are reimagining business strategies. This includes innovations in product packaging, responsible raw material sourcing, transitioning to renewable energy, and committing to policies that protect society’s most vulnerable. The cornerstone? Building trusted supplier relationships. The shift is not just about ticking boxes for the upcoming 2030 and 2050 milestones; it’s about establishing businesses that can thrive amidst rapidly changing global conditions.
Divya further categorizes leadership tiers in sustainability. The first involves those companies that quickly adapt to new sustainable technologies and practices. The second, the “leaders of leaders,” invest in novel solutions, sometimes in collaboration with competitors. The third are pioneers, those who challenge and shift industry paradigms. Examples include Unilever’s living wage commitment and Patagonia’s unwavering environmental pledge. However, the current urgency around sustainability isn’t just driven by foresight; for many industries, it’s about immediate survival. With predictions like the potential depletion of seafood by 2048, some sectors face existential threats. The path forward requires not just innovation, but also deep introspection about the legacies companies wish to leave behind.
The Role of C-Suite in Sustainability
For successful sustainability initiatives, a top-down approach is paramount. While sustainability teams lay the groundwork by identifying environmental and societal challenges, real momentum is generated when the C-suite, especially CEOs and CFOs, offer their support. This leadership involvement ensures sustainability permeates throughout every facet of the organization – from product design and innovation to procurement and energy infrastructure. CEOs, in particular, play a critical role. Their foresight into future challenges allows the company to pivot, innovate, and remain relevant in an ever-changing landscape. This isn’t solely about addressing current consumer needs or navigating impending regulations; it’s about ensuring a viable business future in the face of existential threats such as climate change or resource scarcity.
Challenges in Transitioning to Sustainability and Sustainable Value Chains
Leadership in sustainability isn’t without challenges, however. Some initiatives, like promoting living wages, might not always translate to immediate profits. Yet, even if a company isn’t leading the charge, inaction isn’t an option. Every business, due to its reliance on natural resources, faces potential disruptions. To navigate these disruptions, firms need to be proactive about sustainable sourcing and adopt regenerative practices. But one of the biggest mistakes companies make is viewing sustainability only as a marketing or CALMS exercise. This perspective often leads them to grapple with whether their supply chain practices truly warrant the sustainable labels they claim. Strategically, businesses should evaluate their sustainability claims and align them with genuine practices. Financially, these initiatives demand significant investments, especially in areas like R&D. Adopting sustainable practices could involve using biodegradable packaging, transitioning to regenerative agriculture, or ensuring fair wages for workers. Successful sustainability transition requires cross-departmental collaboration, involving heads of procurement, logistics, marketing, and finance, to ensure a coherent and integrated approach.
Tools like materiality assessments can guide businesses in prioritizing their sustainability efforts, pinpointing high-risk areas that might impact both consumers and the larger world. Such evaluations can forecast potential challenges, as demonstrated during the pandemic, and aid in future-proofing business strategies. While prioritizing is vital, it’s equally crucial not to overlook any sustainability aspect, as lesser concerns can swiftly become significant risks. On the communication front, if a company has a genuine sustainability story, marketing becomes straightforward. Yet, issues arise when businesses prioritize branding before actual sustainable actions. With the supply chain’s increasing visibility, especially during crises like the pandemic, consumers now seek transparency and authenticity in sustainability stories, underscoring the need for marketing and operations to work collaboratively.
Divya stresses, however, that sustainability efforts are about progress, not perfection. The key is transparency about where a company stands in its sustainability journey.
Best Practices for Sustainability Leadership
Leaders in sustainability aren’t merely setting long-term goals; they’re taking transformative steps toward tangible impacts. The most proactive businesses have their sights on 2030 and 2050 emissions targets, considering their Scope 1, 2, and 3 impacts. Since roughly 80% of a company’s emissions often fall within Scope 3, there’s an emphasis on reimagining the business model. This involves genuinely investing in their suppliers, helping them modernize with tools like solar panels and other renewables. These leaders recognize that without adequate support for frontline workers, achieving sustainability is a pipedream. Successful strategies prioritize efficient operations and community programs, like migrant education and improving the health conditions of workers, acknowledging that protecting these communities ensures long-term business viability.
