Tag Archives: supply_chain

Scalable Consumption + Supply Chain + Circular Economy = Hope for Sustainable Economies

1 Mar

Consumers have unprecedented opportunity to be active shapers of the products and services they buy and use, rather than passive receivers, taking whatever companies provide.  Apples most recent litmus test on corporate social responsibility with its key Chinese supply chain manufacturing partner, Foxconn, and resulting consumer outcry is but just one example of the power that consumers have to sway products manufacturers to alter their business patterns.

At the recent World Economic Forum (WEF) in Davos, Aron Cramer (CEO and President of Business for Social Responsibility or BSR) observed at one workshop the “fast-changing relationship between businesses and consumers. The question on the minds of many of the business executives in the room was “is this good or bad for business”. The answer to this particular either/or question is undoubtedly both. Companies that stay ahead of this curve by involving consumers in product design; providing transparent information about the social and environmental content of these products, and looking at new models to provide value in new ways will prosper. Those that don’t will find growth hard to come by.”

Scaling Consumption in a Smart and Sustainable Way

The WEF has devoted a great deal of attention to the issue of scaling consumption sustainably as the world economy shifts both demographically and economically. WEF examines these issues in a report entitled: More with Less: Scaling Sustainable Consumption and Resource Efficiency. The study properly takes a “systems view” of sustainable consumption.  In other words, rather than focusing just on the demand side, WEF looks at the challenges and possible solutions through a value-chain centric lens of what they describe as:

  • consumer engagement (demand)
  • value chains and upstream action (supply)
  • policies and an enabling environment to accelerate change (rules of the game).

“Making your business sustainable in today’s world is an absolute imperative. The business case for sustainable growth is clearer than ever and the urgency of the issues we face means that business leaders have no choice but to act. ” Paul Polman. Chief Executive Officer, Unilever

As WEF explains, “The main outcome is the identification of key focus areas for business leadership through concrete goals and collaboration across industries”.  For this report, WEF engaged with chief executive officers, business leaders and experts worldwide, seeking answers and thoughts centered six key questions:

  1. What are the key trends in sustainable consumption?
  2. What is the size of the opportunity for countries, companies and consumers?
  3. What are the barriers to scaling existing models of sustainable consumption?
  4. What does getting to scale look like?
  5. What new solutions are needed to get to scale in sustainable consumption?
  6. How can we achieve scale by working collectively and creating action on new fronts?

 Barriers, Mind Sets and Complexities- Oh My!

To no surprise, the report identified a number of internal and external barriers to staving and influencing scalable and sustainable consumption, notably (according to the report):

  • Consumers lack incentives for sustainable consumption and are confused by mixed messages. The study noted that one survey of British consumers indicated that 70% were uncertain about the environmental performance of the products they buy.  I have seen similar surveys here in the United States that compare with the British results
  • Supply chains are complex, opaque and interconnected. Deep supply chains, like Apples or the textile industry, create many complexities that place  limits to in certainties sustainable sourcing
  • Technology remains costly and inadequately deployed.   The study notes that “Fewer than 20 facilities in the world are certified to melt down and recycle the cathode ray tubes of old television sets, and all are in Asia. E-waste, which at present largely originates in the US and Europe will travel across multiple countries and continents for recycling – putting the environmental benefits into question and causing additional social concerns”.  That being said, more collaborative enterprises across industries and economies can replace the linear economies that characterize western industrial nations, and create more opportunities to expand technologies further and wider.
  • Policy incentives remain weak. The report notes that “trade systems and tariffs rarely differentiate between unsustainable and more sustainable alternatives, preventing a potential increase of 7–13% in the traded volumes of sustainable products
  • Short-termism dominates the landscape, and traction in fast-growing markets remains low. Typical of capitalism and free enterprise, most companies growth targets rarely look out father than a few years, and seek short term gains to keep shareholders happy.  The WEF report noted that “55% of FTSE 100 company sustainability targets were to be achieved within 1–2 year timeframes, while only 18% looked out to 2018–2020”.

The graphic below suggests some strategies in the report to overcome these barriers along the three key value-chain points as described above.

Solutions for Scaling Economies (Source, WEF, 2012)

Moving Toward a Circular Economy

Something else also happened “on the way to the Forum” (well actually at the Forum) that may offer some insights and solutions that are discussed in the WEF report.  At Davos, Ellen MacArthur, head of the non-profit Ellen MacArthur Foundation, suggested that while” rapid technological evolution across all major industry sectors,{was taking place] … very little change within the economic model itself {has been occurring]. The economy is still based on a linear “take, make and dispose” model.”  A new report Towards the Circular Economy, analyzes the international business case behind the idea of shifting from a linear to a more circular economy.

“The essence of the circular economy lies in designing goods using technical materials to facilitate disassembly and re-use, and structuring business models so manufacturers can reap rewards from collecting and refurbishing, remanufacturing, or redistributing products they make. In this model all things are made to be made again, ultimately using energy from renewable sources[and in a less toxic manner]. Companies shift to focusing on selling performance in the place of product, and consumers now become users.” – Ellen MacArthur

Make sense?  Well if Ms. MacArthurs numbers are correct, “embracing the circular economy model could lead to an annual economic opportunity of up to $630bn a year towards 2025.”  Where do I sign up!!??  Still interested?  Read more about the circular economy, ways to leverage the entire supply chain and build sustainable, scalable consumption here and view a fascinating video here. .

