Thoughts on Carbon as the New Muda

Transcription

1 Thoughts on Carbon as the New Muda

2 Agenda 1 Framing the Challenge 2 The Green Context of Supply Chain Operations 3 How New SCM Practices Can Enable the Green Trend 4 Framing a Comprehensive Green SCM Strategy 2

3 The Need for a Paradigm Shift And Why It Has Not Taken Place Yet! The Imperative The Reality The Question / Dilemma Can Green & Lean Co-Exist? The Interpretation Tell Me How You ll Measure Me, I Will Tell You How I Will Behave! 3

4 Why is Supply Chain Management a Good Starting Point? 60% Source 4

5 and yet, the Green SCM Revolution Remains Elusive Fortune # of Fortune 500 companies that have initiated some Green SCM strategy # of Fortune 500 companies that have approached this with their trading partners JANUARY

6 Achieving this Paradigm Shift Requires a Perception Change of CO 2 as a Decision Variable Carbon in the Business Environment Needs to be De-Mystified Introducing Carbon as the 8 th Muda Defects Inventory Waiting Excess Motion Over Production Over Processing Transportation CO 2 / GHG 6

7 There Are Some Good Signs 7

8 Agenda 1 Framing the Challenge 2 The Green Context of Supply Chain Operations 3 How New SCM Practices Can Enable the Green Trend 4 Framing a Comprehensive Green SCM Strategy 8

9 Where is the Carbon in the Supply Chain? Suppliers & Manufacturers Everywhere! Supply Chain activities create significant carbon emissions, making supply chain an important focus for clients seeking to reduce their carbon footprint Customers & Channels Flows: Product, Process, Information, Cash Design PLM Plan Source Make Deliver SC Strategy Procurement Integrated Ops Logistics Service & End-of-Life Integrated Ops Design for the Environment Carbon footprint thinking throughout product lifecycle design How can the total network be optimized considering service, cost, green tradeoffs What CO2 impact is there from various inventory concepts & planning methodologies How can we best measure a supplier s carbon impact (product, packaging, upstream logistics) and ultimately compliance with carbon reduction requirement? How should we evaluate carbon offsets? What operations strategy (facility location, operating model) provides the best trade-off between cost, service, carbon? Is there a role for sustainable factory / facility mgmt? What distribution network strategy (facility locations, sizes, transport modes) provides the best tradeoff of cost, service and carbon? How can packaging be reduced and recycled? How can field service operations reduce carbon footprint with better routing and parts inventory tracking? Feedback loop to engineering to reduce impact Various strategies to reduce impact throughout lifecycle Asset Management Sustainable facilities management: Green building & renewable energy; carbon footprint asset management; Asset utilization (Real-time data on energy usage; Carbon dashboard) Finance Paperwork Reduction; Environmental Cost Accounting; Environmental Tax Benefits Tracking 9

10 Carbon Distribution Model Carbon Analysis needs to be seen from a total Product Lifecycle View SCM Carbon Distribution Model Phased Product Lifecycle View Our goal can be formulated rather simply: Lower the Outer Edge Time Design & Sourcing Inbound Logistics Internal Operations Outbound Logistics Service and Use 10

11 On the Need to Embed CO 2 as a New Operational Variable Exhibit 1 Procurement Strategy Scenario As-Is ABC ABC, Inc Mexico Classic Value Equation = Least Production Cost despite the Transportation Cost To-Be China ABC Unit Cost Volume Carbon Impact Distance New Green Value Equation = Actual Cost (Production + Transportation) + Corresponding Carbon Cost 11

12 On the Need to Embed CO 2 as a New Operational Variable Exhibit 2 BOM and Routing in a CO 2 -Constrained SC 12

13 On the Need to Embed CO 2 as a New Operational Variable Exhibit 3 Planning Noise & GHG Responsibility A Value Chain Network View Leverage + Prevailing View Our View What is a fabless company Carbon Footprint? What is its environmental responsibility? 13

