Apr 9, 2010

Sony's roadmap to the elusive Zero Footprint

Finally! Finally someone had the guts to commit to a ‘Zero” environmental footprint. Today, Sony surprised the rest of the world by making headlines of a different kind. They committed to a complete zero environmental footprint by 2050. Their plan, titled “A road to Zero” is a really, really long term decision but at least it is something. I think this is the most groundbreaking announcement they have made in the recent past. This despite being in the headlines for their new PlayStation controller and  for a slew of new cell phones. Very recently, I’d written about the concept of “Supply to Zero”, an idea inspired by Bill Gates’ concept of “Innovating to Zero”. Sony has taken this a step further by covering all aspects of its business.

 image

Sony’s Goals I must say their goals are extremely lofty. Sony has announced targets based on four environmental perspectives – biodiversity, climate change, control of chemical substances and resource conservation. Their specific targets for the term starting fiscal 2011 and ending fiscal 2015 (which translates into March 2016) include:

- 30% reduction in annual energy consumption of products (compared to fiscal 2008)

- 10% reduction in product mass (compared to fiscal 2008)

- 50% absolute reduction in waste generation (compared to fiscal 2000)

- 30% absolute reduction in water consumption (compared to fiscal 2000)

- 14% reduction in total CO2 emissions associated with all transportation and logistics (compared to fiscal 2008)

- 16% reduction in waste from sources like parts packaging used by suppliers (compared to fiscal 2008)

- Increase of waste recycle ratio to 99% or more

- 5% reduction in utilization ratio of virgin oil-based plastics in products (compared to fiscal 2008)

- Assessment of impact of resource procurement and facility construction on biodiversity, and promotion of biodiversity programs such as groundwater cultivation

- Minimization of the risk of chemical substances through preventive measures; reduction in use of specific chemicals defined by Sony; and promotion of use of alternative materials

Source: Asahi article

 

Analysis The sheer comprehensiveness of their commitment surprises me. It seems to cover the entire breadth of the product lifecycle, including parts of their supply chain. The distributionimage piece is covered – albeit in a minor way until 2015. Plans include using more economical and environmentally friendly modes of transport. Also, they’ve committed to reduce the amount of incoming packaging – something that a lot of companies like HP, Dell and Wal-Mart have already been practicing. The direct impact that this is going to have on their procurement piece is yet to be seen. The goals here are a bit generic-sounding like “Understand greenhouse emissions attributable to parts and raw materials”. This is understandably a first step. I would personally love to see what they discover in this regard.

 

This is a something that will inspire a lot of “green” news in the future. Wal-Mart announced just last month that it was going to work with its suppliers to reduce its carbon footprint. What Sony has announced is certainly a more massive effort. What does tomorrow herald? A great new dawn? Do give me your thoughts.

Mar 31, 2010

Supply Chain: Efficient or Flexible or Constructal?

Two people whom I personally consider thought leaders in the supply chain space write blogs about Supply Chain Management. They both wrote articles last week which got me thinking about the right way to go about designing and operating the "Ideal Supply Chain". I would love to hear your ideas about this after you read these two viewpoints and my thoughts. The first case in point: Christian Verstraete's blog about Supply Chain and Technology. In his post on The Flexible Supply Chain - ESC Day 1, he recounts the discussions supply-chain-springat the Extended Supply Chain 2010 Conference which he'd attended. Here are his opening words
"This year’s theme was: The Flexible Supply Chain – meeting customer needs by responding efficiently to constantly changing market conditions."

