Posts Tagged ‘green supply chain’

Willie Nelson and the Supply Chain: Let’s Go Back to the Start

Published February 23rd, 2012 by Lauren Bossers 0 Comments

Like many people, the other week I tuned into the Grammy Awards. I was partly driven to see how Whitney Houston was memorialized there, as undoubtedly others were. The show had its highest ratings since 1984—and its second-largest ever—attracting 39.9 million viewers.

What ended up resonating the most with me that night, however, wasn’t a performance, or an award speech. It was a commercial.

Willie Nelson became one of the most popular c...

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The Chipotle ad that aired during the Grammys features Willie Nelson singing Coldplay’s “The Scientist,” as a stop-motion video depicts the story of a man whose family farm evolves into an industrial animal factory. As the business grows, the farmer sees the error of his ways and, as the lyrics say, he goes “back to the start.” The factory is dismantled, and the animals are removed from cages and once again roam free. The final scene shows the farmer placing a crate into the back of a Chipotle truck.

This commercial, which was commissioned by Chipotle to emphasize the importance of developing a sustainable food system, definitely tap dances on all of the heartstrings that it’s supposed to. To the idealist, it is a great vision of the way things could (and can) be. And is there any better voice than that of Farm Aid co-founder Willie Nelson to represent the U.S. family farmer? But to the cynic, it will undoubtedly appear as a flagrant oversimplification (hey, what are the financial and logistical implications of all this de-industrialization, anyway?). For me, it triggers both optimism and pessimism.

The song lyrics also sparked another supply-chain-related response from me. If someone were to ever write a song about the challenges of supply chain planning, I think it might sound something like these select lines from “The Scientist” that play over the commercial:

I was just guessing

At numbers and figures

Pulling the puzzles apart

Questions of science

Science and progress

Do not speak as loud as my heart…

Running in circles

Chasing our tails

Coming back as we are

Nobody said it was easy

Oh it’s such a shame for us to part

Nobody said it was easy

No one ever said it would be so hard

I’m going back to the start

What do you think? Did these lyrics elicit a similar response in the supply chain portion of your brain? And what do you think of the commercial itself? Does it present an overtly idealized vision for farming in the U.S.? Can we really go “back to the start”?

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Posted in Supply chain management

Happy (early) Earth Day! Green your supply chain with these resources.

Published April 21st, 2011 by John Westerveld 2 Comments

Happy (early) Earth Day to you! In honor of Earth Day tomorrow, I got you a little present. I put together a helpful list of links to sites that help you in your quest for a sustainable supply chain. No, No…it’s OK. You didn’t have to get me anything…but if you DID feel the need to do something special for earth day, comment back with your favorite green supply chain site.

Ok, so here’s the list;

Sustainability is Free:  The case for sustainable supply chains: My first pick is a helpful little PDF put out by the “Sustainable Supply Chain Project” at the University of Reno.  It provides a nice rundown of some of the factors for making a business case for sustainable supply chain management. So, if you are (heaven forbid) just starting out on your sustainable supply chain project and need to make a business case, this is a must read.

MHIA – Green resources: This handy site is managed by the Material Handling Industry of America and has a great collection of resources for greening the supply chain.  The site covers manufacturing issues, logistics and distribution, product design and energy and building considerations.  Also, they have a section on making a case for green manufacturing and on government standards and regulations.  Finally, they have a 4-minute video on 10 steps to a greener supply chain. Again, if you are just starting out, this is great information for developing your plan.

United Nations Global Compact – Sustainable Supply Chains: Resources & Practices: This site was launched at the 2010 UN global compact leader’s summit and is a resource for businesses seeking information about supply chain sustainability. While the site appears to be somewhat European centric, there is a healthy resources section and a corporate practices section that will help sustainability programs regardless of your region.

Portal for Responsible Supply Chain Management: This is another European centric site (I have to give credit to the Europeans for their leadership in sustainability). The focus of this site is slightly broader in that the look at issues beyond sustainability (child labor, forced labor, corruption, etc). This site has a very interesting set of resources from the buyer’s perspective and from the producer’s perspective and also has a rich set of resources including forms for self-assessment.