As Aron Cramer mentioned in a GreenBiz article in January, the time for sustainable consumption is now.  “The need to develop new consumption patterns is the mother of all innovation challenges. The race to dematerialize is on. Some of this will come from the digital revolution, as newspapers can now be delivered wirelessly to e-readers instead of plopping dead trees on the doorstep. But some of the innovation will come from redesigning business models.”  Perhaps Mr. Cramer and Ms. MacArthur are onto something.

Are you, as consumer, as manufacturer, product designer or corporate executive, or even as fellow Planet-eer, ready to help make that change?  We can change the rules of the game together, for a stronger, more circular economy. As Captain Planet says, “The Power is Yours”.

Will Apple Finally Embrace Corporate Social Responsibility & Sustainability w/ Tim Cook at Helm?

19 Jan

If you have been a frequent reader of this space, you’d know my position on Apple and the manner in which it’s conducted its supply chain sustainability programs…or hasn’t.

2011: Game On (or the Collective Karma Ran Over Your Dogma)

Last fall, I wrote about the follow up efforts by Chinese NGO Institute of Public and Environmental Affairs (IPE), who performed five more months of research and field investigations and reported that “the pollution discharge from this enormous industrial empire has been expanding and spreading throughout its supply chain, seriously encroaching on the local communities and their environment… the volume of hazardous waste produced by suspected Apple Inc. suppliers was especially large and some had failed to properly dispose of their hazardous waste.”

Six months before that (nearly a year ago), I presented my thoughts about the IPEs report that leveled complaints against the IT/Electronics industry and the overall performance of nearly 30 major manufacturers and their respective key parts suppliers.  The report focused on “the openness of IT firms and their responsiveness to reports of environmental violations at suppliers”.  Concerns were raised in the report regarding levels of environmental toxins and pollutants being discharged in rivers and streams and into air sheds.

Many people have asked me over the past half-year why Apple is being uncooperative or secretive.  Well, “secrecy” has always been part of the Apple mystique, but of course so has evolutionary and disruptive innovation. The problem as I saw it then (and this thought has now been vindicated) is when it comes to corporate social responsibility and sustainability, transparency is the name of the game, not secrecy.  I also suggested that Apples supplier network may be too big to handle and they lack the tools, systems and technologies to perform adequate supplier training and oversight.  Combined with inconsistent Chinese regulatory agency oversight on its industrial manufacturers, this presented difficult challenges to a workable, and meaningful sustainable supply chain solution. But Nike did it, so why couldn’t (or wouldn’t) Apple, I asked?

My advice last September to Apple and new CEO Tim  Cook was to step up and be as evolutionary on corporate social responsibility and sustainability matters as it is with its products.  My exact words were: “show humility, take responsibility, and act swiftly and collaboratively.”

Gladly I am happy to report that Apple has wised up and stepped voluntarily under the glare of public scrutiny.

2012: Enter Mr. Cook…the New, Improved, Socially Responsible Apple?

"Good Apple"

In its Supplier Responsibility 2012 Progress Report, the company states it is “committed to driving the highest standards for social responsibility throughout [its] supply base”. It adds: “We require that our suppliers provide safe working conditions, treat workers with dignity and respect, and use environmentally responsible manufacturing processes wherever Apple products are made.”

The 156 companies it lists alongside the report on its Supplier Responsibility website account from more than 97 per cent of what Apple pays to suppliers to manufacture its products.  A complete picture of all the thousands of suppliers in Apples supply chain may be daunting, but at least the company has captured the suppliers where the “greatest spend” is.

Highlights from the 2012 Report

  • In 2011, we conducted 229 audits throughout our supply chain — an 80 percent increase over 2010 — including more than 100 first-time audits. We continue to expand our program to reach deeper into our supply base, and this year we added more detailed and specialized audits that focus on safety and the environment.
  • Apple-designed training programs have educated more than one million supply chain employees about local laws, their rights as workers, occupational health and safety, and Apple’s Supplier Code of Conduct.
  • Our audits have always checked for compliance with environmental standards. In 2011, in addition to our standard audits, we launched a specialized auditing program to address environmental concerns about certain suppliers in China. Third-party environmental engineering experts worked with our team to conduct detailed audits at 14 facilities. We uncovered some violations and worked with our suppliers to correct the issues. We will expand our environmental auditing program in the coming year. [violations unearthed included dumping wastewater onto a neighboring farm, using machines without safeguards, testing workers for pregnancy and falsifying pay records]
  • We have a zero-tolerance policy for underage labor, and we believe our system is the toughest in the electronics industry. In 2011, we broadened our age verification program and saw dramatic improvements in hiring practices by our suppliers. Cases of underage labor were down significantly, and our audits found no underage workers at our final assembly suppliers. [Apple said it found six active and 13 historical cases of underage labor at some component suppliers, but none at its final-assembly partners]
  • We offer continuing education opportunities at our suppliers’ facilities free of charge. More than 60,000 workers have enrolled in classes to study business and entrepreneurship, improve their computer skills, or learn English. And the curriculum continues to expand. We’ve also partnered with some local universities to offer courses that employees can apply toward an associate degree.

Apple has vowed to deal with worker abuses, hoping to deflect criticism it was turning a blind eye to cases of poor working conditions in a mostly Asian supply chain. Perhaps in a huge move, Apple will allow independent auditors from the Fair Labor Association to also be part of the future auditing process.  In an interview last Friday, Mr. Cook said Apple’s vow to double the number of supplier audits along its supply chain is “raising the bar” for the entire high technology industry, and that more change is on the way.  Cook said “All of this means that workers will be treated better and better with each passing year…It’s not something we feel like we have done what we can do, much remains to be done.”

