Tag Archives: CEO

“Ch-Ch-Ch-Ch-Changes”: 3rd Party Logistics CEOs Priming for a Sustainable Future, Retooling to Compete

3 Oct

Last week in San Diego (my second hometown), the Council of Supply Chain Management Professionals (CSCMP) held their Annual Global Conference.  Over 3,100 supply chain professionals from 41 countries attended sessions from over 20 tracks.

At the Conference, the 17th Annual Survey of Third-Party Logistics Providers was presented by survey author, Dr. Robert Lieb, Professor of Supply Chain Management at Northeastern University, and Joe Gallick, Senior Vice President of Sales for Penske Logistics. The findings analyzed responses from 31 third-party logistics company CEOs across North America, Europe and Asia-Pacific.  The study was pretty comprehensive in its findings but me being the sustainability focused guy that I am, poured through the document in search of green stats. And as expected they were there.

With 87 percent of the companies reported to be rebuilding their workforces in 2009, CEOs revealed that green practices are still a major priority in the 3PL market.  Further, more than 80 percent of the companies surveyed now have formal sustainability groups within their companies. Even in the wake of the recession, most of the companies surveyed these are still heavily committed to environmental sustainability issues.  Take note of these numbers according to the survey:

  1. Fourteen of the 31 companies began new green initiatives during the year.
  2. Eighteen of the companies expanded existing sustainability programs.
  3. Twenty-five of the companies now have formal sustainability groups within their companies.
  4. Twelve of the 31 CEOs believe that their sustainability capabilities differentiate them from their competitors.
  5. Ranking second and third respectively in North America were opportunities related to potential differentiation based upon the companies’ environmental sustainability capabilities and opportunities related to expansion of service offerings.

Also, 27 of the 31 CEOs noted that some of their manufacturing customers have begun to move toward “near-shoring” options during the past year.  This type of “reversal of fortune” for U.S. manufacturing has been driven by quality control issues, fuel costs for transoceanic shipping and (wishful thinking perhaps) a desire to stand by corporate commitment to curtail carbon emissions associated with reduced fuel usage.

Additionally the report cited several business practice trends, related to risk management/risk sharing; business continuity planning; performance based contracts; and enhanced vendor qualifications.  Each of these growth areas fit well into the sustainable sourcing, accountability and risk management picture that I have spoken about in this space as essential elements of a green supply chain.

While the survey results are impressive, there is clearly room for improvement in terms of implementing actual “boots on the ground” solutions.  There are increasing examples everyday where 3PLs have demonstrably improved operations efficiency while lowering fuel use, energy use, air emissions and indirectly related resource consumption and waste generation. But at the same time, these efforts must be able to strike a balance between cost and benefit that CEO’s can understand, appreciate and rally around.  The stat about CEO’s belief in how sustainability can differentiate their companies (only 38% are on board) tells me that much still needs to be done to make a business case for greening of supply chains.

In another recent reportthis past spring by the Economist Intelligence Unit (EIU) of the Economist Magazine,   supply chains are in a massive state of flux.  Individual supply chains “have shrunk at the margins and the network has become denser”, according to the report. The report concluded that many companies are forced to choose between having supply chains that are simple and compact, or those that are complex, redundant and dispersed.  Efficiency versus resiliency, in effect.   But the report found it possible to increase both efficiency and resilience.

The EIU report cited that a more efficient supply chain enhances two drivers of value: operating margin and asset efficiency.  What was notable to me was a note in the report that said “efficiency also has the beneficial side effect of shrinking the carbon footprint”.  The report cited companies like Coca-Cola, that are looking at ways to move to central distribution, cutting back on empty loads (bringing back post-consumer recycled cans  for instance) as ways to ‘own’ its supply chain and drive efficiency (without losing resiliency).

Issues such as supply chain resiliency and agility are two criteria that should be evaluated as 3PL’s move down the sustainability path and create a business case for operational changes.  I am fairly certain, based on the Penske sponsored 3PL report that CEO’s and other top managers will be asking the tough questions, so be prepared to come to the table with some compelling ideas and numbers to back it up.

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Five Ways to Achieve “Top Line” Business Value Through Sustainability

29 Jun

Note: This article also appears on GreenBiz.com at http://bit.ly/9kjYTV

In a comprehensive study released last week by the United Nations Global Compact and Accenture, a survey of 766 CEOs from around the globe indicate that despite the economic downturn, sustainability will be critical to the future success of their companies.  An amazing 93% of CEOs indicated that “a tipping point” could be reached that integrates sustainability with core business processes and systems, and its supply chains. http://bit.ly/cS93dR

So this suggests that ‘triple bottom line’ (TBL) practices and measurements will become commonplace in business…or will it.  Perhaps there is another way of looking at this trend  given the top-down commitments that CEO’s believe are necessary to create this massive shift in corporate behavior.  This point of view is called “triple top line”, but has generally been trumped by its “bottom line” twin.

