Category Archives: Sustainability

Solving the Sustainability of the Supply Chain is Systematically Strenuous and Surprisingly Serpentine

There have been a lot of articles about the sustainability of supply (chains) lately, and some of them are quite good, but not a single one gives you the full picture. And if you were hoping this article was going to do that for you, then the doctor has bad news for you. That’s not an article, or even a book. It’s a trilogy. Of trilogies. And while the doctor has written that much on this blog by word count, it’s not going to happen today.

What is going to happen is that the doctor is going to give you a bit of an understanding of how broad, deep, and complex the problem really is and how it’s almost impossible for most people to solve, although not that hard to address with a reasonably high assurance of results. (And the answer, as regular readers will have surmised, does NOT involve any Artificial Idiocy, but it may involve complex processes and technologically advanced solutions.)

In order for the supply chain to be sustainable, every step of the supply chain has to be sustainable. Internally:

  • Procurement needs to be sustainable. The processes, technology, and talent required to keep the Procurement organization going need to be sustainable.

If you work down the chain:

  • Logistics needs to be sustainable. The methods used by the suppliers and distributors to pack, store, and ship the product to you need to be sustainable.
  • Manufacturing needs to be sustainable. The methods, energy sources, and water sources used to produce the goods have to be sustainable.
  • Materials need to be sustainable. This means that all of the materials used must be renewable, decomposable, or fully reclaimable in a sustainable manner.

And if you work up the chain:

  • Logistics needs to be sustainable. The methods used to pack, store, and ship the products to your customers need to be sustainable.
  • Sales needs to be sustainable. The processes, technology, and talent required to keep the Sales organization going need to be sustainable.
  • Support needs to sustainable. The processes, technology, talent, and materials used to support, repair, or reclaim the products (for recycling and material reclamation) at end of its lifecycle need to be sustainable.

That’s a lot of sustainability that is required up and down the chain. It’s much more than just identifying a “sustainable” supplier who hits ESG targets, favouring renewable materials, or using virtual work (from home) solutions to reduce the travel and office carbon footprint. And attacking it requires a lot more than just attacking the 5 Cap Gemini supply chain transformation levers of Evolution, Orchestration, Data, Technology, and Talent or the 6 McKinsey next-normal strategy focus areas of Agility, Quality, Sustainability, Resilience, Service, and Cost and Capital because buzz-words are not solutions and you can’t decipher all of these dilemmas at the 30,000 foot view.

In other words, while there are easy two-word answers for reconfiguring the global supply chain for greater supply chain assurance and more sustainability at the 30,000 foot level, when you dig into the details, it’s not so easy as you have dozens of facets to get right to truly optimize sustainability across the supply chain.

In future posts we will dig into a few of these areas as addressing them is a lot more complex than you might think!

Kodiak Hub: A Supplier Relationship Management for Sustainability

Kodiak Hub is a relatively new Swedish solution for Supplier Relationship Management. Founded in 2015, it primarily served the Nordics for its first few years but began its expansion into the DACH and UK Regions during COVID (and even serves the NA market, although they don’t plan to tackle the NA market until the coming year).

A visit to its site might lead you to believe it’s a category management platform, billing itself as the starting point in a journey towards smart strategic sourcing, but that’s not quite what it is, or at least not where it’s found its niche and its true capability shines.

It’s true capability shines in sustainability, responsibility, risk assessments, and performance evaluations of suppliers, and their products, where those suppliers are creating (custom) (build-to-order) (manufactured) products where regulations need to be adhered to, carbon/GHG needs to be reported, and the organization needs to ensure they are acquiring a sustainable product (or service) as well as a sustainable supplier.

It’s primary platform is organized into three sections: Insights, Impact, and Intelligence along with a home dashboard that visually shows you the regions of all of your global suppliers and allows you to hover over those regions to see the number of suppliers, the regional economic rating, and the Country safe(SOURCE)TM Rating.

The safe(SOURCE)TM Rating is one of the truly unique capabilities of Kodiak Hub and one of the capabilities that positions it as a strong Sustainable Supplier Relationship Management platform. Using indices and public data sources, it is able to create a regional risk assessment profile that allows an organization to quickly spot geopolitical, environmental, and sustainability risks even before sending out an assessment to a supplier, and to create a generic risk profile when specific information is (not) yet available. When this is combined with local economic indicators (to spot risks of [significant] currency fluctuations, increased bankruptcy, etc.) as well as the ability to pull in credit scores (from credit agencies) (with appropriate data feed subscriptions), it provides an organization relatively deep insight into what expectations it should have for a supplier even before analyzing its policies, practices, and external assessments.

