How will the supply chain evolve as a result of 'green' pressures?

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After attending the IndustryWeek webcast "Developing Greener Products: Trends in Product Stewardship and Corporate Sustainability" last April, I was thinking about how the supply chain we know today will evolve as a response to the ‘green’ pressure. Of course, we always talk about becoming leaner and implementing new processes and techniques that will make our companies more productive and efficient, but that has, until recently, been driven mostly by financial incentives, regulations or environment mandates. Nowadays, according to data published from Gartner (presented in the webcast), competitive advantage/corporate brand is the top driver for participation in sustainability programs (33%), which I believe is a result of customers’ demonstration of a stronger sense that protecting the environment is important to them. Before the webcast, I had come across an extremely interesting video “The Story of Stuff” and was astonished by some numbers and information shared there. The host, Annie Leonard, claims that 99% of total materials flown through the system is trashed after 6 months. Can you believe it!!?? I didn’t at first, but then in the IndustryWeek webcast I learned that 90% of waste in the life cycle of a mobile phone is generated at the raw-material stage. So it became clear to me that there will be no lack of surprises in research results in this area. Whether you may disagree with some points made in the video, the fact is that there is an increasing number of people looking to buy Green, buy Fair, buy Local, buy Used, and/or buy Less. Also importantly, some people are willing to pay closer to the ‘real’ cost of production, and some organizations are preparing to capture that information: for example, the ACCA - associations of chartered Certified Accountants – is calling on businesses to not only account for their carbon emissions, but their water usage too in a report. I can’t stop thinking how this behavior can change the entire game! [caption id="attachment_3495" align="alignright" width="284" caption="See Larry Lapide’s view of “A green supply chain” on KinaxisTV (Analysts Videos)"]

[/caption] Think about recent stories published in the media about some companies’ green initiatives. Who would have thought a few years ago that Walmart would invest in developing a worldwide sustainable product index and monitor suppliers’ emissions? One consequence of the ‘new game’ is the increasing need for collaboration, since the product life cycle activities, “the system” referred to by Leonard, need to be coordinated by all participating organizations so that they can work together to deliver an efficient & sustainable 21st century business model. This requires actions to distinguish core & non-core business, rationalize & virtualize non-core business, develop joint supply chain objectives, define new targeted sustainable operating models. Data capture and sharing assume increased importance and is extended to new areas (see example of BOM management in the webcast). As a manufacturing engineer by training, I am excited to see a lot of new initiatives to reduce waste and improve energy efficiency, especially in supply chains (80% of the carbon footprint is tied to products and supply chain). As always, the companies who are ahead of mandates and continuously innovating processes and products will have a lead in attracting the increased number of costumers concerned with environmental sustainability.

Business models incorporating IT-enabled focused innovation will deliver more sustainable outcomes, enhanced efficiencies, superior growth, margins and cash flows
 “Surviving the Upturn: Sustainability, Innovation and Information in the Low Carbon Economy,” Stephen Stokes, VP Sustainability and Green Technology, AMR Supply Chain Leaders, Gartner Research, 24 March 2010, slide 9.

How is your company reacting to this new wave? Are you investing in building sustainability in your core?

Discussions

Joseph Rinkevich
- July 07, 2010 at 10:19pm
Thank you for a informative article, Francini.

I'd also add that, in addition to water and energy metrics, manufacturers are under increasing pressure to better understand the chemicals in the products they buy, make and use. Given increasingly complex supplier networks, these expectations extend to suppliers, their suppliers, and on upstream.

Getting a handle on carbon emissions and water use per unit of production, or overall is a key element of sustainable product innovation and competitiveness. In addition, companies that are able to cost-effectively evaluate and manage product chemicals to identify substances of concern and efficiently seek preferred alternatives will be see advantages. They will be well positioned to reduce business risk from regulatory compliance and market trends, as well as advocate scrutiny. But above all, all of these efforts will result in better, more sustainable products and organizations.

The companies the implement the most efficient and reliable methods to gather and drive decisions on this information will achieve significant advantage in the coming years.

At SciVera, we help companies and their suppliers cost-effectively review product chemicals via their BOM data to reduce business risk and speed the process of green chemicals innovation.

Sincerely,

Joe Rinkevich

http://www.scivera.com

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