This post, written by Robert J. Bowman, originally appeared in the SupplyChainBrain THINK TANK blog and is reposted with permission from SupplyChainBrain.
It’s easy for a top executive who’s concerned about corporate image to profess a solid commitment to sustainability. When it comes to gauging actual progress toward that goal, however, the reality is one of mixed messages.
A study by Accenture, released in the spring of 2011, highlights the dilemma. The firm reached out to 247 C-suite executives in the U.S., U.K. and China. Ninety-three percent said they had sustainability initiatives in place. Seventy-two percent declared that the benefits from those efforts – in the form of enhanced corporate reputation and trust, lower cost and improved brands – had exceeded expectations. And 68 percent viewed sustainability as an integral part of their business.
Seems like a pretty encouraging picture, but being a glass-half-empty kind of guy, I need to point out that a solid one-third of respondents to the Accenture survey saw sustainability as peripheral to their operations. Slightly more, 34 percent, considered it more of a cost than an investment, and 28 percent believed their companies were already spending too much in that area.
In fact, cost continues to be the biggest barrier to achieving corporate sustainability, as specified by 41 percent of the respondents. Other obstacles cited included an inability to measure the results of sustainability initiatives (31 percent), lack of government incentives (30 percent), and a belief that one company can’t make much of a difference in the effort to combat global warming (29 percent).
Turn now to a more positive study, this one by BSR, a global network of more than 250 businesses dedicated to implementing corporate policies that promote sustainability, accountability and human rights. Conducted in tandem with the research consultancy GlobeScan, the survey polled 498 executives from more two-thirds of BSR’s member companies. Eighty-four percent said they were optimistic that global businesses would embrace sustainability and corporate social responsibility as part of their core strategies within the next five years.
Commented BSR president and chief executive officer Aron Cramer: “Recession or not, it seems very clear that companies are maintaining if not extending their commitments to sustainability.” Positive signs include the rise of the chief sustainability officer and increasing attention being paid to the topic by corporate boards. Speaking at a press conference at BSR’s annual conference in San Francisco, Cramer said companies are realizing that sustainability has intrinsic value. They are coming to see it as “one way to future-proof their strategies.”
I’ll buy that to an extent, while noting the self-selecting nature of a group of companies already devoted to achieving sustainability by way of membership in the same organization that’s polling their interest in that very subject. And BSR’s portrait wasn’t all roses. It identified a serious shortfall in efforts to integrate sustainability into core business functions.
More than two-thirds of respondents said their corporate communications and public affairs departments were the most engaged functions in sustainability and CSR. (No surprise there – what else are corporate communications and public affairs for? Can you say “greenwashing”?) But the numbers slide precipitously when it comes to areas such as marketing (42 percent), research and development (41 percent), human resources (37 percent) and finance (18 percent). In fact, the biggest surprise to the 2011 study’s authors was “the level of engagement of sustainability across the enterprise and how little connectivity there is,” said GlobeScan senior vice president Chris Coulter. “The disconnection is really a challenge.”
Former Vice President Al Gore, now the world’s most high-profile cheerleader in the fight to reverse global warming, was the BSR conference’s keynote speaker. He said efforts by CEOs to integrate sustainability into their operations have become “a global movement.” At the same time, he acknowledged a persistent tendency by companies to focus on the short term. Investors are the chief culprits, pressuring businesses to show ever-rising profits on a quarter-to-quarter basis. Such a mentality, Gore said, “is a terribly debilitating force in the market.” Demands from the investment community supply a “constant headwind” for executives struggling to look beyond the next reporting period.
So we’re faced with plenty of good intentions, some progress and an institutional aversion to the kind of long-term thinking that is crucial to the success of any corporate sustainability effort. BSR seems to feel that this attitude is changing rather quickly. And Gore’s message was positive on balance, even though he continues to deride the kind of “magical thinking” that denies the reality of global warming.
