Tag Archives: shipping

Collaborative Competition + Sustainability = The 21st Century Supply Chain Solution

24 Mar

Last week, I was honored to be the dinner keynote speaker at the European Petrochemical Associations 2nd Interactive Supply/Demand Chain Workshop in Brussels, Belgium.  What a beautiful place, where cobblestones meet bullet trains- two completely differing eras of transportation systems still working (collaborating?) after all these years.  This years’ workshop theme was “21st Century Supply Chains for the Chemical Industry”.  2011 has also been declared by the United Nations Educational, Scientific and Cultural Organization (UNESCO) as the International Year of Chemistry (see the EPCA’s cool new video, “Chemistry- It’s All About You” here).

Throughout the highly interactive, roll up your sleeves workshop, the dialogue centered on innovative tools and value-added approaches to drive supply chain sustainability. Discussion focused on how the chemical industry and its supply chain can support an evolution from the old linear, materials economy mindset to a more circular, systems based sustainability minded economy, as Annie Leonard describes in the Story of Stuff.  As a matter of fact, that short film was the lead-in to my speech on supply chain sustainability and the nexus with consumerism, and the important role of chemical industry and its supply chain.

As I noted in last week’s post, consumer demand appears to be contributing (at least in part) to some of the gains in eco-friendly and sustainability focused design and manufacturing progress that’s being made in the global marketplace. In addition, shipping and logistics partners are showing leadership in embedding sustainability in the “source, make, deliver and return” product value chain as well.

The (Re) Emergence of “Co-opetiton”

The 21st Century Supply Chain is a rapidly evolving business landscape.  Prior to around 2005,   the supply chain landscape centered on vertical collaboration between subsequent actors in the same supply chain, or between suppliers, manufacturers and customers.  Since the mid 2000’s, collaboration has refocused along the horizontal axis.   What appears to be happening is more evidence of collaborative exchanges between companies in the same market, or alliances, partnerships, clusters, and networked organizations.  This represents a real paradigm shift” that collaboration between producers, service providers and their customers.

Another older term coined in the mid 1990’s, “co-opetition” (or cooperative competition), may now find its place in the 21st century supply chain lexicon.  Co-opetition occurs when companies work together for parts of their business where they do not believe they have competitive advantage and where they believe they can share common costs.   The basic premise of co-opetition strategy relies on leveraging alliances, partnering with other shippers (even competitors!) to control logistics  and transportation costs.   In  “games theory, this would be called a “plus-sum” scenario, in which the sum of what is gained by all players is greater than the combined sum of what the players entered the scenario with.  For instance, co-warehousing or load consolidation in transportation and warehousing are straightforward examples where collaborative competition has enormous financial and environmental benefits.  Co-opetition can in effect lead to expansion of the market and the formation of new business relationships, perhaps even the creation of new forms of enterprise.

Co-opetition partners typically include:

  1. Producers, Customers, Consumers who drive producer demand and determine product eco-footprint
  2. Shippers and Terminal Operators: who generate the freight flows and provide the critical infrastructure for product flow
  3. Logistic Service Partners (3PLs): who can design and implement optimized solutions and move the freight
  4. Fourth Party Providers: who can facilitate partnerships, referee blockages, find common ground; and
  5. Governments who can assure that legal and regulatory arrangements are in place to support seamless collaboration

At the same time, though for co-opetition to be truly sustainable, there must also be  a cultural fit, strategic fit,  economic and operational fit,  and, trust and resources.

Source: Adapted from GEMI, Forging New Links

Co-opetition implies that cooperation and competition merge together to form a new kind of strategic interdependence between firms, giving rise to a co-opetitive system of reciprocal value creation. This new era of globalization has opened the door to co-opetition for small to midsized businesses that lack the scalable resources that larger companies have.  So this makes me think that if competition is a key driver behind innovation, and collaboration is a key 21st Century supply chain success factor, then collaborative competition (co-opetiton) may be a new solution to drive supply chain sustainability. I posed this theory to a warm response by the 65-plus chemical industry logistics professionals in Brussels. Yes, it’s a bit of a heretical idea, but one that has shown in some industries to work.  Take Proctor & Gamble’s Connect + Develop or Nikes Considered Design and the Environment open innovation models.  Both offer opportunities to collaborate and drive innovative solutions that can benefit consumers, and open business channels to entrepreneurs lacking resources to bring new (possibly more sustainable) products or processes to market.

Summary: Forging New Links in the Chain

Co-opetition offers opportunities for manufacturers and their upstream suppliers and customers to strengthen each other’s performance, enhance differentiation and foster end-consumer brand loyalty in the following ways:

  1. By tapping into to customer and consumer preferences, industry can adapt its processes, products and services to enhance competitiveness
  2. By collaborating, customer-supplier teams can address Triple Bottom Line (3BL)-related technical challenges that affect the profitability and performance of the overall supply chain.
  3. Reciprocal value creation through vertical and horizontal “co-opetition” means recognizing and quantifying each other’s value contributions
  4. By sharing intelligence and know-how about 3BL issues & emerging technologies.
  5. By incorporating 3BL advantages into their products and services, e.g., reduced cost of ownership.

