Tag Archives: systems

With a Change in Workplace Comes Reflections on Society, Sustainability and a Balanced World

30 Nov

Source: http://www.flickr.com/photos/tsa1/5543988340/

You may have noticed that this space has been “dark” of late.  Why, since I’ve been gone and the world has spun round and round: the Occupy Wall Street launched (and perhaps corporate social responsibility entered the public eye), Kim Kardashian got married AND divorced, Libya fell, the St. Louis Cardinals won the World Series,  the debt ceiling crisis…well that’s still with us.   No, I didn’t disappear into the abyss after my Africa trip in August.  No, I didn’t burn out or give up.  Instead, I’ve moved forward a notch in the journey.

I’ve always maintained to family, friends and colleagues that “change is good”, and that it continues to drive us to continually improve on a personal and professional scale.  As I announced in early October to 800 of my closest personal friends and colleagues on LinkedIn, I recently started a full time position as Associate Director- Environment, Health & Safety (EHS) for Elan Pharmaceuticals, Inc. in South San Francisco, CA.    A long time client of mine, Elan is at the forefront of neuroscience based biotechnology.  Elan’s work includes research and development activities for neurodegenerative diseases, such as Alzheimer’s disease and Parkinson’s disease and autoimmune diseases, including multiple sclerosis.   I am proud to be aligned with a company that is focused on tackling some of the most troubling and challenging diseases of the mind and body, some of which have affected members of my own family.

With my days (and occasional evenings) fully committed with Elan, I’ll be placing ValueStream Performance Advisors on hiatus. Despite the change in venue, my enthusiasm and passion for heretical thinking, innovation, systems-based management and organizational sustainability, remains the same.  I’m happy with what ValueStream was able to accomplish through from 2009-2011 along with my many collaborators and clients

However, while my social media presence may change in the months and years ahead, I will nonetheless continue to be an ardent advocate for organizational sustainability, and proactive EHS compliance and management (which Elan has graciously endorsed as well).  I am truly appreciative of all of the support you, as readers have given me and continue to value the business relationships that we’ve established. To date, over 90,000 (!!!) visits have been made to this site to learn, share, argue and discuss key ideas and issues focused around sustainability.

Managing Change and Life’s Risky Balance

Like my change in workplace, you will also see some changes in the look and content of this site as well, starting with the banner photo.  This was a shot of the iconic acacia trees that I took while on a mini-safari this past summer in the Spioenkop Nature Reserve in the Drakensberg, KwaZulu Natal, South Africa.  Riding on horseback among the roaming wildlife (among them rhinos, giraffe, zebras and hartebeests) I was reminded of how critical it is that we all take a moment to reflect on the nature of humankind, how far we have come in a relatively short period of time on this planet, and how easily we have drifted away from lifes precious balance.    Not far from the ancient cave dwellings of the aboriginal San people, I realized how out of step humanity is with what’s around them, and what a ruinous course we may be on.  We are perhaps the species most at risk.  I also noted in my related post following that South Africa trip discussing environmental, health and safety, that ” companies must take care of basic HSE issues and lay a firm foundational framework for continual improvement first before they can progress along the sustainability journey.  …Regarding sustainability, it makes little sense force feeding a business approach that has little immediate bearing on managing organizations immediate risks.”  This is one of many reasons why I elected to refocus my career work on managing basic EHS issues to assure that a solid foundation is in place to support systematic sustainability efforts.

We are at a critical juncture on this fragile planet of ours.  We all have a moral imperative to passionately recast our “lot” in a much larger, infinitely complex global ecological system.  As Gregory Reggio so eloquently and powerfully captured in his epic 1982 film, “Koyaanisqatsi”, we live in a world…a life, out of balance.  How ironic that the United Nations COP17/CMP7 International Climate Conference has convened this week in  Durban, South Africa, to discuss  the most critical “out of balance” issue of our lifetime, climate change. …just a few short hours away from where the banner shot on this page was taken.

Humanity has the combined technical capability to use science, politics,  innovative technology and cultural awareness  to reshape the global natural, social and economic environment  to a point of balance and equity.   Do we have the collective wisdom to use that knowledge to achieve and maintain that balance?    I think we do, but like the sustainability journey we are on together,  it’ll take many steps and the political will to get there.