The San Jose (California) Mercury News quoted analyst Ken Dulaney with Gartner Research who wondered why this may have taken so long to happen. “Who knows why they didn’t do this sooner? It could have been because of Steve Jobs. Maybe with Cook’s financial background he’s trying to move Apple toward less secrecy, which would be a very good thing. It’s part of their trying to be a good global citizen.”

Under Scrutiny

Either way, Apple will continue to be under watchful eyes, as environmentalist and labor activists continue to push for more reforms by American companies doing business overseas.  Apple still will need to double down its efforts to respond more proactively to the many environmental impact related issues reported in the past by its major suppliers, especially in China.  But for a company that has played its cards extremely close to the chest, it’s a major breakthrough, if time proves the intent to be true.

Judy Gearhart, executive director of the International Labor Rights Forum in Washington, D.C, said that how the industry as a whole responds” depends how engaged they [Apple] are going forward. You see companies make these commitments and there’s often a lot of fanfare, but it doesn’t always pan out the way they say it will.”

Maybe Mr. Cook is the one “Good Apple” that will save the bunch.  Let’s hope so.

Lean Design, Lean Manufacturing, Lean Inventory/Supply Management – A Sustainability “Trifecta”

16 Aug

Source (Popular Mechanics)

You’d have to be living in a mountain cave or vacationing on the south coast of France to not know that world stock markets are being whipped around these past two weeks.  The USA Today has attributed what’s been happening in the markets here in the U.S. along seven key elements, all of which is related more to external factors such as the European money woes, general investor fear and lack of policy direction from the federal government.

The general market fear and scurrying for shelter reminds me that when hikers are caught in a sudden storm, they often seek shelter in a “lean-to” or other protective cover until the skies clear.

I thought that in light of the economic body slamming that has been going on this past week, it’s worth reflecting on some efficiency-based ways that  businesses can use to overcome (or at least buffer) some of the external factors that are causing such economic uncertainty.  Like the hikers seeking shelter from the storm, there are some “lean-to”-like steps that company’s can take to exert some control and influence — and it all relates to a leaner, greener, smarter enterprise.

The Lean and Green Enterprise

Last winter I wrote about how importance a “lean and green” enterprise was in establishing a smarter, leadership position in a rapidly changing global marketplace.  I noted then that a 2009 study suggested that “lean companies are embracing green objectives and transcending to green manufacturing as a natural extension of their culture of continuous waste reduction, integral to world class Lean programs.”  Lean was more rapidly accomplished with a dedicated corporate commitment to continual improvement, and incorporating ‘triple top line’ strategies to account for environmental, social and financial capital.  I also argued by looking deep into an organizations value chain (upstream suppliers, operations and end of life product opportunities) with a ‘green’ or environmental lens, manufacturers can eliminate even more waste in the manufacturing process, and realize some potentially dramatic savings

So I was reminded this past week that Lean in design, Lean in manufacturing, and Lean in inventory can individually or collectively be key success factors in managing waste in all its many forms.  Collectively, this can have a measurably positive effect on a company’s financial, and hence, business performance.  A couple of recent articles touched on this topic this week while you were watching your 401(K) equity or stock value tank.   But first let’s touch on Lean Design.

Lean Design

I came across an older but very relevant article written in the aftermath of the Internet stock crash in the early 2000’s.  The article described product development as involving “two kinds of waste: that associated with the process of creating a new design (e.g., wasted time, resources, development money), and waste that is embodied in the design itself (e.g., excessive complexity, poor manufacturing process compatibility, many unique and custom parts).”  The article cautioned that because the design process is the cradle of creative thinking, designers needed to carefully watch what they “lean out” or risk cutting off the creative process to reduce waste.  What has happened in the ensuing years has been an incredible emphasis on “green design” that focuses on full product life cycle value, such that “end of life management” considerations have taken on a more relevant and embedded nature in manufacturing.

A Lean Manufacturer Can be a Sustainable Manufacturer

In yet another recent article by manufacturing consultant Tim McMahon (@TimALeanJourney), he notes that “Lean manufacturing practices and sustainability are conceptually similar in that both seek to maximize organizational efficiency. Where they differ is in where the boundaries are drawn, and in how waste is defined”.  He notes, as I have in my past posts, that Lean manufacturing practices, which are at the very core of sustainability, save time and money — an absolutely necessity in today’s competitive global marketplace.

The key areas to control manufacturing waste and resource use during the design and manufacturing cycle, can be broken down  and managed for waste management and efficiency in the following five ways:

Reduce Direct Material Cost – Can be achieved by use of common parts, common raw materials, parts-count reduction, design simplification, reduction   of scrap and quality defects, elimination of batch processes, etc.

Reduce Direct Labor Cost – Can be accomplished through design simplification, design for lean manufacture and assembly, parts count reduction, matching product tolerances to process capabilities, standardizing processes, etc.

Reduce Operational Overhead –  Efficiencies can be captured by minimizing impact on factory layout, capture cross-product-line synergies (e.g. a modular design/ mass-customization strategy), improve utilization of shared capital equipment, etc.

Minimize Non-Recurring Design Cost – Planners and practitioners should focus on platform design strategies to achieve efficiencies, including: parts standardization, lean QFD/voice-of-the-customer, Six-Sigma Methods, Design of Experiment, Value Engineering, Production Preparation (3P) Process, etc.

Minimize Product-Specific Capital Investment through: Production Preparation (3P) Process, matching product tolerances to process capabilities, Value Engineering / design simplification, design for one-piece flow, standardization of parts.

Can a Lean Inventory Management Drive Sustainable Resource Consumption?