On the face of it, the theme seems pretty well thought out - especially with many companies starting to finally look positively towards the future. But this line, especially the mention of "efficient response" reminded me of another blog post on the Kinaxis Supply Chain Expert Community written by Lora Cecere. If you're in the Supply Chain space and are not a member of this community, you should be. It has a lot of information and meaningful discussion taking place. Lora is one of the few supply chain "thinkers" I've come across online. She expresses her thoughts on her personal blog too. She recently wrote a post on her Kinaxis blog titled "What we can learn from Mother Nature". I found this to be an extremely interesting post about "efficiency" being a wrong goal most companies have generally used while designing their supply chains. This is why Christian's article caught my attention. Lora argues that the most efficient networks in nature are designed to be the most redundant, not the most efficient - and that efficient supply networks might function well for a while but break down frequently. Here’s an excerpt.

"Over great seafood in Austin, we discussed what nature teaches us about networks. Networks with the greatest resilience -- ability to stand the test of time-- are not the most efficient. In fact the least resilient networks in nature are the MOST efficient.  Instead, the most resilient networks have two characteristics:

Redundancy:  In nature, the networks that last over the generations are those that have the right amount of redundancy.  Excess capacity, extra nodes, and bypass routes.  The efficient network with minimal capacity, node-to-node connections, and no parallel routes fail.  This is especially true in push environments.

Dynamic reconfiguration:  Likewise, in nature, the networks that stand the test of time have the ability to reconfigure under stress.  Networks with the most centrality have the greatest failure rate."


About a month back, I was introduced to something called the Constructal Theory. It is a design theory that mimics nature's design philosophy in engineering. There's a Wikipedia article explaining the theory.

"in the constructal theory's point of view, the naturally optimized forms such as rivers, trees and branches, lungs and also the engineered forms coming from a constructal evolutionary process of maximization of flow access in time."

I have been thinking about the application of Constructal Theory in Supply Chain Management. The basic premise of the theory is for flow systems (in this case, flow of materials in a supply network) to maximize flow access. scm-leafThis is especially true in the case of supply chains too. Maximizing flow access in time will allow more reach while using up the same amount of resources (from a network point of view). The supply chain application does make sense but it isn’t proven yet. Let us for a moment assume it has indeed been practically shown that the theory applies to supply chains too. Consider the goals discussed in the ESC conference - A flexible supply chain that responds efficiently. Note that the network (in this case the supply chain by design) needs to be flexible, not efficient. The ideal network would respond efficiently to changes.  Building an efficient network and a network responding efficiently are two completely different things. Now let us bring in Lora's thoughts about the best networks in nature being redundant. However, redundancy is the enemy of efficiency. So how do we build a supply chain network that responds efficiently? The answer is the 'people' factor. At the core of a Supply Chain are the people running it. I have previously written about the importance of people in building a world-class supply chain. One very important lesson anyone can take away from this confluence of viewpoints is the following:

"The flexibility of a supply chain and its ability to respond to different demand patterns is a direct result of the network design. However, the efficiency of a supply chain and the speed of response depends more on the people that run the supply chain."

Thanks to Lora and Christopher for sharing their thoughts and giving birth to this post of mine. I wonder how many of today's "world-class" supply chains can claim - after reading this article - to have a "flexible supply chain that can respond efficiently"? What do you guys think?

Mar 19, 2010

Wal-Mart's India operations and the supplier sustainability sentiment

Right off the bat, let me thank SupplyChainToday’s Facebook page for posting the video that eventually led to this blog post. The video is an interview of the President of Wal-Mart’s India operations. The reason I felt strongly about this video is because several sectors including retail have reached a flat growth curve. Looking ahead, the developing world is the area retail companies are going to expand. Like the massive green initiative that Wal-Mart recently announced, it has been one of the first American retail companies to have set foot in the developing world too. And it has been forced to do thisvegetable-supply-chain very differently. India, like a lot of developing countries is heavily regulated in the retail sector. Wal-Mart is taking an interesting approach in India by acting as a wholesaler/distributor to the millions of retailers.

 

Here are two key discussions from the interview. I’ve embedded the whole video at the end of the post. It runs to about 14 minutes and I think its time well spent.

 

Question: Wal-Mart in India is not really in the retail business. Can you explain why this is so?

