Monthly Archives: January 2008

Sustainability 2008: The Early Birds

In addition to Eric Strovink’s guest post this morning, a few bloggers have been quick out of the gate in their efforts to contribute to the first cross-blog series of 2008.

Dave Kuketz over on the Business Memory Blog was so inspired by the topic, that he couldn’t wait to get his entry up and posted it shortly after he received the invite two weeks ago. According to Dave, sustainability is about caring for the environment, about being green, about conservation, carbon credits and your carbon footprint, and the carbon footprint of your vendors; its about dangerous chemicals in toys or in consumer products, in our foods, in our skin care products; its about the humane care of animals; its about awarding business to those businesses who deserve it most because they follow the same principles you do; its about social corporate responsibility and making the world a better place. Furthermore, good clean data is the fuel that enables strategy and decision-making and analysis, good data enables change, (and) good data can … help companies strive toward their sustainability goals. Enter the age of e-Sustainability.

Brian Sommer of Services Safari was also quick to the draw with his post on a sustainability case study. According to Brian, sourcing of the capital equipment for the new facility [being constructed by his client] has also taken a green and sustainable approach and almost all of the equipment being installed has been from secondary markets … sparing landfills and junkyards from further (and unnecessary) debris. Furthermore, much of the discussion involving the feedstock for this facility centered around possible use of alternative technologies that would permit greater utilization of recycled materials. Brian also notes that many traditional sourcing techniques are not used frequently in the acquisition of alternative or recycled assets, and a special set of skills is required by these professionals. Thus, a sustainability mindset will require more than just training, but a new skill set as well.

Then, still not content that he had made a significant enough contribution to this very important cross-blog series, he followed it with a second post on sustainability vs. durability over on Services Safari. In it, he noted that while previous generations of cell phones were long-lasting with a high degree of interchangeable parts, today’s cell phones don’t hold a candle to their predecessors. They aren’t made to be durable or lasting, and, just like our laptops and desktop computers, failure and / or planned obsolescence is running at an ever increasing pace. The throwaway nature of today’s technology is clearly running counter to the concepts of sustainability and corporate social responsibility. Technology manufacturers need to do more when it comes to extending the lives of the products they sell and recycling technology that is no longer useable. As Brian points out, technology manufacturers should be focussed on creating products that can be easily upgraded (and, in this instance, Apple is doing a poor job with the iPhone and MacBook Air – the fact that you can’t even replace the battery is why, despite the fact that they are in many ways superior to competitor’s products, yours truly won’t buy them, even though he uses a MacBook Pro as his primary machine), that are durable, and that are supported for 10 years – not 10 months! (And, they should design for recycle from the outset!)

David Bush of e-Sourcing Forum jumped in with his warm-up post on carbon-neutral blogging where he noted that everyone these days seems to be jumping on the green bandwagon. He also brought up the question as to whether or not consumers would pay more for green products, which is important because consumers vote with their wallets, and if consumers don’t change their buying decisions, why should companies change their practices?

And the next guest blog goes up tomorrow morning! Stay tuned!

Sustainable Savings

Today I’d like to welcome Eric Strovink of BIQ who, in his contribution, reminds us not to overlook the importance of verifying we actually achieve the savings we negotiate, because that’s the foundation of a sustainable business. Even though this might not be the definition of sustainability that most of us have in mind, the fact of the matter remains that any business that is not financially stable can not contribute to sustainability from an environmental or social perspective, regardless of where it’s collective heart is. Thus, sometimes its important to be reminded of the basics.

P. J. O’Rourke’s Circumcision Principle states that you can take 10% off the top of anything. That seems to be true for sourcing many categories, true at least if you’ve never sourced the category before. However, it’s irritating to listen to (some) sourcing consultants’ confident claims about “10% savings,” when they clearly have no visibility into what may have been very competent internal initiatives that have already taken place.Can one keep taking 10% off the top, year after year? At some point, no matter how much fat was on the carcass originally, there’s nothing left; and even if there is, 10% of it can’t amount to a hill of beans. Conventional wisdom would seem to mandate that there’s a limit to the savings that can be achieved, and that there is diminishing value to sourcing over time.