It would appear that true progress toward sustainable supply chains won’t be made until all businesses come to see the issue not solely as one of corporate beneficence but of self-interest. Considering the positive impact of efforts such as economizing on fuel, cutting back on packaging, shortening supply lines and making better use of finite resources, that should be an easy case to make.
On January 1st, a new law took effect in California. The California Transparency in Supply Chains Act of 2010 requires any retailer or manufacturer doing business in California and with greater than $100 Million in annual revenue to train employees and publish their approach to eliminating forced labor and human trafficking in their supply chains. The effective date of this legislation comes at a time of increased interest in the social implications of how products are made and distributed. And the interest extends well beyond the industry; I have begun to see people raise this topic on social networking sites like Facebook and Twitter.
The increased focus on socially responsible supply chains is clearly a good thing. Any improvements made in this area – whether as a result of legislation, corporate action, or consumer attention – are unarguably positive. That said, I believe that many of the people outside the supply chain industry who have recently begun to take an interest in social responsibility in the supply chain would be pleased to learn what companies are doing in this area.
In order to comply with the new California law, companies have published their approach to preventing forced labor in their supply chains on their websites. (Here are examples from HP, IBM.) But for most companies (certainly including HP and IBM), a commitment to a socially responsible supply chain is nothing new. For many companies (including ModusLink and many of our clients), joining the Electronic Industry Citizenship Coalition (EICC) was one way to ensure an industry-standard approach to social responsibility. A large number of companies have adopted and published codes of conduct and comprehensive Corporate Social Responsibility (CSR) Reports (view ModusLink’s CSR report) that go well beyond the standards of the EICC. In other words, many of the world’s leading companies are leading by example.
As part of the Professional Services team at ModusLink, I am in the privileged position of collaborating with our clients and analysing the design and execution of their supply chains. This affords me access to detailed data on some of the most complex and robust supply chains in the world. I get visibility into key metrics, such as inventory turns, cost of goods sold, time to market, capacity constraints and general bottle necks and challenges in the supply chain.
While talking with clients and discussing their own supply chain metrics, I am often asked how their supply chains compare to those of our other clients similar in size, scope or industry. It can be very difficult for supply chain leaders within an organization to have insight into the supply chain metrics of other organizations, as they do not necessarily have access to detailed supply chain data either outside their business or even in the industry. The most comprehensive deep dive into the supply chain data and processes of the world’s best brands is found in the annual Gartner Supply Chain Top 25.
But one tool supply chain practitioners can use for benchmarking and business process mapping of their own organization is the SCOR® (Supply Chain Operations Reference) model. The SCOR model was conceived by the Supply Chain Council to describe business activities associated with all phases of satisfying customer demand. It integrates business process engineering, benchmarking and process measurement into a cross-functional framework.
The model encompasses the key supply chain elements of:
- Plan – Processes involved in planning
- Source – Processes involved in procuring goods and services to meet planned demand
- Make – Processes to transform product to a finished state (make to order, make to stock etc.) to meet demand
- Deliver – Processes including warehousing and distribution to meet demand
- Return – Return processes
The processes also translate into detailed metrics for the supply chain, including financial and performance metrics. These metrics can be utilized to benchmark your company’s performance against a wide variety of other companies in a range of industries.
So if you are being challenged on the effectiveness of your supply chain or are doing a review of operations, the SCOR model is a good start on this worthwhile journey.
During the past year our global blog team has shared insight on everything from the need for change in China manufacturing to supplier collaboration to Harry Potter’s perspective on supply chain. In this first post of the New Year, we would like to share with you our top five most popular posts from 2011.
- Incoterms 2010: Why You Should Care
Author: David Stonich
Originally Posted: February 28, 2011
- Increasing Complexity of Managing a Global e-Commerce Function
Author: Robert Koornneef
Originally Posted: April 8, 2011
- Your Supply Chain Challenges May Not Be as Unique as You Think
Author: Jeremiah Benge
Originally Posted: March 2, 2011
- e-Business in China: A Growing Market with Huge Opportunities
Author: Eoghan Dillon
Originally Posted: February 24, 2011
- Global e-Commerce in the Cloud
Author: Robert Koornneef
Originally Posted: September 29, 2011
What was your favorite post from last year? Please share in the comments section below.
