Tag Archives: scm

A Systems Perspective on Sustainability, Supply Chain Management- The Intelligent Choice

18 May

As we approach the mid-point in 2011, the tea leaves of the economic recovery have ‘sustainability’ in supply chain planning and management firming up as a key “rebuilding” block in company activities.  Two recent studies from two different continents bear that notion out.  First, consultancy BearingPoint Ireland has released a report which says two-thirds of companies surveyed in Europe believe that a green supply chain is a strategic priority. The report, entitled Green Supply Chain: from awareness to action, is the fourth of a series of “supply chain monitors” from the private consultancy.  The study was conducted among about 600 European decision-makers by Novamétrie between 2010 and 2011, with a position within Supply Chain, Sustainable Development or Industrial Divisions.   Key industries captured includes: consumer goods, transportation, construction, automotive, industrial goods, retail, energy and utilities, chemicals, IT/electronics and pharmaceuticals, among others.

The goal of the report, according to the authors was to summarize “the evolution over the past two years in terms of mindset, maturity and actions efficiency [and] explores the green Supply Chain practices in Europe, in order to identify the significant improvements in the most representative industries. The results clearly underline a growing interest of executive managements in developing products with a low environmental impact. What was seen as a constraint is now considered as an opportunity.”

Executive Management Mandates, Reputational Risk Management Are Key Drivers

A notable “inflexion” occurred between this survey round and prior surveys.  For instance, in 2008, findings suggested that supply chain ‘greening’ was primarily being driven by important environmental and regulatory developments (such as REACH, WEE, RoHS or the European Union Emissions Trading Scheme).  Now, with compliance programs associated with these initiatives firmly entrenched or in initial development, the drivers appear to be shifting toward meeting internal executive management commitments and addressing reputation management and/or consumer demands.  In other words, according to the report, “Environmental actions presently address new constraints and motives, which are more mature and integrated to companies’ decision processes.” Key findings from BearingPoint’s report include:

  • 70% of surveyed companies declare that green Supply Chain is a true economical lever.
  • For 47% of the companies, the return on investment of a green Supply Chain is reached within 3 years.
  • More than half of European companies now use environmental criteria to assess their Supply Chain performance: share of recycled packaging material, CO2 emissions.
  • Two-thirds of companies adopted or plan to adopt a green policy for their purchases.
  • Manufacturers must be able to measure and reduce their carbon footprint if they are to succeed on export markets
  • Over half of the respondents in the survey said they did not renew contracts with suppliers who did not respect their green charter.
  • Buyers are preferably choosing suppliers with certified processes such as ISO 14001.

According to Bearing Points recent press release, Irish Exporters Association chief executive, John Whelan, said: “There is no question that Irish businesses which produce transparently environmentally positive products, delivered by carbon neutral logistics services will succeed on international markets.”

Sustainability Drivers Both Inside and Out the ‘Four Walls’

In yet another study, Prime Advantage, a buying consortium for midsized manufacturers, unveiled its seventh (2011) Prime Advantage Group Outlook (GO) Survey.  This survey queried small and midsized North American manufacturers, and found that more than 80 percent of North American companies surveyed indicated that they developing more sustainable or energy-efficient products largely driven by customer requirements and compliance regulations.  According to the study, “the biggest driving factors behind these changes are customer requirements (80 percent), followed by compliance regulations (53 percent) and shareholder directives (12 percent). In addition, 57 percent of respondents have also started buying more sustainable indirect products for internal consumption.”

A Systems Perspective Breeds Competitive Intelligence

The Bearing Point study made a statement that caught my eye and for which I wholeheartedly agree.  Identifying with a systems-based mindset that recognizes the intrinsic and realized value sustainability-focused business management is a critical fulcrum for green supply chain practices. I noted in a post last fall that The Fifth Discipline and The Necessary Revolution author Peter Senge argued (in the October Harvard Business Review) 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.

I’ve cited companies like Hewlett-Packard and Danisco as supply chain innovators in their product sectors.  These companies, among other innovators like Intel, P&G, IBM, GE and others, who’ve viewed supply chain in a systematic or holistic manner, organizations successfully have been applying that “big-picture thinking” needed to be truly innovative. Doing so can create leverage points that companies never realized they had before with their suppliers.