Of course, this has not been the case historically — after all, if it were, sourcing consultants would be out of business. What happens in practice is that sourcing initiatives either fail to achieve their objectives, or they erode over time. For example, suppliers know that in order to win business they must compete in auctions and see their margins slashed to zero or even to negative numbers; but they are not foolish. They will find a way to restore those margins, either over time, or almost immediately, by raising prices that aren’t in the negotiated contract, or, in some cases, by ignoring the contract entirely. How many office supplies sourcing endeavors have returned zero actual savings? Answer: a lot of them. Of course, if suppliers are pushed to the wall, they may simply walk away; or worse, if they are a key supplier, go bankrupt and take you down with them.

Furthermore, some sourcing initiatives that appear to generate theoretical savings can’t be implemented in practice. If there’s a management change, and new management are unaware of (or dismissive of) the efforts of the previous regime (human nature means that they usually are), that same initiative is “discovered” all over again, fails once more, and it’s lather-rinse-repeat. Each new group of consultants or sourcing staff that’s brought in has its own ideas and agendas, but the underlying infrastructural problems that prevent the implementation of the initiatives remain.

Even when a sourcing initiative is implemented and a contract signed, there’s still no guarantee that savings have been achieved. As Jack Welch once asked an over-enthusiastic buyer who was claiming huge savings (I wish I could find the original quote, this is a paraphrase from memory): “How do you know you got the price?” Stammers ensued. Buying from an e-procurement system doesn’t mean you’re getting good prices, and negotiating a good contract doesn’t mean anyone’s paying attention to it. I saw a contingent labor invoice analysis a few months ago where not a single contractor — not one — was being billed within the price ranges negotiated.

Wendell Phillips said, “Eternal vigilance is the price of liberty” — and it’s the price of sustainable savings, as well. Economics mandate that suppliers will try for the highest prices possible, and that any means necessary to increase revenue probably be applied, despite all the fancy talk in this blog (and elsewhere) about “supplier collaboration.” Tariq Hassan has said, “Trust, but verify,” which is probably the most accurate summation I’ve seen of the attitude one should have.

Sustainability 2008: Some Classic Posts

Before the series gets into full swing, the doctor thought he’d point out a few classic posts that are worth a re-read if you haven’t read them lately:

Purchasing Certification Blog
Green Supply Chain & Dr. Seuss
Using Diverse Suppliers
Animal Friendly Purchasing in Action

Sourcing Innovation
JLP Responsible Sourcing Part XI: Environment
Sustainable Procurement Supply Management Style: Part I
Design for Recycle
Sustainability Should Be Soldered Into Your Platform

Strategic Sourcing Europe
Back to Basics: Green & Sustainable
Reporting on Sustainability

Supplychainer
Exploring the “True” Cost of Greening Supply Chain Management
What you should do to green your supply chain
Extending social responsibility to the whole value chain: supplier ethics audit

Supply Excellence
Wal-Mart’s Next Move: Poster Child for Sustainable Supply Strategies
2007: The Year of Sustainable Supply Strategies
Sustainable Supply: There’s No Denying It
Still More Reasons Why Sustainability is Good for Business
Misfi(RED)
Sustainability: Think Inside the Box
Carbon Offsets: Common Business Practice of Short-Term Fix?

And, of course, Tim Albinson’s new blog, 2Sustain is dedicated to the issue of sustainability.

Sustainability 2008

The first Sourcing-Innovation sponsored cross-blog series of 2008 starts today – and the topic this time is sustainability. With the recent focus on corporate social responsibility, carbon footprint, the environment, green supply chain, and regulatory compliance, sustainability, in some way, shape, or form is on everybody’s minds – even if they can’t really define what it is. Thus, the doctor thinks it’s the perfect time to address this topic.

the doctor is also hoping that this cross-blog series builds on the success of previous cross-blog series, including:
The Future of Sourcing,
The Future of Sourcing II, and
The Top Three
and becomes the most successful cross-blog series yet. (All of your favorite bloggers, guest-bloggers, and analysts were given one month’s notice, so hopefully they had enough time to prepare! Furthermore, this series runs for two weeks, so even if the doctor missed someone in his invites, or their corporate e-mail server ate the message, they still have time to chime in.)

In addition to giving you great advice on how to be more sustainable, the doctor is hoping that some of the more innovative bloggers will provide us with a better definition of what sustainability really is. If you look at C.J. Abraham’s brief background on sustainability issues, you’ll notice that there’s quite a few definitions out there on what sustainable is, each with a different breadth and depth of focus. Some sound pretty good to the doctor, but others seem to miss the point.