Business Colleague Julie Urlaub from Taiga Company  (@TaigaCompany) summarized a post in a recent Harvard Business Review by green sage Andrew Winston (@GreenAdvantage).  The article, Excess Inventory Wastes Carbon and Energy, Not Just Money describes how the global marketplace “ is sitting on $8 trillion worth of ‘for sale’ inventory [the U.S. maintains a quarter of that  inventory].  These idle goods not only represent a tremendous financial burden but an enormous environmental footprint ” that was generated in the manufacturing of those goods.  Mr. Winston maintains that “If we could permanently reduce the amount of product sitting idle, we’d save money, energy, and material.”  The problem is predicting and managing inventory in such fickle times.   Winston went on about new predictive tools being advanced by companies that hold promise in nimbly driving inventory demand response up the supply chain.  For instance, he noted that “ using both demand sensing software and good management practices, P&G has cut 17 days and $2.1 billion out of inventory. All that production avoided saves a lot of money in manufacturing, distribution, and ongoing warehousing. It also saves a lot of carbon, material, and water.”

What Mr. Winston found shocking though (me too!) was that “even with the fastest-selling, most predictable products, the estimates are off by an average of more than 40 percent. Imagine that a CPG company believes that 1 million bottles of a fast-turning laundry detergent will sell this week. With 40 percent average error, half the time sales will actually fall between 600,000 and 1.4 million bottles. And the other half of the time sales will be even further off the mark.”  The process becomes self perpetuating and the inventory racks up along with the parallel environmental footprint, unless somehow the uncertainty can be better predicted.  While companies like to have on hand what Mr. Winston referred to as “safety stock”, I have come to know as reserve inventory driven by “just in time” ordering .  But that process was shown to have its own flaws such as when orders for goods dried up overnight in 2008 and when it came time to ramp up in early 2010, part counts were insufficient to meet the rising demand.

I really pity the supply chain demand planner, who like the weatherman is subject to the fickle nature of an unpredictable force.  Winston wrapped up his article by stating that “ reducing the inventory itself could be the greenest thing [logistics executives] can do”.  I had the chance to speak and attend the 2010 Aberdeen Supply Chain Summit where demand response planning was discussed at length and where green supply chain issues were recognized as one of many key attributes in effective supply chain management.  In such a volatile economy, its vital that companies keep inventory management in mind as a way to leverage its costs and simultaneously look toward environmental improvements that can reduce waste.

Partnering for Progress

A relatively recent pilot program in the State of Wisconsin just shows how partnering to create a lean focused sustainable manufacturing cluster can have enormous dividends.  According to a recent article in BizTimes.com, the Wisconsin Profitable Sustainability Initiative (PSI) was launched in April 2010 by the Wisconsin Department of Commerce and the Wisconsin Manufacturing Extension Partnership (WMEP). The goal according to the article is “to help small and midsize manufacturers reduce costs, gain competitive advantage and minimize environmental impacts”.  Forty-five manufacturers participated in over 87 projects evaluated. These projects focused on “evaluating and implementing a wide range of improvements, including reducing raw materials, solid waste and freight miles, optimizing processes, installing new equipment and launching new products.  The initial results show that the projects with the largest impact do not come from the traditional sustainability areas such as energy or recycling. Instead, outcomes from the initial projects suggest that transportation and operational improvements are places where manufacturers can look to find big savings, quick paybacks and significant environmental benefits.”

The program is projected to generate a five-year $54 million economic impact, including: $26.9 million in savings, $23.5 million in increased/retained sales and $3.6 million in investment.

Lean design,  Lean manufacturing, Lean inventory management – a Waste Containment and Efficiency “Trifecta”

Together, lean design,  lean manufacturing  and effective, lean inventory management offer a “trifecta” approach for industry to identify, reduce or eliminate and track waste.  Effective use of these tools cannot only drive both in how the product is designed and  produced but offers opportunities all the way up the supply chain to manage effective inventory and resource consumption. As the University of Tennessee studied concluded,  the implications of lean strategies are 1)  Lean results in green; and 2) Lean is an essential part of remaining competitive and maintaining a quality image.  Put the two together and a company can virtually be unstoppable…or a least a bit more recession-proof and “shelter from the storm”.

Nothing Says “Green Supply Chain’ Like Innovative, Sustainable Packaging

8 Jul

Courtesy Tiny Banquet Committee under CC License

The pea pod is possibly the greatest sustainable packaging design nature can provide.  It packs a lot in a small space, efficiently uses the minimum amount of resources…and best of all its compostable…well sort of unless I eat it!

And like the simple pea pod, few sustainability attributes in a supply chain come together across the value chain than packaging.  Packaging and repackaging is ubiquitous along every step of the chain, from product design, prototyping, procurement production, distribution, consumer end use and post consumer end-of-life management.  And the more parts that are in use in making of a product, and steps along the way to deliver the parts, the greater the packaging (and hence environmental footprint) involved along that chain.  And for every packaged part that comes from someplace else to make a product, a similar carbon, energy and resource use can be measured.

That’s why sustainable practices in packaging are so important in driving supply chain efficiency…and why innovation in the ‘green’ packaging sector has been “white hot” the past several years. A study by Accenture found that retailers can realize a 3 percent to 5 percent supply chain cost savings via green packaging initiatives. So if you extrapolate that type of savings out across multiple tiers of supply chain activity, where packaging is the common denominator, the efficiencies and savings can rack up quickly.

A new report from research organization Visiongain finds that because of a variety of drivers such as carbon emissions, extended producer responsibility and waste reduction targets plus advanced packaging technologies, the sustainable and green packaging market’s worth is expected to reach $107.7 billion in 2011. Their report shows varying degrees of growth from developed to developing nations; however what’s striking is that the growth trend is weathering the slumping global economy and higher production costs.