It’s also noteworthy the role of procurement has emerged as pivotal. The Chief Procurement Officer (CPO) should ideally sit alongside other C-suite executives, bridging the gap between suppliers and business objectives. This redefined role sees procurement not just as a cost-saving function but as an innovative hub that balances affordability with sustainability. In the past, the procurement department often operated in the shadows, but as businesses realize its central role in driving sustainable solutions, it’s gaining the respect and voice it deserves. The new-age procurement team returns to the drawing board with solutions and options, working closely with suppliers to highlight new sustainable methods unknown to upstream departments, positioning them as central figures in the journey towards a more sustainable future.
Lastly, Divya reaffirmed that while sustainability is not just about communication, the narrative becomes more straightforward when businesses have a genuine story to share. If companies work towards sustainability in their supply chains and value chains, their marketing narrative will naturally resonate with consumers.
As the fashion industry continues to grapple with the far-reaching impacts of the pandemic and new global challenges, it has become clear that the ability to swiftly respond to changes in the supply chain is a defining factor for companies to achieve success. Industry stakeholders from ultra-fast fashion player Shein, sustainability strategy and operations consultancy GoodOps and management consulting firm Boston Consulting Group (BCG) discussed the challenges and opportunities of an agile supply chain in the recent webinar “Agile Supply Chain and the Future of the Fashion Industry”.
When are supply chains agile?
In the fashion industry, supply chains are considered agile when they can move products from the design phase to retailer shelves in two to eight months (or less), replenish inventory in season based on demand, and keep end-of-season remainders to a minimum. Some of the key challenges are cost management, end-to-end collaboration and quality control.
“In other words, companies with supply chain agility are able to respond quickly to short-term changes in demand by building a customer-oriented, end-to-end product-supply mechanism. This requires close collaboration and the quick coordination of merchandising, design, production, and channel needs,” states the BCG report “Agility Is Fashion’s New Source of Competitive Advantage”.
Challenge 1: changing customer behaviour
Veronique Yang, managing director and senior partner at Boston Consulting Group started the discussion by explaining how customers’ behaviour has changed: “They are expecting more diverse and ample products that come to them faster through faster deliveries and with free returns and exchanges. All the while expecting quality and a competitive price, which adds pressure on brands.” That is the customer-driven business model and according to Yang, ultra-fast fashion exists because of that need of consumers.
“It’s a tall order and we’re trying to meet it,” agreed Shein’s executive vice chairman Donald Tang. “Nobody has the answer of what the new normal is but consumers have become quite demanding and the battle has intensified and moved online,” he added. That is the battle for their attention, business and best deals: While inflation and economic uncertainties have pushed prices up, consumers are looking for ever more affordable prices. Tang stated that a survey among 25 percent of Shein’s customers revealed that while 13 percent are looking for more responsible choices in the current scenario, 87 percent have changed to more affordable brands.
“Those changes were happening already before the pandemic but the pandemic accelerated it,” explained GoodOps’s CEO and co-founder Divya Demato. “While there is no denying of the climate crisis and different industries having a role in that, companies are often at odds with that reality and consumers are at different levels of understanding this; they align themselves to brands according to that.”
Challenge 2: linear business models
For her, a linear business model does not work any more, especially in fashion. “The pandemic caught many off guard; the ones that managed had close relationships with their suppliers but there were still a lot of unknowns,” she said. “Brands are challenged with inventory management. They need to identify a supply chain eco system and build resilience,” she advised.
“Everybody would like to satisfy responsible consumer choices,” said Tang. A transformation that worked for Shein was to digitise small and medium size factories. “A few years ago in China, you saw small factories disappear. We digitised everything and connected small factories so that together, they could become one big company and compete,” recounted Tang. “This has increased their visibility, they can now see their own capacity and we can pay them fast, which leads to better liquidity.”
Opportunity 1: digitisation and transparency
For the Shein executive, sustainability comes back to technology and the platform. “We have to use technology for the planet and to improve working conditions,” he said. In this respect, Tang sees Shein as an “empowerment company”.
For Yang, it is not only technology that has made a difference: “Companies have realised that a supply chain can be really valuable and they started checking how it can be more stable while holding on to quality and competitive prices.”
