Tag Archives: distribution

Green Supply Chain Management Requires Less Procrastination & More Innovation, Leading by Example

15 Oct

Admit it- we’ve all done it.  Procrastinated. Waited until the brink of a bad outcome.  Not taken the time to thoughtfully, proactively, pragmatically complete an assignment, implement a new ‘leading edge’ technology or launch a disruptively innovative initiative.  Instead we react, overlook great ideas for something less, produce a less articulate response to an inquiry, or implement a semi thought out idea.

Even in the business world, whether in supply chain management or in adoption of the ‘triple bottom line’ in business strategy, there are leaders and there are laggards.  Innovators and adopters.  I was reminded of this when I ran across a research paper that was published in “Sustainability” Journal this past spring.  The article, “Supply Chain Management and Sustainability: Procrastinating Integration in Mainstream Research” presents the results of a study conducted by several university researchers in The Netherlands. The researchers noted that “procrastination can be viewed as the result of several processes, determined not only by individual personality, but also by the following factors:

  • availability of information;
  • availability of opportunities and resources;
  • skills and abilities; and
  • dependence on cooperation with others.”

In addition, in a review of more than 100 additional studies on procrastination, the following additional items were found to likely to influence procrastination:

  • the nature of the task, and
  • the context of the issue.

It is these last two issues that the authors raised as primary reasons for procrastination, especially regarding embedding sustainability research and practices in supply chain operations and management. The authors found that “the nature of the task”, because it’s often complex and requires many internal and external stakeholders, and therefore tends to “generate conflicts”.  Also, the roots of supply chain management and related research are generally grounded in operations management and operations/logistics.  Therefore, the researchers noted that environmental and social aspects of supply chain management are foreign,  “out of context” and not wholly integrated into supply chain management and research.  I would also argue that dependence on others is a key issue as well given the widespread, outward facing challenges associated with supply chain coordination.

So what this means is that if a concept is foreign or unfamiliar or “out of context” it’s either set aside as being non-value added.  Also because of some of the complexities often inherent in grasping and applying sustainability concepts, some just throw up their hands and say “I’ve no time for this”.  This in turn can lead to procrastination in the real-world application of sustainability in supply chain management.

In a study conducted during the height of the recession (late 2009), GTM Research found that despite its growing prominence, “sustainability is not a core part of most companies’ strategies today or …a prime driver of their supply chain agendas.”  The study found that sustainability lies in the middle of the pack of supply chain priorities today, behind cost cutting.  The graphic presents a “leaders vs. laggards” scenario.  The 23% difference between leaders and laggards related to sustainability initiative implementation is large and underscores the work that remains to advance the “value proposition” for sustainability in supply chain management.

Prior posts have described positive aspects of adopting whole systems-based, collaborative and transparent approaches to sustainable sourcing and manufacturing,  and green logistics.  Sustainable thinking in supply chain management also value chain practices supports environmental and social responsibility – so why aren’t more companies adopting these methods?

I know who many of the leaders are in implementing greener and more sustainable supply chain practices in their respective markets and I’ve written about them here – Walmart, HP, Dell, Patagonia, Nike, Intel, Cisco Systems, IBM, Herman Miller, Proctor & Gamble, Unilever, Campbell Soup, Timberland, Danisco, UPS, FedEx, Staples immediately come to mind.  Laggards? Well you know who you are, but I am not pointing fingers.

While the future looks bright for a “greener” perspective in supply chain management, there still remains a stigma that a sustainable value chain is a costly one. In reality, there may be some up-front costs associated with some initiatives- very true.  But companies must take a longer view and pencil out the ROI of supply chain sustainability best practices. And its possible by taking a leap and reaping the benefits.  I’m confident that those organizations who wish to lead (and stop procrastinating!) will find a great many benefits including:

  1. less resource intensive product designs,
  2. better supply chain planning and network optimization,
  3. better coordinated warehousing and distribution and
  4. more advanced and innovative reverse logistics options.

Those who choose to lead will realize significant cost savings, improved efficiencies and a more secure and profitable future.

Give it a whirl- what have you got to lose- or should I say, gain?!  C’mon, tell this community what you think.  We’re listening.

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“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.

Sustainable Sourcing with a “Green” Supply Chain Brings Competitive Advantages

2 Apr

Well, can the economic tides be turning?  In my former home base of San Diego, they had a saying: “It takes a long time to carefully turn an aircraft carrier around”.  Capgemini Consulting’s new study of 300 leading companies across Europe, US, Asia-pacific and Latin America states that economic recovery has surpassed economic downturn in the list of business drivers for 2010.

