Are you old enough to remember the opening lines of the Buffalo Springfield song  For What it’s Worth? “There's something happening here/What it is ain’t exactly clear/There's a man with a gun over there/Telling me I got to beware”.     I am thinking there is a green supply chain revolution in play, just as there was political unrest and turbulence of the mid to late 1960’s from which this song originated. Methinks Walmart may be “the Man”, but are they really holding a gun to suppliers?  I’m not so sure.

 

Walmarts efforts internally to establish its sustainability index continue to slowly progress along (I still predict a 2-3 year process before anything tangible emerges).  But, the company is as I predicted last year, changing the rules in how sustainability is felt up and down the supply chain- mostly for good.  Many companies in the retail and electronics sectors, such as Proctor and Gamble and IBM have most notably stepped up to the plate, but many others are learning from Wal-Mart's green supply as well (see “The surprising success of the green supply chain" http://bit.ly/digXmH).  So how is this “cat herding” happening at such a rapid pace and what are the key issues being driven through the ‘value chain’.  Is this just a matter of keeping up with the next guy?

 

First- the ‘drivers”.  There are a number of factors and issues, both internal and external that can be attributed to this hot phenomenon in the supply chain space. In a 2009 study by GTM Research, sustainability was clearly a driving topic in supply chain management, ranking behind only three factors:  improving customer service, reducing supply chain risk and managing and optimizing an extended supply chain network  (Greening The Supply Chain: Benchmarking Sustainability Practices And Trends- GTM Research 2009 http://bit.ly/cl1QlU ).   The same study found that several factors were driving the greening of the supply chain across a number of vertical markets, notably:

·        

  • Lost sales (projected to be in the billions of dollars) because products in the supply chain were not “green” enoug
  • Increased energy and transportation costs (accounting to over 50% of the cost increases)
  • Damage to reputation and
  • Supply disruptions

 

In response, Walmart and other major retail and industry giants are driving upstream and downstream performance based changes, designed to reduce suppliers environmental footprints and focused on several key areas:  energy management, fuel cost containment, carbon emissions, water use and waste generation.  New issues also factoring into the mix include green chemistry and managemMP900401605[1].jpgent of restricted materials, depending on the geographic reach of global markets served.

 

To that end suppliers, from Tier One on down through the chain are responding to varying degrees and the early results appear favorable. As I reported last week, companies like Herman Miller, Walmart, P&G and Johnson and Johnson (http://bit.ly/cFBzjD) are showing marked reductions in most of the key metrics that they have been focused on, with much of the credit due to those suppliers who have found business sense in sustainability.

 

Now to that you may say that suppliers are goaded, cajoled, forced, strongly encouraged, or perhaps threatened to comply, or else risk losing millions in contracts.  Actually, what I am seeing with the likes of Miller, IBM, Hewlett Packard and others continues to be more of the carrot and less of the stick- more collaboration and performance based incentives coupled with onsite verification- that’s all good because it encourages accountability.  But that’s a topic for a future post. 

 

In the meantime, to paraphrase another line in that Buffalo Springfield tune:  Stop [vendors] what’s that sound /everybody look what’s going round”.  Till next time.

In the new ‘green’ economy, disclosure and transparency is king. In fact, consumer demand, especially in the retail sector is driving a new “business as usual”, where green indexes that display the environmental footprint of a product are rapidly becoming commonplace. Sourcing sustainable materials can mean, therefore, putting added pressure on suppliers to share sensitive information and help create green products—or risk being cut out of the supply chain altogether. So was the conclusion in a recent article on how many consumer products manufacturers are literally “going the distance” to source sustainable ingredients (http://bit.ly/a1a1Bw). From specialty products like Dr. Bronner’s Magical Soap to larger products manufacturers like Unilever and Method, manufacturers are revisting the design process to source less resource intensive, more environmentally benign ways to manufacture their products. Not only is this good for the environment, but clearly better for companies bottom lines.

 

A classic case of disclosure in the supply chain came recently with Herman Miller, the popular furniture manufacturer. Years ago the company embarked on the sustainability path, because they clearly saw a business advantage but felt it was the “right thing to do.” The company launched its ‘Perfect Vision’ campaign in 2003, which included green goals such as no landfill waste, no hazardous waste, no air or water emissions from manufacturing, and the use of 100% green energy, all by the year 2020. Simply put, the company couldn’t reach those goals without engaging over 200 materials and components suppliers in managing their own environmental footprints global supply chain.

