How to really hold business to account on their carbon footprint – include their supply chains
Many firms and organisations are now working hard to reduce their carbon emissions. And it is not just good public relations. Pressure is building on firms to lead society in the move towards a sustainable future.
But still too few include their supply chain when considering their environmental impact and this is bad news for the environment. Supply chains contribute significantly to a firm’s carbon footprint and can amount to four times the organisation’s own operational emissions.
The Carbon Disclosure Project (CDP), a charity running the global disclosure system on carbon emissions for investors and other interested parties, found just 29 per cent reported absolute decreases in emissions.
As well as being bad for the environment, this will increasingly cause problems for businesses too. A growing number of regulators worldwide now require publicly listed companies to include measurements of their greenhouse gas emissions in their annual reports. The UK introduced “streamlined energy and carbon reporting” in 2019. This includes supply chains.
Different levels of engagement
By analysing the CDP annual survey data from 2014 to 2017, my colleague Jens Roehrich and I found 1,686 listed companies from all over the world that was actively collecting environmental data and engaging with their supply chain.
Although two-thirds of our sample firms were not doing any of this, we can at least see that engaging with your suppliers is on the rise. The number of firms talking to some or all of their supply chain increased by 57% in the three years we looked at.
We were able to categorise the firms into three levels of activity: basic, transactional and collaborative. The basic level sees companies typically send their suppliers a survey to fill in on their emissions. US software firm Symantec produces an annual report on the greenhouse gas emissions of its suppliers, while Bank of America has done a CDP supply chain survey since 2009.
This is the first step for a comprehensive carbon reduction plan, measuring and collating data. More advanced firms are using that data more productively. At the transactional level firms are calculating their carbon footprint and identifying opportunities for improvements, providing their supply chain with targets and incentives.
The airliner Virgin Atlantic aims to reduce emissions from its supply chain each year. Meanwhile, nuclear power firm Exelon sets goals for its suppliers to reduce energy usage and greenhouse gas emissions.
This data is also being used by companies to develop key performance indicators. These can then be used to select a supplier or worked into contracts to assess a supplier’s performance. They can then send warnings to companies that are not achieving the required performance levels and demand improvements. For instance, pharmaceuticals company [Pfizer] benchmarks its suppliers on the basis of their greenhouse gas emissions and water consumption levels and demands corrective action when suppliers fall short of their targets.
At the collaborative level, firms are working with their suppliers to develop shared goals and values around sustainability. This means more direct conversations through meetings, seminars on best practices, as well as establishing online discussion groups designed to foster innovations that reduce their carbon footprint and create greener products and services.
Food multinational Kellogg’s has organised a Sustainability Consortium with its supply chain to advance scientific research and develop standards and tools that have the potential to improve the environmental, social and economic impacts of their products. Similarly, InterContinental Hotels Group is working with the International Tourism Partnership to reduce the environmental impact of the cotton used in its bed linen.
Firms at the collaborative level also seek to engage customers and consumers, persuading them, through marketing and public relations, of the benefits of new, greener products and how to use them in a way that is less harmful to the environment.
Chemicals company Ecolab partners with its customers to reduce their energy demands and carbon emissions through innovations. French hospitality firm Sodexo funds a professor of sustainable sourcing at the Euromed School of Management in Marseilles.
If firms have to report all their emissions, from the supply chain to the customer, then what each one does affects the other. This makes the collaborative approach increasingly important. Companies need to understand that they are all part of a system that has to work together, rather than use it as another supply chain management tool.
Tech leading the way
Measuring emissions across the whole value chain can be incredibly complex for a company like Walmart with its thousands of suppliers around the world. The amount of data involved is probably why we see tech companies leading the way in reducing their carbon footprint. Their data analytics skills mean it is natural for them to collate data and put it to good use and work up and down the supply chain.
Their experience of handling and managing data also means they see this trend and increasing requirement to record and measure emissions for companies as an opportunity. If they figure out and produce a comprehensive software package that does all this effectively, they can then sell that platform to other firms looking to manage their whole carbon footprint. Verizon, for example, now sees its Internet of Things products, designed to reduce carbon emissions, as a significant source of revenue opportunities.
Sustainability has become the issue of this generation. If businesses are to prosper in this climate, they need to include their whole supply chain to claim they are truly on the planet’s side and not be accused of creative carbon accounting.
