Tag Archives: transport

Surveys Lift the Lid on Innovation & Sustainable Supply Chain Management, Uncovering Value & Leadership Traits

9 Feb

This is a tale of two surveys…one innovation focused, the other supply chain focused.  What both have in common is how the reports focused on define the traits and qualities of those who lead and those who follow in their respective business spaces.  Those who innovate tend to lead while those who follow…well, often play catch up.  That’s not too efficient and can lead to wasteful use of resources.  Trust me-as I learned last fall (see photo), it’s better to be the lead horse rider in a dusty trail ride.

The Leaders vs. Laggards Survey

In 2010, as part of its Innovation Survey Series, Cap Gemini Consulting performed a “Leader versus Laggard” study.  The goal of the study was understand the “current state of affairs regarding innovation, and … to identify what drives the success of companies that view themselves as successful”.  Over 375 companies responded to the survey.  Those reporting ‘over 75%’ of innovation efforts having a positive material impact on the company’s business results were considered “leaders” (slightly more than 11%). The ‘less than 25%’ category represents the innovation “laggard” group (nearly 25% of the respondents).  The remaining 65% percent were somewhere in the middle, innovation-wise. The primary drivers of innovation were: evolving customer needs, technological advances and changes, executive direction/internal demands, macroeconomic/external factors, globalization, and changing supplier capabilities. Innovation efforts were generally wrapped into the following five categories: customer focused innovation, new product development, incremental product improvement, business process innovation, and, business model innovation.

Innovation was considered a top-three strategic priority by more than 76 percent of the respondents to the Capgemini survey. Further, over half of the respondents indicated they have developed relationships with third parties to support their innovation efforts on an ongoing basis. The key study takeaways were:

  1. Innovation leaders have advanced beyond other innovators by having an accountable innovation executive or other form of formal innovation governance structure that deals with this kind of decision-making.
  2. Laggard companies hadn’t mastered collaborating effectively with external partners to improve their innovation results. Leaders however had been able to successfully leverage suppliers, customers and other third parties in the innovation process, including filling in missing capabilities or resources – such as technology and talent.
  3. Business model innovation will be the next big differentiator for companies aspiring to innovation leadership. Innovation leaders are allocating increasingly more resources to business model innovation.

Why is this study valuable in terms of supply chain sustainability?  Read on.

The Sustainable Supply Chain Survey

A revealing and promising study was released by the Aberdeen Research Group a couple of months ago.  The Sustainable Supply Chain surveyed 360 companies and found that sustainable supply chain management and supply chain risk management are among the top three areas for improvement in their organization for one third of the respondents.  While that isn’t a stellar number there are some positive trends.  For instance, the survey showed that 76% of the overall survey respondents have incorporated sustainability criteria into some or all of their supply chain management processes. The results provide further proof that in 2010 more companies viewed sustainable supply chain and greening as a foundational aspect of their business operations.

This survey fared compared well with another survey conducted by eyefortransport (EFT) that I reported on in a prior post).  In the EFT survey, well over 60 percent of those companies surveyed had implemented or were initiating sustainability focused efforts in 2010- ranking around 10th out of nearly 40 supply chain management project categories.   In the logistics survey, most respondents noted a far higher level of positive environmental performance in 2010 compared with 2009.

The Aberdeen survey found that two primary drivers for sustainability revolved around achieving “competitive advantage” and assurance that companies were compliant “with current and future regulations”.   Additional drivers noted by about a third of the respondents included interest in positive impacts to bottom line financials and responding to consumer demands for ‘eco friendly’ products.  These drivers, according to the reports highlighted perspectives of five different stakeholders along the end-to-end supply network: customers, suppliers, regulators, competitors and shareholders.

What makes the Aberdeen survey unique was how it distinguished business pattern between “leaders” and “laggards” (like the Capgemini report).  Two key take-aways were:

1) Best-in-Class companies were twice as likely to incorporate sustainability principles throughout all supply chain management (SCM) processes and

2) a principal characteristic of “laggards” was their lack of focus on incorporating sustainability into their SCM processes.