Answer: In India, retailing is a protected sector and the government currently does not allow any multinational company to operate in retailing. That’s why we don’t have retailing in India. What we propose to have in India is a wholesaler cash-n-carry business which is only permitted for business members. We’re also partnering with Bharti Retail who’ll run and own stores. But we do provide them with merchandise and marketing expertise.

 

Question: How would this business to business model work?

Answer: Essentially India is a nation of retailers. India has 12 million kirana stores (mom n pop stores). This is per capita (despite the size of India) the highest in the world. These stores buy from wholesale markets and direct manufacturers. The distribution chains operated by big companies like Unilever serve close to 1 million of the 12 million kirana stores directly. So a majority of these stores have to go to wholesale markets to buy products. It is a low-cost operation but it is also very inefficient. Especially in the area of fresh produce, meat, etc., it is very archaic. So how this model works is you have a selling point where you directly source product from manufacturers and sell these products to kirana stores at great prices.

 

The interview goes on to talk about other aspects of the business and how government regulations and legislations affect the way they do business in India. I find this model very interesting because Wal-Mart is taking its expertise – that is logistics and distribution and creating a business model to reach economies that they normally wouldn’t have been able to enter. This also ensures that Wal-Mart is able to continually grow its business in other parts of the world. This move also benefits India as they would be getting the supply chain expertise of one of the most evolved and efficient supply chains in the world. Two facts from this interview that I think will interest a lot of you are

  • There is no organized supply chain in India. There is not much forecasting and retailing runs on a largely push based system.
  • Almost 40% of all fresh produce in India gets wasted between the time it is produced and the time it reaches the customer.

Also, it is to be seen how soon Wal-Mart is able to integrate their Indian suppliers into their sustainability watch. The green initiative is going to direct the future of Wal-Mart’s interaction with their suppliers. It’ll be interesting to see how they approach this in the developing world where governments are not very carbon friendly as yet. Watch the rest of the interview and let me know what you think.

 

 

Interview with the President, Wal-Mart India

Apr 9, 2010

Sony's roadmap to the elusive Zero Footprint

Finally! Finally someone had the guts to commit to a ‘Zero” environmental footprint. Today, Sony surprised the rest of the world by making headlines of a different kind. They committed to a complete zero environmental footprint by 2050. Their plan, titled “A road to Zero” is a really, really long term decision but at least it is something. I think this is the most groundbreaking announcement they have made in the recent past. This despite being in the headlines for their new PlayStation controller and  for a slew of new cell phones. Very recently, I’d written about the concept of “Supply to Zero”, an idea inspired by Bill Gates’ concept of “Innovating to Zero”. Sony has taken this a step further by covering all aspects of its business.

 image

Sony’s Goals I must say their goals are extremely lofty. Sony has announced targets based on four environmental perspectives – biodiversity, climate change, control of chemical substances and resource conservation. Their specific targets for the term starting fiscal 2011 and ending fiscal 2015 (which translates into March 2016) include:

- 30% reduction in annual energy consumption of products (compared to fiscal 2008)

- 10% reduction in product mass (compared to fiscal 2008)

- 50% absolute reduction in waste generation (compared to fiscal 2000)

- 30% absolute reduction in water consumption (compared to fiscal 2000)

- 14% reduction in total CO2 emissions associated with all transportation and logistics (compared to fiscal 2008)

- 16% reduction in waste from sources like parts packaging used by suppliers (compared to fiscal 2008)

- Increase of waste recycle ratio to 99% or more

- 5% reduction in utilization ratio of virgin oil-based plastics in products (compared to fiscal 2008)

- Assessment of impact of resource procurement and facility construction on biodiversity, and promotion of biodiversity programs such as groundwater cultivation

- Minimization of the risk of chemical substances through preventive measures; reduction in use of specific chemicals defined by Sony; and promotion of use of alternative materials

Source: Asahi article

 

Analysis The sheer comprehensiveness of their commitment surprises me. It seems to cover the entire breadth of the product lifecycle, including parts of their supply chain. The distributionimage piece is covered – albeit in a minor way until 2015. Plans include using more economical and environmentally friendly modes of transport. Also, they’ve committed to reduce the amount of incoming packaging – something that a lot of companies like HP, Dell and Wal-Mart have already been practicing. The direct impact that this is going to have on their procurement piece is yet to be seen. The goals here are a bit generic-sounding like “Understand greenhouse emissions attributable to parts and raw materials”. This is understandably a first step. I would personally love to see what they discover in this regard.

