This Editor and supply chain management technology industry analyst recently had the opportunity to interview Jon Chorley, Group Vice President and Chief Sustainability Officer at Oracle Corporation. Jon has a particular passion in the area of sustainability, and we wanted to explore and share with our global audience his perspectives on creating more sustainable business and supply chain operations.
Why should organizations be thinking about creating more sustainable supply chain operations?
One of the most powerful motivators for business will always be the bottom line and the simple fact is that it pays to be sustainable. Creating an efficient supply chain is one of the best ways to drive down costs, but it’s also where most companies can see the biggest gains in terms of environmental impact.
For example, many organizations are banning straws and single use coffee cups (both great initiatives) in the office, when improved supply chain planning or reducing the number of empty trucks on the road and booking backloads to move product would actually have a much greater impact in terms of reducing environmental impacts. It also makes sense as customer priorities change.
There is an increasing tension between consumers selecting sustainability versus convenience. In developed countries, many consumers are becoming more conscious of the impact of consumption on the planet. For example, a recent Accenture survey found that half of Americans would choose delivery options that leave a smaller carbon footprint, such as slower shipping and in-store pickup. Additionally, 45 percent indicate they plan to shop at retailers this holiday season who demonstrate social consciousness in their business practices and working conditions. This trend is only going to continue as younger generations (future customers) demand action from companies to mitigate environmental impact.
Where do you see the most inefficiency within the supply chain?
It depends what business you’re in. But most businesses have a logistics and transportation component for either receiving goods to be sold or getting goods to customers. There is a ton of inefficiency in transportation and many of the processes haven’t changed in decades. For example, in a lot of businesses booking freight is still done via phone and fax, which is entirely manual and not at all scalable. We’re seeing significant adoption of Oracle Logistics Cloud and Oracle Warehouse Management (WMS) Cloud which gives customers access to fleet insights, route optimizations and freight brokerage services to reduce the number of empty trucks on the road.
In other industries improved demand forecasting and synchronizing the supply (manufactured or purchased) to that supply can have a dramatic impact on reducing waste and improving profitability. We call that becoming “demand driven” and Oracle has best in class planning Cloud capabilities fully integrated with supply chain operations and manufacturing to help companies make that transition.
What is the environmental and business impact of this inefficiency?
Without technology, these companies would be burning unnecessary fossil fuels and adding excessive carbon into the atmosphere – either by moving empty trucks, getting stuck in traffic, carrying partial or empty loads, or by producing products for which there is inadequate demand and thereby increasing waste. This is not only hurting the planet but also draining the company’s resources. Manufacturing processes and logistics ones won’t be going away but the emergence of technologies such as autonomous electric trucks and demand-driven businesses will certainly help to reduce the environmental and business costs of production and shipping. Many of these tools are available now. The key is it get on a continuously evolving platform such as the Oracle Cloud that makes these technologies and processes available now and which will add more automatically as they become available.
How can organizations create more sustainable supply chain operations?
Efficiency problems can’t be solved in a piecemeal fashion. Having end-to-end visibility of supply chain operations and real-time data insights will be essential to optimizing supply chains and ensuring they are sustainable. Additionally, many of these problems won’t even need to be solved by humans, machine learning algorithms and artificial intelligence is in the best position to see inefficiency and correct it in real-time. It is the thoughtful combination of People, Policies and Technologies that will achieve this result.
Disruptive technologies such as the Internet of Things (IoT), artificial intelligence (AI), big data, and Blockchain are driving unprecedented environmental and business innovation by supporting real-time data collection and holistic decision-making that includes environmental impact. For example, Blockchain technology has enabled Volvo to better track cobalt from the Democratic Republic of Congo to improve accountability in its supply chain and prevent purchase of conflict minerals or cobalt that’s been mined with child labor. Toyota is using data visualization to design more sustainable mobility solutions. Companies like Coca Cola and Kraft-Heinz are using Oracle Logistics Cloud which leverages IoT and machine learning to create more efficient and sustainable logistics networks.
However, moving to intelligent supply chain management and sustainable operations will require applications that sit on a common view of information. A shared data model, such as is the basis of the Oracle Cloud, provides a way of simplifying this. For example, a change in the manufacturing system needs to automatically carry over into the warehouse management system, the transportation management system, enterprise resource planning system and customer service applications etc. These applications should also be delivered as-a-Service (SaaS) to reduce disruption and prevent integrations from breaking with each product update and new feature. I also see a future where this approach can be extended across the supply chain. So much energy in supply chain systems is expended modelling what the other person is doing. In the future a shared view, likely based on Blockchain, may simplify this.
What has Oracle done to improve its own manufacturing, transportation and logistics supply chain efficiency?
In our own internal manufacturing and logistics operations we’ve taken the steps mentioned above to move our supply operations to Oracle SCM Cloud, giving us the foundation for more intelligent and efficient supply chain operations. While we drive towards an AI-enabled supply chain, we’ve also made changes to logistics and shipping options for our hardware customers to reduce waste and carbon emissions.
What we’ve realized is that when customers buy a rack and servers, 95 percent of the time they don’t require it the next day. As a result, we’re able to assemble and shrink-wrap the completed server rack (instead of shipping in different boxes for the customer to open and assemble), which reduces packaging waste. It also enables us to make sensible logistics decisions to deliver the assembled product within a 10-day window. This efficient system works for 95 percent of our customers and for the small minority of customers that need it urgently, we will do whatever it takes to deliver it as soon as possible. But this is not our default option.
We’ve also improved our demand forecasting combined with a disciplined Sales & Operations planning process. All of this has improved efficiency and reduced waste.
What are some of the results of these initiatives?
We’ve moved to 100 percent renewable energy for our data centers in Europe and globally we operate with 62 percent renewable energy in the Cloud. Because we control the whole stack, we’ve also been able to get more compute out of our Oracle Exadata systems and higher server utilization rates. Our data centers are generally 60-70 percent more efficiency than a standard corporate data center. We pass those environmental and cost savings on to our customers.
We have more than 25 million square feet of real estate and facilities. Across this footprint we’ve been able to reduce our absolute scope 1 and 2 emissions by 17 percent over a 2015 baseline with a goal to reduce it by 26 percent by 2025 (in line with science-based targets), we’re now at 35.5 percent renewable energy for our facilities (58 of our owned offices are now 100 percent renewable energy) and are on track to reduce landfill waste per square foot by 25 percent by 2020. We also retire more than 3 million pounds of customer hardware assets for recycling or reuse each year.
On the operations side, more than 80 percent of Oracle’s direct manufacturing spend is associated with suppliers who have energy or carbon reduction goals in place. The initiatives and optimizations mentioned above have also prevented more than 30,000 metric tons of carbon dioxide from being added to the atmosphere.
We are incredibly proud to have been recognized on CDP’s Climate A List for the last three years running. We’ve also earned a gold rating in the 2018 EcoVadis CSR Assessment, putting us in the top 5 percent of responding companies for supplier sustainability.
We sincerely thank Jon Chorley for sharing his passion and perspectives on this important area of business strategy and especially on how technology can play an enabling role.
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