Lack Of Leadership, Sustainability Hamper Green Efforts In Supply Chain, Study Says
January 1, 2010
For several years now, motor carriers who have rolled out green programs have complained that while shippers may talk a good line about sustainability, it's not truly a priority for them and they're c...
For several years now, motor carriers who have rolled out green programs have complained that while shippers may talk a good line about sustainability, it’s not truly a priority for them and they’re certainly not willing to pay for it. As Scott Smith, president of J.D. Smith & Sons recently said: “Customers have switched from sustainability plans to how much less green can they give you.”
A recent study proves motor carriers have reason to complain. Operations, logistics and supply chain executives need a better understanding of how to go green and save green across increasingly complex, global, and multi-tiered supply and distribution networks, according to the study.
The study, released in July, called Acceleration of ECO-Operation: Achieving Success & Sustainability in the Supply Chain, was put together by the Business Performance Management (BPM) Forum, which seeks to advance performance accountability and compliance in global organizations, and E2open, a provider of integrated demand-supply network solutions.
“ECO-Operation” describes a new management mantra aimed at bringing business gain to the value chain through enhanced trading partner visibility, flexibility and new levels of verifiable sustainability across the entire demand and supply ecosystem of global corporations.
Top benefits achieved through better ECO-Operation programs include more environmental responsibility, better sustainability compliance, more efficient product manufacturing, and better customer responsiveness, but 42% do not consider their carbon and energy footprint as including their entire extended supply chain, and only 55% say their customers would agree.
The study, conducted in second-quarter 2009, surveyed more than 125 supply chain, operations, finance, and executive professionals around the world across multiple industries. While 90% of supply chain and operations professionals said their management subscribes to enhanced trading partner visibility, flexibility and sustainability across the entire supply and demand chain, nearly two-thirds have marginal or no visibility across all tiers and levels of their value chain.
In fact, 78% of companies rated the level of synergy and accountability in their global trading network as sub-optimal.
A lack of leadership, visibility and standardized sustainability metrics are holding companies back from achieving bottom line benefits, even while companies say their customers will continue to put more green pressure on their providers. Some 76% of respondents say their customers have not requested information on carbon and emissions containment, but two-thirds expect customers to demand this in the next year.
“We were surprised at the heightened awareness of the management buy-in to the need to become more sustainable. What’s disturbing is seeing the lack of vision, leadership, and standardized sustainable metrics,” said Derek Kober, senior vice-president and program director of the BPM Forum.
On the positive side, he noted, 85% of respondents are involved in new programs, and the second top initiative respondents are undertaking is changes to logistics and transportation practices.
However, many challenges in synchronizing supply chain operations remain. Among these are the following:
• There is no single, universally accessible solution for visibility across the value chain.
• Partners are unwilling or unable to provide necessary information.
• Companies don’t have access and visibility into second-or third-tier trading partners.
• Only 20% currently use a single, hosted platform that integrates, coordinates and controls every aspect of their value chain network. (Of those that use one, 58% have seen an impact on value chain performance).
• Less than a third have a goal of carbon neutrality in supplier operations and/or customer product use. (Of those that do, 71% will achieve that goal in four years or less).
Rich Becks, senior vice-president of strategic supply-demand solutions at E2open, told Motortruck Fleet Executive that with respect to sustainability, most of the progress has been made on the operations side, specifically in the quality area, in terms of adhering to country directives, for example.
“Does the ‘C’ level understand the impact (of sustainable practices)? I think at an abstract level they do, but they are concerned about competitiveness, top line productivity, and market brand. If you can translate the value that transport and logistics brings into a strategic framework, that has more impact,” said Becks.
He added that the BPM study does a good job in terms of linking sustainability and profitability.
“What that means is that this is an opportunity for them to think about this in a new way.
“If you’re not profitable, you’re not sustainable, and you’re not competitive. Customers are asking if companies have their eyes on the things that are driving their costs, and when you’re hunting carbon dioxide and fuel in the supply chain, you’re hunting costs,” said Becks.
“From BPM Forum’s standpoint, we feel that the move to become more environmentally (sustainable) will go beyond just regulation and special environmental groups to a much more mainstream issue,” said Kober.
And if you’re going at sustainability from the idea that it and profitability are inextricably linked, then energy costs doubling in the supply chain is a huge risk you’d want to know about.
“Accuracy versus precision will be the next frontier in sustainability,” said Becks.
In terms of cracking the problem of accessing data across multiple tiers, the technology has progressed considerably, he added.
“There is technology out there that allows server-to-server participation, or Web user interface and uploading of data, and that info is used to orchestrate the end-to-end process from customer order to supplier, shipping it through the logistics process to the customer dock, through the inventory process and all the way to the end customer and to consumption. Most people are still stuck in a mindset of functions by software. There’s a loss of fidelity and timeliness that way. If we put this info into a platform that resides in the network and everyone can interact with it, visibility and collaboration go up,” he said.
Such technology, he added, is on a cost par with any TMS or WMS.
“The message that I hope came across is that there is an additional area we need to consider, to holistically manage supply networks, and to organize the flow of goods around world through multiple tiers of partners working together. These are networks and you should be able to manage your carriers through a platform with a consolidated view. Some products are moving around the world several times because they’re looking for demand -we have to get a lot better managing supply and demand,” said Becks.
“Supply chain executives understand the benefits of better managing collaboration and sustainability in the value chain -now they just have to make it happen.” mt