Tag Archives: coca cola

“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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Sustainability, Peter Senge, and the Necessary (Supply Chain) Revolution.

29 Sep

I just finished reading an interview with Peter Senge in the October Harvard Business Review.  Senge, for those of you that are unfamiliar, founded the Society for Organizational Learning, is a faculty member at MIT Sloan School of Management, and the author the The Fifth Discipline and The Necessary Revolution.  Senge maintains that to make progress on environmental issues, organizations must understand that they’re part of a larger system. Senge also makes a great point that companies will be in a better competitive position if they understand the larger system that they operate within and to work with people you haven’t worked with before. And while these two skills might seem distinct, in practice they’re interwoven. This is generally because systems are often too complicated for one person to grasp, crossing over many boundaries, both internal and external.  It’s these external boundaries that supply chain management issues begin to become apparent.

According to Senge, and as I mentioned last month in an earlier post about Starbucks, supply chains support whole systems thinking because they focus on the “nature of the relationships”. In the HBR article, Senge maintains that in most supply chains, 90% of them are still transactional.   Manufacturer or retailers still pressure upstream suppliers to get their costs down and little incentive is given toward innovating together.  This in turn erodes trust, however, as I have mentioned in this space, changes are everywhere.  Some companies like Starbucks, Coca-Cola and Walmart are also partnering with Non-Governmental Organizations (NGO) and working in an open source manner with industry associations to innovate.   Successful ventures like Walmart/Environmental Defense Fund, Unilever/Oxfam and Coca-Cola/World Wildlife Fund are taking a collaborative approach to problem solving that drives innovation, breeds trust and industry “cred” and offer NGO’s a wider voice in addressing social, environmental performance issues in the supply chain.

But success in levering supply chains to impact environmental performance ultimate resides with corporate leaders.  Senge maintains to successfully engage thousands and thousands of people around the world from multiple organizations, you’ll need technical innovations, management innovations, process innovations, and cultural innovations.  And to effectively achieve these innovations take bold, often heretical leadership.  Organizations need to often take a step back from the details and “see the forest for the trees” (and hopefully not just see more trees!)

Research and practice in supply chain management is beginning to prove once and for all that supply chain as a “practice” offer unique learning opportunities related to triple bottom line based sustainability.  Learning experiences can range from relatively simple, incremental modifications to a current knowledge set – for example, new environmental regulations like REACH and RoHS – through to complex new approaches which will involve experimentation, small scale piloting and larger scale adaptation (such as those designed to help transporters manage their carbon emissions).

How does your company use “whole systems” thinking to manage supply chain issues? In coming weeks I will begin exploring supply chain learning and management through a sustainability lens, and share some findings from various manufacturing sectors.  It’s my hope that readers can then begin to understand how to apply whole systems approaches across enterprises in the supply chain.  It’s my grand plan that these ideas will gel into practical steps that add value and become a core operating principle in your company.