Green Supply Chain: This site is sponsored by GSX.COM (a B2B e-commerce company). They have some helpful resources including videos and best practices. They also have a nifty counter on the main page showing how much wastewater, solid waste, CO2, trees and energy GSX has saved through their customer’s use of B2B. Yes, it’s a bit of an advertisement, but I think I can let that go.

The Green Supply Chain: Not to be confused with “Green Supply Chain”,  THE Green Supply Chain website is published by the people at Supply Chain Digest.  The site is focused more on sustainable supply chain news, but also has case studies, reports and other resources.

Green Supply Chain Network: The Green Supply Chain Network is a blog sponsored by the Supply Chain Network and has a series of articles that deals primarily with supply chain logistics and transportation.

Dave Meyer’s Green Supply Chain Blog: Any discussion of a greener supply chain would be incomplete without mentioning Dave’s green supply chain blog over on the Supply Chain Expert community sponsored by Kinaxis. Definitely worth checking out!

So there you have it; my Earth Day present to you. I hope some of these links help you and your company on your quest for a greener, more sustainable supply chain. I’m under no illusions that I’ve captured all the resources out there, so if you know of one that I missed, please comment back and add it to the list. The earth will thank you!

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Posted in Best practices

Sustainability in today’s strategic supply chain – insights from Kinexions

Published November 1st, 2010 by John Westerveld 0 Comments

Last week Kinaxis successfully hosted Kinexions 2010 - our annual user conference, which this year was held at the Kierland resort in Scottsdale.  With over 200 people in attendance, an impressive list of speakers, and three tracks of product workshops – it was certainly a full agenda….but wrapped in a very fun format.  Over the course of the next few days, we will be blogging about our thoughts as we reflect on the event.  In the meantime, Bob Ferrari was there and covered the event on his blog at Supply Chain Matters – check it out.  The twitter feed #kinexions also provides an interesting commentary of the conference.

For me, I was particularly interested in Andrew Reese’s presentation.  After reading his blogs and articles, I was very excited to hear Andrew, Editor of Supply and Demand Chain Executive speak at Kinexions and meet him afterword.    He and his team has been the spark for more than a few of my blog posts. 

Andrew spoke on “Sustainability and the Strategic Supply Chain”.    As readers of this blog know, I have a strong opinion about our responsibility as manufacturers to the environment (See Going Green shouldn’t make you see red).  Andrew’s presentation shed some new light on how supply chain practices will need to change over the next few years.

So, first of all, why should we care about sustainability (or green) in the supply chain?  Andrew points out that there are pressures coming from a number of fronts;

Regulatory pressure - There are more and more rules and regulations being applied to manufacturing every year. Carbon emissions, energy footprint, chemical regulations, RoHS all are impacting the supply chain.  Regulations change from region to region as well.   What may be unregulated in the North America may be controlled in the EU.   Adding to this complexity is that you need to look beyond your own operations.  Do you sell into supply chains impacted by these regulations?  Do you receive supply from suppliers impacted by these rules?   If so, then you may still be impacted.   The rate of change of these regulations in increasing significantly.  The supply chain is going to become much more volatile as we try to come to grips with this new world.

Supply Chain Pressure - Large, influential corporate entities are setting their own rules as part of their efforts towards good corporate citizenship.  Companies like Wal-Mart and IBM are demanding that their suppliers track and report their environmental performance.  In Wal-Mart’s case, the ultimate goal is to provide information to the buying public about the relative environmental  impact of their products so that Wal-Mart’s customers can make informed opinions.  By the way, this is not at all new.  I blogged about this almost a year and a half ago! (Demand for green is coming.  Are you ready?).  This brings potentially the biggest and most unpredictable supply chain pressure…the buying public.   At some point, we will hit a green inflection point where people will consider green and / or sustainability as a key part of their purchasing decision.  If you are not providing a green alternative and your competition is, you may find your share of the market shrinking fast!

Financial Pressure - Analysts and investors are starting to look at sustainability as a leading indicator of a company’s overall efficiency and risk exposure.  In his presentation, Andrew had a very telling quote; “If you’re not efficient you can’t be sustainable or, in the long term, profitable”   This was from Tony Prophet SVP, HP Personal Systems Group Worldwide Supply Chain at Hewlett-Packard.