What ideas do you have to forge new links in the sustainable supply chain?  Let’s start the collaboration now, shall we?

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Solving the Sustainable Sourcing & Green Supply Chain Management Puzzle: A 2010 Rewind

22 Dec

2010 is nearly ‘in the books’, and I vowed that I would not fall prey to the endless lists and recounting of annual accomplishments.  However, never in my 30 years in the sustainability and environmental business has there been so much attention paid to the influence of supply chain management and its role in the greening of business.  2010 has been truly remarkable in a number of key areas of green supply chain management from a number of perspectives, including: policy and governance, operations and optimization, guidance and standardization and metrics.  The green pieces of the supply chain and sustainability puzzle appear to be nicely falling into place.  Key themes that I can glean from this most incredible year are:

Big Industry Movers and Government Green up the Supply Chain- over the past year, observers and practitioners read nearly weekly announcements of yet another major manufacturer or retailer setting the bar for greener supply chain management.  With a much greater focus on monitoring, measurement and verification, Wal-Mart, IBM, Proctor and Gamble, Kaiser Permanente, Puma, Ford, Intel, Pepsi, Kimberly-Clark, Unilever, Johnson & Johnson, Herman Miller among many others made a big splash by announcing serious efforts to engage, collaborate and track supplier/vendor sustainability efforts.  Central to each of these organizations is how vendors impact the large companies carbon footprint, in addition to other major value chain concerns such as material and water resource use, and waste management.  Even government agencies here in the U.S. (General Services Administration) and abroad (DEFRA in Britain) have set green standards and guidelines for federal procurement.  More and more companies are jumping on the green train and the recognition is flowing wide and deep.

Supply Chain Meets Corporate Social Responsibility- Adding to many companies existing concerns over environmental protection, large products manufacturers such as Nestle, Corporate Express, Danisco, Starbucks, Unilever and the apparel industry stepped up in a big way to address human rights, fair labor and sustainable development in areas in which they operate throughout the world. Each of these companies and others like WalMart have embraced the “whole systems” approach that I’ve previously written about in this space and that underscore transparency and collaboration the “value” in the supply chain.  Each company recognizes that to be a truly sustainable organization, it must reach deep beyond its four walls to its suppliers and customers.

Emerging Sustainability Standards Embrace Supply Chain Management- This year, the international Organization for Standardization (ISO) unveiled its ISO 26000 Corporate Social Responsibility guidance document.  In addition, two prominent organizations, UL Environment and Green Seal unveiled and vetted two sustainability focused product (GS-C1) and organization (ULE 880) standards, both of which may markedly affect supply chain behaviors in the future.  Central to all these standards and guidelines is how important supply networks are in supporting the entire product ‘value chain”, not only from an environmental perspective, but from a social and community focused perspective.

Transparency and Collaboration Take on a Green Hue– in April, I had the honor of addressing C-suite supply chain managers and practitioners at the Aberdeen Supply Chain Summit in San Francisco.  A central theme of this conference involved the critical importance of collaboration throughout supply networks to enhance efficiencies and optimize value.   My talk (linked here) focused on how the most successful greening efforts in supply chains (like those used by Unilever, Herman Miller and Hewlett Packard) were based on value creation through the sharing of intelligence and know-how about environmental and emerging regulatory issues and emerging technologies.  Suppliers and customers can collaboratively strengthen each other’s performance and distributing cost of ownership.  Practitioners have found “reciprocal value” through enhanced product differentiation, reputation management and customer loyalty. And the continuing Wikileaks controversy is boldly reminding the business world that accountability and transparency and corporate social responsibility is vital and may even be a game changer in how products and services are made and delivered to the global marketplace.

Logistics Turning to Greener Solutionsnumerous studies and surveys conducted by peer organizations this year underscored how sustainability among carriers and shippers was central in the minds of most logistics CEO’s.  Whether it was by land, air or sea, shipping and logistics embraced sustainability as a key element of business planning and strategy in 2010.  I also had the pleasure of visiting briefly with FedEx’s Vice President, Environmental Affairs & Sustainability (@Mitch_Jackson) this fall and learned of the myriad of operational innovations and sustainability focused metrics that the company is tracking throughout its operations and maintenance activities. And UPS even mentioned its efforts to manage its carbon footprint in its catchy new brand campaign “I Love Logistics”.  Finally logistics companies are partnering with manufacturing to support reverse logistics efforts designed to manage end of life or post consumer uses of products or resources.