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The company chose to take a holistic approach to design, raw materials, production methods, packaging, shipping, recycling, and even marketing--across the entire value chain. They reached down four full tiers in their supply chain, crafting hundreds of non-disclosure agreements to understand the true environmental footprints of each and every component of their products.  They knew that to be a truly sustainable company, they had to green its entire supply chain. This obviously has not happened overnight, but Herman Miller has stayed the course.  They embraced transparency and openness but did so with their value chain in a collaborative, win-win manner.  To date nearly half of the 200 plus suppliers are in alignment to meet Millers waste reduction goals with 10 more years to cross the finish line.  It’s clear to me that most companies are not lagging behind to meet these goals and are stepping up to stay ahead and to stay competitive.

 

Successful supply chains are based on mutually beneficial relationships between suppliers and customers, so it is important to extend the scope of sustainability value creation by sharing intelligence and know-how about environmental and emerging regulatory issues and emerging technologies, so that suppliers and customers can collaboratively strengthen each other’s performance. Doing so aids in distributing cost of ownership, enhancing product differentiation, and ensuring customer loyalty.

 

 

Collaboration and transparency then creates a sort of “reciprocal value creation” in the supply chain, where both suppliers and customers are better equipped and enabled to recognize and quantify each other’s value contributions to a successful, green supply chain.


 

 

 

Back in the 1990’s there was a popular term being used called “industrial ecology (IE)”.  Basically, IE is defined as a “systematic organizing framework for the many facets of environmental management.  The industrial world was viewed as a natural system - a part of the local ecosystems and the global biosphere.  IE offers a fundamental understanding of the value of modeling the industrial system on ecosystems to achieve sustainable environmental performance (Lowe, 1993).  The IE ecosystem boundary included the raw materials grower or extractor, the materials processor or industrial manufacturer, the waste processer, and of course the consumer.  The “value chain” of product manufacturing and the handing off of raw materials to manufacturer, and finished goods to consumer (i.e. the supply chain) can be viewed much the same way as IE.

Industrial Ecology.png

An industrial ecology (ecosystem) has been defined to exist on three levels, each characterized by the amount of recycling or reuse of material that is within the system (or the system’s “openness”). The second level is characterized by some factor of energy and material is reused within the system, and seems to be the most applicable model for actual systems. It is within these industrial ecosystems models that green supply chains will play a critical and practical role. http://bit.ly/b9Irc4.

 

Green supply chains operate on the premise that material flows and wastes generated are viewed, designed and managed in a way that “dematerializes” products, promotes optimal resource conservation, recycling and reuse.  The focus of a green supply chain then is entirely on managing material content in a systematic and collaborative way, so that all participants up and down the value chain benefit.

From a supply chain perspective, raw material price volatility (sharp rises, and sudden falls, in the price of raw materials) have been plaguing the global marketplace. In particular, energy, metals and commodities used as ingredients in manufactured goods and consumer products – have escalated since 2005.   Much of this volatility has been fueled by rapid growth in Asian markets and traditional supply and demand constraints. 

 

IE based systems then and the new 21st century green supply chain “networks” then are based on three key areas, each designed toward materials resource optimization, advance clean technology and demand response:

 

  • Technical

                    -Engineering perspective with technological innovation

·                   - Business System and Networks

  • Shared services, transportation, and facilities
  • Community-Business Interactions

·                  - Symbiotic networks and collaborative services

·                 -  3 Es:  Economy, Environment, Equity

 

According to a study on IE and risk analysis by Paul Kleindorfer of the Wharton School of Management http://bit.ly/a9QugQ, “in the industrial ecology framework, each company has a special role as steward of the environment and ecosystem within which it operates…this role of product stewardship and environmental waste and risk management [encompasses] suppliers and customers just as “extended value chain analysis” encompasses suppliers and customers in the traditional supply chain improvement process.”

 

So green supply chain management and industrial ecology are in essence operational process management practices, each designed first to manage an organizations and its stakeholders environmental footprint (materials and waste flows) and as a risk management tool.

 

There’s more to come in the weeks ahead on best practices and tools to leverage upstream and downstream value chain opportunities- the ‘green’ way.

As I mentioned in my first post, in the supply chain world there have been many exciting trends/developments that have occurred during the recent economic downturn:

 

 

  1. Logistics and procurement have become more strategic and nimble
  2. More organizations outsourcing, forming partnerships and alliances
  3. The product environment becoming more complex
  4. Time based competition that requires time compression
  5. Managing suppliers and customer relationships more proactively
  6. Competition shifting from company vs. company to Supply Chain vs. Supply Chain

 

 

At the same time, a number of environmentally driven issues have been elevated including, growing public concern over climate change, new environmental mandates in key global markets (many restricted materials requirements in Europe, for instance) and the increasing availability of greener products and services. Companies are looking at ways to improve efficiencies within their supply chains and at the same time, reduce waste, use less resources, and better position themselves. Supply Chain/Logistics professionals are responding by:

 

  1. Adding more environmental specifications in contracts
  2. Mandating “green’ certifications for products and services i.e. ISO 14001, FSC.
  3. Use of product specific eco-labels, reusable packaging etc
  4. Taking a closer look at supplier environmental practices, environmental compliance history and implementation of voluntary, proactive environmental programs.