A friend of mine recently shared a customer service horror story with me – and 500 of her other friends – via Facebook. She purchased a DVD player from a major retailer online and eagerly awaited the arrival of her new purchase. Four days after the anticipated delivery day came and went she called customer service to find out what happened.
(Names have been changed to protect the guilty.)
After spending 45 minutes on hold and getting frustrated, Casey Customer decided to hang up and call back later. After tending to the needs of her very active two-year old daughter, Casey tried calling customer service again and got the following pre-recorded message, “We are experiencing higher call volumes than normal and wait times will be longer than expected.” While this was disappointing, she felt like waiting was her only option to ensure that she gets the gift she ordered in time for the holidays.
But as you can see, this wasn’t the case …
After waiting what felt like forever she finally got a customer service rep on the phone. While the rep tried to be helpful, he lacked visibility into shipping information and could not help her get a new item shipped out since the original was showing as having been shipped and he was unable to track the package. Now, not only does Casey Customer not have the merchandise she paid for, but she also spent the better part of a day trying to get it straightened out without success.
Later that day, the saga comes full circle with Casey Customer finally getting assistance, ironically, after posting a message on the retailer’s Facebook page. Her attempts to get anywhere with the contact center were futile because the representatives she spoke with were not empowered to help her get a new item sent out or truly identify what happened to the original.
So, what have we learned here? First, participation in social media and the ability to resolve customer issues using those channels is critically important. Also, if the retailer had a good contact center then the disgruntled customer would not have had to post her tale of woe on Facebook for the whole world to see!
The moral of the story?
Empower your contact center.
Contact center support can make or break the customer experience, especially during the busy holiday season. Your contact center should be able to emulate what the consumer is doing online in order to solve pain points and challenges, fast. Train agents so they know what products are being sold online, as well as details regarding promotions, requirements to purchase, shipping and return instructions. Empower agents to resolve issues on the first call and to upsell products.
If your current customer contact center solution is leading to unsatisfied customers fleeing to your competition, it may be time to make a change. When I first started out in marketing I always heard the phrase “one unhappy customer will tell ten friends.” Nowadays, the voice of the customer reaches a lot further! Make sure you have the right systems in place so that your customers are sharing a story of joy instead of a tale of woe.
As a result of my previous blog on cloud computing, I have had conversations with many IT executives. Cloud computing is a trending topic in most organizations. During both face-to-face and online conversations, I noticed that the “need” for cloud services usually is not part of a structured plan or part of an approved IT roadmap/yearly plan, but is treated as a separate project or path. During the discussions it became clear to me that since CIOs have been primarily focused on stripping out costs at an operational level during the last few years, making business-aligned IT plans has become a lower priority.
When I asked how business value is being measured with the introduction of new a cloud solution, I heard a lot of silence. During follow up meetings it became clear that there is still a need for a model that will link and measure innovation, client satisfaction, internal processes and financial results. This reminded me that a methodology like a balanced score card (BSC) could be revitalized again.
BSC
The BSC was introduced by Kaplan and Norton in 1992 at an enterprise level. The basic principle is that the evaluation of a company should not be restricted to financials only. The additional areas of innovation, internal processes and client satisfaction should ensure future financial results, while driving a company toward its future goals. Therefore, each of the four areas should be evaluated so that managers can get a more balanced view of the organization. For each of the perspectives they proposed a layered model: mission, objectives and measurements.
An IT-strategic BSC links with the business by contributing to business goals. The IT-strategic BSC can be supported by a linked cascade of scorecards (e.g. architecture, development, operations management). This set of BSCs, including measurements, will help to determine how business value is being created.
e-Commerce IT BSC
When the BSC was launched, e-commerce was just at its commercial beginning. What has changed from the ”old days” is that the IT function/role today is more a strategic partner than a service provider. The following four areas can be part of an e-commerce BSC framework: customer satisfaction, innovation, operations and financial control. Below is an example of how we could map e-commerce actions into a BSC. As actions may occur not only for technology, it is beneficial to split actions into the headers: technology, organization and processes.