So how does one respond?   One option is to wait for regulation, market forces, or financial analysts to force your hand.  This could work but I think it is the riskiest of the approaches.  Why?  How long does it take for you to get a product out to market?  Weeks?  Months? Years?  How long could you go survive If your top performing product was no longer allowed to be sold in your largest market?  In many cases, regulatory changes can result in a complete redesign of your product, or the design of a new product to replace the old.

While acknowledging that this is a complex problem and that the target is constantly shifting, Andrew identified 5 steps towards getting a handle on the sustainable supply chain;

  1. Get an understanding of the issue – The sooner you are aware of a potential issue impacting your product, the sooner you understand how your product might be impacted, the sooner you can put together an action plan to respond.
  2. Get involved in industry group – but don’t wait for them! – Industry groups can provide a more effective voice than an individual company.  However, if you are aware of a problem, don’ t wait for the industry group.  The other truth about a group is that they tend to move more slowly;  It may be too late before they achieve resolution.
  3. Assemble and engage the organization - Inform other parts of the organization to ensure that they are aware of the issues, then collaborate to ensure that the response has the buy-in of those involved.
  4. Assess your IT landscape – Part of the regulations and Supply chain pressures being applied is the requirement to document carbon footprint, energy consumption and chemicals used throughout the supply chain. Most ERP packages have little if any abilities to track this.  If your ERP system can accommodate this, great….if not, you need to start looking for alternatives.  There are some niche software applications that can be used for this purpose.
  5. Simulate your response  – Will your response work?  What will be the costs?  Can your suppliers support?  Being able to simulate your response will give you the assurance that you are on the right track and may identify some adjustments to the plan that will assure success.

Whether you believe in the issues that are driving these changes or not, you must agree that green and sustainability issues are impacting our supply chains today.  So now, the question is what are you going to do about it?

Comment back and let us know!

Posted in Supply chain management

Going green shouldn’t make you see red

Published September 24th, 2010 by John Westerveld 5 Comments

I saw an article in IndustryWeek the other day stating that according to the Manufacturers Alliance/MAPI, the proposed reduction in ozone emissions would harm US manufacturers.  The report cites costs in the Trillions and job losses in the Millions. This really got me annoyed.  Why does it seem that every time there is a concerted effort to make improvements, there is always some group pushing back, trying to keep things the way they are?

Now don’t get me wrong;  I’m very sympathetic to the plight of the North American manufacturer.  As a person who started his career in manufacturing and now work for a software company that sells solutions specifically for the  manufacturing industry, I want to see manufacturing in North America thrive.   I’m also going to freely admit that I’m not the most environmentally conscientious person in the world.  I’m not out there hugging trees or blocking logging roads.    The majority of my ecological decisions (energy efficient lights, appliances, vehicles) were choices I made mostly because they made economic sense.  But even I can’t ignore the mounting evidence that we’re in trouble from an ecological point of view;  Species are disappearing at an alarming rate.  Glaciers are shrinking dramatically.  The weather is absolutely Bizarre.    The issues facing the planet can no longer wait.  I remember hearing warnings about global warming and the environmental impact we were having back in the 80s.  Back then, the warnings were “ if we don’t change in the next 15-20 years we’re in serious trouble”.  Well…here we are 30 years later and guess what?  We’re in trouble!

Of course, it’s not just manufacturers that are to blame.  People are still buying oversized SUVs at a ridiculous rate;  We buy and discard technology as soon as the next big thing comes out.  We moan and complain if our energy bills go up a few cents so energy companies avoid new green technologies because they cost more.  If we want to slow the changes to our climate, everyone needs to do their part, including manufacturers.

It’s time we faced the reality that outdated manufacturing processes must change.  This doesn’t necessarily mean the end of manufacturing in North America, in fact, this is a huge opportunity if only we can be bold enough to reach out and take it.

The world must move to greener technologies.  The US and Canada have a long history of inventing new technologies.  Think about it;  radio, telephone, powered flight, computers, cell phones all were invented here.  If there is one thing we can do and do well it’s invent and bring to market new technologies.   What if we were to take this knowhow and apply it to green manufacturing.  It can be done!

Green manufacturing doesn’t necessarily have to cost more  From a lean perspective, one thing I’ve learned is that lean manufacturing can be green manufacturing.  Why?    Lean manufacturing is about the relentless elimination of waste.  If, for example,  your value stream mapping exercise includes energy consumption and one of your goals is to reduce wasted energy,  you will likely find many opportunities to reduce wasted energy.  What does this cost? Typically very little.  What does it save?  Could be millions. 