For example, the Aberdeen study identified a 29% spread between leaders who’ve achieved 12% emission reductions versus laggards corresponding 17% increase in emissions.  Similar polar opposite movement was found in areas related to energy consumption and operating margin containment.  And like the Capgemini study, best in class (leaders) companies were 70% more likely to establish corporate governance teams, making technology investment to collect and report metrics, and engaging their suppliers.  Think of the potential savings that leaders have realized compared to their laggard counterparts.

Logistics Providers Leading the Way

As one example, two logistics giants, FedEx and UPS have done deep dives in their business practices and implemented industry leading solutions to bake supply chain sustainability into their operations and supplier networks. UPS has deployed “package-flow” software to map out its most efficient delivery routes. Besides limiting left-hand turns, UPS estimates it shaved nearly 30 million miles off its delivery routes, saved 3 million gallons of gas and reduced CO2 emissions by 32,000 metric tons.  FedEx has deployed cleaner vehicles, sourced alternative power sources for its facilities and engaged its supply chain to promote recycling, product reuse and greener packaging to support FedEx’s operations. The company reports that they’ve improved total fleet miles per gallon within the U.S. by 14.1 percent since 2005, saving over 53 million gallons of fuel or approximately 472,700 metric tons of carbon dioxide emissions, with a goal of improving by 20 percent by 2020.  And like UPS, FedEx  is (according to its web site) redesigning its “physical distribution models to maximize the density of … ground and air shipments. This reduces the amount of fuel it takes to ship each package….”

The Aberdeen study also mentioned how the UK based non-profit Supplier Ethical Data Exchange (Sedex) has developed a secure online platform for companies to share and monitor sustainability data across supply chain.  Sedex’s mission is “connecting businesses and their global suppliers to share ethical data and enabling continuous improvement in ethical performance”.  Currently used in over 160 countries, the membership driven initiative focuses on metrics capture across four “key pillars”: Labor standards, health and safety, business integrity and environment.  Being on Sedex does not mean that a company has met any ethical standards or is in compliance with any code but it does mean that suppliers have made a commitment to continuous improvement.  Suppliers to major retailers and brand owners continue to own the data and manage its use, and keep it updated on a semiannual basis.  Suppliers’ customers then have the option to run a “risk profile” which can allow them in turn to prioritize suppliers for additional collaboration to manage the sustainability footprint of their products or practices.

The Work’s Not Done

The Aberdeen study did uncover several challenges that companies face, especially those with wide supply chain networks.   The study found that about 40% of companies outsourcing at least some of their manufacturing struggle to establish operational capabilities that yield measurable results (less than 10% efficiency).  This underscores the difficulties that many manufacturers have in effectively controlling or influencing supply chain behavior.  And while sustainability initiatives focused on improved energy use efficiency and practices to reduce environmental footprints are highly relevant in improving operations efficiencies, execution still remains challenging.

“The focus on sustainability has changed from being a philanthropic, ‘nice to have’ initiative, to the one that is core to the success of organization…Consistently adhering to the sustainability mandates established by clients as well as establishing mandates for your suppliers is an important strategy to gain incremental business value in the current environment” – Nari Viswanathan, Vice President and Principal Analyst of Supply Chain Management at Aberdeen.

Pushing the Supply Chain Envelop Requires Innovation and Leadership

Many of my prior posts have suggested that “supply chain successes are driven by those who lead through innovation and don’t procrastinate.  These organizations have vision– for the short term and long-term”.  The Aberdeen and Capgemini surveys are proof that ‘first mover’ companies are changing the way business gets done, sometimes in marked, ‘greener’ ways.

I believe that innovative companies are those who consider business operations through a “sustainability lens” by 1) developing key performance goals and metrics to make supply chain sustainability initiatives thoughtful, effective and believable; 2) implementing sustainability initiatives that create environmental and social benefit and that are aligned with the company’s financial strategies and business vision; and 3) identifying and developing value-added transparency and proactive collaboration throughout the supply chain.

Who is up to pushing the supply chain envelope, be a sustainability leader and reap the benefits?

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Green Transportation- All It Takes is Innovation and Drive

16 Mar

Framing the Issue

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

‘Greening” Transportation in the Supply Chain

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

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

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

Solutions:

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

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

Business Case Examples

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

Summary

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

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

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

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

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