For her, there have been three major changes: globally, the emergence of redesigned supply chain networks and even models; more openness and transparency across the supply chain, which includes new technology and digitisation; and finally, a high awareness of sustainability. All this, according to her, leads to resilience, responsiveness and responsibility, which is all very important as Demato pointed out “more is coming as the pandemic showed”.
Opportunity 2: on-demand
In terms of the tools to make all of this happen, Yang who manages different kinds of product categories, admitted that the fashion supply chain is the longest and most complex. “It involves many internal and external stakeholders and is quite fragmented,” she said. It requires the coordination of a large group of parties of different complexities, sophistication levels and digitisation levels and managing all that is challenging, which is why the complexity of the fashion supply chain can be a bit overwhelming. “Everybody needs to learn from the best but carefully select what fits their own business model,” she advised.
“Agility is the new source of competitive advantage, even before the pandemic,” emphasised Tang. Through its on-demand model – which Tang calls ‘a game-changer’, Shein also makes sure there is no waste, manages its inventory well and focuses on consumers’ needs, which for him is crucial for growth. “We want to be more inclusive; colour of skin, location, orientation, etc. does not matter but you have to reimagine the supply chain. At the end of the day, the consumer wins and you have to find a way to do go good while you’re doing well and do well while you’re doing good,” he summarised.
Demato agreed and compared Shein’s on-demand model for retail to how Walmart revolutionised prices through its wholesale model and how Amazon revolutionised e-commerce. “There could be less wast upstream but what about downstream? What can technology do? Consumers are still going to buy.” For her, it will be about more sustainable materials and innovations in textile recycling as only one percent of garments are recycled today because the technology is not there yet.
Opportunity and challenge: sustainability
“The infrastructure is there and many elements are in place but from a circularity perspective, we have to think of the whole life cycle. Consumers will ask ‘is it worth it to buy this? Or will this go to landfill?’. This is an opportunity for brands to get ahead of that,” Demato said.
“This moment has probably come already,” chimed in Tang, adding that “we have to figure out the preferred materials.” He also pointed out that “so far, we are only getting the half life here, not the full life cycle”. For him, it all comes down to cooperation: “Nobody is going to be big enough to sustain it and figure out the end-of-lifetime approach on their own.”
Yang agreed that industry players have to come together and use their power, scale and know-how collectively. “Fashion is a discretionary category that has a social and environmental impact. The supply chain needs to be of service to build a future of fashion and consumers. Technology helps us to reduce products, maximise resources and select more eco-friendly choices when it comes to dyeing, washing and other processes,” she concluded.
As the fashion industry continues to grapple with the far-reaching impacts of the pandemic, it has become clear that the ability to swiftly respond to changes in the supply chain is a defining factor in achieving success.
On 6 June, 2023, SHEIN hosted a webinar that discussed how digitalization and agile supply chain models are helping fashion industry players gain a competitive edge in today’s market.
Panelists:
Donald Tang, Executive Vice Chairman, SHEIN
Divya Demato, CEO & Co-founder, GoodOps
Veronique Yang, Managing Director and Senior Partner, BCG
As the world recovers from the standstill that was the pandemic, the customer purchase decision process has changed, as have the products being prioritized. Customers are demanding greater product variety, including more responsible options and faster product fulfillment to feed their desire for almost instant gratification. Veronique Yang, Managing Director and Senior Partner, BCG, said consumers are demanding more inclusive products with speedier delivery. She added that the growth of ecommerce channels during the pandemic has also driven customer demand for speedier delivery times – while holding expectations on quality and price.
“Consumers are becoming quite demanding and less forgiving, and the battle for those hearts and minds has intensified. And the battle has moved online,” added Donald Tang, Executive Vice Chairman from SHEIN. He further referenced results of a recent survey of over 2,500 SHEIN customers, where 87% reported shifting to more affordable fashion choices as a result of inflationary pressures.
With increasing global economic pressures, there has been a notable shift in supply chains, with companies increasingly having to adapt their models to survive. Said Divya Demato, Co-Founder and CEO of GoodOps, “These changes were happening before the pandemic, but the pandemic exacerbated it.” This was echoed by Donald Tang, who shared SHEIN’s business model of on-demand production. Veronique Yang further explained that companies are rethinking their global supply chain network – diversifying their supply bases “and sometimes even changing their supply chain models to prevent disruption.”
