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 this 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

Wait! A Supply Chain Water Footprint? Seriously?

Do we in the Supply Chain industry really care about something called the Water Footprint? Is it something that you’re even aware of? I was not aware of this until I read a Harvard Business blog post  detailing the impact water shortage might have on businesses in the future. Sure – we’re hardly started with the whole Carbon Footprint issue and you dare bring this upon us!! The author of this post is CEO of a sustainability consulting company. Is it just me or are we really trying to invent newer ways to make our already complicated world of business all the more so? Is it not enough that we’re battling hard to get the right item at the right place and time, while being efficient and making money doing so?

 

While reading the article, I started wondering if the concept of a Water Footprint was pertinent to all industrial sectors. One aspect that has made the carbon footprint this popular, is the fact that the concept can be applied to all companies irrespective of whether they are involved in manufacturing or service. The apparent immediacy of the problem compounds the effect. I can easily say that the Water Footprint is a concept that will apply mainly to manufacturing companies. It is the very nature of the problem we’re trying to tackle that makes it so categoric. The HBR article itself talks about a beer brewing company SABMiller and how they’re evaluating water use in their supply chain. SABMiller has even released a report in collaboration with the World Wildlife Fund which details their perspective. But for a beer brewing company – or any beverage company for that matter, water is indeed an important resource. The article goes on to list other sectors that water footprinting might be relevant. Here’s what the article had to say (note that there is not one non-manufacturing sector mentioned)

Supply chain water footprinting is not just confined to the beverage sector. Borealis (a plastics materials provider) and Uponor (a plumbing and heating systems company) have initiated a study of the water footprint in the plastics value chain, from raw materials to plumbing and water systems installed in a home. The goal is to reduce resource use in product design and manufacturing in addition to developing water-efficient products.

Again like I said, it is the nature of the problem we’re seeking to tackle in this case. For pertinent industries however, analyzing water usage does make sense. Again, what level are we willing to take this to? The HBR article also talks about a World Water Week event conducted at Stockholm recently.

The linkage between water and business was a hot topic at the August 2009 Stockholm World Water Week. Bjorn Stigson, president of the World Business Council for Sustainable Development, singled out supply-chain water use for specific attention. As fresh water becomes more scarce and supplies uncertain, how companies use water and where it comes from will increasingly affect their business risks and opportunities.

I did some further research and found that the issue indeed is a ‘silent giant’ – something that’s out there – we just don’t know about it yet. I found a website dedicated to this issue - Waterfootprint.org. They have an interesting take on the supply chain perspective of Water Footprint.

The water footprint of a business - that is its 'corporate water footprint' - refers to the total volume of fresh water that is used directly and indirectly to run and support the business. It consists of two components:

 

• the operational water footprint, i.e. the direct water use by the business in its own operations,
• the supply-chain water footprint, i.e. the water use in the business’s supply chain.

Many businesses have a supply-chain water footprint that is much larger than the operational water footprint. This is particularly the case when a company does not have agricultural activity itself but is partly based on the intake of agricultural products (crop products, meat, milk, eggs, leather, cotton, wood/paper).

 

When consumers use the products from a business, there can also be a water footprint in the end-use stage. Think about the water pollution that results from the use of soaps in the household. In this case one can speak about the end-use water footprint of a product. This footprint is not part of a business’s water footprint, but it is part of the consumer’s water footprint. That does not mean that the business can withdraw from some responsibility about what happens in the end-use stage.

Check out the image I’ve attached. It should give you a perspective about what this metric means to your business. The Waterfootprint.org website is a good and informative read nevertheless and it gives valuable input on a topic I never knew existed until a couple of days back. Here are some links to studies that you can download if you think the topic is pertinent to your organization. They are sourced from the Waterfootprint.org website.

 

1. Barton, B. (2010) Murky waters? Corporate reporting on water risk, A benchmarking study of 100 companies, Ceres, Boston, USA.
2. Ercin, A.E., Aldaya, M.M. and Hoekstra, A.Y. (2009) A pilot in corporate water footprint accounting and impact assessment: The water footprint of a sugar-containing carbonated beverage
3. SABMiller and WWF-UK (2009) Water footprinting: Identifying & addressing water risks in the value chain, SABMiller, Woking, UK / WWF-UK, Goldalming, UK
4. Hoekstra, A.Y. (2008) Measuring your water footprint: What’s next in water strategy, Leading Perspectives, Summer 2008, pp. 12-13, 19.
5. Hoekstra, A.Y. (2008) 'Water neutral: reducing and offsetting the impacts of water footprints'
6. Gerbens-Leenes, P.W. and Hoekstra, A.Y. (2008) 'Business water footprint accounting'

It does take time for a concept to prove itself. I think people supporting this issue as part of a broader sustainability strategy for companies will need to convince businesses of the economic viability of measuring the Water Footprint. That is going to take time – think similar to what happened with the Carbon Footprint. Remember there’s 5 things you can do today to improve your personal Carbon Footprint. Personally, at this point in time, my opinion mirrors my post title – Water Footprint? Seriously?