Setting the Context

Top-Line Definition (Sustainability Dictionary http://bit.ly/aRPZh8)

The total revenues an organization reports on their income statement. While many activities within an organization are focused on reducing costs, initiatives such as innovative product and service development focus on creating more valuable and desirable offerings that increase revenues. Attention to human and natural capital (as well as financial capital) can often increase revenue by differentiating a company and its offerings in a beneficial way to the market. When this is done poorly however, it can be seen as green-washing and results in the opposite effect.

In contrast, bottom-line refers to Net Income (top line revenues – expense).  Bottom-line activities typically focus on cutting expenses in order to improve income.  William McDonough also coined this term from a design perspective in his landmark book Cradle to Cradle: Remaking the Way We Make Things (2002, North Point Press)

Triple Top Line Definition (Sustainability Dictionary http://bit.ly/9emKPX)

The effect that attention to sustainable management of natural, financial, and human capital has to an organization by increasing revenues (by offering more desirable products and services) and reducing costs and expenses throughout operations (through more streamlined operations. While many of these benefits are measured in terms of triple bottom line accounting, even more valuable are their effects to a company’s top-line financial performance because they require less capital investment and reduce the cost of capital.

In the UN/Accenture report, CEOs cited several barriers to achieving their sustainability goals, including ‘organizational silos’, competing priorities and lack of ‘value recognition’ by investors.  To counteract these barriers, several steps were needed, including CEO leadership to create real, value-added and long term change.  Specifically, five key areas were mentioned:

  • Shaping consumer preferences for sustainable products.
  • Training, training, training on sustainability issues- not only for the rank and file but managers too.
  • Improved investor communications with investors to create a better value proposition about sustainability.
  • Improved TBL metrics and communication of the value of business in society.
  • Partnering with governments to shape policy and regulation and create a level playing field.

A "Triple Top-Line" Strategy Yields Enhanced Business Growth

In sustainable terms, both a top-line and bottom-line focus is important. However, many recent efforts to slash expenses in the short-term can actually hurt long-term sustainable value.  Like the UN/Accenture study suggests, a focus on increasing top-line value through innovation, lean thinking, and smarter brand enhancement can lead to more sustainable and profitable growth.  I offer a simple framework to start down the path of sustainability from a top line perspective that recognizes human and natural capital as well as financial aspects of business.

1. Understand the current situation.

Gain awareness of the context in which environmental top line value can be realized.

  • Take stock of the organization’s core business strengths / strategies.
  • Identify the environmental aspects of the organization’s processes and services in each link of the organization’s value chain.
  • Identify customer environmental challenges and how the processes and services relate to customer needs.
  • Develop a business case for moving forward.

2. Develop a strategy.

Decide upon a strategy for creating environmental top line value that supports the organizations business strategy and takes advantage of the organization’s strengths.

  • Develop a top line strategy that will be a best fit for the organization.
  • Consider how the strategy will address sustainable business practices.
  • Determine whether any changes are needed to the existing business model or strategic plan to realize the strategy.
  • Develop an action plan to implement the strategy.

3. Choose initiatives and measure progress.

Develop and implement initiatives that will bring the strategy to life.

  • Consider how the organization’s existing processes and services can be positioned to address the chosen strategy, using the case studies for inspiration.
  • Examine each link of the product value chain to identify potential initiatives, such as reuse of recycled materials, resource optimization, reduced energy or water consumption, all of which can create top line value.
  • Measure your efforts by establishing meaningful and measurable key environmental, social and financial performance indicators
  • Be realistic about how process changes that can have direct environmental benefits fit into the overall set of differentiating features and benefits of the process. Do not assume that consumers will be willing to pay a price premium or accept performance or quality trade-offs.
  • Examine customers’ value chains to identify top line opportunities to meet customer expectations and support their sustainability initiatives.
  • Identify potential partnerships with stakeholders that will lead to top line value by promoting collaborative supply chain management.

4. Gain internal alignment.

The process of aligning an organization around the importance of taking action begins at the time an organization first develops an awareness of the context in which environmental top line value can be realized, and carries all the way through implementation of the top line strategy.

  • Gain buy-in from top management.
  • Communicate the business case for moving forward.
  • Identify internal champions within the organization who will move the top line initiative forward.
  • Start with pilot efforts to test the waters and generate early successes.
  • Communicate early successes.

5. Maintain the momentum.

Develop processes for maintaining the momentum of the top line initiatives.

  • Create a “change management” process to build environmental factors into new or modified processes or activities.
  • Develop business-based metrics of environmental and management and top line success.
  • Develop an award and recognition program for ideas or projects that result in environmental and/or management top line value.
  • Integrate environmental stewardship and associated activities with all operations.
  • Raise the capabilities of the customer service function to probe for and address customer-specific environmental or social responsibility issues/ concerns.

By following this simple ‘plan-do-check-act’ process, companies (large and small) can create upstream supplier alignment, downstream value for their customers and maintain a more secure competitive financial position in the global marketplace.

I believe the distinction between a good company and a great one is this: A good company delivers excellent products and services; a great one delivers excellent products and services and strives to make the world a better place. —William Clay Ford Jr.