BlogSupply Chain Sustainability/Circular EconomyThe benefits of an ethical supply chain are more stability and efficiency.

The ethical supply chain has gone from something that only students and a handful of others worried about to a mainstream consideration. Any local grocery store carries more than a few products bearing a fair trade stamp, which indicates they were grown, harvested, and prepared ethically with consideration for both the environment and laborers. Over 60 percent of consumers are willing to pay more for products from companies that are committed to environmental and social responsibility. Among the younger generation, that number rises above 70 percent. It’s heartening that so many people are willing to put their money where their mouth is in order to support responsible business practices. While building an ethical supply chain can be costly, it’s worth the expense. In some cases, it may be worth the effort and cost due solely to the public’s demand for ethical products. Yet there are other advantages to ethical practices as well.

The benefits of an ethical supply chain go well beyond good publicity and the ability to charge more for products. These benefits aren’t just a “nice to have,” either; they’re required for making any supply chain stable, efficient, and profitable.

Why Build a Transparent, Ethical Supply Chain?

An ethical supply chain has many benefits.We live in a global age where electronic components are shipped from around the world to be assembled into complete products, and the bagged salads bought in stores might include lettuce from California, tomatoes from Mexico, and onions from Brazil. Unless companies makes a special effort to learn the policies, procedures, and practices of their suppliers, they could be buying products or components made under unethical practices. Not being knowledgeable about the habits of their suppliers is how most companies find themselves involved in unethical practices. 

The effort to become familiar with every step and practice in a product’s supply chain is called transparency or visibility. A transparent supply chain is fundamental to creating an ethical supply chain and makes it easier for a company to determine where its products came from and under what conditions they were grown or made. This is probably the single most important benefit of an ethical supply chain, but it has other advantages as well.

The transparency and visibility of an ethical supply chain can actually help to cut costs while increasing quality.

1. Greater Quality Control for Products

In March of 2007, pet cats and dogs in the U.S. began dying. The cause was a pet food ingredient imported from China that was contaminated with melamine, likely to fool tests for protein content. The next year, 300,000 babies in China became sick from melamine-contaminated milk and six died. Both incidents make it clear how important an ethical supply chain really is.

Knowing how components and ingredients were produced and the conditions they were produced under are fundamental to creating an ethical supply chain. One of the benefits of knowing this information is that it vastly reduces the potential for a sweeping crisis such as the ones caused by melamine contamination. While supply chain visibility cannot entirely rule out supply chain issues, adhering to ethical practices makes surprises like these far less likely. If incidents do occur, a company with a transparent supply chain will be more equipped to act in a way that minimizes injury, damage, and liability.

2. Superior Efficiency and Cost Saving

When companies think of an ethical supply chain, they typically think of the additional expense involved. The fact that customers are willing to pay more for ethically sourced products indicates that it’s what the public thinks of, too. However, the transparency and visibility of an ethical supply chain can actually help to cut costs while increasing quality. In a transparent supply chain, managers at each stage of the manufacturing process know where products are coming from and where they are going at any given time.

This makes it possible to implement kaizen ideas in the warehouse as well as other areas of the supply chain. A high level of transparency opens up the possibility for logistics managers at each production facility, warehouse, and distribution center along a product’s route to create efficiencies on the fly. The instantaneous flow of information brings the same transparency to global logistics that workers on an assembly line have at their workstation. This transparency can be used to refine production and delivery schedules in order to ultimately lower costs.

A company first needs to know where its materials, packaging, and products are coming from before it can decide where they will end up.

3. Easier Future Implementation of Circular Business Practices

Yet another benefit of a transparent, ethical supply chain is that it improves a company’s ability to be sustainable. A circular business model is one in which product packaging, excess materials from manufacturing, and, in some cases, the product itself, are reused or recycled to make or package future products. This model is the pillar of a sustainable economy. The first steps toward a circular model of supply chain management are the same as those toward a more ethical supply chain. A company first needs to know where its materials, packaging, and products are coming from before it can decide where they will end up.

Once the source of components, ingredients, and the materials used to make and package products are clearly established, a company can begin experimenting with modifications. It might recycle packaging and make new packaging from those recycled materials or close other loops in the supply chain. Sustainability is part of an ethical supply chain and is another initiative increasingly demanded by the public.

The Benefits of an Ethical Supply Chain Go Beyond Good Press

Supply chain transparency to get the benefits of an ethical supply chain.Fair and ethical supply chains are often treated as only worth pursuing as a marketing talking point or in order to receive a stamp of approval from the public. But as we’ve seen, the benefits of an ethical supply chain go far beyond perception. Ethical practices make an impact on the quality of a company’s products, the safety of their operations, and consumers’ trust in a brand. 

Plastic shipping pallets are up to 30 percent lighter than pooled wood pallets, saving on fuel and lowering CO2 emissions for every load shipped.

However, ethical supply chains are neither cheap nor easy, and they are usually built step by step. One small way that companies can begin to build an ethical supply chain is by using vendors that engage in responsible, sustainable practices. Renting shipping pallets from a plastic pallet pooling provider is one example of a way to support a sustainable, circular business model. Unlike wood pallets, high-quality HDPE plastic pallets can be recycled to make “new” plastic pallets at the end of their lifespan, keeping waste out of landfills. Plastic shipping pallets are also up to 30 percent lighter than pooled wood pallets, saving on fuel and lowering CO2 emissions for every load shipped. The strength and reliability of plastic pallets reduce product damage and retailer rejection, too, saving your business money on product losses and retailer fees. Switching to plastic pallets is a responsible step toward enjoying the benefits of an ethical supply chain. 

iGPS rents GMA-spec plastic pallets that are 100% recyclable and can lower your Total Cost of Business. To learn more about how our plastic pallets can bring some of the benefits of an ethical supply chain to your logistics system, contact us at 1-866-636-6443, email a specialist at [email protected], or visit our contact page.