It’s nice to see a big publication like Inc. address the issue of sustainability in supply chains. It’s even nicer when it says that smaller supply chains without the financial means to make an aggressive push towards sustainability can still take gradual steps to be more socially, economically, and environmentally responsible, as it did in a recent article that addressed How to Build Sustainability Into Your Supply Chain.
Going after the low-hanging frutit of transportation and sourcing efficiency is a big step. Transportation is among the most unsustainable processes in an average supply chain as there are no viable long-distance shipping options that don’t rely on fossil fuels. While plants can be powered by wind, hydro, and solar energy, trucks, planes, and trains still require fossil fuelds. Thus, minimizing shiping distance, and the need for shipping in the first place, takes a lot of waste out of the operation and makes it sustainable.
Another easy step, as the article points out, is to minimize waste. Many manufacturing by-products can be reused or recycled, and can often even be resold to companies that can reuse or recyle them, turning (the) cost (of waste disposal) into profit.
Yet another easy step, not pointed out in the article, is to install timers and motion sensors and automatically turn off lights, heat, cooling, etc. when it’s not needed. A considerable amount of your energy is wasted heating and cooling space that no one is using.
Even if you can’t transform your operation overnight, you can still green it considerably taking baby steps.
About the same time that CAPS Research and A.T. Kearney were releasing their study on Value Focussed Supply: Linking Supply to Competitive Business Strategies (which was discussed extensively on SI in VFS: Will Yet Another Acronym Solve Our Woes?, VFS Enablers: Competitive Enablers in a New Wrapper, VFS: Accident or Planned?, VFS Level 1: Eliminate Value Leakage Part I and Part II, VFS Level 2: Increase Current Value, VFS Level 3: Create Tomorrow’s Value, VFS Level 4: Stretch for Added Value, and VFS: Are You Ready) and not long after Dalip Raheja of The MPower Group (TMG) declared the need for Next (Supply Chain) Practices in his much debated post on how Strategic Sourcing is Dead (which was followed by his declaration that The Sourcing Emperor Has No Clothes, his contribution to the Strategic Sourcing Debate in Part IV, and his invitation to The Wake for Strategic Sourcing), Tompkins Associates quietly released a 41-page white paper on Leveraging the Supply Chain for Increased Shareholder Value that declared the need for a new Supply Chain Value Creation Framework and a renewed focus on business value in the supply chain. Stating that the supply chain needed to move away from a cost focus to a focus on value, Tompkins Associates defind three objectives for the supply chain — profitable growth, margin improvement, and capital efficiency — and went on to describe the actions that a modern supply chain could take to achieve these goals … actions that aligned nicely with the CAPS and AT Kearney Value Focussed Supply paradigm and echoed the need for Next Practices and Next Generation Sourcing.
The importance of supply chains and their effectiveness, or lack thereof, has never been more apparent. A single supply chain disruption can cripple, and even bankrupt, your business, and a single failure in quality control can turn into a PR nightmare overnight with effects just as deadly. But even worse, lack of value creation on a daily basis will slowly eat away at profitablity and the life blood of the company.
But this doesn’t have to be the case as good supply chains drive value, which ultimately reaches shareholders and investors. It is the supply chain mega process, Plan – Buy – Make – Move – Store – Sell – Return, that comprises the core operations of most businesses, and the four supply chain information flows — Materials/Product, Information, Cash, and Work Flow — that determine the effectiveness and efficiency of overall business operations. Thus, a well oiled supply chain greases the rest of the business and an efficient and profitable supply chain lays the foundation for an efficient and profitable business.
A supply chain that uses a Value Creation Framework, such as the one presented by Tompkins Associates in their white paper, and that focusses on Profitable Growth, Margin Improvement, and Capital Efficiency can deliver significant and lasting value to the business simply by adopting and executing on value enabling actions. The whitepaper outlines six primary types of value enabling actions and then dives deep into implementation strategies that your organization can use to create value in the supply chain. The next four posts will discuss some of these actions at a high level and outline why Tompkins Associates‘ white paper on Leveraging the Supply Chain for Increased Shareholder Value should definitely be on your reading list as you outline your Next Generation Sourcing strategy.