I had the opportunity to sit in on the MIT Forum for Supply Chain Innovation’s quarterly meeting last week, dedicated to the theme of implementing the green and sustainable supply chain. My thanks to Professor David Simchi-Levi and Executive Director Dr. William Killingsworth for their invitation, knowing my interest in this topic.
The conference featured a number of interesting and insightful speakers representing academia, government, and management consulting viewpoints on this key topic. For me, the key takeaway messages from this conference are the following:
Green supply chain strategy makes sense from an overall business perspective, but the vast majority of companies are in early stages of strategy development. Europe has more momentum right now because of the financial and legislative environmental policies directed at carbon and waste reduction. Many of the speakers touched upon industry survey data that indicates early and selective adoption, where green supply chain compliments specific business strategy. Most all of the speakers mentioned the lack of consistent measurement and tracking measures.
While customer and the end consumer are increasingly expecting companies to be green, they may not necessarily be willing to pay the extra costs, especially given the current economy. Taylor Wilkerson, Research Fellow of the non-profit Logistics Management Institute (LMI) provided an overview of the initial green supply chain measurement metrics that will be included in the SCOR Release 9 reference model, as well as the importance of securing executive sponsorship, alignment, and consistent data sources to monitor and measure meaningful progress in overall green initiatives. Dana Hanson, Senior Executive at Accenture shared recent consumer and business directed survey data indicating that consumers are very concerned about climate change, and value the actions taken by business to address climate change. Yet, 40% of businesses surveyed seen “Green” as a business opportunity, 60% see this as a normal cost of doing business.
In today’s increasingly challenging business environment of high fuel and commodity prices, green and sustainable supply chain strategies can be complimentary for reducing overall supply chain costs. Kristen Pierre, Director of the Green Supplier Network of the U.S. Environmental Protection outlined the EPA’s proactive efforts to assist small and medium business in cost-effectively implementing sustainability initiatives. Most refreshing was this writer’s observation that this is an area where government is proactively helping to lower barriers, lowering risks, and providing useful information.
Implementing an end-to-end green supply chain is an immensely complex problem and will require multi-year initiatives as well as technology-enabled analytical analysis and tracking tools. Professor David Simchi-Levi’s presentation provided an insightful analysis of how key trends in the overall cost of fuel, as well as supply chain process maturity can drive significant changes in overall supply chain strategy. His conclusion was the current combination of factors such as very lean globally stretched supply chains, increasingly higher fuel prices, and the emerging need for environmental sustainability will once again drive tradeoff decisions such as incremental inventory vs. transportation, local production vs. transportation, lean vs. green.