Please take a moment to add my new email to your contact list. I’ll retain dmeyer@valuestreamadvisors.com  address as a general professional networking address, or you can reach me here or at Elan — my new contact details are pasted below. And of course, you can still find me on Twitter and my commentary on Sustainable Business Forum, Sustainable Plant, Kinaxis Supply Chain Expert Community, and other media sites.

All the Best!

Dave R. Meyer, Associate Director- Environment, Health & Safety

Elan Pharmaceuticals Inc.

800 Gateway Blvd., South San Francisco, CA 94080

Direct: +1 650.877.7624

Email: david.meyer@elan.com

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Chinese NGO Claims Apple Supply Chain Sustainability is ‘Rotten to the Core’. Will Consumers Agree?

2 Sep

Photo by i.hoffman under CC License

Here we go again.  Six months ago, I presented my thoughts about a report by Chinese NGO Institute of Public and Environmental Affairs (IPE) 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.

Worker complaints about unsafe working conditions and acute health problems were presented.  The IPE gave opportunities to every company referenced in the report to initiate an open and two-way dialogue, and most did …except Apple Electronics.  According to the report, Apple was more secretive about its supply chain than almost every other American company operating in the China.  Apple came up among the laggards among 29 major electronics and IT firms in a transparency study drawn up by a coalition of China’s leading environmental groups.

These are the iPad and iPod guys for crying out loud!  The evolutionary wizards who have shaped and fundamentally changed the way that most consumers behave, work, interact and get on with their daily lives.  Those guys who at one point this summer became the wealthiest company in the United States…this before iconic CEO Steve Jobs retired.

Apple- Skinned Again

Following the early 2011 report, the IPE 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.”

The IPE reported (rather colorfully I might add) that 27 suspected suppliers to Apple had known environmental problems.  The IPE noted that in Apples ‘2011 Supplier Responsibility Report’, “where core violations were discovered from the 36 audits, not a single violation was based on environmental pollution. The public has no way of knowing if Apple is even aware of these problems. Again, the public has no way of knowing if Apple has pushed their suppliers to resolve these issues. Therefore, despite Apple’s seemingly rigorous audits, pollution is still expanding and spreading along with the supply chain.”

IPE reported that “during the past year and four months, a group of NGOs made attempts to push Apple along with 28 other IT brands to face these problems and the methods with which they may be resolved. Of these 29 brands, many recognised the seriousness of the pollution problem within the IT industry, with Siemens, Vodafone, Alcatel, Philips and Nokia being amongst the first batch of brands to start utilizing the publicly available information. These companies then began to overcome the spread of pollution created by global production and sourcing, and thus turn their sourcing power into a driving force for China’s pollution control. However, Apple has become a special case. Even when faced with specific allegations regarding its suppliers, the company refuses to provide answers and continues to state that “it is our long-term policy not to disclose supplier information.

The IPE offered its opinion that “Apple has already made a choice; to stand on the wrong side, to take advantage of the loopholes in developing countries’ environmental management systems, and to be closely associated with polluting factories.”

IPE concluded that Apple needed to own up and be accountable for its supply chain for the following four reasons:

  1. “… any company that produces a large amount of hardware must bear the responsibility for the environmental and social costs incurred during the manufacturing process.
  2. Secondly, the suppliers who violate the standards for levels of pollutants emitted and who ignore environmental concerns and workers’ health do these things with the aim of cutting costs and maximizing profits.
  3. Thirdly, Apple Inc. understands that when passing the blame for social responsibility it can be difficult to pull the wool over the eyes of the general public…; and
  4. Fourthly, many people do not understand that Apple and other brands’ outsourcing of production is not the same as ordinary purchasing behavior. Various sources of information show that Apple is deeply involved in supply chain management—from the choice of materials to use to the control of clean rooms in the production process.”

So What’s Wrong With Apple?