The quality of the last mile of delivery makes all the difference in your customer relations
Customers are becoming more demanding when it comes to delivery – which is why getting your logistics right on the last mile is crucial.
In a world affected by a global pandemic customers are getting increasingly aware of the quality and environmental footprint of their daily delivery. This is putting pressure on retail and e-commerce to manage the so-called last mile well – the last part of the journey when the goods are delivered directly to the customer. In fact, the delivery personnel are the only in person touch-point in a standard e-commerce transaction. Here is what customers expect: Increasingly same-day delivery (ideally in a couple of hours), but they also expect it to be in the most environmentally friendly way, as they are becoming more and more aware of the impact their shopping has on the environment.
Once an order has been processed, the customer’s entire purchase experience takes place during the last mile. Their satisfaction is affected not only by the availability of accurate information throughout the delivery but also by contact with the carrier itself. An unfriendly and unprofessional courier can cast a shadow over the entire buying experience and impact your brand. A helpful, smiling and carefully trained one increases customer satisfaction and willingness to shop with you again.
A study of the Bibloo fashion store, which decided to outsource last-mile logistics through DoDo serves as a case in point. According to the survey, customers using express delivery (within two hours) had a 47 per cent higher retention, and the average value of their orders was 65 per cent higher than that of customers using slower delivery methods. Dodo achieved this mainly by professional and friendly personnel and uncompromised quality in delivery.
Now or never
Same-day delivery, previously seen as a premium service, is becoming the norm. But although 75 per cent of consumers are interested, according to a PwC survey, most retailers are unable to offer this type of delivery. The figures also show that 41 per cent of consumers are willing to pay for the privilege, while almost a quarter (24 per cent) of shoppers would pay a further fee for an additional one or two-hour delivery window of their choice.
This is why Amazon began using predictive models years ago, enabling it to send goods to warehouses in areas where they were more likely to be ordered. One of the basic problems of the last mile is the constant struggle with inefficiency, and every minute gained plays a crucial role. In less exposed areas, delivery points on a specific route may be several kilometers apart; in cities, transport is an obstacle and the cost to the customer is largely influenced by the standard of delivery, such as delivery in a selected hourly window. This creates a huge space for the development of technological innovations that would reduce inefficiencies and meet customer needs.
Through data to fresh delivery
The coronavirus crisis has shown that there is no room for chance and error in last-mile logistics. This is even more true in the case of fresh food distribution, where it is necessary to strictly adhere to the temperature chain and all hygienic measures.
The solution is data, as evidenced by Czech logistics startup DoDo, which already operates in Berlin and Munich. The fastest-growing technology company in the Czech Republic, and the second-fastest growing in Central Europe according to Deloitte Technology Fast 50 CE, DoDo delivers thousands of orders a day for e-shops, fast food chains and supermarkets. Its clients include brands such as KFC and Tesco. Within the DoDo Fresh division, which specialises in the delivery of fresh food, specially designed refrigerated boxes, certified cars and carefully trained couriers are used. The maximum efficiency of distribution is ensured by DoDo’s GAIA logistics platform.
When technology reduces costs
The last mile is the most complex and expensive stage in the entire logistics process. It accounts for as much as 53 per cent of the total cost of goods distribution, making it more expensive than transporting goods between a remote factory on another continent and the destination city. It is not such a big surprise that this area causes great interest in the implementation of new technologies and logistics models, process optimisation and data-based decision-making. Every unused area in the transport space, every unexpected obstacle in city traffic, every kilometer and every minute affects the final price of transport.
Outsourcing last-mile logistics through a technologically advanced partner lets you focus on your own core business, instead of having to spend time untangling HR, fleet management and scalability problems. DoDo comes with a comprehensive solution that offers a system, cars, couriers, dispatching, customer and marketing support. In addition, it can tailor everything to the requirements of the company, whether it is a logistics model with a guarantee of availability according to the client’s needs or branding of the entire fleet. Wide possibilities of individualisation are possible, among other things, thanks to the GAIA platform. The modular platform can be adapted to the client’s business and offers – for example – business intelligence reporting.
The platform not only monitors the movement of orders and all logistics processes in real-time, but also scores the behaviour of couriers behind the wheel; all this with the aim of streamlining the last mile for an ever-growing number of partners who want to succeed in omnichannel trading and fulfilling customer promises.
