In this issue: Challenges to Sustainability in the Supply Chain

Transcription

1 Issue 55 October 24, 2012 In this issue: Challenges to Sustainability in the Supply Chain Q&A with: Kimberly Knickle IDC Manufacturing Insights

2 Challenges to Sustainability in the Supply Chain Q&A WITH KIMBERLY KNICKLE IDC MANUFACTURING INSIGHTS Overview Creating sustainable supply chains has come to be seen as increasingly essential among high-level executives in terms of delivering long-term profitability. More and more, the conversation around sustainable supply chains has become as prevalent as cost, value, and speed among purchasing and supply professionals, and organizations have begun operating with the belief that sustainable supply chains frequently mean profitable supply chains. We spoke with Kimberly Knickle, practice director for IT Priorities & Strategies at IDC Manufacturing Insights about manufacturers views on sustainable supply chains. Environmental Leader: What factors are driving manufacturers to make their supply chains more sustainable? Kimberly Knickle: There is a lot of focus on managing costs in the supply chain right now. Companies are looking at what kind of supply chain they need in order to keep costs manageable. If they can find a way to use the supply chain in a way that they use less fuel, for example, they ll save money. Companies are also looking at efficiency and eliminating waste, how they can get quality products to market in a timely manner. 2

3 But there s also a reputation issue at play here. Saying, I have a greener supply chain, carries some weight. And sometimes larger customers, or government customers, have green requirements built into their RFPs. Plus, companies want to show that their company does important, leading-edge things like understanding their environmental footprint. EL: How is the need to consider sustainability affecting business decisions in terms of supply chain? KK: It s not just sustainability. Efficiency, sustainability, cost these are all factors that are being taken into consideration. Companies need to evaluate their options: the ocean may be slower but greener, while air freight is faster, but planes consume a lot of fuel. Efficiency and speed are not necessarily the same thing. You have to decide how you measure efficiency. Is there a sustainability component to efficiency? There s so much data behind these decisions, and that data needs to be managed and optimized. We re not just talking about buying a more fuel-efficient vehicle. Companies are looking at collecting the data, knowing the routes, knowing whether the routes are optimized, knowing their mode options. They re looking at packaging: whether they need to change their packaging in order to ship a larger amount of goods in the same amount of space, what kind of cardboard they re using, what kind of pallets they re using. EL: How are these decisions ultimately being made? KK: This is one of those problems we seen in manufacturing. This kind of decision is just overwhelming for most companies. One of the challenges is, how do you know when you ve made the best decision? Say you walked up to the grocery store line and someone asked you, Plastic or paper? You re pretty sure paper is the right decision, but you re not 100 percent certain. To know for sure, you d need a lot more information, right? That s where we are with sustainability. We re pretty sure that if something is traveling globally, the ocean is the best decision from a sustainability perspective. But is that always true? Companies need more information. 3

4 Another problem for vendors in the supply chain is balancing their customers needs. Say a customer picked you because you offer greener options, but also because you get their orders delivered on time. If they have an order and need it fulfilled in a shorter amount of time, you might not have the ability to use the greener option. You need to have all this information at your fingertips. EL: How are companies successfully managing all this information? Is there a simple solution? KK: There s no single solution to all of this, but there is software sometimes it's sustainability specific, but not necessarily, for example integrated business planning that can help. Integrated business software can bring the two parts together: the way you produce and supply your goods, and what the customers are asking for. But there s no easy fix there. EL: Who is the most important person within a company in terms of managing all this? KK: It s not necessarily a single person who is making all this happen. There s the chief sustainability officer, of course, but what s important is how they bring sustainability into the whole company. How does that CSO interact with the head of supply chain management, with the CEO, with the VP of sales? They need to see the big picture, they need to be a diplomat. It might be a matter of convincing the VP of supply chain to use more fuel-efficient trucks, and helping them to understand that the fuel savings might be four years out. EL: For the most sustainable companies, what do you really see as changing within the supply chain? 4

5 KK: The supplier evaluation piece is one bit that people are struggling with right now, because it starts to get really out of control. If I were to pick a supplier for a component, I may tell them the specs of the component and how to ship them to me, but unless I go in and audit their processes, I may not know how much energy they consumed in the production of the component, where they bought their materials, how far those materials traveled, etc. So the more leading sustainable companies are making sure the suppliers are producing those components in a way that s greener. They are learning where the components and the materials are coming from, whether they are produced in a way that is reducing energy and water consumption. They re learning the social aspects, as well: hours worked, working conditions, child labor. They re looking not only at the shipping but also at the production of the components as well. It s not necessarily about a green supply chain; it s all about making it work in terms of the greater business and making it work for customers. About IDC Manufacturing Insights IDC Manufacturing Insights is based in Framingham, MA and operates throughout the world utilizing IDC's network of global facilities. Its focus is to provide strategic business technology and application advice for the manufacturing industry. IDC is the foremost global market intelligence and advisory firm with more than 1,000 analysts in 110+ countries. IDC forecasts worldwide markets and trends to deliver dependable service and client advice. IDC is a subsidiary of IDG, the world's leading IT media, research, and exposition company. Author Profile: Kimberly Knickle As a practice director, Kimberly Knickle is responsible for research and analysis of business and IT issues related to the asset-oriented value chain (AOVC), which includes manufacturers in chemicals, pulp & paper, metals, and downstream oil & gas. In addition, she manages the Emerging Agenda practice area, which focuses on hot topics that are rapidly becoming critical priorities for manufacturers such as environmental sustainability; RFID, sensors and M2M; and establishing presence in emerging markets. Ms. Knickle also supports research in the supply chain and the consumer packaged goods industry. 5

6 Contact Information IDC Manufacturing Insights Tel: Speen Street Framingham, MA URL: LinkedIn: Analyst LinkedIn: KKnickle@manufacturing-insights.com 6