Apples image problem appears to be getting worse before it gets better and it may be more than just a public relations problem; and it’s not just in China that Apple is facing criticisms.  Apple, like most consumer electronics manufacturers is a major user of highly sought after precious minerals, many of them associated with conflict areas (so-called ‘conflict minerals’). Apple in fact sources tin from 125 suppliers that use 43 smelters worldwide.  That’s an awful big challenge from a supply chain management perspective. But Apple was still a bit slow to step up like other key IT companies like Dell and Intel and collaborate with the Electronics Industry Citizenship Coalition in developing a framework to address conflict mineral traceability.

Further complicating the issue is the sheer size of Apples supply chain and the general difficulty that comes in managing dispersed multi-tired supply chains in other countries.  In an excellent piece published in GreenBiz this week, Environmental Defense Fund Project Manager Andrew Hutson suggested that  “If you’ve got an office in Shenzhen or Hong Kong, it’s very  hard to keep tabs on the perhaps thousands of factories you have across  China in any given moment”.  The article went on to discuss how scrutiny can sometimes  lead contractors to move factories to more remote areas, farther away  from watchdogs, suggesting that “the sheer distance from headquarters created by chasing low-cost labor  to developing countries can effectively reduce accountability”. While cheap labor in far off lands certainly has its benefits, clearly it has its disadvantages and Apple is paying the price.

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 is when it comes to corporate social responsibility and sustainability, transparency is the name of the game, not secrecy.  In this “WikiLeaks” world of ours, mystique only gets companies mired deeper into areas of suspicion and distrust.

Photo via Michael Holden under Flikr CC License

But perhaps there is more to the issue to noodle on. Is it entirely possible that Apple isn’t ignoring the problem, but rather its supplier network is just too big to handle and they lack the tools, systems and technologies to perform adequate supplier training and oversight?  Or is it that Chinese regulatory agencies also lack the resources or institutional oversight necessary to monitor compliance over in-country industrial manufacturers that service multiple consumer brands?  Or is it possible that as consumers our insatiable appetite for Apple products is partly responsible for creating such high demand that Apple must reach out to hundreds if not thousands of suppliers to fulfill its orders and keep Apple product lovers happy?   Or is the problem a combination of rampant, unsustainable consumerism, poor regulatory oversight, a supply chain ‘gone wild’, AND a deviated moral center on the part of Apple (as the IPE suggests).  You see, its complicated and maybe, just maybe, we should all take a close look in the mirror and question our own culpability in this mess.

For any of my dedicated readers, I am by no means being an apologist for Apple.  You all know where I have stood in the past by constructively calling for Apple to step up and be as evolutionary on corporate social responsibility and sustainability matters as it is with its products.  I noted in my prior post the many key steps that Apple can and must take to effectively make a difference in its supply chain.  In addition Treehugger writer extraordinaire Jaymi Heimbuch offered some outstanding advice to new CEO Tim Cook, not the least of which was “requiring transparency in the supply chain and being more direct with suppliers about standards”.  My advice is simple Mr. Cook: show humility, take responsibility, and act swiftly and collaboratively.

Rest assured there are more activist organizations shaking Apples tree.  And what I fear (as Apple should too), is that one day all that shaking will bring that big old tree down.

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”.

‘Green’ Procurement: Getting its ‘Value Creation’ Game On to Drive Supply Chain Sustainability (Part 2)

27 Jul

In Part 1 of this series on sustainable procurement, I laid out my vision of the heart of a sustainable, green supply chain that runs through its procurement function.  It’s simple to show how every product has a hidden human health, environmental and social impact along the entire supply chain.  However, it’s been challenging to bring sustainable procurement into a central decision making role in line with organizational business goals.  The results to date have been a mixed bag, as I alluded to when I mentioned Aribas new Vision 2020 report and companion dialoguing process, now underway.

Sustainable Procurement: back to management!

On the heels of the Ariba effort comes a promising benchmark report recently released by HEC-Paris and Ecovadis. Entitled Sustainable Procurement: back to management! this study (available for download on Ecovadis’ site) has risen to rescue and tempered my fears of devolving sustainable procurement.  In fact, the report may suggest a positive “tipping point” in favor of sustainable procurement.  The efforts behind the 2011 edition of the HEC/EcoVadis Sustainable Procurement Benchmark were carried out between the fall of 2010 and early 2011.  This benchmarking process started in 2003 and the 5th conducted since that time.

