New research published in Science (Poore & Nemecek, 2018) analyzes land use in food supply chains. An astounding 3.1 billion ha reduction in land use could be possible by excluding animal products from current diets. That is an area equivalent to Australia + China + European Union + United States. The author also shows that animal products use about 83% of the world’s farmland and contribute about 57% of food’s different emissions, despite providing only 18% of our calories. These findings demonstrate that we need to shift from “company thinking” to “supply chain thinking” if we want to see the full picture.
The circular economy is gathering momentum: In the future this model could, for example, mean that smartphones will not be sold and consumed anymore, but companies like Apple and Samsung will then keep scarce resources and sell a smartphone service to users instead of a product to consumers. These users will then be required to bring back the phone after a specified amount of time. California Management Review has now published a special issue on the circular economy. Several of the articles of that special issue refer to supply chains and supply chain management; and several of the authors have published in SCM journals before. This indicates that “supply chain thinking” and “circular thinking” are increasingly stimulating each other. I would even go so far to say that the 21st century’s supply chain management has to shift from linear to circular. This also has implications for our research. What we might need to re-think is whether the “chain” in “supply chain management” is still the right expression.
A new research report, provided by Mighty Earth, argues that “[deforestation] is the result of a long supply chain that starts on the South American frontier and ends on European plates”. The report is titled The Avoidable Crisis. It reveals that a small group of companies controls the global agricultural trade: “These companies collectively control the majority of global grain trade […]. In addition to their role in trade, these companies also play a more direct role in driving ecosystem conversion by providing plantation owners with financing, fertilizer, infrastructure, and other incentives for new deforestation to expand their supply base. Given their outsized role, these companies have the power to insist that suppliers protect native ecosystems and land rights. But so far, these companies have prioritized reckless expansion over even easy conservation wins.” The authors argue that “[the] EU must send a strong signal to the market by requiring that companies implement measures for transparency and traceability into their supply chains”.
The Case Centre has recently announced the winners of their 2018 global awards and competitions. Already last year, the winning case in the Production and Operations Management category was closely related to supply chain management (see my previous post, Zara: The World’s Largest Fashion Retailer). This is also the case for the 2018 category winner, which is titled Everything Is Connected: A New Era of Sustainability at Li & Fung. It was written by Hau L. Lee and Sheila Melvin. The case deals with the way how Li & Fung, a Hong-Kong-based trading company, reacted to the Rana Plaza disaster and other such events to ensure sustainable supply chain management. Li & Fung’s Head of Learning and Development is right when saying: “The hard part is to make sustainability part of our DNA, to get 27,000 people to understand that this is now as fundamental to us as the fact that we source globally.” Therefore, this case could be a great building block for future SCM courses!
Are business success and sustainability contradictory? A new white paper by Schmidpeter & Bungard, sponsored by DHL, is rather optimistic and argues that both goals can instead be mutually beneficial. The paper is titled Unlock the True Value of Your Supply Chain: Business Success through Sustainable Supply Chain Management. The authors state: “Sustainable Supply Chain Management (SSCM) can help drive positive business change by helping companies save costs, strengthen ‘license to operate’ and generate additional revenue streams.” But the authors also acknowledge that “[a]lthough there are good tools and best practices available for integrating sustainability into your business, there is no silver bullet that will let you realize the benefits of SSCM overnight”. They also acknowledge that the Sustainability department should not do it alone: “The topic of sustainability should be on the agenda for every leader and employee within a company”. The white paper might partly be quite optimistic, but it provides several good practices from business reality.
Today I present my personal predictions for supply chain management in 2018. Sustainability and digitization will certainly top the SCM agenda! First, much more action is needed to combat global warming. SCM could play a key role to cope with this challenge, as a “supply chain” rather than “company” perspective helps to understand that upstream greenhouse gas emissions may occur anywhere in the world. Unfortunately, time is slowly running out! New technologies like blockchain, ID systems like bluenumber and standards like ISO 24000 could help us make a breakthrough. Second, we might see increased momentum to move beyond the machine learning hype. Machine learning could soon be integrated in all kinds of value-creating processes. But while IT giants like Google, Amazon and SAP highlight the strengths and opportunities of such technologies, we should also take the weaknesses and threats into consideration: Will robots take our children’s jobs? And what does all this mean for SCM? 2018 will bring some more questions and hopefully even more answers.
Today’s economy is a plastics economy, as most of our global supply chains contain plastics. A report, published by the Ellen MacArthur Foundation, is titled The New Plastics Economy: Rethinking the Future of Plastics. Herein it becomes evident that linear supply chains need to become circular: “The circular economy is gaining growing attention as a potential way for our society to increase prosperity, while reducing demands on finite raw materials and minimising negative externalities. Such a transition requires a systemic approach, which entails moving beyond incremental improvements to the existing model as well as developing new collaboration mechanisms.” The report “explores the intersection of these two themes, for plastics and plastic packaging in particular: how can collaboration along the extended global plastic packaging production and after-use value chain, as well as with governments and NGOs, achieve systemic change to overcome stalemates in today’s plastics economy in order to move to a more circular model?”
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