The entire DoDo fleet is powered by CNG, which, together with delivery planning and the ability to respond immediately to operational barriers, reduces the NOx and SOx levels in inner cities, a major headache for mayors of European cities. Currently, DoDo also has maximally utilised electric cars in pilot operation, with couriers able to handle the maximum number of orders within one route and will introduce to the market as soon as feasibility is proven.
DoDo also offers solutions to companies that deal with reverse logistics. In some instances, customers may return goods, the distributor may not sell out of stock, the goods cannot be delivered, or part of the product (especially packaging) must be returned for recycling. After all, according to a survey by the Shopify platform, the return on e-commerce is around 20 per cent, and in the case of brick-and-mortar stores, the average is around 8 to 10 per cent, depending on the type of goods. Building logistics as a one-way-street does not necessarily pay off.
Challenges as an opportunity
New challenges in logistics, from delivery within hours to greater sustainability, represent a great opportunity. Technologies that include, for example, machine learning, or rethink shipping practices, can help retailers meet customer expectations. Companies such as DoDo cover last-minute logistics solutions that free companies from having to invest in the costly development of their own tools or the purchase and maintenance of cars in the fleet. The result is an effective last-mile available to all merchants, regardless of the kind of goods or volume of orders.
Greening inner cities
The interest in the combination of modern technologies and an effective tailored solution of the last mile is growing rapidly, as is the entire e-commerce segment and the requirements of increasingly demanding customers. It is no coincidence that DoDo has grown by more than 8,400 per cent in the last four years, the second-fastest-growing technology company in Central Europe. DoDo currently operates in more than 50 cities across six countries.
However, our ambitions are much greater: Our green DoDo cars will be seen more and more often on the streets of German cities.
For more information please visit www.idodo.de
by Richard Vlcek, CESO, DoDo
The future of supply chains and the balancing act between technology and technique
Anne Robinson, Chief Strategy Officer, Kinaxis
What Stonehenge can tell us about the future of supply chain
Stonehenge may be the world’s most famous prehistoric monument, but its stones are not the only aspect of this site that has endured. The mysteries involved in understanding this part of English history continue to fascinate, but in spite of what we still don't know, when you view everything as a supply chain some aspects stand out and make for a colourful comparison. Four elements of its supply chain still matter today and will in the future. The planning involved was momentous, the sourcing strategy was global and innovative technology was used to make it. But it was humans who carried out the work and the reason why Stonehenge was built. Because past, present, and future, supply chains are human.
Stonehenge is the final “product”, but the amount of planning involved was massive. It had to be designed, materials had to be sourced and hundreds of people were managed to construct it – imagine the production planning and scheduling needed alone. Supply chain planning remains an extensive activity, because while technology shows promise to automate some planning, we are a long way from a fully autonomous supply chain.
Recent archaeological research has shed new light on sourcing for Stonehenge, because novel analysis techniques suggest that the smaller stones were sourced “abroad” – 180 miles away in Wales. Theories abound as to how the stones were moved over those distances before the invention of the wheel. All other European Neolithic sites chose materials within 10 miles, so how and why Stonehenge’s designers sourced from so far away remains a mystery, but clearly, they had good reasons. Reshoring is a hot topic these days, but today’s global supply chains also have a good reason for their complexity, such as rare raw materials, lower labour costs and specialised local expertise. As long as the benefits remain significant and the risks tolerable, global sourcing will continue.
Innovative technologies were employed to build Stonehenge in shaping the stones and engineering joints to erect them, using techniques not seen in any other location. Much innovation today is from artificial intelligence and machine learning (AI/ML), which can augment human intelligence to automate mundane tasks like managing thousands of lead times. Investment in these capabilities is a major driver behind digital transformation, so technology’s role in supply chains shows no signs of abating.
We don’t know why Stonehenge was built, but whatever the purpose, the “customer” concern was if it served that purpose effectively and not how it was built. Similarly, the best measure of a supply chain is customers that are delighted with the product and companies that are profiting from it. And as much as things have changed (thank goodness for the wheel!), the need for good planning, the complexity of sourcing and the incorporation of new technologies are enduring elements. But perhaps the greatest continuity of all, although the one most in question today, is the role of humans.