This drove the conversation towards the topic of resilience, which all speakers agreed was fundamental for the advancement of the fashion industry. While Donald Tang further shared how SHEIN had made it its mission to empower the supply chain since the start of SHEIN’s business, whether it was by funding their adoption of new tools and technology, or providing training and up-skilling to their workers, or even offering flexible settlement terms that are much shorter than the 90-days standard of the industry. Veronique Yang also added that resilience required creating more openness and transparency across the entire value chain – from suppliers to retailers. “They have to work together to problem solve the potential frictions… and digitization is a big part of that.”
Speaking to the recent report, Creating Agile Supply Chains in the Fashion Industry | BCG, Veronique Yang shared key learnings from BCG’s research:
Digital technology can help improve performance across three measured commercial areas: balancing cost, speed to market and quality
Digitalization helps streamline supply chain tasks and save time for suppliers. For example, an online fabric ordering database and order system makes it effortless for suppliers to carry out material preparation ahead of production
People think it’s hard to control quality while keeping cost down. In reality, a digital system can predict and pre-empt potential quality issues, containing them from the very start of the value chain.
Donald Tang agreed, adding how on-demand fashion enables a brand to minimize waste while addressing the “fashion trilemma” – offering the broadest amount of choices, with frequent refresh while addressing inventory management. In this way, bespoke production can actually cost less than mass production.
Divya Demato countered that while there could be fewer articles of clothing upstream, fashion brands still need to consider downstream and post-consumption. She raised a call to innovation and investments in technologies and materials to support more sustainable fabrics for upstream.
In closing, speaking to forward looking change, Veronique Yang added: “Fashion industry companies – you have the responsibility and power and influence and to shape this together.”
In the short Q&A segment, there was much interest in SHEIN’s ability to replicate its business model in other markets. Donald Tang invited Marcelo Claure, Chairman of SHEIN Latin America, who was in the audience, to share about his plans and experience in rolling out manufacturing for SHEIN in Brazil.
If there’s one takeaway from the pandemic, it’s that an agile supply chain can make or break a company.
The pandemic exposed supply chain vulnerabilities that caught many fashion brands and retailers by surprise. Companies that didn’t have the agilities to pivot around isolated problems, solid supplier relationships to gain access to limited resources, or supply chain visibility beyond Tier 1 to appease an increasingly demanding consumer, were left out in the cold. Shifting consumer priorities also put pressure on fashion brands to produce faster, more broadly, more sustainably and without added cost—a four-way challenge if there ever was one.
The webinar “Agile Supply Chains: The Future of the Fashion Industry,” outlined how nimble supply chains offer a major competitive advantage, including improved customer responsiveness, faster time-to-market, reduced inventory holding costs and enhanced collaboration with suppliers. The discussion tapped into the knowledge of Donald Tang, executive vice chairman of global fashion and lifestyle e-retailer SHEIN; Veronique Yang, managing director and senior partner, Boston Consulting Group (a recent study outlined SHEIN’s supply chain advantages); and Divya Demato, CEO and co-founder of sustainable supply chain consultancy GoodOps.
Achieving supply chain agility is not easy, but digitization that empowers suppliers along the value chain to be more efficient, self-sufficient and make smarter choices is a sure path. It also requires a cultural shift and revolutionary rethink on the scale of Henry Ford’s auto assembly line, Walmart’s everyday low prices or Amazon’s overnight shipping.
And with consumers wanting more, more, more—from endless trend options to more inclusive sizing—brands must strike the delicate balance of creating more while keeping production waste to a minimum. This can only be achieved by really knowing what the customer wants, then using shared information and services, material economies of scale, and sharp manufacturing technology to do it efficiently.
“We reimagined the supply chain, which is a daunting task, and we have done it by digitizing the small- and medium-sized factories to give them visibility to see their own capacity, continued order flow and seamless efficiency. [We also] give them better liquidity because we pay them very fast and give them volume discounts on the raw materials,” said Shein’s Donald Tang. “All these benefits help them make better choices in terms of investments and how they run their factories.”