Lean Manufacturing Meets Green Supply Chain as manufacturing continues its slow rebound from the Great Recession, companies are recommitting themselves to implementing less wasteful production as a way to leverage cost and enhance savings.  Parallel efforts are in play also to incorporate more environmentally sustainable work practices and processes.  Enhancing this effort to lean the product value chain is recognition of upstream suppliers and vendors work practices and possible impacts they may have on manufacturing outputs. Lean efforts have been demonstrated to yield substantial environmental benefits (pollution prevention, waste reduction and reuse opportunities) as well as leverage compliance issues.  More and more, companies are exploring the overlaps and synergies between quality-based lean  and environmentally based ‘green’ initiatives.

Supply Chain and Climate Action Rounding out the year, the climate summit in Cancun (COP16) produced modest results (given the low expectations all around, what was accomplished looked huge by comparison to Copenhagen).  Activities at COP16, especially by the private sector were geared toward identifying key linkages between supply chain sustainability and climate change.   Perhaps the biggest news to emerge from the two-week conference was an effort by apparel manufacturers to enhance supply chain social responsibility and an internet database that will list the energy efficiency of most ocean-going vessels, in a scheme designed to reduce shipping emissions by nearly 25%.  As I noted, this effort is important not only because it recognizes shipping and transport as a backbone” of commerce (as other industry sponsored programs have recognized already), but because of the value of transparency in enhancing supply chain efficiencies.

Looking Forward to 2011

Yes indeed, it’s been a big year for supply chain management and its intersection with sustainability.  I see little for 2011 that will slow down this upward green trajectory, and naturally I am glad.  I am glad that more businesses “get it” and don’t want to be viewed as laggards in leaning towards a business ethic that values sustainability and socially influenced governance. I am glad that more companies are seeking out green innovation through new technologies and being ‘first movers’ in their respective business spaces.

And I am glad that you (my readers) and I am here to be part of the change.

Sir Bransons Climate Challenge to Sea Cargo Shippers- Carbon Accounting Successes & New Tools

7 Dec

In prior posts I have discussed the importance of transportation and logistics as critical elements in anchoring a sustainable supply chain (see separate posts here and here).  Last week I discussed the key linkages between supply chain sustainability and climate change.   No comes a bit of encouraging news from the Cancun Climate Summit (COP16), still in progress through this week.  A free internet database was announced over the weekend, the focus of which will list the energy efficiency of almost every ocean-going vessel, in a scheme designed to reduce shipping emissions by nearly 25%.  This effort is important not only because it recognizes shipping and transport as a backbone” of commerce, but because of the value of transparency in enhancing supply chain efficiencies.

“By eco-labelling clean and dirty ships, we hope to change the mindset in shipping and begin making gigaton-scale reductions in emissions,” said Peter Boyd, director of Carbon War Room.  The Carbon War Room was a co-founded by Sir Richard Branson.  Using publicly available data on the engine size and CO2 emissions of nearly 60,000 ships, exporters and importers, as well as holidaymakers on cruises, will be able to choose between ships that run on cleaner fuels and have other technologies designed to reduce environmental “loads”.

The initiative, called Shippingefficiency.org, rates ships on a scale from A to G in a similar fashion to ratings given to fridges or washing machines. According to the site, the Energy Efficiency Design Index (EEDI) ratings for an individual ship are calculated by assessing the values for that ship to overall average values for all ships of that type (e.g. bulk carriers) and to other ships of a similar size within this type. It will “allow supermarkets, oil and mining companies, food importers, retailers and manufacturers” to specify that their goods are sent from point to point by the least polluting ships.

The “Dirt” on Sea Shipping…

The shipping industry has been challenged for decades to find ways to efficiently deliver the majority of goods from point of manufacture to point of use.   Ocean transport carries more than 90 percent of the world’s traded goods and contributes between 3 percent and 4 percent of global emissions.  Shipping has been slow to address carbon emissions, choosing to focus on containment and control of other critical pollutants such as sulfur dioxide (SOx) and nitrogen oxides (NOx)[1]. According to the International Maritime Organization (IMO), the UN body that governs shipping, the industry has an opportunity to make substantial money by reducing the first 250 million tons of its CO2e.[2]

Shipping has a number of inherent institutional issues that hamper demand for widely available fuel-efficient technologies.  For instance, the worlds shipping fleet has been driven for years by engines designed to burn the cheapest, dirtiest “bunker” fuel, passing on the cost. Nearly 15% of the world’s ships account for about half of all the industry emissions.  In addition, most shipping lines traditionally pass on most of the fuel costs to charterers, providing few incentives to build more efficient ships (often referred to as the “landlord and tenant scenario”).  In addition, shipyards worldwide always charge an often cost prohibitive premium to operators for new designs and technologies

Also, its shipping-attributed pollution can pose serious human and environmental health risks.  For instance, particulate matter emissions from ships have been reported to contribute to an estimated 60,000 premature deaths annually (with most deaths occurring near coastlines in Europe, East Asia, and South Asia), as reported in a 2007 study published in Environmental Science & Technology.