The supplier profiles or scorecards that Kodiak Hub can maintain are quite extensive, allowing an organization to maintain all the compliance, performance, risk, and sustainability data it needs on suppliers, products, and services to power its supplier management, sourcing, and procurement. It supports all standard company profile data, including supplier type and spend totals, detailed (customizable) assessment data, detailed on-site audit data (which will override the existing data as necessary), (third-party) risk/ESG/CSR data/rankings/metrics, externally computed KPIs, and related company, product, and service linkages. It can also store any and all documents of relevance or interest (insurance, certification, specifications, contracts, etc.).

Insight is the entry point to the platform’s supplier, product, and services summary screens that capture, and allow a user to query, all of the data associated with a supplier, product, or service.

Impact allows you to create and dive into (data-driven) supplier assessments, (onsite) supplier audits, KPI-based evaluations, and identified actions (in progress).

Assessments are unlimited and can be on the supplier in general, specific products or services, and even restricted to specific category management or sourcing projects. They can cover quality, health and safety, compliance & governance, human rights, environmental, business, product, information security, and other areas of relevance to the organization and use pre-built (template) questionnaires, customized variants, or custom questionnaires.

Right now, even though they can be assigned a “type”, actions are essentially requests to the suppliers with an integrated messaging trail for asynchronous communication that allows suppliers to ask questions, buyers to provide answers, and action states to be recorded (pending approval, in progress, completed, etc.). Future versions of the platform will contain specific types to ensure necessary information is captured, processes and workflows are followed, interim checks and approvals are in place, and so on.

Intelligence is its integrated analytics platform that allows a procurement professional to analyze suppliers across campaigns, projects, KPIs, assessments, categories, products, capabilities, etc. Relationship managers and buyers can create custom dashboards and reports, and customize the pre-built dashboards as needed.

The UX is very clean, modern, broken into logical segments, and very easy to use. It’s intuitive where to go to get the information you need and how to update new information when it comes in. This reviewer finds it so intuitive that he believes you can jump in and be productive with it without any training whatsoever.

So if you’re looking for a great supplier relationship management platform to manage your sustainability efforts and assess your supplier risks, we recommend you include Kodiak Hub in your shortlist.

Sustainability Begins in SRM

We recently broke records in global temperature. RECORDS IN GLOBAL TEMPERATURE! If sustainability isn’t on your mind now, then obviously you don’t have a mind that is working because not only does it mean the planet is in very dire straits*, but

  • the acceleration of natural disasters is going to intensify beyond anything that was predicted (and a five-fold increase was recently predicted)
  • natural resources (and food) are going to get scarcer faster as fires destroy our usable lumber and crops
  • hurricanes are going to drench and destroy coastal cropland, possibly long-term
  • rapidly melting polar ice caps are going to raise sea level, drown our richest coastal farmlands, and damage our coastal (shipping) infrastructure
  • rapidly heating equatorial zones are going to dry out our freshwater lakes and canals (like the Panama canal we rely on for shipping)

… and that’s just the tip of the rapidly melting iceberg. (There’ll soon be no more dildo icebergs for Dildo, and that won’t be a good thing. Canadians rarely get angry, and when they do, that’s bad. the doctor, who is about as Canadian as it gets, has never seen a Newfoundlander angry, and when that day comes, he’d rather not be one province away … so please make sure that day never comes!)

Unless we lower

  • fossil fuel energy production and utilization
  • clean water utilization
  • waste byproducts
  • dependence on non-renewable resources that are getting more expensive, and environmentally damaging, to mine

environmental and societal damage is going to only intensify. We need to be sustainable. But sustainability has to start at the source — and the consumer is NOT the source (it’s the sink, and anyone who’s studied networks will tell you that by the time you reach the consumer, the product has been produced, the service has been rendered, and there’s nothing consumers can do to undo the damage that has been done … sure we can do our best to consume less and waste less, but the damage starts at the mine or the farm and propagates through the supply chain).

As a result, sustainability starts with the source supplier, and must be maintained throughout the entire supply chain.

And at the end of the day, for a Fortune 500 / Global 3000, it doesn’t matter if a CEO gives up the corporate jet — it matters only if they instruct their company to be sustainable in all aspects of operations and force their supply base to do the same.