If you have created a BSC and look at the defined actions, it may appear that some planned actions may benefit in several areas.
Example of an e-Commerce IT BSC
Conclusion
As many organizations are in some kind of transformation mode, whether due to newly available technology or changing business needs, it may be a good idea to consider structuring your activities according to a BSC. This will ensure that the defined activities will really contribute to the creation of business value.
What kind of BSC card or equivalent are you using?
As 2011 draws to a close, I think it’s worth noting this was a banner year for supply chain disruptions. Those disruptions covered the gamut from political upheaval to natural disasters and all had far reaching implications for supply chain professionals. During the last 11 months, the global market has been impacted by the Arab Spring, the earthquake and tsunami in Japan as well as the flooding in Thailand. Although the latter situation is still developing, we’re already feeling some of the impact – Honda, which has facilities in the flooded area, has been forced to roll back the availability of at least one of its new models.
While your operations or suppliers might not be in these regions, that doesn’t mean you won’t remain unscathed. Here’s why: disruptions on this scale will absolutely effect the world’s energy production and cost. And our modern supply chains are inextricably tethered to oil, gas, electricity and natural energy sources like solar and wind. Let’s take a minute and break down how we consume energy.
- Planes, trains and automobiles – Logistics account for a significant amount of energy consumptions worldwide. And that consumption comes with a price tag. As Dan Gilmore (@scdigest) states in an article on the topic, “… transportation is a huge element of supply chain costs, representing 6 percent or so of US GDP and even higher levels in many countries.” The political unrest in the Middle East has strained oil production in countries like Libya. In a March Special Report by Dun & Bradstreet, “The Global Fallout from the Middle East Crisis,” the disturbances were said to likely affect hydrocarbon prices and raise business costs. Additionally, natural gas supply disruptions were predicted that would significantly raise counterparty risk and have ramifications on supply chains in Europe and around the world.
- Manufacturing – The ability to sustain manufacturing operations is based on energy availability. We saw this first hand last spring in Japan. In September, CNN reported the Japanese government mandated big industrial energy consumers cut down their power usage by 15 percent to avoid blackouts. While the country’s manufacturing ability is improving, this isn’t a long-term solution. And if you rely on components from Japan, chances are your business has been impacted.
- Storage – Once made, products spend a certain amount of time in storage. Keeping those products cool and secure adds to the overall energy costs. While all products are likely to require high-tech security systems, storing temperature-sensitive products such as produce, pharmaceuticals and technology can add significant energy costs. Ensuring the warehouses had sufficient electricity in Japan this year was yet another issue raised after the tragic events of last March.
The popular saying, “When man plans, God laughs,” has special meaning for supply chain professionals. While there is no way to anticipate events that will impact energy availability and cost, there are steps you can take to mitigate those risks. Here are five tips for your consideration as you plan for 2012.
- Ensure you have visibility into your suppliers’ sub-tier suppliers so you can quickly recalibrate your supply chain if energy availability will comprise your ability to meet production quotas. Also, diversify your supplier base and develop relationships with suppliers in different regions around the world to ensure continuity if one region is impacted by a natural disaster.
- If your logistics costs are particularly high due to your industry segment or competitive pressures, consider hedging the price of oil.
- Adopt postponement strategies that allow you to finish products closer to the end consumer.
- Investigate more sustainable sources of energy. Place your storage facilities in areas that can tap into natural energy such as wind or solar.
- Redesign your packaging for further pallet optimization. This has additional benefits such as meeting retailer requirements and consumer demand for less packaging.
BP puts out an annual review of energy production and consumptions every June that is a veritable gold mine of information on the state of global energy. In the most recent report, BP estimates that global energy consumption rose 5.6 percent in 2010, the highest rate since 1973. It will be interesting to see how 2011 will compare given recent events.