There are many  opportunities for green manufacturing;

  • New, greener materials for chemical processing and parts cleaning
  • Fuel savings through better logistics planning
  • Energy savings through cleaner, more efficient office and factory equipment
  • Packaging reductions (also reduces the tones of garbage produced by the average North American consumer)
  • Energy supplements through solar and wind power

Further savings can be realized if the product is designed considering green manufacturing right from its inception.  Designing a product that uses a component that has an expensive, environmentally damaging manufacturing process to one that is “green” can have a huge impact on environmental issues.   The material on green manufacturing is continuously growing.  One of my favourite sources is Dave Meyer’s blog on the Supply Chain Expert community.  You can find it here

Don’t wait for government regulations or public pressure to make your operations greener.  Everything we do today will help tomorrow.

Do you have ideas on Green manufacturing?  Comment back and let us know.

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Posted in Supply chain management

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

Published July 7th, 2010 by Francini Ortiz 1 Comment

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!

See Larry Lapide’s view of “A green supply chain” on KinaxisTV (Analysts Videos)

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?

Posted in Demand management, Supply chain management

Is collaboration the next supply chain optimizer?

Published June 17th, 2010 by John Sicard 2 Comments

On June 15th, I had the privilege of presenting at the world first Chief Supply Chain Officer Summit alongside a very well-known and respected Supply Chain Leader. I say alongside because Angel Mendez, Senior Vice President of Customer Value Chain Management at Cisco (NASDAQ: CSCO), really did the majority of the work. On this occasion, his message focused on the path he’s taking towards creating the “Next Generation Value Chain to Deliver Customer Value” for Cisco. While still a work in progress, with over 9,000 strong under his influence across 90+ locations and 32 countries, my money is on Mr. Mendez succeeding with his endeavor.

It begins with what he believes defines the customer experience value chain:

“Network of internal and partner processes, people and capabilities that translate innovation into customer value while delivering an unrivaled customer experience”

While closely formulated from Forrester’s definition, loosely defined as “activities through which companies create value, competitive advantage, and superior customer experiences”, what I find unique and interesting about Cisco’s definition is the specific attention and promotion of “people” and their “capabilities”. Perhaps this resonates so much with me because I have long believed that collaboration is the next supply chain “optimizer”, and collaboration is decisively a purpose-driven human activity. To be more precise, it is the unifying of actions taken by uniquely capable people for a common good (more on this later).

Angel identified four legs required to support the creation of strategic advantage; Customer Focus, Agility, Collaboration and Sustainability. At first glance, you might find these to be obvious and perhaps not so unique – and indeed, many companies are talking about these elements in one form or another. What is different about Angel’s message, for one, is the maturity and execution of the model. For example, I’ve never met a company who would say they are “not customer focused”; however, most continue to govern themselves according to traditional, and very operationally focused, metrics (e.g. cost, quality, delivery and speed). Cisco, on the other hand, measures their customer focus by focusing on perfect product launch, perfect order, order-to-invoice cycle time and last but not least “moment of truth customer satisfaction measurements” – thus, redefining their balanced scorecard to align with its customer focus.

A significant portion of Angel’s presentation was spent on the Flexibility/Agility leg. What caught my eye most is a theme I am seeing across multiple manufacturing segments, and is becoming a key requirement for many looking to improve their supply chain management and S&OP processes: the growing gap between Demand Chain and Supply Chain. Today, it is not uncommon to see completely disjoint demand side planning (S&OP) and detailed supply chain planning solutions, and yet, it is in between the two where a significant amount of efficiency and performance can be lost. I believe the gap is widening at a steady rate, and this is what is driving the need for new and innovative solutions to “collaborate and effect change in real time”.

So we’re back to Collaboration – the third leg. In my humble opinion, it will be in this area where excellence will be won or lost. You might look at collaboration as the combination of people + processes + technology/tools, but I was very impressed to see a slight variant of this long standing equation. In Angel’s vision, it is “culture” + process + technology/tools. I admit never having thought about it as a cultural challenge, but having worked with many large organizations on this problem, I’ve come to realize how unique a problem this is… collaboration amongst peers and employees is often challenging enough across departments. The type of collaboration Angel is talking about is inter-enterprise – which means that on a given day, you may very well be collaborating with a complete stranger living on a different continent. Indeed, there are cultural implications to achieving this level of maturity.