Sustainable Packaging 101

Sustainable packaging solutions deliver around two colors according to the Accenture report: black (deliver reduced costs) and green (reduce environmental impacts). Sustainable packaging relies on best engineering, energy management, materials science and life cycle thinking to minimize the environmental impact of a product through its lifecycle.  Given the past decade or so of science and engineering work around sustainable packaging, there are some discovered and tested attributes, such as:

  1. Reducing packaging and maximizing the use of renewable or reusable materials
  2. Using lighter weight, less toxic or other materials which reduce negative end-of-life impacts
  3. Demonstrating compliance with regulations regarding hazardous chemicals and packaging and waste legislation ( such as the European Directive 94/62/EC  on Packaging and Packaging Waste)
  4. Optimizing material usage including product-to-package ratios
  5. Using materials which are from certified, responsibly managed forests
  6. Meeting criteria for performance and cost (e.g., minimize product damage during transit)
  7. Reducing the flow of solid waste to landfill
  8. Reducing the costs associated with packaging (i.e., logistics, storage, disposal, etc.)
  9. Reducing CO2 emissions through reduced shipping loads

Best in Class Examples

I have seen companies stress the importance of the 6 R’s of sustainable packaging (refill, reduce, recycle, repurpose, renew, reuse;  Walmarts 7 R’s of Sustainable Packaging (Remove Packaging, Reduce Packaging, Reuse Packaging , Renew(able), Recycle(able), Revenue (economic benefits), and  Read (education);  and even the 10 R’s eco-strategy (Replenish, Reduce, Re-explore, Replace, Reconsider, Review, Recall, Redeem, Register and Reinforce).

Associations are stepping up to the plate as well as manufacturers in a variety of consumer product markets.  In March of this year, the Grocery Manufacturers Association (GMA) announced the results of survey research by McKinsey that indicated elimination of more than 1.5 billion pounds (800 million pounds of plastic and more than 500 million pounds of paper) since 2005, and another 2.5 billion pounds are expected to be avoided by 2020.  Over 180 packaging initiatives were identified and evaluated.  The GMA estimated that the reduction would be equal to a 19 percent reduction of reporting companies’ total average U.S. packaging weight.

In the fast moving consumer goods category Coca Cola’s packaging efficiency efforts just in 2009 avoided the use of approximately 85,000 metric tons of primary packaging, resulting in an estimated cost savings of more than $100 million.  The company rolled out of short-height bottle closures, reducing material use, implemented traditional packaging material light weighting; and used more recycled materials in packaging production.  At the end consumer point, the company has also supported the direct recovery of 36% of the bottles and cans placed into the market by the Coca-Cola system and continues to work with distributors on increasing recovery efforts.

In the electronics space, Dell Computer committed in 2008 to reduce cost by $8 million and quantity by 20 million pounds of packaging by 2012 centered around three themes (cube, content, curb):

  • Shrinking packaging volume by 10 percent (cube)
  • Increasing to 40 percent, the amount of recycled content in packaging (content)
  • Increasing to 75 percent, the amount of material in packaging to be curbside recyclable (curb).

As an example, Dell wanted to find a greener, more cost efficient way to package its computers by eliminating foams, corrugated and molded paper pulp.  The solution was sustainably sourced bamboo packaging certified by the Forest Stewardship Council.  So far, Dells efforts have resulted in eliminating over 8.7 million pounds of packaging, and they have nearly met their recycled content goal.

Perhaps most significantly, WalMart took a huge step in 2007 to seek supplier conformance around packaging.  Since then, despite the initial uproar, there has been an uptick in design and innovative product activity by thousands of key suppliers in response to the mega-retailers challenge.  By reducing packaging in the Wal-Mart supply chain by just five (5) percent by 2013, that would 1) prevent 660,000 tons of carbon dioxide from entering the atmosphere, keeping 200,000 trucks off the road every year (that’s a green attribute) and save the company more than $3.4 billion (a black attribute).  Walmarts bottom line was to put more products on its shelves in the same space, and also recognized the sustainability attributes that change would make.  They also knew that most consumers (me included) just despise excess packaging.  Here are two examples of Walmart supplier efforts from a small and large supplier:

Alpha Packaging: the company has a new bottle design for Gumout Fuel Injection Cleaner.  The company concentrated the product and switched from PVC bottles (which are not recyclable) to much smaller bottles made from PET (which is recyclable and has 30% post-consumer recycled content).  This led to 1) reduced product weight by up to 51% and 2) capability to transport a truck filled with new 6 oz products (formerly 12 oz) equating to 153,600 bottles as opposed to 61,000 originally.

General Mills: the company took a novel approach and they looked at the product first.  They straightened its Hamburger Helper noodles, meaning the product could lie flatter in the box. This, in turn, allowed General Mills to reduce the size of those boxes.   According to the company, that effort saved nearly 900,000 pounds of paper fiber annually.  The company effort also managed to reduce greenhouse gas emissions by 11 percent, took 500 trucks off the road and increased the amount of product Wal-Mart shelves by 20 percent.

Win-Win-Win.  For the environment, for manufacturers and suppliers, and for consumers.

Full Circle Collaboration is Vital to Drive Sustainable Packaging

What makes sustainable packaging compelling is that it’s one of the key elements of a product that consumers can see, touch and feel.  Over packaging or improper packaging can produce high reaction levels, right? (remember last year’s noisy Sun Chips compostable bag dust up?)  But in an interesting post last year in Packaging Digest by Katherine O’Dea of the Sustainable Packaging Coalition, she mentioned the critical importance of collaboration between brand owners and retailers. What was a scary statistic is that “brand owners and retailers may have direct control over as little as 5 percent of the environmental impacts of packaging and only indirect control over the other 95 percent.”  On the other hand another study conducted by the market research firm Datamonitor showed of U.S. consumers surveyed, 49% felt that packaging design has a medium or high level of influence over their choice of food and drink products.