Some key findings of note from a supply chain perspective:

  • Over 58 percent of the supply chain managers say their main business driver for 2010 is “Meeting (changing) customer requirements”.  (Well, I guess that is a no-brainer, as a successful business should be nimble and always responsive to customers’ needs to succeed in the marketplace)
  • More than 50 percent of the participating companies indicate they will start up or continue with operational excellence / LEAN.  Another obvious direction – reduces waste, optimize resources.  This should translate into bigger profits and competitive position.
  • Sustainability is the second most important business driver for 2010 — up 16 percent over last year. However, the survey results suggest that this has not yet directly translated into a significant increase in supply chain sustainability projects.  Well, remember that aircraft carrier quote that I just mentioned?

These findings really suggest that while the road to recovery is long, that much foundational work remains.  But the trend from survival to revival is in play now.

Perhaps the biggest take-away from this report is the increasing emphasis of supply chain management in creating the proper ingredients of a successful business strategy. And coincidentally, the concept of a Green Supply Chain is gaining interest among operations practitioners as a sustainable and profitable undertaking. A Green Supply Chain can be thought of as a supply chain that has integrated environmental thinking into core operations from material sourcing through product design, manufacturing, distribution, delivery, and end-of-life recycling.

The implementation of Green Supply Chain initiatives has evolved from strictly a compliance issue into a means of generating value. Traditionally, companies incorporating green projects have focused solely on cost avoidance by assuring compliance, minimizing risk, maintaining health, and protecting the environment. In the emerging value-creation model, implementing green initiatives along a company’s supply chain can raise productivity, enhance customer and supplier relations, support innovation, and enable growth. The Green Supply Chain is no longer exclusively about green issues, but also about generating efficiencies and cost containment. As organizations restructure to reduce their company’s environmental footprint, supply chains have increasingly become a key area of focus. Improvements in transportation efficiency, operations, raw material selection and packaging are all topping the list of “green” supply chain initiatives.

Source: Diamond Management & Technology Consultants

Green Supply Chains enable organizations to:

  • specialize and concentrate manufacturing efforts in a way that manages environmental risks and costs of compliance with existing or new regulations;
  • improve product, process, and supply quality and productivity.
  • make innovative decisions that respond to “green economy” requirements;
  • gain access to key markets through ISO 14001 registration or other certifications;
  • improve or create brand differentiation and customer loyalty by offering unique capabilities to address environmental related requirements and expectations;
  • reduce customer pressure and even gain preferred status; and

The ISO 14001 Certification / Supply Chain Nexus

Over the past several years, studies have been performed worldwide comparing ISO 14001-2004 and its value in development of green supply chains.

  • One recent study found that more than 75% of manufacturing executives surveyed had ISO 14001 certification or were in process in order to enhance their competitive supply chain position,
  • Companies that are already ISO 14001 certified are 40% more likely to assess their suppliers’ environmental performance and 50% more likely to require that their suppliers undertake specific environmental practices,
  • Preference in market share is often given to suppliers that have attained ISO 14001-certification,
  • Consumer preferences are increasingly important drivers for many companies to improve their supply chain environmental activities,
  • Procurement officers increasingly use ISO 14001 certification as a required vendor qualification,
  • Suppliers without an environmental management system will feel increasing pressure to modify their practices or risk losing customers, and will be subject to higher costs for licenses, inspections and insurance.

Questions and issues to consider when developing your Supply Chain/Value Network:

  • Will the service provider enhance the cause of sustainability both upstream (i.e., primary customer/end customer) and downstream (i.e., all tiers of supply base, including logistics service providers)?
  • Will some relationships drive significant redesign of the supply chain, including product innovations and modifications (e.g., collaborative development of decomposable packaging material?
  • Is your supply chain implementing progressive environmental management systems to manage their environmental footprint?
  • Establish a more cohesive collaborative model in transport, warehousing and distribution that will drive efficiencies up and incremental costs down, while reducing environmental impacts throughout the supply chain.

The Green Economy Post assembled a number of Green Supply Chain studies to assist you in your efforts to understand and address these issues in your business (15 Green Supply Chain Studies You Should Know About http://bit.ly/6X3YDU).

Environmentally responsible procurement, in alignment with your company’s environmental sustainability values, is critical for organizations that desire to manage their environmental risk and maintain a competitive advantage.

Not only does this mean that businesses must choose their suppliers well, they also have to ensure that suppliers comply with the standards they claim to meet.

I will have the honor of conducting a breakout session on this topic on April 13th at the Aberdeen Research’s Supply Chain Management (SCM) Summit in San Francisco, CA (http://summits.aberdeen.com/index.php/Supply-Chain-Management-Summit/2010-scm-summit-overview.html).  Hope to see you there!

