Calling for fresh thinking

When it emerged in 2010 that a dis­turb­ing num­ber of work­ers at a Chi­nese com­pa­ny called Fox­conn had com­mit­ted sui­cide, alleged­ly in response to stress­ful work­ing con­di­tions, it had lit­tle res­o­nance with the UK’s tech­no-geeks.

Like­wise, few of the ear­ly adopters, who queue up to get their hands on the lat­est smart­phone, have heard of the min­er­al tan­ta­lum. Yet these are both issues that are deeply embed­ded in the glob­al sup­ply chains for some of the world’s largest mak­ers of con­sumer elec­tron­ics goods and illus­trate just a few of the chal­lenges that can arise as a result of the glob­al­i­sa­tion of the world econ­o­my.

Fox­conn is one of the biggest sup­pli­ers to Apple and oth­er com­pa­nies, while tan­ta­lum is vital to elec­tron­ic goods such as mobile phones. One of the main sources of sup­ply for this min­er­al, how­ev­er, is the war-torn Demo­c­ra­t­ic Repub­lic of Con­go (DRC), where prof­its from min­ing this sub­stance have fund­ed both sides in a bloody civ­il war, accord­ing to mem­bers of the US Con­gress.

Sus­tain­abil­i­ty in the sup­ply chain is now a busi­ness imper­a­tive, says Gary Han­i­fan, glob­al head of sup­ply chain at Accen­ture. “Com­pa­nies are look­ing beyond the low­est price and max­i­mum avail­abil­i­ty to eval­u­ate sup­pli­ers on fac­tors such as their abil­i­ty to help the busi­ness to with­stand sup­ply chain dis­rup­tion,” he says. “We have seen all sorts of exam­ples where a company’s share price has been pun­ished because of an inabil­i­ty to resist dis­rup­tion, whether that is from nat­ur­al dis­as­ter or it is self-inflict­ed.”

Marks & Spencer intro­duced a new type of trail­er, which can car­ry 16 per cent more load but uses 10 per cent less fuel

There is a par­tic­u­lar busi­ness risk for brand­ed con­sum­able com­pa­nies, says Mike Bernon, direc­tor of exec­u­tive devel­op­ment with­in logis­tics and sup­ply chain at Cran­field School of Man­age­ment. “Com­pa­nies that pur­port to be sus­tain­able can be caught out by uneth­i­cal or non-sus­tain­able prac­tices in the sup­ply chain,” he says.

But the issue goes far beyond rep­u­ta­tion. “Sup­ply chain stew­ard­ship extends across phys­i­cal envi­ron­men­tal fac­tors rang­ing from green­house gas emis­sions and water use, par­tic­u­lar­ly in stressed areas, to waste pro­duc­tion and bio­di­ver­si­ty impacts,” says Hugh Jones, man­ag­ing direc­tor at Car­bon Trust Advi­so­ry. “It also cov­ers social and com­mu­ni­ty impacts and oppor­tu­ni­ties.”

Many com­pa­nies have dis­cov­ered that a focus on sus­tain­abil­i­ty can cut costs at the same time as improv­ing envi­ron­men­tal per­for­mance. For exam­ple, as part of its Plan A pro­gramme, Marks & Spencer intro­duced a new type of stream­lined “teardrop” trail­er, which can car­ry 16 per cent more load but at the same time uses 10 per cent less fuel, allow­ing the com­pa­ny to save 840 tonnes of car­bon a year. “Look­ing for effi­cien­cies such as this can pay unex­pect­ed div­i­dends,” Mr Bernon says. “Plan A pro­duced about £75 mil­lion of sav­ings that M&S had not bud­get­ed for.”

Com­pa­nies look­ing to offer more sus­tain­able prod­ucts soon dis­cov­er that many of the major impacts are not with­in their four walls but embed­ded in the sup­ply chain. Phar­ma­ceu­ti­cals com­pa­ny Glaxo-SmithK­line found 80 per cent of its prod­uct car­bon emis­sions occur out­side its direct con­trol, says Mr Jones. “As con­sumers look to under­stand the impacts of the prod­ucts they buy, and com­pa­nies look to man­age the risk and cost of mate­ri­als or process­es in their sup­ply chains which are vul­ner­a­ble to future scarci­ty, so the spot­light is increas­ing­ly focused on sus­tain­abil­i­ty in the sup­ply chain,” he adds.

