Lean and Green Supply Chain Initiatives Can Be Complimentary
A guest post by Bob Ferrari
I’m very pleased to have the opportunity to be a guest blogger and contribute commentary to the Value Unchained community of followers.
I would like to reflect on some observations related to sustainability strategy deployment across the supply chain, namely important considerations in alignment of so-termed green supply chain strategies with contributing benefit to overall business strategies.
Previous commentaries on Value Unchained noted a recent University of Tennessee research study, “Green, Lean and Global Supply Chain Strategies.” In the posting, Beyond the Research Part Three: Green and Lean Global Supply Chain Strategies, the researchers at the University of Tennessee made a rather important observation. They noted that supply chain professionals understand what is meant in having a ‘lean supply chain’, but were uncertain as to what was implied in having a ‘green supply chain’. The researchers further observed that they were encouraged to hear that there was fundamental agreement with the concept that ‘lean equals green’ but green supply chain strategies are relatively new concepts that preclude the true synergy of both initiatives.
This observation did not surprise me. The notion of having a green supply chain is a term that many marketing professionals enjoy utilizing. The concept of lean initiatives has been around for quite some time, and is well understood among many functional teams. However, these observations, as to lack of alignment among lean and green, indicate a need for the education and cross-functional alignment that we often encounter in many supply chain wide initiatives, particularly when external marketing and internal operational goals differ. Instilling a “language of green”, as noted by the University of Tennessee researchers is key, and examples can be garnered from other firms.
Once the context of green and sustainable supply chain are linked to increased efficiency and reduction of waste, it opens a broader framework of potential strategies. That could include a range of activities from more sustainable and efficient packaging, increased leverage of supply chain postponement strategies, or broadly incorporating sustainability goals in overall supply chain network alignment and deployment. It becomes a matter of scoping need to desired business result.
Let us reflect on two examples where alignment is evident. Procter and Gamble has had a concerted sustainability strategy since 2002, when the company first established an external Annual Sustainability Report published to all audiences. A review of the strategy and goals of this P&G initiative outlines five complimentary strategies that align the need for development of ‘sustainable innovation products’ with complementary needs for P&G to improve the environmental profile of its own operations. The needs to track and improve overall energy usage, GHG emissions, water usage and waste disposal not only provide opportunities for where supply chain efforts need to align, but also a framework where management performance metrics can also be aligned. Another clear example has been P&G efforts in improving or simplifying product packaging, and requiring transportation carriers to report on GHG emission footprints. The notion of aligning ‘lean’ with ‘green’ becomes clearer in the minds of cross-functional teams, especially when these teams reflect on the best means to initiate broader lean initiatives that involve more than just individual production or distribution facilities. Green and sustainable initiatives such as packaging can then be easily aligned for cross-functional efforts.
Walmart is an even more pertinent example, since this global retailer fully understands two principles concerning its business. First, consumers prefer to shop at and return to a socially and environmentally responsible retailer. Second, supply chain drives the most considerable aspect of material and margin costs. The Walmart Sustainability Report outlines broad areas of scope, measurement and management accountability. It should also be no surprise that Walmart has communicated its intent to reduce billions of dollars in overall supply chain costs in the next few years through consolidated direct purchasing with vendors. Dealing with vendors directly also affords opportunities to drive complementary lean and green strategies, hence teams can easily align the needs of lean and green.
Some argue that the recent economic environment did not lend itself for active senior management support of green supply chain initiatives. I submit that when proper context is added, namely lean can equal and often does equal more green and sustainable strategy, the dots become well connected.
Bob Ferrari
Note: Bob Ferrari is the Managing Director of the Ferrari Consulting and research Group LLC, and serves as the Executive Editor of the Supply Chain Matters blog, of which ModusLink is a sponsor.