 

This is a something that will inspire a lot of “green” news in the future. Wal-Mart announced just last month that it was going to work with its suppliers to reduce its carbon footprint. What Sony has announced is certainly a more massive effort. What does tomorrow herald? A great new dawn? Do give me your thoughts.

Mar 31, 2010

Supply Chain: Efficient or Flexible or Constructal?

Two people whom I personally consider thought leaders in the supply chain space write blogs about Supply Chain Management. They both wrote articles last week which got me thinking about the right way to go about designing and operating the "Ideal Supply Chain". I would love to hear your ideas about this after you read these two viewpoints and my thoughts. The first case in point: Christian Verstraete's blog about Supply Chain and Technology. In his post on The Flexible Supply Chain - ESC Day 1, he recounts the discussions supply-chain-springat the Extended Supply Chain 2010 Conference which he'd attended. Here are his opening words
"This year’s theme was: The Flexible Supply Chain – meeting customer needs by responding efficiently to constantly changing market conditions."

On the face of it, the theme seems pretty well thought out - especially with many companies starting to finally look positively towards the future. But this line, especially the mention of "efficient response" reminded me of another blog post on the Kinaxis Supply Chain Expert Community written by Lora Cecere. If you're in the Supply Chain space and are not a member of this community, you should be. It has a lot of information and meaningful discussion taking place. Lora is one of the few supply chain "thinkers" I've come across online. She expresses her thoughts on her personal blog too. She recently wrote a post on her Kinaxis blog titled "What we can learn from Mother Nature". I found this to be an extremely interesting post about "efficiency" being a wrong goal most companies have generally used while designing their supply chains. This is why Christian's article caught my attention. Lora argues that the most efficient networks in nature are designed to be the most redundant, not the most efficient - and that efficient supply networks might function well for a while but break down frequently. Here’s an excerpt.

"Over great seafood in Austin, we discussed what nature teaches us about networks. Networks with the greatest resilience -- ability to stand the test of time-- are not the most efficient. In fact the least resilient networks in nature are the MOST efficient.  Instead, the most resilient networks have two characteristics:

Redundancy:  In nature, the networks that last over the generations are those that have the right amount of redundancy.  Excess capacity, extra nodes, and bypass routes.  The efficient network with minimal capacity, node-to-node connections, and no parallel routes fail.  This is especially true in push environments.

Dynamic reconfiguration:  Likewise, in nature, the networks that stand the test of time have the ability to reconfigure under stress.  Networks with the most centrality have the greatest failure rate."


About a month back, I was introduced to something called the Constructal Theory. It is a design theory that mimics nature's design philosophy in engineering. There's a Wikipedia article explaining the theory.

"in the constructal theory's point of view, the naturally optimized forms such as rivers, trees and branches, lungs and also the engineered forms coming from a constructal evolutionary process of maximization of flow access in time."