Clearly, the environmental (and often the social) footprint of a product extends beyond the four walls of the company who “brands” the product.  This footprint extends upstream and downstream, and must capture, control or influence inputs and outputs all along the way.  Some of the largest footprints (like energy and carbon) lie upstream or in the final hands of the consumers.  This is why leading companies are rethinking the global extents of their supply chains, exploring local sourcing options and implementing other operational efficiencies.

The results of the recent surveys indicate that companies in a wide number of sectors are waking up to the fact that sustainability is more than business innovation- it’s business intelligence.

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Global Supply Chain Survey: Sustainability Efforts Can Move Balance Sheets from Red to Black (with a Little Green)

28 Oct

The eighth annual “Global Survey of Supply Chain Progress,” was released recently.  The poll was conducted by Computer Sciences Corporation (CSC), Supply Chain Management Review, The Eli Broad Graduate School of Management at Michigan State University, with assistance from The Council of Supply Chain Management Professionals (CSCMP) and Supply Chain Europe Magazine.

This year’s survey gauged respondents present competencies and future plans in such areas as supply chain management policies and practices, supply chain continuity, and green and sustainability initiatives.  Understandably, with the down turn in the economy of the past couple of years, the results showed a mixed bag.  However, a key finding from the survey is that supply chain management (SCM) is now perceived by the vast majority of respondents as being of core business importance.  Leaders that implanted SCM practices that led to cost savings yield far greater results than the laggards…er, followers.  Nearly 77 percent of the respondents reported that SCM improvement and emphasis had increased over the past year, leading me and the surveyors to think that many companies may have been much worse off without SCM.

The Green Supply Chain Edge

Meanwhile, green supply chain initiatives indicated “lukewarm results” and once again, the most positive improvements reported resided mainly with the SCM leaders. A large number of respondents reported a modest but steady 3 to 4 percent annual savings, especially in areas of energy, transportation, and packaging.  Clearly, sustainability initiatives have a long ways to go before significant positive results are achieved. But as I see it, that small margin may just be the difference maker for many companies financial health.

The survey found that 49 percent saying they were currently implementing options and another 31 percent currently evaluating options.  When asked to judge performance from a sustainability perspective, the response was a typical bell shaped curve.  Nearly half of the respondents placed themselves squarely in the middle of the pack.

Kimberly-Clark Shows How Green Gets Done

Efficient supply chains are increasingly essential to maintaining prices and generating new revenue.  One example where efficiency has paid off handsomely, with additional environmental benefits is in the case of Kimberly-Clark- you know, the Kleenex folks (and so many other personal care products).   Kimberly-Clark is among those companies that successfully demonstrate that a focus on sustainable business practices goes hand-in-hand with cost reduction and efficiency.  Not only is the company designing and manufacturing products with a smaller environmental footprint, but they are getting smarter about how they transport their product.

According to i2 Technologies, a supply chain solutions provider, Kimberly-Clark is “ both reducing its environmental impact and running a lean and efficient supply chain, which in turn brings real benefit to its biggest customers, grocery retailers, and ultimately to consumers. Along with other initiatives designed to improve its impact on the environment, Kimberly-Clark has implemented i2 Transportation Management order fulfillment solutions in its European and North American operations that manage transportation pricing but have also reduced carbon dioxide (CO2) output. The company estimates that it’s saved over “£1 million, a reduction in mileage of 380,000 miles and a reduction in CO2 of as much as 540,000 kg”.

Perhaps Kimberly-Clarks CEO Tom Falk summed it all up: “”Because sustainability is a core value at Kimberly-Clark, we know that making better choices for the environment and society can many times mean making better choices for our business.”

The innovative example above and the recent CSC Global Survey demonstrate that small incremental gains can make a huge difference between being in the red or in the black on the balance sheets.

This post was originally published on my New Green Supply Chain Blog, which can be found at https://community.kinaxis.com/people/DRMeyer/blog

New Green Supply Chain Blog on Kinaxis Supply Chain Community

6 Aug

Friends- I want to let you all know that I have recently been invited to be the lead expert blogger on green supply chain issues for the Kinaxis Supply Chain Community. 3500 members and growing strong! As mentioned, The Supply Chain Expert Community is “Your social place for learning, laughter, sharing and connecting.”

LEARN—Read insights from our bloggers and members. Ask questions, discuss trends, research topics.

LAUGH—Visit the “Just for Laughs” section, and enjoy some supply chain humor.

SHARE—Impart the lessons you’ve learned and the obstacles you still face. Invite your friends and colleagues to join the discussion.