The objective of the benchmark is to provide a snapshot on what’s trending in the area of Sustainable Procurement practices.  According to the authors, the following overarching questions were explored:

  • How has the vision of the Chief Procurement Officers (CPOs) evolved?
  • What tools and initiatives seem to be the most effective over time to drive changes?
  • How is Sustainable Procurement progress measured?
  • What are the remaining challenges faced by most Procurement organizations?

The study identified three main drivers behind Sustainable Procurement initiatives: Risk Management, Value Creation, and Cost Reduction.  These findings mirror some of the trending areas and critical issues identified in the Ariba report.  HEC and Ecovadis suggested that these three drivers’ shows that many organizations are now facing new expectations in terms of Corporate Social Responsibility and Sustainability from the Procurement Departments of their clients and, suggest that having a sustainable procurement program in place can become a competitive advantage.

 Sustainable Procurement Remains High on Executives Agenda

  1. 92% of the surveyed Companies consider Sustainable Procurement a “critical” or “important” initiative, even though for the 1st time this year, “Risk Management” took over as a priority initiative.
  2. The major progress made in 2011 is on the support from the Top Management (+24%) thus demonstrating that Sustainable Procurement is attracting more and more interest from Executive Committees, and significant progress was made in implementation of tools and organizational changes.
  3.  Significant organizational changes have been implemented: 45% of companies already have “dedicated teams” and 57% report having trained a majority of procurement staff on Sustainability.
  4. Whereas in 2007 only 1/3 of companies were using formalized methodologies for assessing their suppliers’ sustainability performance, in 2011 two-thirds of them are now implementing dedicated tools (either internal or leveraging 3rd parties).
  5. Finally 92% companies have increased (56%) or maintained (36%) their budgets related to Sustainable Procurement, which should yield more changes in the future years.

Tools for Sustainable Procurement on the Rise

The HEC/Ecovadis study found that basic tools such as “Suppliers Code of Conduct” ,  “CSR contract clauses” and “Suppliers self-assessment“ were now the rule rather than the exception among companies surveyed by a ratio of 2 to 1,  but interestingly were still found to  limited value in terms of risk management.  What I found encouraging was that the study found maturation in the types of tools used, including “Supplier Audits” and “Supplier CSR information databases“.  This type of work has clearly been evident in what I have reported in the past, especially among multi-national companies with contractor manufacturing operations in developing economies (like China, India and Brazil).  These advanced tools offered more opportunities for suppliers to engage directly with buyers, allow for data verification, and offer direct recommendations for supplier CSR and sustainability improvement.  Over half of the companies surveyed had advanced to this next level.  Finally, when asked what the most effective uses of resources were in developing a Sustainable Procurement Program, respondents mentioned 1) top level support, 2) creation of cross functional teams and 3) training, as key success ingredients.   All three of these success factors had shown substantial improvement over the past several benchmark cycles, according to the study.

Sustainable Procurement Creates Value

This is not the first study that has come along that demonstrates value and return on investment from sustainable procurement.  I wrote earlier of a joint study by Ecovadis, INSEAD and PriceWaterhouseCoopers that demonstrated similar results.  In that study, payback from most green procurement activities was huge. Companies surveyed were able to benefit quickly from risk management reduction and potential revenue growth opportunities, due in part to sustainable procurement.  The study also found that there were additional ‘value creation’ opportunities that could be realized if procurement departments collaborated more closely with the marketing and R&D departments upstream on the projects.

Also, a study in 2009 by a company named BrainNet (Green and Sustainable Procurement: Drivers and Approaches”)  looked at sustainable procurement and value creation and found that “… procurement with an ecological and social conscience is not a cost factor, but a value factor…Companies that pursue a consistent approach to green and sustainable procurement receive an above-average return on capital deployed.”  The study produced what they describe as an “evolution curve for sustainable procurement” that describes the maturity of various approaches of sustainable procurement.  This curve compares well with the most recent EcoVadis/HEC findings and suggests that there may be a widening gap between leaders and laggards.

Sustainable ‘green’ procurement embraces a holistic approach, one that encompasses organization, people, process, and technology to create greater product value along the entire supply chain.  This type of value creation can managed by establishing firm triple bottom line based metrics from upstream suppliers to downstream users and using the procurement function to support product and process innovation and accounting for total cost of ownership (TCO).