Today I had the privilege of hosting the eighth webinar in our Value Chain Exchange series: Social and Environmental Leadership across the Supply Chain. The event featured an excellent keynote presentation from Bob Murphy, vice president, global hardware execution for IBM and culminated with a panel discussion including Bob and Louis Ferretti, who is responsible for product environmental compliance and supply chain social responsibility for IBM.
When we started this series two years ago, we were responding to a clearly stated desire from our clients for an avenue to share best practices and learn from real supply practitioners on how they are dealing with real supply chain issues.
The keynote from Bob on today’s webinar certainly met that expectation head on, with a wonderful overview of how the IBM Integrated Supply Chain team has taken corporate social responsibility and embedded it as a business imperative within the supply chain.
Many companies – including our own – are on a journey towards a more sustainable supply chain. Making the transition from awareness, to initial projects to a comprehensive corporate social responsibility commitment requires clarity on objectives and top-level executive support.
IBM is recognized as a leader in this space and today’s webinar provided great insight into its approach, the challenges faced and system of management for this area of its business.
Of particular interest was the linkage between the IBM approach to financial benefits, and senior leadership goals and the extension of the program across the supply base. The requirements for supplier compliance extend the influence of the program and in turn extend the benefits to IBM as better supplier performance ultimately results in a better result for IBM.
I would like to thank Bob and Louis for joining me on the webinar and invite additional questions and comments on the topic in the comments section below.
A recording of this webinar will be available in the resource center of www.moduslink.com shortly.
I can hear the cries of ‘bah humbug!’ as I type. It is not popular to disrespect the guy in red and it can be particularly risky this time of year as he is rumoured to maintain a ‘list’ but somebody needs to speak out.
Forbes published a seasonal review of the Santa supply chain yesterday which asked the question - Santa’s Supply Chain: Best in the world? In the review, Richard Howells does a great job discussing the merits of the Santa operation, but ultimately lets the reader judge on whether we should hear a jolly ”Ho! Ho! Ho!” at the acceptance awards for next year’s Gartner Supply Chain Top 25.
While we at Value Unchained have always tried to be balanced in our reviews of the North Pole based supply chain things do not look good for future award lists as we outline below.
Financial model (50% of the award criteria) – Despite having more customers than Facebook, analysts struggle to understand how Santa’s enterprise can convert this customer base into a viable commercial model. With no visible revenue, Santa Inc. fails many of the key financial metrics required for Gartner’s Top 25 supply chain companies. (Could it be that the Gartner metric is over weighted towards financial criteria?)
- Below the revenue threshold for qualification for the Top 25
- Negative three-year weighted return on assets
- Flat three-year weighted revenue growth
- Insufficient public data to comment on inventory turns – although a model of building inventory throughout the year for one big shipment at the end is unlikely to meet world class standards.
Peer and analyst opinion (remaining 50% of the criteria) - This would seem to hold higher potential for the sleigh-bound supply chain enterprise. After all, who could argue with the impressive global coverage, on time delivery metrics, the management of SKU proliferation and unquestionable customer satisfaction (as is evidenced by the queues of customers waiting patiently in line to place orders and the millions of hand written customer testimonials that are sent every year to the North Pole HQ)?
Even here, however, there are questions being asked by certain sections of the media that may have an impact on the opinion scores:
- Supply chain secrecy – Little is known about the actual supply chain structure, but it is reputed to include hundreds of thousands of elf workers in the North Pole campus, millions of tonnes of packaging consumed and the use of animals in the transportation process. Although there have been no reports of incidents of concern, there are calls for increased disclosure into supply chain practices at the firm.
- Restrictive returns practices – Consumer advocates are demanding a more liberal returns policy that would include right of return within a reasonable timeframe. Unfortunately this appears to be a one-way supply chain process.