When Proc­ter & Gam­ble made its Ariel Excel wash­ing gel more con­cen­trat­ed, it meant the com­pa­ny used less water and pack­ag­ing, and could trans­port more bot­tles per truck load, reduc­ing its dis­tri­b­u­tion costs. How­ev­er, the new liq­uid also gets cus­tomers involved by allow­ing them to wash clothes at just 15C, sav­ing ener­gy they would have used heat­ing the water.

Cus­tomers are becom­ing an ever­more impor­tant part of the sup­ply chain as com­pa­nies com­mit to reduc­ing the impact of their prod­ucts, as Joe Frans­es, direc­tor for cor­po­rate respon­si­bil­i­ty and sus­tain­abil­i­ty at Coke bot­tler and dis­trib­u­tor Coca-Cola Enter­pris­es, explains. “We com­mit­ted to reduce the car­bon foot­print of the drink in the customer’s hand by a third and we knew we could only do that by work­ing with our sup­pli­ers,” he says.

The com­pa­ny under­took a full life­cy­cle analy­sis of its prod­ucts, which revealed that 48 per cent of the company’s car­bon emis­sions came from pack­ag­ing. “We realised that our cus­tomers could make a sig­nif­i­cant dif­fer­ence to the life­cy­cle impacts of our prod­ucts by recy­cling that pack­ag­ing,” Mr Frans­es says.

Anoth­er fac­tor that extends the con­cept of the sup­ply chain is the grow­ing range of leg­is­la­tion, often ema­nat­ing from the Euro­pean Union, which makes busi­ness­es respon­si­ble for prod­ucts once con­sumers have fin­ished with them, such as the End of Life Vehi­cles Direc­tive, and the Waste Elec­tri­cal and Elec­tron­ic Equip­ment Direc­tive. Hav­ing to think about how prod­ucts will be dis­posed of leads com­pa­nies to change the way they are designed and how they are used so that they are easy to recy­cle.

Mr Bernon high­lights a trend known as servi­ti­sa­tion – more snap­pi­ly explained by aero-engine mak­er Rolls-Royce’s tagline “pow­er by the hour” – which works on the basis that, rather than sell air­lines the engines, the com­pa­ny (and all oth­er aero-engine groups) charges a fixed sum per hour flown. Addi­tion­al­ly, it pro­vides a com­plete main­te­nance and replace­ment ser­vice, allow­ing air­lines to fore­cast their costs with greater accu­ra­cy, and reliev­ing them of the need to wor­ry about engine care.

Pro­grammes such as this have pro­found impli­ca­tions for sup­ply chains and the way prod­ucts are designed. In a sec­tor such as mobile phones, for instance, rather than hav­ing devices with a built-in obso­les­cence peri­od of two years or less that are eas­i­er to throw away than fix, phones would be more robust, bet­ter qual­i­ty and built to last. They would also be eas­i­er to main­tain and would be “future proofed” so they could be upgrad­ed as tech­nol­o­gy improved. When they did reach the end of their life, they would be easy to dis­man­tle and recy­cle. There may also be changes in the way prod­ucts are used, with many being leased for a cer­tain peri­od of time and then returned, rather than being bought and owned.

For sup­pli­ers too, the focus on sus­tain­abil­i­ty is both an oppor­tu­ni­ty and chal­lenge. “Sus­tain­abil­i­ty is becom­ing a cen­tral busi­ness issue for the com­pa­nies we deal with,” says Frances Way, direc­tor of the sup­ply chain pro­gramme at the Car­bon Dis­clo­sure Project. “We hope to see sup­pli­ers who under­stand sus­tain­abil­i­ty and deal with it well get­ting big­ger orders and hav­ing bet­ter rela­tion­ships with sup­pli­ers.”

When it emerged in 2010 that a disturbing number of workers at a Chinese company called Foxconn had committed suicide, allegedly in response to stressful working conditions, it had little resonance with the UK’s techno-geeks.