What’s Next?

According to the most recent HEC/EcoVadis benchmark report, it is clear that new green and social business models depend upon innovation, and a gap still among many organizations to implement a truly Sustainable Procurement vision.  This was clearly in evidence by the lack of mentions by Chief Procurement Officers that I discussed last week in the Ariba study.

The HEC/Ecovadis report suggests that when implementing Sustainable Procurement practices, a three phase process can get the ball rolling, starting first by orienting and energizing the procurement function through:

“1. Communication activities: Building awareness among employees regarding the approaching change, the benefits and the steps to be implemented.

2. Training and Performance support: ensuring that the initiative is being understood among those who are to execute the change or be part of it, and leading to buy-in of the key stakeholders.

3. Rewards and recognition: ensuring that employees – and suppliers – who embrace change are properly recognized and rewarded. This final step is when implementation is not only measured, but also celebrated.”

I’m going to say it again…and again. All sustainable business roads lead through the procurement function.  The procurement function is the perfect nexus and a critical organizational player that touches product designers, engineers, multiple tiers of suppliers and subcontractors, manufacturing operations, logistical warehousing and distribution and the end users.  Yes indeed, things are looking up for sustainable procurement…it’s ‘game on’.

Got Sustainable Procurement? Yes! No! Maybe. Supply Chain Surveys Read the Tea Leaves (Part1)

21 Jul

Courtesy LeoReynolds via Flickr CC

To paraphrase  a timeless Bob Dylan song, “The Times They Are A’ Changin’” is no understatement.  You can read the details from across the globe in the news every day and are rapidly happening simultaneously on political, economic and social levels. And business is also making radical changes in the sustainability and corporate social responsibility (CSR)  frontier.

“Then you better start swimmin’
Or you’ll sink like a stone
For the times they are a-changin’.”- Dylan

One area that appears to be in movement is Procurement. You know, those folks on the third floor in the back that order stuff?  Well, wrong! I’ve maintained that the heart of a sustainable supply chain runs through its procurement function.  That’s because every product- every single purchase- has a hidden human health, environmental and social impact along the entire supply chain.  My previous posts have discussed how the procurement function is a vital cog in product value chain.  Purchasing staff are the “gatekeepers” that can access powerful tools and serve as a bridge between supplier and customer to assure that sustainability and CSR issues are taken into account during purchasing decisions.  2010 was a watershed year for sustainability initiatives and supply chain management and I predicted that 2011 would see greater progress.

So I was incredibly excited when I recently got my hands on a relatively new white paper from Ariba, entitled “VISION 2020 -Ideas for Procurement in 2020 by Industry-Leading Procurement Executives”.  According to the conveners of the document, the “objective [of the effort initiated in 2010] is to initiate a dialogue on the future of procurement and to create a roadmap for how to get there.”  For that, they connected with leading practitioners and executives from around the world and across a variety of sectors to share their ideas, best practices and to read the tea leaves as to where procurement might be in 10 years.

And while the initial report laid out some pretty intriguing and widely varying trends and predictions about the state of procurement in the corporate function, I was unfulfilled.  I was all ready to read about how the emergence of sustainability in the marketplace was going to drive procurement decisions.  I expected to hear how top flight companies around the world were collaborating with their supply chain, implementing staff training on ‘green purchasing’ practices, and implementing sustainability driven supplier audits and ratings scorecards.

Boy, was I wrong!  Only ONE  mention of the word “sustainability” (thank you Dr. Heinz Schaeffer, Chief Procurement Officer, Northern and Central Eastern Europe for AXA), and no mentions of “responsible sourcing”, “green supply chain” or “sustainable sourcing”.  I would have expected more from chief procurement representatives from the likes of KeyBank, Maersk, Sodexho, and former execs from Hewlett- Packard, General Motors, and DuPont.  Most of these companies are generally considered leaders in the sustainability space.  So why would there be a disconnect between what companies are doing in design, manufacturing and product life cycle management and the procurement function?