Why? The aviation industry as a whole contributes 2.5% of worldwide CO2 pollution. 2.5% overall! So how much do you think one private jet contributes? Not enough to really matter. (On average, it’s like removing the emissions of 400 cars, and while that sounds significant, once you realize there’s over 300 million registered vehicles in North America that contribute to about 30% of GHG produced, it’s barely a drop in the CO2 bucket [giving it up for show while your factories pollute unhindered is not the solution]; and FYI, most of that vehicular CO2 production is NOT our private automobiles, its commercial transportation [as we have catalytic converters, there’s no laws that can be enforced mandating equivalent technology on ships in international waters].)

In comparison, a coal burning energy plant will generate about 2.26 pounds of CO2 per kWH, or about 7 Billion pounds of CO2 annually (which is over 3 Million Metric Tonnes) in an average 500 megawatt coal power plant. (In comparison, a private jet burning an average of 5,000 pounds of jet fuel per year at 7 pounds of carbon dioxide will produce only 35,000 pounds of CO2 a year. This is still a lot, but a supply chain that consumes the equivalent output in electricity in its manufacturing and shipping operations as that produced by a coal burning 500 megawatt power plant will produce 200,000 times the CO2. TWO HUNDRED THOUSAND TIMES. So don’t get distracted by the little things in your quest for improving your carbon footprint, which will soon be mandated in more and more countries globally. Your CEO should give up the jet, especially when he can still fly in those first class cabins no one else can afford, but that’s just the start of what your organization needs to do.)

And the only way to monitor and manage your supply base, require and track reporting from, and ensure improvements are made, is with SRM. It’s not just supplier development anymore, it’s supplier sustainability.

* and not the good kind of Dire Straits, the bad, bad, kind

It’s Not Just Beds Burning Anymore, it’s the Planet. What Impact Are Your Efforts To Stop it Having?

Four decades ago, when sustainability was only a concern for the environmental extremists because, thanks to industrialization and burgeoning globalization, we had other disasters to deal with (hunger in Africa, aboriginals being forced from their land [sometimes with fire], the global AIDS epidemic, etc. — see Billy Joel’s We Didn’t Start the Fire, which took us through 1989 [the year, not the 2014 Taylor Swift release], and the doctor chronicled the next 20 years here in an unofficial Part II). And even though we still have all these disasters, and many more, the planet is in upheaval with every type of natural disaster occurring everywhere all the time. In fact, climate-related disasters have tripled in a mere 7 years. 7 years! We’ve gone from disasters increasing over the span of thousands of years during natural planetary cycles to disasters increasing in the span of mere years due to global warming thanks to the rapid increase in carbon and GHG emissions as a result of 150+ years of industrialization and rapid deforestation and wetland destruction. (Forests and wetlands have historically acted as carbon sinks for all of the carbon released by life, it’s historically primitive actions, and traditional disasters that resulted in the destruction of forests [and when trees die or get burned, all the carbon they captured is released]).

Now it’s true that, on average, even the largest of corporations on its own could only make a small dent when the depth of the problem is considered, but if even ten of the largest corporations in an industry teamed up, they could make quite an impact. (And if the largest retailers teamed up, think Amazon and Walmart and Target, and insisted on a maximum carbon footprint per product — think of the impact that would make.)

For details on the impact that can be made today, you should download the new Ecovadis Network Impact Report, 3rd Ed. which points out that Industry-level collaboration is one of the best levers available to companies looking to build more sustainable value chains and scale their positive impact. EcoVadis Sector Initiatives (SIs) are a highly effective vehicle for this. Six initiatives spanning a diverse range of sectors — from chemical manufacturing to health — are using the EcoVadis solution to share best practices and collectively address sector-specific challenges across their often highly interconnected supply chains. Our data shows that participation in an SI helps buyers improve their supplier engagement and enables rated companies to improve faster than their network peers.

More specifically, companies engaged in a Sector Initiative outperform the [Ecovadis] network average by 5.3 points — not only do companies that try to better than those that don’t, but companies that work with peers on the right objectives do better still.

But this is only one reason you should read the latest Ecovadis Network Impact Report, 3rd Ed.. Another reason is because, if you don’t, you won’t see how Ecovadis, which in 2022 officially became a “purpose-driven” company under French Law, has continued to grow at a rapid rate and how it is starting to make a global impact. When your customers represent 4.8 Trillion in global spend, you are starting to get somewhere. That’s 4.5% of GDP, and if Ecovadis could grow 30% year-over-year for nine years, that 4.5% could become 49%, close to the tipping point where we’d finally start making significant progress. (Which means if we can survive until 2032, we could start making real progress on sustainability and environmental stabilization. Not as fast as we need to, as parts of the planet will literally start burning by then, but Ecovadis and its peers may still save some of us.)