In spite of the popularity of the vision of a touchless supply chain, the human role in the supply chain will be as enduring as Stonehenge. Some scholars argue Stonehenge was built as a solar calendar. While today’s weather forecasts have far greater precision, progress in AI/ML even allows us to incorporate “signals” like weather into our demand forecasts to increase their accuracy. AI/ML can find these predictive patterns in huge amounts of data but still lack context, collaboration, and conscience. For these attributes, we need humans.
Context. Researchers are uncovering new information about Stonehenge, but there are still big gaps in our understanding, just as there are in today’s supply chains. Neither novel archaeological methods nor AI/ML can derive meaning from context, a capability unique to humans. A Neolithic human would easily be able to explain why Stonehenge was built, just as today’s supply chain planner can turn numbers into stories, illustrating the importance of domain expertise.
Collaboration. Building Stonehenge took hundreds of people, who had to collaborate across all their functional areas to plan, source and make the monument. Even today, maths can yield insights into relationships between data elements but cannot build relationships between people. Human collaboration is likely to grow in importance, as the future will call for even more unique partnerships in a broader supply chain ecosystem, including coopetition.
Conscience. Stonehenge was likely built for some kind of ritual (theories exist for burial, worship, or healing), serving the human need for purpose, meaning, and ethics. This is a third area AI/ML doesn’t understand, because humans separate right from wrong with conscience, which machines lack. When a supply chain has to go on allocation, it is human judgement that must decide the fairest way to distribute the goods. While we humans can steer supply chains into trafficking in conflict minerals, exploiting human labour or despoiling the planet, it is also human conscience that sounds the clarion call for change.
Even as automation is on the increase for the machines that make the products we need, humans still operate machine automation. And AI/ML provides invaluable machine intelligence, but we still need human intelligence to operate the models while bringing context, collaboration and conscience to our supply chains. Because supply chains are human – built by us and for us, from prehistory into the future.
Article written by Polly Mitchell-Guthrie, VP Industry Outreach & Thought Leadership, Kinaxis
Failure to supply will always trump cost-saving targets
The economic environment is changing so quickly it’s hard to keep pace, but you can be sure in our connected world that the number of disruptions to supply chains will rise. Trade relationships are more volatile, and protectionist measures more of a threat around the world from China to Europe. The pandemic has given supply chains the extra focus they deserve, and lessons are being learnt, but challenges continue. For example, as economies around the world open up at different speeds, virus outbreaks at key ports are still affecting suppliers - all the way down the supply chain. China’s third-biggest port, Ningbo-Zhoushan was shut for 10 days last month when one worker contracted the virus and a wave of shutdowns have affected other ports too. Supplies from food to Christmas goods are being threatened. So, what should companies be doing now?
I would say build resilience. There has been too much focus on cost savings in recent years, with just in time supply chains, and reliable sole suppliers making cost efficiencies more straightforward. The most expensive lesson you’ll ever learn is when a vital supply of goods doesn’t turn up, and your business subsequently grinds to a halt because of a previously unknown problem. Failing to supply a customer is a far greater issue for an organisation than not meeting cost savings targets. This has been the experience for many, and that’s why companies are looking to digitalise their supply chains to bolster transparency across their supply bases so any red flags such as transportation difficulties or squeezed supplies can be dealt with swiftly and efficiently.
More sophisticated and targeted technology solutions can meet this need, and give businesses access to more information, greater efficiencies in inventory and operations management, reduced costs, and even more support in product development. Take this one step further into cyber-physical systems and a company’s physical assets can be linked to computational capacity, and machines can communicate with each other, making quicker and better decisions - without human intervention. The stuff of the future, or nightmares maybe, but in terms of competitive advantage, companies are ahead of the game with these systems in place and others will be driven towards transformation in the next few years if they don’t go willingly now. Reacting with more agility when disruptions hit will be a basic expectation from customers, consumers and shareholders.
This is not about the latest fashionable tech trends, though 3D printing, artificial intelligence and robotics do have a certain fascinating quality about them, but about keeping up with transformations in business and supply chains. It’s not a quick fix either. Just-in-time supply chains took decades to finesse, and digital strategies will be constantly evolving along with other strategies such as multiple sourcing to mitigate sole supply problems, or customs expertise to manage the challenges of Brexit.