Again, I might say there is nothing new about promoting collaboration as a key to success; however, it is what Cisco is doing about it that distinguishes them from the rest. They are leveraging many of their own technologies to produce what they call an “Integrated Workforce Experience” (IWE) platform capable of bringing teams together to collaborate and solve ‘moment of truth’ problems that occur in the gap between demand chain and supply chain planning. Unlike social networking platforms, such as Facebook, MySpace and the like, which use friends, family and fun as a hook, I believe platforms like IWE will motivate productive usage and involvement through content, context, and consequence.

Finally, we have Sustainability, which is extremely topical these days as we watch in horror the catastrophe still hemorrhaging under the Gulf of Mexico. Here, we heard some common themes on creating efficiencies and innovations in product design, educating and increasing employee involvement, and a particularly catchy tag line: “Don’t just ‘comply’, lead, innovate, differentiate”. The one resonating message around sustainability, more of a lesson really, is the reminder that sustainability should not be viewed as a factor for competitive advantage, but rather, the one common flag around which everyone can unite and learn from one another. Industry collaboration will be the key to effecting a meaningful and lasting change.

Does Angel’s vision align with yours? Do you see effective collaboration as an emerging competency that will distinguish your company’s performance?

By the way, if you missed the presentation, grab a soda and sandwich and watch the replay of this presentation by registering here.

Posted in Best practices, Sales and operations planning (S&OP), Supply chain collaboration, Supply chain management

Seeing the green light: Time to get moving with environmental practices

Published February 11th, 2010 by John Nafis 0 Comments

The latest edition of IndustryWeek’s Manufacturing Business Challenge has been published.

This month’s challenge discusses a multinational manufacturer of engine and transmission components that is starting to get pressure to show its green/sustainable practices, including their management (i.e., reduction) of carbon emissions.  As a result, they are trying to figure out what tools and practices they will need to succeed in this new green world.

We were very fortunate to have a contributed solution to this case-study challenge by Frances Way, Head of the CDP Supply Chain Program at the Carbon Disclosure Project (, an independent not-for-profit organization that holds the largest database of corporate climate change information in the world.

What would be your recommendation to the challenge as described below? 

First, let me say, that I had been a little skeptical about global warming and other environmental issues. But, over the years, I’ve gradually seen the evidence build. As a person, I’m concerned. As a CEO, I’m concerned for my company. Treest Power is a multinational manufacturer of engine and transmission components for industrial and consumer equipment. I see the growing awareness of carbon emissions in the public sector swiftly moving into the industrial sector, and there are reasons for Treest Power to act now.

While I have been awakened by the environmental data and evidence, many in my industry still have their heads in the sand. Going green, or whatever you want to call it, is more than just a good thing to do. If Treest Power approaches this strategically and quickly, pulling in our critical supply chain partners as well, we can get a jump on our competitors and capture a growing market of environmentally conscious customer firms. I believe emerging government incentives and stimulus spending will suddenly wake many in my business, so I’d like to get the headstart.

In addition, Treest Power is beginning to get pressure to show our green/sustainable practices, including our management (i.e., reduction) of carbon emissions. Four of our largest customers have asked for documentation on our green practices and the green practices of our supply chain so that they can prove and promote to their customers the greenness of their products. While none of the companies have specifically asked us to make changes, the implication is clear: get on board. This is the push we need as, I believe, eventually industry or government regulations will dictate what we need to do, and I’d rather not be scrambling to meet these mandates — or not meet them and be in real trouble.

How can Treest Power begin taking the necessary steps today to better understand the issues and opportunities that await as we transition from old world to green world? What tools and practices will we need to succeed?

Here’s what we said…

Posted in Supply chain management

SCM predictions for 2010: Lessons from the retail world

Published January 4th, 2010 by Trevor Miles @milesahead 0 Comments

Lora Cecere, while at AMR Research, published a list of predictions for 2010 that are CPG and retail focused, which is her specialty.  What is interesting about the list,  in my opinion anyway, is that we will see a lot of retail behaviour begin to percolate down the supply chain.  This is my first prediction, but it is really an observation of an acceleration of this phenomenon, rather than a beginning.  At the heart of Lora’s predictions is the shift of power over the last 20-odd years from the brand owner to the retailer to the consumer.  This is associated with a big increase of online shopping, or as Lora states “What’s old is new again, with e-commerce rising from the ashes of the bubble.”