What I found in the Apple Supplier Responsibility Report - 2009 vs 2010

It seems like the “Apple” of the eye is the talk of town this year. January was all sweet news as the world anticipated and later debated the features of iPad – Apple’s flagship device that’s shipping April 3. On the other hand, the month of February has not been as kind to Apple – especially its supply chain. First,  came reports that an Apple Supplier (read Foxconn) had roughed up a Reuters reporter in China. This news caught wind and brought back memories of the Foxconn iPhone leak suicide case. I’d debated whether these acts were turning into a New kind of Supply Chain Risk caused due to over-secretive company policy. Later towards the end of February, reports started floating around claiming Apple’s supplier responsibility report contained a mention of illegal child workers – an issue that spread like wildfire and prompted many strong reactions. I wrote a post about this issue detailing what companies need to do if they were faced by similar issues. This post, entitled “The Apple that ate the child” went on to become the one of SCM Blog’s most popular posts in February. Today, I aim to compare Apple’s Supplier Responsibility Reports from 2009 and 2010 and present my findings. I think you’re going to be quite surprised. The impact – as always, lies in the minute details.

 

KEY DIFFERENCES

Change in focus: As I looked through both reports, closer to the top, I saw a slight change in how the report opened. I’ve pasted screenshots here to show you what I mean. In 2009, the introductory passage looked to familiarize the reader with Apple’s supply chain structure and make him understand who was being measured. In the 2010 report, Apple looks to make the reader understand the importance of the supplier code of conduct. It clearly articulates the areas in which the Supplier Code of Conduct seeks to exercise its authority.

This is a good step forward. Apple has looked to depict the seriousness with which it looks at the various aspects of Supplier Responsibility in the 2010 report. Apple gets a plus for this one.

 

Number of facilities audited: Apple has audited more locations in 2009 than it did in 2008. In the 2009, they’d audited 102 facilities compared to 83 in 2008 and 39 in 2007.  However the rate of increase in the number of facilities audited has reduced dramatically. I’m not quite sure if this is because they plainly ran out of facilities to audit or something else. My tries to find out the total number of facilities Apple’s suppliers run ended a blank. Do let me know if you have some insight into how many facilities Apple has in total.

 

The Child Labor Saga: This fact is something that shocked me too. After all the angry commentaries we’d read about Apple finding illegal child workers in their supply chain. Check out the images to the left. Turns out, the 2009 report tells of Apple having found illegal child workers in SEVEN facilities compared to the THREE facilities quoted in the 2010 report. I wonder if there was as much noise made about the same issue last year. Any comments?

 

Environmental Impact: There are a few more disturbing facts that I was able to uncover from the report for those concerned about the Green Apple. The percentage of compliant comapnies has gone down from 2009 to 2010. While this is probably because of the increase in the number of facilities they audited this year, the decrease is uniform across a lot of categories. For instance, the percentage of “Management systems in place” for over 5 categories went down in 2010 compared to 2009. Check out the two graphics here. The one colored blue is from the 2009 report and the green image is from the 2010 report.

 

You can look at the reports for yourself here. It certainly looks like there is a lot of information in the supplier reports that a company could use. Especially if you’re Apple’s supplier and have not been audited yet. Should Apple really have rated themselves so high? Are they doing enough? What do you think? Let me know in the comments section.

You might also want to read the other articles I’ve written about this issue – “The Apple that ate the child” and “A new kind of Supply Chain Risk”.

Twitter Stream: Interview with HP's CEO and Community clouds in Supply Chain

Every week, I post five interesting articles and links I came across in my Twitter Stream with their sources. I try to think of it as a weekend series where I get a chance to look at other people’s ideas. Check out my Twitter page. It is just one of the several ways of connecting with me. I’ve also created a list of “Supply Chain” related people I follow on Twitter. The list keeps growing. In my first Twitter Stream post, I’d mentioned that the lis t had 55 people. Today, the list has 85 people and is growing everyday. Here is this week’s five tweets. Do let me know what you think.

 

Twitter Stream #03 

McKQuarterly Interview with HP's CFO: Thinking longer term during a crisis http://bit.ly/dtdFzn

thegreengod Recycling efforts fail to change old habits: ... in the past decade, even as environmental concerns have sparked “... http://bit.ly/dovo2n

SupplyChainMgt Should We Switch To Consumption-Based Carbon Dioxide Accounting? http://ow.ly/16NxOc

rmontellano RT @SupplyChainBlog: 5 Case Studies on Companies That Win at Social Media and eCommerce http://bit.ly/18aq9n

christianve Community #clouds can foster #collaborationacross the #supply chain http://bit.ly/91VtYd Combining services facilitates this

 

I especially think the community clouds idea has a lot of potential. Thanks Chris and thanks to all the tweeters in my stream. Keep the ideas coming.

 

What are your ideas about the Twitter Stream series? Do you think it adds value to you?