In this testing environment, it looks like many companies are heeding the call for more digitalisation. We found that 95 per cent of those companies surveyed last year, had adopted at least one digital technology in recent years such as cloud computing or managing their vast stores of data more efficiently; even if 40 per cent of survey respondents felt the costs of digital investment were prohibitive for now.
But at what cost, if the investment is not forthcoming? Hampered supply chains, shortages, increased risk and ensuing chaos is sure to follow and delayed payment resulting in the loss of small businesses from our economy. If we are to react with speed to unforeseen disruptions and avoid modern slavery or another horsemeat scandal, we must change how supply chains work right now and implement digital solutions to power Industry 4.0. Start with business strategy, with an eye on true value and not just cost and a more in-depth analysis of supply chains is a good start, along with training staff to fill any gaps in digital capability.
by Malcolm Harrison,CEO, CIPS Group
From PPE shortages to Covid-19 vaccine distribution, the supply chain has emerged as a determinant of health
Toilet paper. Hand sanitiser. Coffee. Over the past year, many people have probably spent more time thinking about their abilities to gather basic supplies than in other recent times.
Supply chains are the networks involved in getting products to their final buyer or user, such as the toilet paper many of us were desperately tracking down in early 2020. As with most things, supply chains are actually quite complex. This is especially so in the context of a crisis, such as the Covid-19 pandemic, where there is a need to rapidly and equitably distribute supplies at a massive scale.
The Covid-19 pandemic has very clearly revealed the reliance that Canada’s public health and healthcare systems have on global supply chains. When the healthcare system went into crisis mode, it caused simultaneous supply and demand disruptions in global supply chains.
The most immediate and early needs were for critical medical products, such as respirators and personal protective equipment. These products were in short supply globally, which left healthcare workers and patients vulnerable.
We’re now at a different stage of the pandemic, and many demands on the global supply chain are focused on vaccination supply and distribution. We have heard about how rich countries have monopolized vaccine supply chains, causing disproportionately more deaths and economic turmoil in lower-income countries.
Additionally, vaccine supply chains require a “cold chain” infrastructure to deliver vaccines to the population. These have strained public health budgets and created additional barriers in many countries and regions around the world.
Supply chains influence health
It is widely recognized that where we were born, how we live and where we work are among the most critical factors that shape our health. These factors are known as the social determinants of health. Throughout the Covid-19 pandemic, the supply chain has emerged as a very important determinant of health.
We make this assertion as a team of health supply chain and health services researchers who have been deeply involved in studying several relevant aspects of the pandemic over the last year. Public health and the provision of health care depends on global health supply chains.
The Covid-19 global pandemic has exposed the interdependence of our socio-economic systems. Supply chains are often complex networks with many members using their know-how in production, processing, transportation, retailing and waste management through the product life cycle. There is no obvious centralized decision-maker or mastermind commanding and controlling the end-to-end supply chain. Rather, several distributed participants co-operate and compete to deliver value to end customers or patients.
China dominates the world’s production of personal protective equipment (PPE). At the end of 2019, the epicentre of the Covid-19 pandemic happened to be located in the global PPE production centre. On Jan. 23, 2020, the city of Wuhan was locked down by the Chinese authorities, shutting off all industrial activities and the outflow of PPEs.
Supply chains are not only a determinant of public health, but also affect all other factors responsible for the health of individuals and communities. Despite their critical importance, health supply chains still exist as an addendum in health public policies and investments. In many health care organizations, a health supply chain is reduced to a purchasing or sourcing unit.
Resiliency of supply chains
Thereafter, the rest of the world realized the gravity of the situation and the extraordinary impacts of this pandemic on health care systems around the world.
Many factors affected the health supply chain’s ability to continually fulfil the range of changing and sometimes conflicting requirements for PPE, vaccines and other medical supplies. The increased global competition for the same supplies increased pressure on supply networks, especially in production capacity and global distribution.
Internally, health supply chains continue to be fragmented and barely coordinated among different authorities and health care units. This is far from ideal.
Health supply chain management includes managing operations and logistics for supply to meet effectively and efficiently the demand. It drives coordination and collaboration with partners, suppliers, third-party service providers, frontline workers and those who need to access health care. The fragmentation of health supply chain management is the reason that most health supply chains continue to struggle during the pandemic.