CONNECT—Meet peers who face similar challenges and opportunities. Give and receive support.

You can view my Green Supply Chain Blog here:

https://community.kinaxis.com/people/DRMeyer/blog

A Green Supply Chain Starts with a Promise, But Needs Verification Too

26 May

In the past month, a number of large-scale products manufacturers (IBM, Ford, Intel, Proctor & Gamble, Puma) and service providers (Kaiser Permanente) have issued sustainability focused supply chain related announcements.  As noted by Green Advantages’ Andrew Winston, a common theme of each of these mandates focuses on “transparency” (http://bit.ly/a8Tjfq).  Also, new reports are emerging that companies are taking climate change programs to their respective supply bases (http://bit.ly/bbNCya) as means to support corporate responsibility reporting.

But, while a “Green Supply Chain” starts with a promise and a goal or two, what I have heard from many logistics and sustainability professionals that the hard work centers on actually requiring and monitoring supply chain compliance.  Most practitioners believe, as I do that sustainable sourcing and green supply chain effectiveness must include supplier monitoring and “verification” to truly be effective and sustainable.  This need was also underscored recently by reports out of China that many IT suppliers to major global electronics manufacturers were in “gross” violation of many of China’s environmental regulations (see China’s IT Poisons in the Huffington Post http://huff.to/a3mlcx).

That is why the mandates from IBM, Proctor & Gamble and Kaiser Permanente stand above the rest and offer great promise.  Each of these programs includes a verification element to supplier conformance.  In addition the IBM and Proctor & Gamble initiatives contain a component that rates individual vendors on the basis of maintaining a proactive environmental management system and other key environmental performance metrics important to each company.  This data in turn is rolled up to support company-specific corporate sustainability performance criteria.  Monitoring and verification through demonstrated performance metrics is strongly encouraged through implementation of proactive management systems (such as ISO 14001-2004 or other continual improvement based certifications).  This step assures that the information provided by suppliers is accurate (so as to not compromise what is reported and to avoid reputational risk in corporate social responsibility reporting).

There is no doubt in my mind that green supply chain management 1) improves logistics agility by helping company’s mitigate or leverage risks and speed innovations; 2) increases adaptability by fostering innovative processes and continuous improvements, and (most importantly) 3) promotes alignment, by creating a platform to negotiate policies between suppliers and customers, thus resulting in better alignment of business processes and principles.

Last month I spoke at the Aberdeen Research Group Supply Chain Summit in San Francisco (http://bit.ly/d7e856 )on strategic and tactical steps that companies can take to green their supply chain.  A key takeaway from many of the presentations at the conference was the critical importance and value of “collaboration” and optimized value chain management to leverage supply chain positioning.  These two elements are critical elements to successful supply chain “greening” as I recently noted (http://bit.ly/93C2Xp).  Three tactical tools that I discussed at the Aberdeen Summit include:

1) Prequalification of suppliers

  • Require/encourage environmental criteria for approved suppliers
  • Require/encourage suppliers to undertake independent environmental certification (ISO 14001)

2) Environmental requirements at the purchasing phase

  • Build environmental criteria into supplier contract specs
  • Incorporate 3BL staff on sourcing teams

3) Multi-tiered supply base environmental performance management

  • Supplier environmental questionnaires
  • On site supplier environmental audits and assessments

Finally in order to be successful in implementation of sustainable supply chain practices, it’s vital that suppliers are engaged early in the supply chain development process by : 1) working with industry peers to standardize requirements; 2) informing suppliers of corporate environmental concerns by issuing statements related to triple bottom line priorities to suppliers or distributing a comprehensive green supply chain management policy ; and 3) promotion of exchange of information and ideas through sponsored supplier events and mentoring programs.

I summed up my presentation (can be viewed here http://slidesha.re/9fY6mz) with a few key points, which I offer for your consideration:

  • Look for the win-win and make the business case, both internally and externally
  • Consider the holistic supply chain – engage your key suppliers that are most vital to your most important product
  • Consider all aspects of your business & innovate
  • Consider the Extended Enterprise both up and downstream of your organization (several tiers deep)

Perhaps most importantly, get started today and engage your supply chain to implement green practices.  Improving sustainability in the supply chain and implementing verification practices may be the key to pulling away from your competitors and establishing your company as sustainability-focused, “best-in-class”  leader.