…and What the Industry is Doing About It

Mr. Branson’s announcement in Cancun adds another initiative to the increased attention being paid to the transport industry in managing pollutants, including greenhouse gas emissions. As I recently noted in a recent post on shipping and logistics, Inbound Logistics Magazine earlier this year released its Top 50 Green Partners listing earlier this year.  Eight of the companies and organizations listed were ocean carriers.  These appear to be true leaders in implementing improved operational practices designed to lower the environmental impact of their operations.

Also, back in the early 2000’s, the Business for Social Responsibility (BSR) launched the Clean Cargo Working Group (CCWG). The group consists of over 60% of the leading multinational manufacturers (shippers) and freight carriers and forwarders (carriers).  The group is dedicated to” integrating environmentally and socially responsible business principles into transportation management”.  Unlike the new EEDI rating, the CCWG methodology is the only existing standardized approach to calculate CO2 emissions for ocean going container vessels. The data is put in the form of emissions factors to enable shippers and liners calculate carbon emissions in a consistent manner.  This allows trade routes to be compared. In addition, the CCWG annually benchmarks member lines’ environmental performance, further increasing focus and reducing environmental footprint.

Other collaborative efforts that cover other transport modes include EPA’s SmartWay Transportation Partnership, Ecological Transport Information Tool, and the GreenShip Project.  Each of these and other transportation-focused groups have made strides in developing tools and methods for different parts of the sector.

Case Studies

Reducing emissions is technically feasible using current technology, and, in the case of efficiency measures to reduce fuel consumption, can contribute cost savings that make it economically attractive with appropriate financing of upfront costs. Of those emission reductions, the first approximate 25% of reductions could be achieved “profitability”, according to the IMO GHG Study.

Big Players Getting it Done: At a transportation conference convened this past summer by the U.S. Department of Transportation, Federal Highway Administration, Lee Kindberg of Maersk Lines (one of the top 50 Green Partners reported by Inbound Logistics) reported that “… vessels are becoming more energy efficient and reducing emission. This is due to technologies, operations, the speeds we operate at, and the vessel sizes as there definitely are economies of scale. …Since 2002 [Maersk] reduced our CO2 emissions per container per kilometer by 20% and set a goal of an additional reduction of 25% by 2020.  In addition Kindberg indicated that the company was switching to a distillate fuel instead of the heavy fuel oil, resulting in sulfur oxide emission reductions of 95%, particulate matter emission reductions by 86% and the NOx emissions reductions by 6% to 12% depending on the vessels.  Reducing ship speeds, reducing ship drag, or ballast water optimization and treatment systems has also increased ship efficiencies along with improvements in ship procedures, crew training and performance measurement using independent third party environmental certifications like ISO 14001.

The Little (Hybrid) Tug That Can: Major cargo seaports are also collaborating with companies to introduce new technology to comply with stricter air quality regulations.  The world’s first hybrid electric tugboat, Foss Maritime’s Carolyn Dorothy which works in Southern California’s San Pedro Bay at the Port of Long Beach, California, emits 73 percent less soot (tugs are known high soot contributors), 51 percent fewer nitrogen oxides and 27 percent less carbon dioxide than a standard tug of comparable size.  The tug also can claim improved fuel efficiency and a quieter operation, all contributing to a lower environmental footprint.

Conclusions/Food for Thought

This past weekend’s announcement at Cancun and the slew of industry cross-sector, multi-modal collaborations are encouraging.  Whether it’s sea shipping, air cargo, rail or road transport, all modes play a vital key to solving part of the climate change puzzle.  As Maersks Kindberg stated this year at the FHWA conference, “We have to keep in mind that it’s the total lifecycle footprint that matters. Transportation is often only a small part of the total …If you focus on improvements and actually incorporate the carbon impact into business decisions, you can actually make real progress on both and perhaps also improve your business.’

It’s clear that all the nodes of a supply chain (from design to manufacturing and from point of use to end of life) and all the modal components in between want to be part of the solution, not part of the problem.  Businesses are stepping up to the challenge.

As we head into the final week of climate negotiations at Cancun, are the world’s climate negotiators up to the task?


[1]According to the Carbon War Room, the shipping industry is the largest emitter of NOx and is also one of the largest emitter of SOx.  It’s been estimated by the IMO that demand will increase, and CO2e emissions from ships will reach 18% of all manmade Greenhouse gas emissions by 2050 under “business as usual”.

[2] The IMO GHG Study 2009 estimates that eco-efficiency technologies could reduce CO2e emissions from shipping by between 25% and 75% with substantial monetary advantages.

“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.