Public authorities and stakeholder groups should recognize the critical importance of building robust and resilient health supply chains that connect those involved in the delivery and management of health care globally, nationally and regionally.
Supply chains and health
The overarching goal of designing and operating a health supply chain is to contribute to public health and social well-being while reducing the impacts on the environment. Declaring the health supply chain as a major determinant of health calls for management strategy beyond the conventional race for efficiency at all costs.
Most importantly, it calls for the recognition that supply chains are an integral component of socio-economic resilience and, conversely, vulnerability. For decades, we have justified the under-investment in health care supply chains in the name of budget cuts and financial efficiency. However, while this may have provided short-term benefits, it is not sustainable for the long term.
Adel Guitouni, Associate Professor, Gustavson School of Business, University of Victoria; Jie Zhang, Associate professor, Service Management, University of Victoria; Nadine Schuurman, Professor, Geographic Information Science, Simon Fraser University, and Valorie A. Crooks, Professor, Department of Geography and Canada Research Chair in Health Service Geographies, Simon Fraser University
Nando’s chicken shortage: how the pandemic has made supply and demand tougher to predict
Peri-peri chicken fans were disappointed and frustrated when Nando’s announced the temporary closure of nearly 50 restaurants. A chicken shortage has been blamed, and while reactions to the closures were satirised on social media, the problem is a serious challenge for the company.
Hungry customers will no doubt be asking whether the supply could have been better managed. Similar questions were more widely raised at the beginning of the pandemic when supermarkets ran out of toilet rolls and flour.
Some blamed poor planning by retailers, but spikes of demand like this had not been seen before. And the pandemic continues to disrupt established supply chains.
A recent shortage of microchips for example is partly due to increased demand for appliances such as phones and games consoles, and a resurgence of coronavirus cases in Asia (where most microchips are made). The situation is so serious that Toyota is being forced to temporarily cut vehicle production by 40 per cent.
Pandemics aside, patterns in demand for goods generally show fluctuations from day to day and from week to week. Some of these are explainable and predictable, for example, because of known periods of high demand, like Bank Holiday weekends.
Other changes defy explanation or prediction and are described in statistical forecasting models as “noise”. And although the nature of the next “noise disturbance” is not known, its impact can be measured and taken into account when setting stock levels. But even this careful approach breaks down when there is a sudden spike in demand, unlike anything that has previously occurred.
The current shortages of chicken at Nando’s are due to disruptions in supply, rather than demand, which could not necessarily have been expected.
From a forecasting perspective, sudden changes in supply are similar to sudden changes in demand. Inventory control systems usually base their stock calculations on a regular lead time (the length of time from placing an order to when the product arrives and is ready for the customer).
If there are occasional minor variations in the lead time, the calculations can be adjusted accordingly. But again, such an approach breaks down if there is a sudden major problem, unlike any others that have gone before.
In this situation, we should have some sympathy for Nando’s. It would be incredibly wasteful of them to carry large stocks of raw chicken in anticipation of possible major disruption.
If they were to do this in normal times, a significant proportion of meat would be unused and go off. Clearly, this is not a viable solution.
Instead, the problem of major disruptions calls for a different approach to forecasting, known as scenario planning. The problem at Nando’s seems to have been caused by labour shortages at their suppliers. And while the timing of labour shortages could not have been anticipated, their occurrence – at some point – could have been foreseen.
In a scenario planning exercise, managers imagine major causes of disruption that could happen in the future. This sort of exercise will never be perfect, and some events will remain uncovered, but this should not deter progress being made by thinking through potential supply chain problems and the company’s response.
For example, if an organisation is reliant on a single supplier for a product, then they may consider introducing a second supplier, who will also receive regular orders and can flex to respond to higher-order volumes if there are problems with the first supplier.
This can also help to address responses to unexpected spikes in demand. And if a problem affects all suppliers, then plans can be put in place to order larger quantities of substitute products.
As a general rule though, the demand forecasting methods embedded in supply chain software should work well in normal times and can be used with confidence as the basis for stock replenishment planning. To anticipate extraordinary times, forecasting needs to shift from a system-based to a human-based activity.
Managers should attempt to foresee the major causes of shocks to their supply chains and put in place policies that will mitigate their effect. This will be beneficial not only to restaurant chains in developed economies but also to humanitarian supply chains in which food, clothing and medicines are desperately needed.