 

It’s this last point that I want to expand on by providing an overview of options that companies can use to “green” their supply chain. What follows below are examples of environmental sustainable practices that companies have been increasingly adopting to increase supply chain visibility for their products and services.

 

Prequalification of suppliers

Require/encourage environmental criteria for approved suppliers

Require/encourage suppliers to undertake independent environmental certification (ISO 14001)images1.jpg

Environmental requirements at the purchasing phase

         Build environmental criteria into supplier contract specs

        Incorporate sustainability and environmental staff on sourcing teams

Supply base environmental performance management

        Supplier environmental questionnaires

       Supplier environmental audits and assessments

Build environmental considerations into product design w/ suppliers

       Design for environment (DFE) product innovation, life cycle analyses, clean tech

       Coordinate minimization of environmental impact in the extended supply chain

Cooperate w/ suppliers to manage end-of-pipe environmental issues

       Reduce packaging waste at the customer/supplier interface

       Reuse/recycle materials in cooperation with the supplier

       Launch reuse initiatives (including buy backs and leasing)

Reverse logistics

Give supplier an incentive to reduce the customer’s environmental load

Work with industry peers to standardize requirements

       Create internal procurement group to collaborate on environmental issues

       Standardize supplier questionnaires

Inform suppliers of corporate environmental concerns

       Issue statements of environmental management requirements and priorities to suppliers

       Draft and distribute comprehensive GSCM policy

Promote exchange of information and ideas

Sponsor events to facilitate discussions between customers and suppliers on environmental issues

Host training and mentoring programs

 

By implementing these practices in a collaborative and proactive manner across multiple tiers of suppliers, companies are enhancing long term competitiveness. Sometimes the efforts described above involve some short-term expense; but the long term return on investment more than offsets the short term tradeoffs. Future postings will explore these approaches in greater detail.

 

Greetings! As a newly minted Kinaxis community expert blogger, I want to first thank Lauren Bossers and the Kinaxis Team for all their efforts to date to establish the Supply Chain Community.  The supply chain world needs places like this where information can be shared and communicated, and where innovative ideas can be born and launched.  I am truly excited to be here.


Nchain.jpgow to why I am here.  My body of expertise comes with an environmental lens. I have been asked to share my experiences related to all things elated to design, development and implementation of what is generally referred to as “green supply chain management” (GSCM).  I aim to introduce concepts, share case studies, raise questions and offer practical tips on implementing value chain driven sustainable sourcing processes. 


I’ve written, taught and presented on this topic for many years, as an outgrowth of my sustainability-focused consulting work.  I wrote this spring on how newly issued reports cited an increasing emphasis of supply chain management as a vital ingredient of a successful business strategy in a rapidly changing global economy (http://bit.ly/93C2Xp).  At the same time, the concept of a Green Supply Chain is gaining interest among operations practitioners as a sustainable and profitable undertaking.

 

 

GSCM is ‘integrating environmental thinking into supply-chain management, including product design, material sourcing and selection, manufacturing processes, delivery of the final product to the consumers as well as end-of-life management of the product after its useful life’ (Srivastava, 2007)

 

More recently I have written that sustainable sourcing and green supply chain effectiveness must include supplier monitoring and “verification” to truly be effective and sustainable (http://bit.ly/bWKdmm).  That is why recent supplier mandates from IBM, Proctor & Gamble and Kaiser Permanente stand above the rest by including a verification element to supplier conformance.  Supplier data on critical issues such as energy and fuel use, carbon emissions, and resource consumption are in turn rolled up to support company-specific corporate sustainability performance criteria. 


This year I had the honor of speaking at the Aberdeen Supply Chain Summit on green supply chain management.  I will use future posts to expand on the issues and ideas that emerged from that dialogue- but two central themes emerged- transparency and collaboration.  These two issues tended to dominate all the supply chain tracks as the global economy continues its shift to a more carbon-free, resource limited and efficiency focused business marketplace. 


I hope that my postings will generate questions and advance the discussion on the importance of socially and environmentally responsible supply chain management that yields positive financial benefit.  I also hope that our discussion is collaborative and transparent.  No idea is a bad idea here! I ask that each of you that join me weekly ask questions back, and make this a truly open dialogue among professionals in the supply chain and logistics space.


So ask yourselves: “What color is my supply chain”?  And in turn I ask: “Did you ever notice that an environmentally responsible (green) supply chain is the same color as money?”