It’s a tough topic. If you look at just the topics covered in the John Lewis Partnership’s Responsible Sourcing Supplier Workbook that was designed to enable sustainable supplier business practices that was covered herein last year (see the JLP category), it alone talked about child labour, forced labour, health & safety, discipline, freedom of association, working hours, equality of treatment, wages, regular employment, and the environment. However, we’ve also talked about carbon foot print, regulatory compliance, waste reduction, SaaS, design for recycling, security, and a host of other topics with respect to sustainability here on this blog.

So be sure to check back regularly as the doctor will be indexing and covering the posts as they hit the blogsphere on a regular basis.

To sustainability!

Some 2008 Manufacturing Predictions

Supply and Demand Chain Executive recently ran an article on some 2008 Global Trade and Supply Chain Predictions that are worth restating. It’s predictions were as follows:

  • Green continues to grow
    Thanks to Al Gore and the China fiascos of 2007, this is a guarantee.
  • Manufacturers Lag in Environmental Compliance
    The article notes that despite the number of environmental regulations introduced globally over the past year, a large number of manufacturers are still in non-compliance with the new trade laws.
  • Sourcing Shifts from Asia to the Americas
    The article notes that the falling U.S. dollar, limited free trade agreements, high energy costs and rising production costs in Asia will all contribute to companies reevaluating extended supply chains and moving sources closer to their home markets. Uh, yeah! I’ve been pushing what I call home country sourcing for close to a year now. Glad to see that it might finally catch on.
  • Import Safety Initiatives Increase Burden for U.S. Importers
    After the huge number of recalls last year related to imports, and China imports in particular, it’s a guarantee that a number of new requirements are going to be introduced in the US over the next one to three years.
  • Supply Chain Security Initiatives Gain “Teeth”
    This is the year the global AEO (Authorized Economic Operator) security program is launched – and even though, like C-TPAT, it is not mandatory, because it’s being pushed strongly in Europe, this will be the year that even smaller importers and exporters start to demand compliance.
  • Trade Compliance Further Scrutinized
    This pretty much follows from the first five predictions.

This was followed by an article in Industry that stated Large Manufacturing Will Move Toward a Globally Integrated Business Model, based on Manufacturing Insights Top 10 Predictions for 2008 (registration or login required). Most of the MI predictions were also pretty good. They were:

  • Innovation management will be a prominent topic and garner attention … but industry will be slow to adopt innovation.
    I certainly hope that it becomes a prominent topic because innovation, which I’ve been pushing for since day one, is sorely needed. And although I do expect industry to be slow in adoption, recognizing the need is the first step.
  • Business models will migrate from multinational to globally integrated enterprises.
    Maybe. It’s coming, but I’m not sure if this is the year.
  • Collaborative decision environments will amplify the value of product life-cycle management and emerge as the next big IT investment area.
    They’ll definitely amplify the value of PLM – but whether or not it’s the next big investment area remains to be seen. Decision optimization, true spend analysis, and regulatory compliance – given the dire need, may take off first.
  • PLM will evolve from an application category of loosely coupled tools to an enterprise strategy.
    … and the technology to support it, SLM, has already appeared.
  • Renewed interest in knowledge management practices.
    Again, I certainly hope so.
  • Information democratization takes place, but in moderation.
    This may be the year that organizations recognize the need for information sharing and inter- and intra- organizational decision collaboration, but as to whether or not the information gets democratized, we’ll just have to wait and see.
  • Organizations cannot keep up with data proliferation; a new generation of analytics and search tools will emerge.
    A new generation of analytics tools is already available – and they’ll keep getting better. As for search – progress on contextual-based indexing has been going much slower than initially predicted, so I wouldn’t hold my breath for better search.
  • New business models will leverage remote service and machine-to-machine communication technology to create new revenue opportunities.
    From a remote service perspective, definitely. As for machine-to-machine communication technology – we’ve had that for years. It’s called EDI – and it was replaced by XML.
  • More software will bring more challenges.
    Unless you go SaaS.
  • With [the need for] compliance across the value chain, your suppliers’ and partners’ problems will be yours.
    Definitely.