A Green Supply Chain Takes Innovation, Systems Thinking, Collaborative Approach–And Patience

As I have been involved with organizations through the years on environmental issues, I have discovered many things about supply chain management:

• Contractors and suppliers often create environmental impacts, sometimes related to the nature of their product or work, sometimes by accident
• Most organizations for some reason feel “powerless” to control their suppliers products
• Many companies are constrained by cost factors (purchase from the lowest cost vendor or bidder)

So when considering how to effectively manage and influence contractors and suppliers, raise expectations and take control of your supply chain, it may be valuable to take a “systems thinking” approach. Those that do realize that doing so may unlock significant revenue and cost savings potential.

Consider Starbucks. In mid 2009, Starbucks announced a legitimate attempt to address some very vocal stakeholder issues to clean up its supply chain by staring efforts to ensure that single-use cups are recyclable by 2012. So they convened a “cup summit” with representatives from every part of the paper and plastic cup supply chain, including raw material suppliers, cup manufacturers, retail and beverage partners, local municipal governments, Starbucks employees, and environmental NGOs. They brought in systems thinking guru Peter Senge. This effort is no small task given the internal (vendors and suppliers) and external (end use customer) variables necessary to make this program a success. They modified their goal to 2015. Starbucks reconvened this past spring and they are continuing down this open, transparent path to a sustainable supply chain. They are taking on this approach one city, one franchisee at a time. They are working with customers and cities to develop more proactive, use friendly recycling solutions.

To date, in its approximately 2,200 company-owned stores in North America that control their own waste collection, recycled items are made from one or more materials. While the company has continued to encourage recycling in cities where it’s “marketable,” a great deal remains to be down on the customer side (see Triple Pundit 8/20/10 article http://bit.ly/9SOJig). The company is also reaching deep and is offering farmers incentives to prevent deforestation, with pilot programs currently underway in Sumatra, Indonesia, and Chiapas, Mexico. This represents both an upstream and a downstream approach to green supply chain management. Sustainability is built into the company’s business vision, all performance metrics and product development decisions.  Starbucks has a long way to go to meet its goals but heretical goals like theirs may be takes time, coordination, patience, and above all, will.

Like Starbucks, Hewlett-Packard, the obvious Walmart makeover and others, forward-thinking companies are making efforts to consider how parts or components of a system are interconnected and examines the linkages between them. In the manufacturing and delivery of a product, a systems approach recognizes the interconnectedness between product components and delivery systems. So changing the way one component is manufactured, delivered, used and reused can effectively change behaviors and operations along the “value chain.” And along with this product systems thinking approach, sustainability data and metrics will flow with it, demonstrating the benefits to all those in the value chain.

So by standing back and viewing the supply chain in a systematic or holistic manner, organizations can apply 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. So how does a company like Starbucks, or HP, or Walmart tackle such a beast, with literally tens of thousands of suppliers in their supply chain? Well nothing comes easy and overnight. Get yourselves into that mindset first before you proceed. But there are some relatively simple ways you can proceed and make the progress you have set out to achieve:

Develop macro and micro-scale process maps of the critical stages of the supply chain, with an emphasis on key sustainability inputs (energy, materials use, waste generation, carbon footprint), to fully understand where supplier processes and products connect. Identify those processes that you do not even have direct control over–this is vital because you may gain a better appreciation of you supply chain partners’ priorities as well

Identify the critical supply chain partners that have the greatest product impact and begin evaluating the strengths and weaknesses of the current relationship. If need be, can you effectively influence or control what they do and how it’s done?

Create a sustainable sourcing plan (with a two- to five-year window) where you develop a relationship with partners at those critical phases in your supply chain, from Tier to Tier. Develop a long-term engagement plan (as shown on the figure below), that incorporates your supply chain one tier at a time. Also make sure that the approach is collaborative and transparent (as I recently noted) in order to manage your suppliers expectations–and your own.

The upsides of collaborative, systems-based thinking is that suppliers feel ownership of the process, feel more invested in its outcomes and better positioned for a value-added business relationship. This is the essence of a green supply or “value chain.” All parts really are pulling together–this is the new wave of business in the 21st Century.

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