How an OMS can help decarbonize your supply chain

According to research by McKinsey in 2022, 83% of Fortune 500 companies have corporate targets relating to climate change. A prior (2020) survey of companies in the US, UK, France and Germany suggested that 88% of publicly-traded companies have ESG initiatives in place. However, research reported by the Harvard Business Review in 2022 indicates that many organisations are “struggling to deliver on their commitments”: only 27% of companies have any enterprise-wide ESG KPIs in place, and just 3% have a full set in place. Being sustainable – and proving it via objective reporting – is, it’s clear, far from straightforward.

 

Businesses still have a long way to go to understand and mitigate the risks involved in ESG reporting, such as energy costs, regulatory risks, reputational risk and supply chain factors. There’s no single ‘magic bullet’, so each business department needs to contribute by determining metrics, setting targets, implementing solutions to hit those targets, and reporting on performance against them.

And that’s the context for this post. Because, whether you have formal sustainability goals already or they’re about to come your way, decarbonizing your supply chain can be one of the quickest-to-implement and most impactful measures that will help you become a more sustainable business (and, in terms of the ‘big picture’ outcome from that, help to mitigate climate change).

An Order Management System (OMS) helps you achieve this by streamlining supply chain processes. While you may already be familiar with some of the following functions of an OMS, let’s consider them now in the context of sustainability. 

Both overstocking and understocking lead to unplanned and unnecessary transportation, shipping, goods movement and storage. All of these incur both financial costs and, by definition, unwanted carbon emissions associated with your supply chain. An Order Management System, however, optimises your inventory management by providing real-time visibility, automating stock updates, reducing overstock and stockouts, and enabling efficient replenishment based on accurate demand forecasting. 

IHL’s 2022 report on the Order Management Systems market describes the shipping optimisation engine [of an OMS] as “one of the greatest sources of OMS ROI”. An OMS can help you reduce transportation needs by consolidating shipments, reducing the number of trips required, and prioritising local transport. For instance, an OMS can advise you to use a local store to fulfil an order rather than use a warehouse further away. With most transportation still based on fossil fuels, not only will your OMS improve the finances of shipping, but can minimise the carbon consequences associated with shipping.

(IHL’s report also describes shipping optimisation engines as “one of the areas of greatest disparity between OMS vendors”. Ask us about ours.)

 

An OMS provides extensive opportunity for supplier collaboration through the provision of real-time visibility into inventory levels, order status, and delivery schedules. This visibility can be applied to reduce lead times, minimise out-of-stock situations and improve delivery accuracy, all of which lead to fewer returns and exchanges from dissatisfied customers (a double whammy). Again: this helps reduce the carbon emissions associated with shipping and delivery and, hence, contributes to decarbonising your supply chain.

 

An OMS enables you to make genuinely data-driven decisions, by providing real-time insights into your supply chain performance. Such knowledge can help identify other areas for improvement, ensure processes ripe for optimisation are optimised, and that waste is constantly targeted for reduction. All resources cost money, and many are still carbon-based – reducing the resources necessary for your operation inevitably has a positive effect on your financial performance and on the carbon footprint of your supply chain.

 

In fact, decarbonising your supply chain and financial efficiency are one and the same thing