Green Transportation- All It Takes is Innovation and Drive

16 Mar

Framing the Issue

  • “Only 22 Fortune 500 companies have begun blunting their supply chain’s impact on the environment”
  • The amount of cargo shipped is “expected to triple in the next 20 years”
  • Measuring ghg emissions is the “fundamental starting point” of “any serious entity”
  • When reducing transportation emissions, “it is best to begin with the ‘low-hanging fruit’”
  • Rail transport is four times more efficient per ton than motor and 600 times more efficient than air transport

‘Greening” Transportation in the Supply Chain

“Logistics” is the integrated management of all the activities required to move products through the supply chain. Generally, “green logistics” focuses on seeking ways to manage the environmental footprint of the supply chain associated with your product, from point of manufacture through to the end user.  This translates often to taking a life cycle approach to manufacturing and distributing your product (as well as reverse logistics in some cases).

Transportation is a very key element of the logistics process and the supply chain which runs from vendors through to you to your customers. It involves the movement of product, service/speed and cost which are three of the five key issues of effective logistics. It also impacts with the other two logistics– movement of information and integration within and among suppliers, customers and carriers.

The 2009 14th Annual 3PL Study found that newer concepts and technologies are emerging to help both 3PLs and shippers cope with a “new, slower growth world”. The report advocated creating “horizontal, cross-company supply chains refereed by neutral third parties. This innovation is based on the concept that by clustering specific logistics activities and consolidating supply chains, significant economies of scale can be achieved in terms of efficiency (logistics cost), effectiveness (customer service) and environmental sustainability (carbon footprint)”, and as noted below.

Solutions:

From a logistics standpoint, 3PL providers might consider development of strategies to eliminate unnecessary materials handling or avoidable transport, and look for efficiencies that could move more product at a time.  Trucking, rail, marine and air modes of transport all have their up and down sides and it’s best to look at point to point options that will result in lower energy/fuel costs, use of modes that use cleaner fuels (LNG, ultra low sulfur diesel), and generate fewer greenhouse gas emissions (use of larger ships that employ more efficient equipment or operational practices).

Any number of “green” strategies to enhance the competitive position of freight-forwarding services are being implemented worldwide , including at key ports of entry here in the U.S.  Most freight related environmental issues generally involve solutions to reduce energy consumption and limit greenhouse gas emissions.  Naturally some carbon or energy intensive issues can be managed only if they are directly controlled by freight forwarding companies, while other activities not under direct control can only be influenced in practice (for instance contract carriers).

Business Case Examples

  • Freightliner Trucks. Freightliner Trucks addressed the issue of fuel savings by focusing on more efficient aerodynamics. The aerodynamic features to the company’s Cascadia truck result in 7.8 percent to 22 percent less drag than other aerodynamic tractors, resulting in annual fuel savings of $900 to $2,750 per truck.
  • Nortel: Nortel shifted from air to sea transportation to deliver significant cost reduction and took major adjustments in production planning and order scheduling to make it work For Nortel, the increased use of sea freight has saved more than $1,000,000 versus the more expensive air freight cost, as well as the opportunity to negotiate improved pricing that has realized approximately $500,000 of cost reduction.
  • The 2009 14th Annual 3PL Study: This study found that shippers want to create more sustainable, environmentally conscious supply chains. That means striking a balance between labor and transportation costs and the market value of carbon-reducing processes, compressed production cycles and less carbon intensive transportation modes that beat the competition.

Summary

Eyefortransport’s Green Transportation & Logistics European Report  (2008-09)  indicated the “The results from this year’s survey show that the supply chain industry has increased its focus on green initiatives from last year, and anticipates this trend to continue for some time yet. This has been shown in most of the topics of the survey, from increased adoption of initiatives, greater awareness of options available, growing incentives for greening whilst barriers are diminishing, to greater anticipated ROI and effectiveness of supply chains. …While those companies who have adopted strategies are gaining, those who have been left behind are finding it harder to implement changes. “

A 3PL green logistics strategy, regardless of whether you are involved with domestic or international, to be effective in gaining a competitive foothold, must recognize the criticality of:

  • Customer requirements
  • Mode selection
  • Carrier relationships.
  • Measuring/benchmarking
  • Regulatory impact.
  • Carrier mergers and alliances and closings
  • Flexibility

Looking at these basic challenges through a sustainability lens offers greater opportunities to find innovative opportunities to optimize resources, leverage risk and maintain cost volatility through enhanced supply chain relationships

It goes to say that a sustainability-focused 3PL strategy one innovative way to respond to the dynamics of your business, its customers, suppliers and operation through cost-effective, value added supply chain solutions.