How ERP can support sustainable business practices

In 2020, amidst the pandemic, Nike pushed the sustainability envelope by producing their most environmentally friendly shoe to date. Fabricated with over 50% recycled material, the shift solidified the rise of recycled materials as a commodity in the circular economy.
Circularity refers to the continual use of resources and the elimination of waste. Waste from one process, should be an input into another process either as a by-product, as a recovered resource for another process, or as a regenerative resource that can be put back into the environment. Participating in the circular economy is particularly vital for the apparel and footwear industries, which alone generates 700 million metric tons of carbon dioxide equivalent (CO₂e) per year.

The pandemic also introduced a new problem, with the rise of PPE and disposable pandemic masks. In Australia, masks are being converted into road materials and in the US, protective equipment is being recycled into benches.

Other industries are also finding innovative ways to participate in the circular economy. Some are looking into the benefits of product life extension, with the aim to maximize a product’s utilization rate and duration. Think about the value of not having to replace your mobile phone every couple of years, or the fact that it takes 2,700 liters of water to produce enough cotton to make one cotton shirt.
The reality is there is increasing pressure for businesses to consider their environmental footprint.

According to the World Economic Forum, with less than 10 years to prevent global warming from exceeding 1.5˚C , it is critical to bring together leaders across industry, government and civil society to shift the global economy more aggressively toward circularity.

As the world celebrates Environment Day on 5 June, manufacturers have an opportunity to re-examine and re-configure their operations for increased sustainability.

Here is how ERP can support circularity.

1. Ensuring control by checking your Bill of Materials (BOM)
In order to incorporate recycled materials into a production process, manufacturers should have visibility into their Bill of Materials or BOM. ERP provides full control of quantity, quality, the cost of materials and can even help companies trace and report on the percentage of raw materials that make up the final product. This in turn reduces unnecessary loads on the system, reducing waste.

2. Reducing wastage by understanding material requirements
Wastage can be reduced, simply by understanding what stock in available before production even begins as well as what items and quantities are required for the production process.
This can be achieved by utilizing Materials Requirements Planning (MRP), and the Kitting functionality within your ERP solution. MRP Assists manufacturers and distributors to automate the process of managing the balance between material supply, product and service demand.

3. Logging and tracking excessive or expired stock
Manufacturers need to have visibility into excessive stock and expiry dates. This is where an inventory management system is beneficial as it logs and tracks these criteria. By integrating with IoT and sensors for real-time data, manufacturers can be assured that stock can be stored appropriately and consumed before it reaches its expiry date.

4. Connecting with suppliers directly
Improved collaboration with suppliers is key to ensure the inclusion of recycled materials. With an automated Request for Quote capability, you can easily invite existing and new suppliers to include reused or recycled items in their tenders.

Ultimately ERP provides the processes and tools to manage stock levels to reduce wastage, and the ability to incorporate recycled materials to ensure long-term participation in the circular economy. Sustainability is a clear selling point for the end consumer and companies that are going green, are reaping the rewards.