Economy
Why collaboration improves supply chain sustainability and the ways you can do it
Collaboration could allow organisations to tackle problems far greater than themselves, and work together for more sustainable and transparent supply chains, writes Martin Chilcott, founder and CEO of 2degrees.
With the impacts of climate change, a global population of 9 billion and a dramatic expansion of the middle-classes, our ability to consume the earth’s natural resources is now significantly greater than the planet’s ability to rejuvenate and restore them.
Industrial globalisation and communication technology have given businesses the tools to change the rules, in particular, encouraging companies to outsource production and source materials from the farthest corners of the planet.
As a result, supply chains are becoming more stretched and less transparent, making them vulnerable and fragmented. With this often come increased risks around the environment, security of supply issues, corporate reputation and product integrity.
Recently Jeffrey Seabright, Coca-Cola’s former vice president for environment and water resources, cited, “Increased droughts, more unpredictable variability, 100-year floods every two years,” as problems that were disrupting the company’s supply of sugar cane and sugar beets, as well as citrus for its fruit juices, and said, “When we look at our most essential ingredients, we see those events as threats.”
Also earlier this year, Asda, the Walmart-owned supermarket, following a yearlong mapping exercise of its fresh produce supply chain, bravely announced that 95% of its fresh produce was at potential risk from climate change.
How do we address these global problems? Problems that are bigger than any one company or government. The answers to these threats, I believe, lie in collaboration. It can drive innovation, reduce risk, increase transparency and traceability, create direct operational cost savings, strengthen brand reputation and critically, for global companies like Asda and Coca-Cola, secure supply.
The case for collaboration
Evidence is overwhelming that collaboration is more than just a ‘feel-good’ concept when creating sustainable supply chains: it is now becoming a new commercial reality. Technology provides the ways and means to make it efficient for companies to work together to implement practical initiatives that can deliver measurable returns to their bottom line. For evidence on the power of collaboration, I’d invite you to view 2degrees’ White Paper Joining Forces: The Case for Collaboration. Some examples include:
- $1.3 billion estimated p/a potential savings in the food supply chain of one leading supermarket as a result of its supplier collaboration network
- 12% improved profit margin for manufacturing companies involved in collaborative initiatives
- €4.6 billion estimated p/a savings for the European manufacturing sector through supplier collaborations in areas such as energy, transport and waste
As collaboration takes root within supply chains, we see that instead of traditional buyer-supplier relationships focused purely on optimising financial transaction, a ‘new spirit of partnership’ is developing often based on mutual financial and environmental goals. As Ric Schneider, senior vice president of global procurement for Starbucks, recently said, the role of the Chief Procurement Officer could now more accurately be described as the chief relationship officer.
A great example of this in practice is the 2degrees managed Tesco Buying Club, which started with four participating supplier sites and focused on LED Lighting. Through advice and combining ‘demand’ for LED lights into a single contract, the Buying Club secured a reduction in the cost of installing the technology of around 25% and lighting costs reduced by close to 80%.
The Buying Club is now being fully rolled-out, and Tesco expects hundreds of suppliers to participate as it focuses on a range of technologies and solutions. Here the combination of financial and environmental savings proved compelling.
How to collaborate
The reality is that collaboration isn’t a straightforward case of ‘just talking more’ and normalising best practice across a supply chain is certainly not easy. These are big problems that often require large-scale sharing of experience, know-how and insight, often between competitors.
It requires, in our experience, an online platform, facilitation and processes that enable what we at 2degrees call ‘fully-linked’ collaboration (this is where anybody with a problem or challenge can quickly and easily find someone(s) with relevant experience, or even the very answer that they are seeking).
If we take the example of Asda, in response to the risks posed to its fresh produce from climate change, it created a framework (the Asda Sustain & Save Exchange) that has since been applied across the company’s trading operations, building a unique industry leading initiative to work more closely with their producers to adapt and make a more sustainable supply chain.
To help interested parties on their first steps to ‘fully-linked’ collaboration we’ve produced eight non-technology lessons we have learnt from our programs that are critical to making fully-linked collaboration work within a supply chain.
The future for fully-linked collaboration is exciting and dynamic. I believe that as technology empowers suppliers and their customers alike, it will enable them to overcome the constraints of traditional supply-chains, with their insufficient ‘one up, one down’ communication, and we’ll see the creation of competitive value webs.
For the first time, this will offer the ability for operational management deep within organisations to find peers anywhere on the planet, to share knowledge and solve problems together. Capability so powerful, it will unlock a long tail of efficiency gains and innovation to help reduce risk and exposure for brands and drastically improve sustainable operations.
Martin Chilcott is CEO and founder of 2degrees, the world’s leading community for sustainable business professionals.
Photo: Akarsh Simha via Flickr
Further reading:
Apple bans hazardous chemicals from supply chain after investor pressure
Samsung to continue using ‘child labour’ supplier
Food and drink sector cut water use by 16% in 2013