14 Noise in the Supply Chain is Neither Lean nor Green The Carbon Reverse Bullwhip Effect Extended Supply Chain View Inventory Produced Suppliers Plants Retailers Carbon Produced Classic Bullwhip Effect Amount of Inventory Inefficiencies Amount of Carbon Inefficiencies End Customers Caron Buildup Process True Customer Demand 14

15 Suppliers The 3 Primary Supply Chain Variables taken from a Green Perspective I L T Inventory Lead-Time Throughput John D.C. Little Institute Professor Your Company Raw Materials Component Suppliers EMS Partners OEM s / Brand Owners Warehouse(s) Retailers T Customers Lead Time Observations Cost and Environmental concerns are likely to create a trend for supply chain collapsing / localization Incentives need to be put in place to encourage creation of local and sustainable supply chain networks 15

16 Which Leads Us to Some Interesting Observations Observation # 1 Local Model Regional Model Global Model Local and Regional Models need to be encouraged (less carbon footprint and less inventory as a result of reduced lead times) ECX Observation # 2 CCX AP OCE Proliferation of CO 2 trading platforms will delay properly tackling the problem Carbon trading should be approached as a global commodity 16

17 Agenda 1 Framing the Challenge 2 The Green Context of Supply Chain Operations 3 How New SCM Practices Can Enable the Green Trend 4 Framing a Comprehensive Green SCM Strategy 17

18 A Green Supply Chain Requires a Holistic View Some Emerging Best Practices Customer Satisfaction Command Center N-Tier Rapid Planning Supply Chain Visibility Cost Reduction N-Tier Shortage Management VMI Hubs 3PLs Retailers Inventory Reduction Component Suppliers EMS/CM/ODM Partners Distributors Customers Lead Time Reduction Supply Chain Velocity Supplier VMI Metrics Alignment Multi-Tier Costing Supply Chain Segmentation 18

19 Green Supply Chain Management Value of a Network Approach BOM AnalysisTier2+ Partner Selection Reverse Operations Channel / Distribution Supply Substitutable components Sourcing choices Location choices Inventory policy Safety stocks Lot sizes Replenishment VMI/VMR Packaging Package size options Package recycling options Corrugated box Processing Manufacturing Repair Order fulfillment / refurbishment process Quality process Shipment control process Shipment QC process process Quality Organizational control management process Transportation Modes Shipment frequency Load consolidation Carrier routing Energy Embodied Energy GHG Regulatory $ Impact 19

20 Green Supply Chain Management Implementing a Network Approach Sustainability & SC Integration Automate Compliance Data Collection Associate compliance to Orders & Inventory Provide performance KPI s to customers 20

21 Disseminating the Message Sample Supply Chain Maturity Framework The Orchestrators Quadrant Companies in this zone clearly understand the need to reach across their supply chain spectrum to optimize their operations leveraging advanced optimization and business intelligence for superior performance The Overachievers Quadrant Companies in this zone have managed to leverage their size or anchor position to build a multi-tier planning model that still lacks advanced analytics to handle complexity and provide visibility and responsiveness The Underachievers Quadrant Companies in this zone have heavily invested in enterprise automation and planning solutions but yet to reap any significant benefits because of lack of leverage or reluctance to embrace the required mindset shift The Basic Quadrant Companies in this zone have neither the supply chain reach nor the advanced planning capabilities to turn SCM into a competitive differentiator. Many companies from emerging markets fall in this category 21

22 Applying the Supply Chain Maturity Framework The Tale of Two Leading Companies Ideal State Ideal State Phase I Start Phase I Start Company A Company B 22

23 An End-to-End Supply Chain Command Center and the potential to leverage for GHG tracking 23

24 Agenda 1 Framing the Challenge 2 The Green Context of Supply Chain Operations 3 How New SCM Practices Can Enable the Green Trend 4 Framing a Comprehensive Green SCM Strategy 24

25 12 Ideas to Make Your Supply Chain Greener 25

26 Exploring the Ideas Redesign the product Reconfigure Manufacturing Shift to Green Suppliers Shorten Distances Alter service-level agreements Shrink packaging 26

27 Exploring the Ideas (continued) Plan for reverse supply chain activity Consolidate shipments Plan smaller routes Coordinate with partners Take a life-cycle view Start now: define a green strategy 27