The HBR recently ran a great article on Creating Shared Value that quickly gets to the problem with many companies today, and, by extension, many supply chains.
Companies themselves … remain trapped in an outdated approach to value creation that has emerged over the past few decades. They continue to view value creation narrowly, optimizing short-term financial performance in a bubble while missing the most important customer needs and ignoring the broader influences that determine their longer-term success.
By failing to take into account the well-being of their customers, the depletion of vital natural resources, supplier viability, and general economic distress of the communities in which they do business, companies are thinking very short term and sacrificing long-term success for short term gains. And unless they correct their thinking, and, according to the article, focus on shared value, they will fail to build real wealth.
But when the focus is on social good, the real reasons that long-term thinking yields supply chain success become muddied. Simply put, they are:
- Lower Operational Costs
Reducing the need for natural resources reduces the costs associated with those resources. Long term thinking selects the solution that will reduce the need for expensive resources in the long term, even if integration costs a little more in the present.
- Lower Material Shortage Risks
Switching to more environmentally friendly materials and materials that are not in short supply, even if costly up front, secures supply for the long term. In contrast, depending on a rare mineral or hazardous material brings the risk that a single natural disaster or environmental regulation can take out an only source of supply.
- Lower Risk of Market Backlash
If your consumer base all of a sudden goes green and you’re seen as the worst offender, bye-bye sales and no supply chain will save you.
So think long term. The savings will pay for the effort many times over.