Just as there are challenges to drive consumer acceptance of more sustainable types of package designs (especially aesthetics), there are equally challenging design factors (such as package strength, permeability, and other physical factors that may compromise product integrity during shipment.

Opportunities to Leverage the Supply Chain from Design to Post Consumer Package management

High performing manufacturing companies are clearly using sustainable packaging design and manufacturing as a way to lever efficiencies through the product value chain.  Companies are finding that using less complex packaging helps cut sourcing, energy production and distribution and fuel costs across the supply chain.  The glory days of corrugated packaging as the one stop solution are being replaced with reusable packaging options.  Also, reducing the consumption of raw materials, carbon emissions and waste generation reduces manufacturing costs.

Since disposal by consumers is one of the largest waste streams in the supply chain, using less packaging of direct-to-consumer shipments also offers great opportunities for supply chain optimization.  The previously mentioned Accenture report recommends that through route planning and sourcing software, “collaboration across the companies in the supply chain is necessary to maximize freight utilization. In particular, retailers need to proactively encourage vendors to provide pallet or “trailer feet” specifications for collecting shipments… retailer’s planners can determine the optimum transportation mode and look for multi-stop opportunities.”

Optimized Supply Chain (Accenture)

As shown in the accompanying diagram, Accenture suggests there are opportunities to reduce the packaging/un-packaging cycle by addressing the product life-cycle and optimized material use.   Through ongoing recycling and the use of alternative materials throughout the product value chain, opportunities are created to reduce the volume of packaging waste. Also, take back programs create a two-way transportation flow, with reusable packaging materials being sent back up the supply chain rather than to a landfill.

Remember too that there are several key association and initiatives that can be tapped into, including:

  1. Sustainable Packaging Coalition: http://www.sustainablepackaging.org/default.aspx
  2. Greener Package: http://www.greenerpackage.com/
  3. Sustainable Packaging Alliance: http://www.sustainablepack.org/default.aspx
  4. Sustainable Biomaterials Collaborative http://www.sustainablebiomaterials.org
  5. Reusable Packaging Association: http://reusables.org/

Some final pointers to consider when designing packaging and using the supply chain to drive sustainability:

  • Source alternative sustainable packaging materials- the innovative options are plentiful.
  • Evaluate product life-cycle impacts as a way to discover design options that could lead to less packaging.
  • Anticipate the total energy and resource use over an entire products package life
  • Evaluate materials disposal and post consumer end-of-product life opportunities
  • Design products for efficient transport
  • Schedule and optimize transportation networks
  • Collaborate, Collaborate, Collaborate!

Keeping it Simple: Seven Action Steps for Manufacturers and Suppliers to Climb Up the Sustainability Ladder

29 Jun

The authors new three-string Cigar Box Guitar (made with mostly recycled parts)

This past weekend I went and finally did it.  I closed the loop on my dream to play gritty, stripped down delta blues on a cigar box guitar (CBG) in tandem with my harmonica.  At first I went to the local Recycled Arts Fair thinking I’d buy a four string CBG.  But within a few minutes of speaking with local Vancouver, WA luthier Alan Matta  at Hammered Frets (www.hammeredfrets.com), he’d convinced me to start with a 3 string and then think about a 4 (or more) string later.  Why?  Well, it’s simple.  I don’t know how to play the darn thing!  Fewer strings also means easier chords (with many requiring just one or two fingers), and more harmonic simplicity to help a newer player (like me) keep from getting overwhelmed. Plus, fewer strings means less tension on the neck and risk of bowing.   (Sidebar: I do have a musical pedigree, having played brass instruments and harmonica since I was 12), and I get music theory, but playing stringed instruments…can an old dog learn a new trick?)

If you are a small to mid-sized manufacturer for instance, getting started with a company sustainability initiative, or in greening a supply chain is a lot like learning a musical instrument.  Quite often if companies try to bite off more than they can chew (three vs. four string chords), there’s too much stress (like a guitar neck) and greater risk of failure (bowing of the neck).  Simplicity often trumps complexity when getting started down the sustainability path.  This is particularly true if companies are starting from scratch, or lack deep financial or personnel resources.  So before companies start to feel overwhelmed, there are ways to “ease” into sustainability, without the stress.

Last year I wrote about how the “look” and “feel” of sustainability depends on the level of enlightenment that a company has, the desired “end state” and on the depth of its resources to execute the change.  Also, I spoke about the importance of adequate resources to make the leap and a systematic process to keep on track.  I advocated systematic planning before moving  ahead.  This involved:

  • Building a system to plan, implement, measure and check progress of the initiative.
  • Looking for the quick wins.
  • Building an innovation-based culture and reward positive outcomes.
  • Measuring, managing, reporting and building on the early wins.
  • Building the initiative in manageable chunks.

A Systems Framework to Get the Ball Rolling

Let’s accept for a moment that if you are reading this, you already understand that sustainability as a term means many things to many organizations.  An effective sustainability roadmap and the systematic framework to manage sustainability must consider four key focal areas: compliance, operations, product sustainability and supply chain sustainability.  Bearing in mind that “one size doesn’t fit all”  there still needs to be a systematic way to get to the “desired goal”.  A systematic framework like an ISO 14001-based Environmental Management System (EMS), offers a set of processes and tools for effective accomplishment of sustainability objectives.  But in the event that a company isn’t quite ready to make the leap into the ISO world, there are alternatives.

