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2011

image Past couple of decades have generally seen supply chains stretching ever longer from one end of the world to another. As manufacturing started becoming heavily concentrated in China, more and more companies found it was just cheaper to build or buy in China and ship it to their factories, assembly plants, and markets rather than maintaining traditional domestic sources. The volatility in energy prices and growing awareness of the cost of supply chain disruptions might just change that.    

 

The graphic below traces the path of a DVD player as it gets added to a retailer’s assortment driving the production of components, assembly, and distribution back to the retailer’s home market. The picture pretty much summarizes the state of global supply chains that our commerce routinely depends on. The story is not much different whether it is ipads, hybrid cars, electronics, kitchen electrics, or for that matter even our food! The trends that drove such cross-global supply chains were substantially low wages in some of the Asian countries, cheaper raw materials, growing process automation, and cheap cost of energy.

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But most of these trends may be reversing. A Forbes story reported in 2007 that the wages in China nearly doubled in past four years outpacing the growth of GDP. According to the Department of Energy, the cost of diesel fuel has almost quadrupled in the same time from 1998 to 2008, (see: http://www.supplychainmusings.com/2008/05/optimization-transportation-versus.html). In the meantime, the supply chain disruptions have grown due to natural disasters as well as socio-political instability across large parts of the globe.

Off-shoring is so passé! Near-shoring, Right-shoring, and building local supply chains are the new trends. Redesigning supply chains can help. Consider the following and you may be on your way to a more sustainable supply chain:

  1. Energy profile (Production). The energy profile models the total energy requirements of producing the raw materials as well as the manufacturing process that converts them into finished merchandise. Consider how can you leverage such data to create and manage the energy profiles of the manufacturing process and the energy profiles of your raw materials as well as the packaging materials.
  2. Distribution profile. This captures the carbon footprint of the material movements required to manufacture a given product, with elements such as the distances traveled by the raw materials from their source to the factories, and by the finished goods to reach the retailer’s warehouses and stores from the factories. The modes available on these routes and energy profiles of these modes may affect such scores. Consider how you can model and manage the distribution profiles to better manage your distribution costs. Some of the related articles at the bottom provide clues on how to better manage your transportation processes to reduce costs and carbon!
  3. Recycle profile (Disposal). This profile can model the material’s recycling characteristics, types of facilities required, and regional laws governing recycling requirements by collecting data on the recycling profiles for the merchandise as well as for the packaging materials.

Related Articles:

Other Resources:

Want to know more about supply chain processes and supply chain strategy? Check out my books on Supply Chain Management at Amazon .

© Vivek Sehgal, 2011, All Rights Reserved.



Originally posted by Vivek Sehgal at http://feedproxy.google.com/~r/SupplyChainMusingsstrategyVisionOperationalExcellence/~3/yc9eMLWqgpA/past-couple-of-decades-have-generally.html

image Sustainability has been slowly gaining traction. This may be the year when it becomes mainstream theme for a majority of companies. While most companies adopted sustainability as a tool to enhance their corporate brand, a lot of them have discovered that it can also affect their bottom-lines. The sustainability seems to be going mainstream within the corporate culture and is being adopted as a business strategy to drive Growth, Return on Capital, and even Risk Management. That is the message from a recent survey from McKinsey Quarterly .

Some of the major takeaways from the survey:

  • Corporations are thinking of sustainability beyond the corporate image. In fact the survey shows that the top two reasons for adopting sustainable approaches to business now focus on reducing energy and waste from their operations. In response to the areas where companies are taking action, 63% of the respondents chose reducing energy, followed by 61% who chose reducing waste, compared to only 51% choosing “managing corporate reputation for sustainability”. This is of huge significance for supply chain executives, since supply chain processes control significant portions of operations for most industries.
  • Corporations have also integrated the sustainability themes across several processes in their businesses. These processes vary from mission and values to budgeting and employee engagements. Number of the respondents who said that their companies have integrated sustainability into the following areas: Operations 58%, Strategic Planning 57%, and Supply Chain Management 41%.

McKinsey also assesses the impact of sustainability activities on growth, return on capital, and risk management, claiming that opportunities in these areas vary by the type of industry. For example, businesses in the energy sector may find more opportunities to leverage sustainability activities to impact growth and risk management; while for the retail industry, the opportunities primarily lie in increasing the return on capital with some impact on managing risk. This follows logic: For example the energy sector is generally seen more damaging to the environment and therefore, any changes in their portfolio to add more sustainable energy sources are certain to open more opportunities for growth in the future. For retail, the message is simple as well – there are cost-savings to be achieved by managing their energy footprint largely by optimizing their distribution network and operations while simultaneously reducing business risk by creating a more environmentally friendly brand.

Related Articles:

Resources:

Want to know more about supply chain processes and supply chain strategy? Check out my books on Supply Chain Management at Amazon .

© Vivek Sehgal, 2011, All Rights Reserved.



Originally posted by Vivek Sehgal at http://feedproxy.google.com/~r/SupplyChainMusingsstrategyVisionOperationalExcellence/~3/xssqFP8q2O4/from-fashionable-to-foundational.html