It is this re-emergence of e-commerce that has given the consumer the buying power.  Of course, the recession has had a role to play by making price a key buying criterion, possibly the key criterion.  But e-commerce allows the consumer to compare several alternatives, in terms of both brand and price, in a fraction of the time and with greatly reduced effort.  While mall shopping isn’t going away any time soon, there is no doubt that e-commerce has shifted the buying power to the consumer through ease of use and ease of choice.  For example, my daughter went to the mall with a friend and came home excited about a skirt she had seen in a store but couldn’t afford it.  My wife called her friend to get a few more details and then spent about 20 minutes on the internet finding the best deal, which was 30% less than the store price, including shipping.  It would have taken her at least 20 minutes to drive to the mall and the 30% reduction does not include the cost of driving to the mall.  And it arrived in time for Christmas.  What’s not to like about this story?

So how does this relate to our market, which is much more in the low volume, high mix and build-to-order category, rather than the high volume, low mix and make-to-stock environment typical of CPG?  As has been commented by many people before me, retail-like behaviour is being adopted in more industrial environments.  I visited a fab-less semiconductor manufacturer in late December that is wrestling with increasing demands for a much wider choice of product capabilities coupled with expectations of greatly reduced order to delivery lead times.  The lead time expectation is a lot less than the manufacturing lead time so the semiconductor manufacturer is looking at postponement strategies including, very importantly, die reservations in the foundry, which of course they do not own.  Because of a greater product portfolio they cannot afford to keep the same levels of inventory because of the associated risks of price reduction and obsolescence.  As I stated in the opening paragraph, the adoption of consumer behaviour in a business-to-business environment has been increasing over the past few years, and will only accelerate.

Perhaps it is Lora’s point about the effect Wal-Mart is having on the supply chain that best captures the impact consumer and retail behaviour is having on the larger manufacturing sector.  Because Wal-Mart is such a dominant player, initiatives enforced by Wal-Mart soon trickle down the supply chain through multiple tiers of supply and affect other industries too.  Lora selects 3 initiatives: “sustainability scorecards, rethinking inventory strategies, and the initiation of the Supplier Alliance Program.”

Let’s start with inventory.  For centuries, inventory has been used as a buffer between demand and supply, starting with grain silo’s and other food stores.  The fab-less semiconductor manufacturer I mentioned above is, like many other manufacturers, adopting postponement strategies including reducing inventories to preserve cash, while at the same time being faced by the need for shorter order to delivery times.  Obviously there is a lot that can be done to improve manufacturing flexibility and shorten change-overs, but the biggest gains are to be had in reducing the order processing times, especially the time it takes to determine if the order can be delivered on time and in full.  Given the reduction in inventory, the issue has gone from available-to-promise (promising from finished goods inventories) to capable-to-promise (determining if the products can be manufactured in time), blurring the distinction between execution and planning.

The sustainability scorecard will perhaps have the biggest and widest long term effect on the supply chain.  As stated in a New York Times article, “In the future they may also have information about the product’s carbon footprint, the gallons of water used to create it, and the air pollution left in its wake.” With the impact of environmental legislation also trickling through the supply chain, particularly the electronics supply chain, it will only be a short time before a full product sustainability scorecard will be required including “carbon” accounting.  I think it is only some time before we will have a “carbon cost of goods sold.” And, as commented on in the NYT article by Tim Marrin, associate director of external relations for Procter & Gamble, “The last thing a supplier really wants is when you’re doing a separate index for every retailer.”  Wal-Mart has the market “muscle” to see this through and to ensure a standard is adopted across the industry.  For assembled products, such as consumer electronics, this means that the suppliers to the brand owners will also have to conform.  Which is how we will see the “trickle down” effect influence the adoption of a sustainability index on labels permeate other industries.  To be fair to high tech, particularly computing, they have had a start rating in effect for some years.  But the Wal-Mart initiative will take this to a whole new level of detail and accountability.

Am I just still too full of Christmas “cheer”?

Posted in Best practices, Demand management, Inventory management, Lean manufacturing, Milesahead