I am happy to share the following guest post by Dexter Galvin, Head of Supply Chain, CDP. Thank you for contributing to my blog.
Our latest Global Supply Chain Report 2017, written in partnership with BSR and the Carbon Trust, revealed emissions savings of 434 million tonnes disclosed by suppliers in 2016. That’s more than the annual emissions of France, and it shows that the supply chain is a critical component – the missing link – in securing our sustainable, low-carbon future. Our data showed that supply chain action isn’t just about reducing emissions; it’s also good for the bottom line. Companies with emissions reduction projects disclosed cost savings of $12.4 billion as a result of their carbon-cutting measures – double what was reported in 2015. Almost half of the top 100 projects by savings were related to energy efficiency, and with a payback period of three years or less, the majority of projects had an attractive investment profile too. While the savings achieved by suppliers were certainly impressive, around half of the 4,300 companies we surveyed didn’t report any emissions reduction activities at all. So think what the impact could be – on costs and carbon levels – if they all took action?
Dexter runs the Supply Chain program at the global climate change NGO, CDP, from their London Headquarters. He has launched a number of important global initiatives to drive climate action in private and public sector supply chains, including CDP’s Action Exchange initiative. You can follow him on Twitter: @GalvinDex
The volume, variety and velocity of business and supply chain data are increasing dramatically. At the same time, improved technologies, such as artificial intelligence and machine learning, are already on the horizon. Ernst & Young has recently published an interesting report, titled Digital Supply Chain: It’s All About That Data. The authors make one thing very clear: “Companies must act now to focus, simplify and standardize big data through an enterprise data management strategy.” If companies fail to do so, the authors argue, “technology will drive increasing data cost, complexity and inefficiency; companies will be unable to benefit from advanced analytics like machine learning; and they will be unprepared for the next wave of data growth triggered by new technologies like IoT and blockchain.” In other words, companies fail to be successful unless they become masters of their supply chain data. Maybe business schools should increase the proportion of IT knowledge in their SCM curricula?
The following Google Ngram Viewer graph shows the frequency of the terms “supply chain”, “logistics” and “procurement” in books published between 1975 and 2008. It turns out that the use of the term “supply chain” accelerated in the late 1990s and overtook “logistics” in 2007. We can only speculate about the current use, as Google’s database ends in 2008.
What are the upcoming SCM trends? Firstly, in our recent research about “hot topics” in SCM, sustainability topped the list. Indeed, 2016 has, most probably, been Earth’s hottest year on record. Ask yourself: “What will be my contribution to revolutionize our business models and create truly sustainable supply chains?” Secondly, 2017 could become the year for supply chain managers, as an increasing number of companies realize that SCM belongs in the C-suite – and that this can make a difference! Another example is Lego, the toy maker, which has recently appointed a supply chain expert to become new CEO. Companies seem to understand that SCM is not just another name for logistics; it rather creates the smile of value creation. Finally, machine learning and artificial intelligence have recently made an astonishing leap forward. Not much imagination is needed to realize that this development is about to “disrupt” decision making in SCM. Why not let machines select your suppliers? Have a good new year!
Jay Wright Forrester was “an electrical engineer whose insights into both computing and organizations more than 60 years ago gave rise to a field of computer modeling that examines the behavior of things as specific as a corporation and as broad as global growth”, as the New York Times writes in an obituary. Forrester was a pioneer of systems dynamics, which “deals with how things change through time, which includes most of what most people find important”, as he once wrote. Forrester’s (1961) book Industrial Dynamics had a huge impact on the development of supply chain management. Herein, he studied “the behavior of industrial systems to show how policies, decisions, structure, and delays are interrelated to influence growth and stability”. His analysis of what we call “supply chain” today revealed an effect now known as the bullwhip effect – undoubtedly the single most important theory in supply chain management. Forrester died last week at his home in Concord, Massachusetts.
Forrester, J.W. (1961). Industrial Dynamics. ISBN 0262060035