And, even if you don’t think Ecovadis is the answer for you (even though 945 organizations do and the number increases every year), the report will still educate you on the five key pillars of a sustainable procurement platform. And once you understand those pillars, you can assess, monitor, improve, report, and continue the wheel.

2030 is too late for Center-Led Procurement!

Especially since 2020 was too late! And organizations should have been there by then since center-led procurement was being discussed as the next generation model in the mid-2000s and, more importantly, as the futurists were predicting that the future of work, and companies, was remote and distributed last decade, every company should be “center-led” by now.

(Note that we mean “center-led” and not “centralized” where one central office handles all major procurement projects globally. We mean center-led where a centralized function determines the best procurement path for each category — which could be centralized, distributed, multi-level, or mixed — and provides guidance to all of the global teams and makes sure they build the right procurement — and supply chain — models up front.)

In fact, by now, all organizations should be working off of a virtual center-led model where the “center” is the Procurement A-Team, where the members could literally be spread out over the 6 continents to “locally” absorb the situations in each geography before making decisions and to always have someone available to answer questions on not just a follow-the-sun but follow-the-local-business hours model.

And while virtual / remote / distributed work still seems to be an entirely new thing that most companies didn’t think of before the pandemic and that most companies are trying to eliminate entirely now that the pandemic has been declared over (even though the next pandemic is just around the corner and, yet again, no one is prepared for it), those of us in IT and Supply Chain have been doing it for two decades (and the doctor has been primarily been working remote for the past 19 years — the tech has been there, and has worked, for two decades … and now that high speed is in just about every urban area globally, there’s no reason a hybrid/virtual model cannot work and work well).

The reality is that the pandemic not only brought global supply chains crashing down but brought to light the high risk embedded in them a few of us saw a decade ago, which went beyond the obvious risks of “all your eggs in one basket” (even though Don Quixote was published in 1605) and “The Bermuda Triangle“*1, but also included the risks of relatively centralized procurement where one team in one part of the globe made the all-our-eggs-in-the-China-basket*2 and managed the relationship with one team at one factory in another part of the globe; so if either team got completely locked down with little remote/virtual support (and we saw some countries limit people to 1KM from their homes and China lock down entire cities and not even let people leave their apartments), the entire chain was shut down even beyond the worst case that some of us were envisioning a decade ago (and made our definitions of bad — which was factory goes out of business, shipping lane closes, or ship sinks — look good by comparison because, at least then, you could still go to work and travel to find a new factory, organize a new lane, or spin up the factory 24/7 until you remade the order).

However, with virtual center-led, you not only have a team that knows how to work distributed and remote, and who knows how to use that setup to better mitigate operational risks, but who also has a risk-mitigation mindset that any supply base should also be distributed and different locations remote from each other (two factories in the same town is not risk-mitigation; an earthquake destroys the roads, the entire town gets quarantined, or political borders shut and its effectively one cut-off source of supply) and will help the different parts of the organization design more risk-adverse, or at least risk-aware, supply chains — tapping into local expertise in each part of the world to make the best decision and allowing the organization to move management of the chain around as needed and local teams (because you’re not sourcing your Canadian snow-plow and igloo building services from India, for example) to always have remote access to guidance and best practices in snow-removal services RFP construction (and know how from Norway and Japan).

In other words, center-led procurement (of which you can find a lot of guidance on in the archives here and over on Spend Matters, especially since, now retired, Peter Smith of Spend Matters UK was a guru on this as well as sustainability) of the virtual kind is what you need to be doing now if you want to last until 2030.

 

*1 which, while statistically no more dangerous than any other part of the oceans, exemplifies the fact that even the biggest ships, with an entire year of your inventory on board, can sink, especially when oceanographers have finally realized [even though mathematicians working with wave models understood this concept decades ago] that rogue waves are not a once a in decade occurrence, but a DAILY occurrence on this planet, it’s just that the ocean is so big that the fraction ever covered by ships is so microscopic that the chances of any ship encountering a rogue wave are infinitesimal on a ship-by-ship basis)

*2 likely thanks to McKinsey, although many of the Big 5/6/8 followed suit quickly thereafter and proclaimed China the future