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  • Writer's pictureZsofia NAGY

Operational aspects of frugal supply chains

In the first 2 parts of the series, we went through the overall concept of frugal mindset, the tools of evaluation, strategies and organisational aspects.

In this last closing part, we'll take a look at the operational areas and implications, specifically processes and systems (as we looked at the people side already).

As each week, let's start with a recap on the main principle of frugal supply chains:

We need to re-adopt that frugal mindset that will allow us to utilise resourcefulness again and create economical, social and ecological value simultaneously.

These help us execute on the principles of circular economies: reduce-reuse/repair-recycle/upcycle-retire-regenerate.

Operational processes and metrics have been organised only based on efficiency and on economic value so far, especially in supply chains (for cost/time and resources, but only optimising resources in a linear way, focusing on individual spots of processes or P&L lines in silos). Therefore re-evaluation of value along the value chains is critical, we have to include social and ecological value impact at process/system levels.

The chart here is a summary of those points that we always have to keep in mind at reviewing what we do, like an operational compass.

It can be seen superficial or too high level and straightforward (this is what everyone is saying in the last 5-10 years already, isn't it?!), yet having reviewed many organisations in my professional life, these are easier said then done. In fact, not many can incorporate these in their self-reflection and re-design.

Even those cannot always fulfill completely where they start with a circular design, as managing the whole network with partners, even finding sustainable partnerships, is challenging. Let alone building fully circular setups with frugal mindset (unless you can afford full vertical & horizontal integration, which is highly unlikely if you want to keep efficiency and competitiveness).

That's why more and more companies need to change to frugal mindset, as this enables the missing operational links for circularity (e.g. material exchanges, links between users of same RM/WIP/PackMat/returned materials/upcycling processes, facilitating platforms etc.) and can become viable to use for a larger community of companies and easier to deploy over time.

What can be done? How to proceed then?

Reviewing these points above, it quickly becomes clear why we need the TVC/TnVC models to support the end-to-end value chain evaluation. Otherwise we would end up seeing increasing cost with missing value points, or placing cost in the wrong evaluation bucket at the wrong source.

But using these tools can quickly show us where we can find value and what next steps we have to take:

  1. Even if you don't want to make huge transformational changes, you can review your process landscape, amend processes & add processes missing (there are missing processes now, even from the SCOR model - if you need the additions, let me know, but based on what I shared so far, you can easily find out which ones are missing). Do include the metrics for social/ecological impact and amend metrics where these should be combined with the economic impact.

  2. Instead of fixed end-to-end picture, review processes for modularity & ownership model: this means that certain modules of the processes will be conducted only with partners, but can be also carried out with other partners in case of need and can be scaled up/down as resources are shared (obviously requires much higher collaboration).

  3. Based on the value chain & process reviews, it will become visible, what other product/services you can add to your portfolio that are coming from the processes deemed non-value adding before, but now are value adding towards suppliers & service providers (they are your new customers as well). Make no mistake, this does not mean mixing up supplier/customer relations in contracting, as it happened before in some industries (specifically pharma). This needs to stay clean.

  4. Many unnecessary systems have been added to the business processes that companies don't use or don't utilise as they should, or buy and replace them within 3 years' time. So review what you really use and review what you should use. Opt for systems / solutions, where you have the opportunity to add social & ecological cost/value parameters for full transparency and clarity at decision making, otherwise adding these on manual solutions won't support the change in evaluation and mindset. Ask about these from your current system/solution provider - you'll be surprised how much can be included without huge change or overhaul.

  5. Allow time for collaboration with partners and for creative thinking in the organisation. Many times SRM/CRM meetings are prepared almost on autopilot and conducted with little collaboration (or as little as possible). Prepare meetings also as if you were the other person viewing your organisation and challenge all joint processes at this level along the TnVC model.

  6. Allow your teams to spend time on critical thinking and creativity beyond their roles regardless of level. Ask them to challenge their own & the team's thinking every day and consciously rotate people around. This cannot happen only if it is convenient for the organisation or the individual, it must happen to reach a change of mindset. It will be inconvenient, but it will pass and become part of the culture.

It is fairly clear that some of these solutions will require change in legislation, so it is important that companies can see the changed value sets clearly too and communicate their needs towards authorities accordingly (and in collaboration).

The overall legislative landscape is changing, but it is slow and coming up with solutions that help define new legislation and help embed frugal ways of working is critical to make a lasting impact and create circular economies. Some of the good ideas already exist for a long time, but they weren't facilitated by legislation earlier. No surprise that this is one of the reasons why we can read more and more articles about public & private sector collaboration and how partners should challenge each others' thinking.

To wrap up the series: I believe everyone can see how I changed the use of existing methods and models to get us closer to adopting frugal mindset in how we manage supply chains, even though I only listed a few points from the many more we could share. I also hope you will carry these thoughts and will be able to utilise them in your professional lives.

Let me know if any of the above have sparked further questions or thoughts, I'm happy to hear inputs from other practitioners and supply chain experts!

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