It comes down to collaboration and shared goals, so all stakeholders are on the same page. “The pandemic also drove the different parties of the ecosystem—suppliers, manufacturers, brands and retailers—to work together to solve frictions and problems,” said BCG’s Yang. “And digitalization is a very important foundation to enable that.”
Digitization links the chain
To get the best commercial performance out of the supply chain, companies must balance cost, speed to market and quality, said Yang, who noted SHEIN’s accurate demand forecasting, digital sampling to reduce inefficiencies, and new DTC approaches.
As fabrics account for approximately 65 percent of a garment’s costs, SHEIN takes steps to help all its suppliers, no matter their size, optimize their textile buys. Based on market forecasts, SHEIN consolidates the fabric early on, then digitizes fabrics so its suppliers can instantly and easily place orders. Digital analysis then looks at which factory is optimized for an order, reducing redundancy and wait time.
On speed to market, digitalization streamlines production and orders, removing admin and coordination time, while preset criteria creates alignment with all players. On quality, a digital feedback system helps “identify and contain” quality issues.
“People think it’s very hard to control quality when you’re trying to control a call center, but with the digital system, you can feed all the quality issues back into the system. And then this can lock into the average crux of the supply chain,” Yang said. “So starting from the design, you are already pre-answering the potential quality issues.”
Sustainability must drive end of life
As most of fashion’s impact happens upstream, it’s up to the brands to cut production waste and harmful emissions—without passing along the costs to consumers who say they are willing to pay more for sustainable goods but don’t always demonstrate that with their wallets. SHEIN’s on-demand agile supply chain facilitates sustainability by effectively addressing over-production through the alignment of production with customer demand, responsive order fulfillment, reduction of excess inventory and waste, and enhancement of overall supply chain efficiency.
But there’s also an urgency to explore what is happening downstream, especially since fashion demand isn’t going away. And more fashion merchandise coming into the world means more must be dealt with on the other end.
“Sustainability is very challenging. Yes, there can be less waste upstream, but how many articles of clothing downstream are going into the world?” said GoodOps’ Demato, noting that only a miniscule percentage of fashion is recycled, and even garments made from recycled bottles don’t remove fashion waste from landfill. “What can we do upstream with more sustainable materials to help what happens downstream? From a circularity perspective, we have to think about the entire system. That’s a very critical piece in this entire conversation.”
As a major fashion retailer, SHEIN is taking this seriously, but concedes it must be a global effort.
“It’s all going to come down to whether we work together or not, because if we tried to do these things separately, then everybody will fail,” said Tang.
One sustainability action SHEIN recently took was to partner with Queen of Raw, a company that sources existing materials from brands and retailers looking to responsibly clear out their excess fabric inventory rather than have it go to waste in landfills. The company says that diverting 1 million yards of fabrics from excess inventory would set SHEIN on the trajectory to become one of the global leaders in repurposing deadstock materials, helping conserve water and preventing the creation of carbon dioxide equivalents that would have been generated through conventional production methods.
“We have to take bigger steps to really address that through a point of view,” Tang added. “If you can find a way to do well while doing good, and do good while doing well, that’s a great resource.”
The global pandemic has pushed many companies worldwide to improve the sustainability within their supply chains. GoodOps CEO Divya Demato is leading the charge, as they consult with some of the world’s largest companies, exploring new ways to improve their sustainability practices and gain competitive advantages by going green.
Whoever said “leave well enough alone,” was surely not a small business owner in growth mode. Change is not only a product of, but often a prerequisite to, breaking through to the next phase of business growth.
“That surprises some business owners,” says Divya Demato, CEO and co-founder of GoodOps, a supply chain and sustainability consultancy that advises companies on their business strategy. “They think, ‘We had success with this strategy, why change?’ But what you realize is you may have to modify your products or services, or vendors or partners, to be able to scale.”
Growing businesses—and all businesses in today’s ever-evolving business environment—must embrace agility. Whether that means adapting to changing conditions, like a global pandemic, or making strategic adjustments to reach the next level, the key is knowing what to change. Read on for four ways small business leaders must evolve their companies to enable growth.