A Cycle of Continual Improvement

“Plan- Do-Check-Act” Creates Shared, Sustainable Value

One such alternative comes from Organisation for Economic Co-operation and Development (OECD).  The OECD has produced a “ Sustainable Manufacturing Toolkit”, that as they say “provides a practical starting point for businesses around the world to improve the efficiency of their production processes and products in a way to contribute to sustainable development and green growth.” The OECD addresses the four key sustainability focal points that I mentioned previously.  As an aside, a collaborator with SEEDS Global Alliance (Sustainable Manufacturing Consulting) had a hand in contributing to this valuable project by providing detailed feedback on the toolkit.

According to the newly launched site, it offers two parts: a step-by-step Start-up Guide and a Web Portal where technical guidance on measurement and relevant links are provided.  I tested out the site, and while parts appear to still be under construction, the information there is pretty intuitive and gives the novice some basic information that they can use to get started.  For manufacturers in particular, the guidance offers 7 action steps to sustainable manufacturing:

Prepare [Plan]

1. Map your impact and set priorities: Bring together an internal “sustainability team” to set objectives, review your environmental impact and decide on priorities.

2. Select useful performance indicators: Identify indicators that are important for your business and what data should be collected to help drive continuous improvement.

Measure [Do]

3. Measure the inputs used in production: Identify how materials and components used into your production processes influence environmental performance.

4. Assess operations of your facility: Consider the impact and efficiency of the operations in your facility (e.g. energy intensity, greenhouse gas generation, emissions/discharges to air and water [ and land]).

5. Evaluate your products: Identify factors such as energy consumption in use, recyclability and use of hazardous substances that help determine how sustainable your end product is. (I’d also add water consumption and wastewater outputs).  It’s here that the upstream supply chain becomes a very important consideration.

Improve [Check/Act]

6.Understand measured results: Read and interpret your indicators and understand trends in your performance.

7. Take action to improve performance: Choose opportunities to improve your performance and create action plans to implement them.

What more can a small to mid-sized manufacturing company ask for if they are seeking basic actionable steps for starting up the sustainability ladder.  Remember folks, it’s better to start in small, incremental steps, with a scalable internal (risk and process driven) and external (supply network enabling) plan that provides “sustainable value”.

Implementing a sustainability program is best done in stages, like learning that cigar box guitar.  No organization has the resources (or appetite) to tackle the “whole enchilada” at once.  That’s why I’m keeping it simple and sticking with the three-string…for now.

“Continual Improvement” Using Sustainability Metrics Takes Planning, Accountability & Resources

23 Jun

"Jump Start" by Jenny P (CC License)

Note:  This post marks the 75th since I started writing in early 2009.  When I launched ValueStreaming, I did so with the intent of providing timely, relevant, quality content over quantity.  The feedback that I’ve consistently received  is that this blog gives readers detailed, value-added content and thought leadership in the sustainability, supply chain and environmental policy space.   I humbly thank you all for your readership and support…you are the sustaining “wind in my sails”.  Paz, Dave

“On your mark, get set”…BANG.  As a competitive swimmer in my youth, I learned the rhythm of a good start off the blocks, kept my head down and paced myself through to the finish line.  I never won the “big” race, but always went for my personal best.  It’s that way with sustainability initiatives. Having a good baseline and pushing the limits to improve to the next level

Back in the late 1990’s I was working with one of my many semi-conductor clients on their ISO 14001 Environmental Management System.  A hallmark of ISO 14001 is “continual improvement”, focused primarily on going beyond compliance to reducing the overall environmental impacts and footprints of operations.  This particular company had identified hazardous waste generation as a “significant aspect” of its operations and developed some programs and targets intended to reduce generation.

One of the facility engineers was very excited one day when I showed up at the facility, proudly telling me that the company had managed to reduce waste generation by 25% over the past several months since he’d started tracking metrics.  “That’s great!” I said. “How’d you do it?”  He responded, “Well I ‘m not sure exactly”.  So I prodded.  “How has production at the plant been the last quarter?” “Well, it’s down…um, about 25%”, he answered in a muted tone.  See a problem here?  The company didn’t “normalize” the data (pounds of waste generated per number of units produced, for instance).  So in effect, there was no “continual improvement.  Oh well, back to the drawing boards!

Setting the Sustainability Mark…and Missing It

So it was interesting to read a summary of Green Research’s latest report, “Setting and Managing Sustainability Goals: Trends and Best Practices for Sustainability Executives.  I had the pleasure of meeting Green Research’s founder, David Schatsky, at the recent Sustainable Brands ’11 Conference in Monterey,  California.  In this latest report, David seems to have touched on some issues which get to the core of a value-added sustainability initiative…that being, demonstrating “continual improvement”.

As  this week’s by Mr. Schatsky article in Environmental Leader notes, while a flood of public and private companies (across many sectors) are “increasingly using public goals to signal their commitment to sustainability and their superiority to rivals…many are unprepared to meet those targets”.  The report suggests that sustainability planning, implementation, and performance measurement are still in an early maturation phase compared to financial and other operational goals.  Some of the key findings were:

  • A quarter of the 32 sustainability executives surveyed in Europe and North America for the study say their companies have set “aspirational” sustainability goals and lack a clear plan to achieve them.
  • Over 40 percent said progress on sustainability goals is reported to senior management only semi-annually or annually.
  • 57 percent of respondents characterized at least some of their sustainability goals as “stretch goals” – that is, challenging but probably achievable – and 54 percent said at least some of their goals are “realistic”.