I have been thinking about the application of Constructal Theory in Supply Chain Management. The basic premise of the theory is for flow systems (in this case, flow of materials in a supply network) to maximize flow access. scm-leafThis is especially true in the case of supply chains too. Maximizing flow access in time will allow more reach while using up the same amount of resources (from a network point of view). The supply chain application does make sense but it isn’t proven yet. Let us for a moment assume it has indeed been practically shown that the theory applies to supply chains too. Consider the goals discussed in the ESC conference - A flexible supply chain that responds efficiently. Note that the network (in this case the supply chain by design) needs to be flexible, not efficient. The ideal network would respond efficiently to changes.  Building an efficient network and a network responding efficiently are two completely different things. Now let us bring in Lora's thoughts about the best networks in nature being redundant. However, redundancy is the enemy of efficiency. So how do we build a supply chain network that responds efficiently? The answer is the 'people' factor. At the core of a Supply Chain are the people running it. I have previously written about the importance of people in building a world-class supply chain. One very important lesson anyone can take away from this confluence of viewpoints is the following:

"The flexibility of a supply chain and its ability to respond to different demand patterns is a direct result of the network design. However, the efficiency of a supply chain and the speed of response depends more on the people that run the supply chain."

Thanks to Lora and Christopher for sharing their thoughts and giving birth to this post of mine. I wonder how many of today's "world-class" supply chains can claim - after reading this article - to have a "flexible supply chain that can respond efficiently"? What do you guys think?

Mar 19, 2010

Wal-Mart's India operations and the supplier sustainability sentiment

Right off the bat, let me thank SupplyChainToday’s Facebook page for posting the video that eventually led to this blog post. The video is an interview of the President of Wal-Mart’s India operations. The reason I felt strongly about this video is because several sectors including retail have reached a flat growth curve. Looking ahead, the developing world is the area retail companies are going to expand. Like the massive green initiative that Wal-Mart recently announced, it has been one of the first American retail companies to have set foot in the developing world too. And it has been forced to do thisvegetable-supply-chain very differently. India, like a lot of developing countries is heavily regulated in the retail sector. Wal-Mart is taking an interesting approach in India by acting as a wholesaler/distributor to the millions of retailers.

 

Here are two key discussions from the interview. I’ve embedded the whole video at the end of the post. It runs to about 14 minutes and I think its time well spent.

 

Question: Wal-Mart in India is not really in the retail business. Can you explain why this is so?

Answer: In India, retailing is a protected sector and the government currently does not allow any multinational company to operate in retailing. That’s why we don’t have retailing in India. What we propose to have in India is a wholesaler cash-n-carry business which is only permitted for business members. We’re also partnering with Bharti Retail who’ll run and own stores. But we do provide them with merchandise and marketing expertise.

 

Question: How would this business to business model work?

Answer: Essentially India is a nation of retailers. India has 12 million kirana stores (mom n pop stores). This is per capita (despite the size of India) the highest in the world. These stores buy from wholesale markets and direct manufacturers. The distribution chains operated by big companies like Unilever serve close to 1 million of the 12 million kirana stores directly. So a majority of these stores have to go to wholesale markets to buy products. It is a low-cost operation but it is also very inefficient. Especially in the area of fresh produce, meat, etc., it is very archaic. So how this model works is you have a selling point where you directly source product from manufacturers and sell these products to kirana stores at great prices.

 

The interview goes on to talk about other aspects of the business and how government regulations and legislations affect the way they do business in India. I find this model very interesting because Wal-Mart is taking its expertise – that is logistics and distribution and creating a business model to reach economies that they normally wouldn’t have been able to enter. This also ensures that Wal-Mart is able to continually grow its business in other parts of the world. This move also benefits India as they would be getting the supply chain expertise of one of the most evolved and efficient supply chains in the world. Two facts from this interview that I think will interest a lot of you are

  • There is no organized supply chain in India. There is not much forecasting and retailing runs on a largely push based system.
  • Almost 40% of all fresh produce in India gets wasted between the time it is produced and the time it reaches the customer.

Also, it is to be seen how soon Wal-Mart is able to integrate their Indian suppliers into their sustainability watch. The green initiative is going to direct the future of Wal-Mart’s interaction with their suppliers. It’ll be interesting to see how they approach this in the developing world where governments are not very carbon friendly as yet. Watch the rest of the interview and let me know what you think.

 

 

Interview with the President, Wal-Mart India