1. Reshape Your Team For Growth
“Many times, the core entrepreneurial team that got you to this point, some of them may not be able to go on that journey of scale with you,” Demato says.
This can be a tough one—especially for close-knit companies. But it’s a matter of evolving roles and the skills needed for those roles. Small companies often require generalists rather than specialists and operations talent rather than managerial. Larger companies need more specialists and managers. And businesses in growth mode? They require a unique blend of both.
“You’re looking for people who have both entrepreneurial and operational strengths, and it’s a very potent combination,” says Demato. “It’s an interesting time in your business. You’re not so big yet, but you’re not a startup either.”
Small business leaders looking to grow should evaluate their team’s strengths and skill sets to ensure they have the right folks in the right roles and to determine what, if any, gaps in talent exist. This analysis will help leaders strategically recruit or retrain the talent needed to position their company for growth. While the talent market may be tight, offering recruits what they’re looking for now—including flexible work options and diverse teams, according to a 2021 study—can help attract the right candidates.
2. Leverage Customer Data
To grow your business, you have to know your business. Nothing can tell you more about your company, products and—most importantly—your customers, than data.
“If you’re not collecting customer data, you need to begin immediately,” Demato says. “Your business data will tell you the health of your business, but the consumer data lets you know how your consumers behave.” Understanding that behavior will allow you to adjust your sales, products, and marketing as needed to grow.
Many startups, and retailers in particular, choose the visibility and reach of third-party marketplaces to find and grow their customer base. The trade-off is often that the third party ends up owning the customer data.
In order to understand who is buying the product, what they’re willing to pay, what other products they’re interested in and where they’re located, some businesses may need to refresh their ecommerce strategy. If they’re selling through a third-party marketplace, based on the resources available, it may be time to move to their own retail site.
And, of course, they’ll need to learn how to interpret and leverage that data, too.
“You have to have the right people on your team that can make sense of that data,” says Demato.
3. Diversify Your Supply Chain
Growing companies should learn from the struggle that businesses of all sizes grappled with in a pandemic-impacted world. Dealing with uncertainty has pushed businesses to adapt, allowing them to be more agile, adopting new strategies and processes based on what they’ve learned. Small businesses with an eye on growth should do the same by building out their supply chain networks with the potential for disruption in mind.
“Make sure that whenever unforeseen situations happen, you can pull the right levers that keep you in business,” Demato says.
She recommends a two-pronged approach, beginning with a diversified supply base. Having multiple vendors allows businesses to keep operating, even when unexpected events disrupt one supplier’s operations. She also emphasizes the importance of developing strong relationships with suppliers.
“They’re truly your partners. You need them to buy into your vision. Think about their needs, and help them stabilize and be sustainable,” she says. “You want them to grow with you.”
4. Embrace Sustainability
Entrepreneurs have a breadth of options when it comes to sustainable sourcing. Though environmentally friendly suppliers and practices may have been a cost burden in the past, based on her experiences helping companies build sustainable supply chains, Demato has observed a change.
“There are great and very affordable options now,” she says. “The assumption that sustainable operations are more expensive, it’s just not the case anymore.”
At the same time, the costs of not operating sustainably are going up. Consumers, talent and investors all have sustainability top of mind—70% of consumers in a 2021 survey said they buy from brands that share their values. This reveals a clear market opportunity for small businesses. In another 2021 study, 85% of consumers said they have become greener in their purchasing, and more than a third of Gen Z and Millennial buyers say they’re willing to pay a premium for sustainable products.
For many small business owners, maintaining sustainable operations and choosing environmentally conscious suppliers—like Office Depot, whose Office Depot’s GreenerOffice™ line offers products with environmental attributes and ecolabels like cleaning supplies made with less harsh chemicals and paper with recycled content—is an easy first step. Your existing resources and partners are an extension of your team. Tapping into their sustainability opportunities is an efficient way to begin your sustainability journey.
Companies that can authentically communicate their environmental efforts to consumers have a competitive advantage when it comes to attracting and retaining customers. Establishing that rapport allows you to demonstrate that your brand has similar values as your customers and that you care about making a difference.
For small companies, growing does not mean running the same business on a larger scale. With the right people, processes and partners, small businesses can position themselves to reach their growth goals.