- Questionable substitution policies – The politically correct term may be ‘demand shaping’ but there is increasing evidence that in times of short supply Santa has been known to invoke his right to substitute (generally the hot items of the season) that appears to be implied rather than expressly stated at the time of order.
- Restrictive shipping policy - He is clearly a champion and pioneer of the direct model but how sustainable is a ‘one channel, one delivery day’ model in an increasingly multichannel, customer-centric business environment.
Ultimately there are trade-offs in every supply chain and every business model. The Claus management has developed a dominant position in a highly seasonal market and has sustained that position for many generations.
Surely that deserves some peer respect? Maybe, but it is not likely to happen.
Perhaps the most damaging factor to the ‘Clause Cause’ is the make-up of the panel for the peer opinion vote. Reliable sources have confided in us that none of Gartner’s analysts or the two hundred industry professionals selected for the peer vote are under the age of 15.
We have examined the merits of the Top 25 methodology in the past but I will let the conspiracy theorists take it from here.
Happy holidays.
Twenty years ago getting great holiday shopping deals usually included a trip to the mall on the Friday after Thanksgiving. With the Internet offering a plethora of options for online shopping, you now need to go no further than your laptop to snag big discounts and “doorbuster” deals while checking items off your list.
Cyber Monday, as the Monday following Thanksgiving has now been coined, provides online retailers a huge opportunity to maximize the holiday shopping frenzy. According to CNN Money, online retailers expected a robust Cyber Monday with some analysts predicting a record $1.2 billion in sales.
If you have ever shopped online before or signed up for emails from your favorite retailer, you undoubtedly received lots of offers in your inbox this morning with enticing subject lines such as “50% off Everything” and “Free Shipping.” In addition to traditional email channels, retailers are also using search and social media to attract online shoppers. The savviest retailers are also making it easy for shoppers using their mobile devices to complete transactions (just think of all those corporate-blocked websites workers can access from their smart phone!).
With the official kick off of the holiday shopping season behind us and shoppers going online en masse, here are some tips for how you can ensure your customers have a seamless brand experience and get the products they want on-time for the holidays:
- Make it easy for customers to find what they want. Keep the number of clicks needed to locate items and place them in the shopping cart as low as possible. Use web analytics tools to determine where customers are dropping off your site. You can have the best products and the lowest prices and still not make the sale if customers cannot find the product page easily on your site.
- Offer flexible payment methods and fraud protection. Is your site secure? If not, this could be a reason why shoppers abandon their carts. Security is a major concern among consumers who shop online, and many opt to purchase from sites that offer flexible payment options and that are secured by authentication services, like VeriSign. Partner with a payment gateway service provider that can help protect your site against data breaches and that supports multiple currencies and payment options across the globe, from PayPal in the U.S. to Postepay in Italy. Your site should include advanced fraud screening, real-time authorization and black lists of fraudulent transactions, and all transaction data should be stored in an environment that adheres to PCI DDS data security standards.
- Use loyalty programs and promotions to entice shoppers. The Internet makes it easy for shoppers to compare prices and products across multiple retailers. Make sure you have a way to stand out from the crowd. Whether its frequent buyer rewards, prepaid gift cards, rebates or even free shipping (consider free expedited shipping to really stand out), make sure you are differentiated from the competition.
- Provide a consistent multichannel shopping experience. Can customers buy online and pick up in-store? Will they see the same products, pricing and branding on your mobile site, your regular website and in your brick and mortar store? In order to provide a consistent multichannel shopping experience, you need a robust e-commerce platform that can integrate multiple devices and consumer touch points. Your platform should have the ability to recognize what type of device a consumer is using in order to present the content in a usable manner. It should also tie in with your physical retail stores to ensure customers have a positive shopping experience.
- Provide visibility to inventory levels and estimated shipping times. Remember that year the sweater you bought for aunt Mabel arrived on December 27th? Enough said.
I would love to hear your tips on how to prep your e-store for the holiday season. Please leave your tips in the comments section below. Also, what did you buy today? Don’t worry. I won’t tell your boss.