 “Despite the best of intentions, even some excellent companies are challenged to execute on the sustainability goals they announce,” said David Schatsky, principal at Green Research

As I noted back in August 2010 in a post on Environmental Leader, there are two old axioms:

1)      “You are what you measure”, and

2)      “What gets measured gets managed.”

As Green Research’s study revealed, without an effective strategy to establish an internal benchmark for continual improvement, it becomes harder to innovate, advance and proactively respond to stakeholder expectations. Finally, good metrics if applied properly will foster innovation and growth.  Therefore, it’s vital that there be a systematic process in place that maintains focus on continual improvement.  Continual improvement is the primary driver for monitoring and measuring performance. If metrics don’t add value, they will not support continual improvement and eventually will not be used.  It’s a vicious cycle that can be avoided if the proper system is firmly implanted in organizational strategy and operations.

Setting Goals That Matter

Many times over the past several months, I’ve been asked by colleagues and clients”what can I measure that means something”.  And I answer them usually by asking “what matters to your organization and its stakeholders”?  “I see what your saying”, they say “but I can’t always see the payback”.  Well, sometimes the “payback” is hidden and can’t always be realized in tangible, hard dollar terms. Sometimes, especially if companies are not water, energy or resource intensive, or don’t produce a lot of waste byproducts, you need to peel off some layers.  What this often means is looking at other production, operational or worker activities that can’t be measured in hard dollars but in terms of “efficiency”.  Sometimes metrics can be measured in terms of avoided costs rather than actual expenditures.  As an example,  a client of mine “avoided” $2.4 million in accrued fines and violations (over a three year period) due to enhanced sewer infrastructure maintenance and reduced response times to effluent spills when they occurred.

"Bullseye" by TimSnell (CC License)

As the Green Research found, many companies initially establish said that “targets for realistic or stretch goals…through a bottom-up process, beginning with a baseline of current performance.”  I view this finding as similar to what I coach my clients to do in environmental management system or sustainability engagements- perform a risk-based evaluation of what poses the greatest environmental, social or governance risk and establish measurable (and achievable) objectives and targets.   Some of my clients like the Natural Step “back casting” process too , which attempts to envision a company’s “desired state”, measure a baseline “current state”, and fills in the gaps with programs and activities intended to reach the desired state.

Remember, when companies establish sustainability objectives (whether they are social, environmental, operational or financial) and define their targets, here are a few simple things to remember about metrics.  They must be:

  • Representative
  • Understandable
  • Relevant
  • Comparative
  • Quantifiable
  • Time-based and Normalized
  • Unbiased and Validated
  • Transferable

Staying on Track Within the Four Walls and in the Supply Chain

As I mentioned in last year’s post, once organizations decide what’s important to measure to meet sustainability related objectives, they needed to assure that they actually track metrics, report, calibrate and keep on measuring.  It’s called keeping your eye on the ball.  And this applies to supply chain management as well.  As I have reported in this space many times before, supply chain sustainability and responsible sourcing are two key ingredients for an organization to consider itself to be “truly” sustainable.  Many of an organizations greatest product and operations related impacts (like carbon emissions, resource or toxic chemical inputs, etc.) actually come from within its upstream supply chain.

Photo by HeraldMM (CCLicense)

A few tips to get your continual improvement process started:

  1. Measure things that add value to organizational decisions. Measuring for the sake of measuring is a waste of time.
  2. Make goal-setting a 360-degree exercise- Look inward through the organization rank and file for innovative ideas.  Seek advice and input from external stakeholders too (your suppliers and customers matter too!).
  3. Commit to what you can control or influence.  Don’t make broad declarations that you cannot achieve because you’ve no influence. Don’t over commit ( although a few heretically goals here and there aren’t too dangerous)
  4. Get some quick wins under your belt.  This will enhance the momentum behind the effort.  Remember to scale performance incrementally in line with the financial and labor resources that you’ve budgeted
  5. Own the goal and be accountable.  It’s not likely that organizations will succeed in meeting their goals without someone keeping track.  Make sustainability performance part of personal or group performance evaluations.
  6. Measure, Report, Repeat.  Don’t stop at the first sign of success or trouble.  Look for ways to press on, raise the bar and continually improve.  Report progress regularly (sometimes monthly, sometimes quarterly.  It all depends on what is being measured. 
  7. Go Short, Go Long.  Set some targets as short term goals, but think long term too (three to five years out), and in alignment with corporate strategies.  Most large companies like my client (Johnson & Johnson), Unilever, Sony and many others usually set five to eight year planning horizons.
  8. Measure things that compare well but slightly differentiate yourselves from your competitors. Novel and unique metrics are just as important to differentiating you as your products.
  9. Seek out globally-recognized metrics (like the Global Reporting Initiative) to assure that multi-national companies who also measure sustainability metrics can apply the data to their own goals.
  10. If you are a large company with multiple department, divisions or sites, the metrics of the subordinate organizations must be able to be “rolled up” in a way that addresses the entire organization but still meets site or department specific needs. 
  11. Report the Bad with the Good:  No one’s perfect and a little self deprecation, even in business can pay handsomely from a reputational point of view.  In this WikiLeaks era, information moves swiftly.  Stay ahead of “the story”, own up to the shortfalls, you’ll be forgiven and given more credit for your successes.
  12. Build off of prior continual improvement initiatives to track perform over longer periods of time.  It’s not like you flicked on a switch one day and became the sustainable organization that you aspire to be.  It takes time.

On second thought, I did win a “big” race.  My freshman year in high school I placed first in a 100 yard Individual Medley event against an arch rival high school in the Chicago suburbs.  That was my greatest moment in the pool…for a race many said I wouldn’t even finish.

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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