Before we go too far, its helpful to define what “sustainable procurement” is.  While there is no singular definition for it, I like the definition offered up by the  UK-based Chartered Institute of Purchasing & Supply (CIPS).  CIPS definition is  “a process whereby organisations meet their needs for goods, services, works and utilities in a way that achieves value for money on a whole life basis in terms of generating benefits not only to the organisation, but also to society and the economy, whilst minimising damage to the environment.”.  And what CIPS defines as  ‘whole life basis’ is that “sustainable procurement should consider the environmental, social and economic consequences of design; non-renewable material use; manufacture and production methods; logistics; service delivery; use; operation; maintenance; reuse; recycling options; disposal; and suppliers capabilities to address these consequences throughout the supply chain” [emphasis added].

It’s a good thing that the authors from Ariba stated that “The [2020 Vision]report is intended not as an end, but rather as a point of departure for much discussion and debate around where procurement can and should be setting its sights for the year 2020 and beyond.  In fact, Ariba invites readers to “join the debate and to extend the discussion with new ideas by joining the conversation.  I have and I hope you will too.  But I think I’ll start right here first.

Key Findings of Interest:

The report identified six key trending areas and take-aways among the participants who have weighed in so far, namely:

  1. Procurement devolves- with spend management requirements shrinking, companies are being forced to optimize what resources they have and make better informed decisions.  More work at the business line level will occur, possible eliminating the central procurement function entirely.  Money and metrics will drive most decisions as companies face leaner profit margins.  There will be a need to engage end customers more and more and leverage relationships.
  2. The new supply management emerges– some traditional sourcing functions may become outsourced.  Strategy “will tie directly to an enterprise’s end customers and it will be more cognizant of the diversity of desires and requirements within the customer base”.
  3. Skill sets change.  The Chief Procurement Officer and staff must have broader skills that allow them to not only create opportunities for revenue enhancement internally and optimized “spend”, but also be more in touch with end customer values-driven needs. Procurement staff need to be tuned into multiple tiers of the supply chain, dive deep “inside the supply chain and bring [issues] forward to the designers within [individual] companies”.
  4. Instantaneous intelligence arrives.    Market pricing will become more transparent [the Cloud forces transparency to some degree].  Companies will have to rapidly extract innovation and other value from supplier bases, and build exclusive commercial relationships with leading suppliers that share both risks and rewards.
  5. Collaboration reigns- There will be as the report notes a “big emphasis on driving and taking innovation from the supply base… the supply role will be less ‘person-who-brings-innovation-in’ and more ‘person-who-assembles-innovation-communities-and-gets-out-of-the-way’.  Suppliers are being asked more often to participate in early design and product development as a way to leverage risk and control overall product life cycle management risks.
  6. Risk management capacity and demands soar– as companies are already realizing, effective procurement relies on response to risk management variables (financial, ethical, and operational performance).  Companies must create “360-degree performance ratings and provide greater transparency into market dynamics, potential supply disruptions, and supplier capabilities”.  A few participants noted that  there will be a “big expansion in the kinds of risks companies address in their supply chains, considering, for example, such things as suppliers’ sustainability, social responsibility…”.

Now if I read in between the lines, I can easily pluck out a number of key procurement trends from the 2020 report that transfer well to sustainability and responsible sourcing.  Risk Management.  Collaboration.  Design phase (life cycle) engagement of multi-tiered suppliers.  Key performance metrics. Responding to consumer demands. Supplier performance ratings. 

Courtesy babycreative via Flickr CC

One takeaway for me appears that there may be a disconnect still between the procurement function and other functions within organizations. So is the procurement function still operating in obscurity in most organizations?  It all depends who you talk to but also on your skill at reading the tea leaves.

Rest assured that compared to only a few years ago, more companies that are seeking to manage the life cycle environmental impact of their productsfrom design and acquisition of materials through the entire production, distribution and end of life management.  They’re finding sustainable procurement to be a valuable tool to quantify and compare a product or component’s lifetime environmental and social impact early on in a products value chain while positioning the company for smart growth in a rebounding economy.  We may be at a sustainable procurement “tipping point” and Part 2 will present the results of a very promising benchmark report recently released by HEC-Paris and Ecovadis, which tells a much different story.

The times they are [indeed] a’changin’.

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.