Some day in the near future, all supply chains will need to be sustainable supply chains. Our current supply chains are depleting non-renewable resources and they are not optimized to sustain renewable resources. I just recently read the book, Collapse: How Societies Choose to Fail or Succeed
, by Jared M. Diamond. This book brought home to me the message that we cannot continue to indefinitely rely on non-renewable resources to sustain our supply chains and economies. We cannot continue to use supply chain sources and solutions that degrade and reduce the productivity of the environment. These type of supply chain practices will more and more result in supply chain and business collapses. There is a need for change that can only be brought on by innovation and the better use of technology to include information technology.
The Need to Transform Unsustainable Supply Chains. Jared M. Diamond’s book, Collapse: How Societies Choose to Fail or Succeed, provides ample evidence that there is a close correlation between poorly managed economic growth and environmental degradation. There are countless examples going back thousands of years, where societies and economies have collapse because they depleted the natural resources that supported their economies. It is quite obvious that most of our supply chains today are unsustainable. Within our generation we must change our supply chain practices through innovation and technology or suffer the consequences of unsustainable economic growth.
Sustainability Development Defined. The United Nations defines sustainable development as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. This is the goal needed to transform unsustainable supply chains into sustainable supply chains. We need to find innovative business practices and technologies that enable supply chains to support the current needs of businesses without compromising the ability of supply chains to meet the needs of businesses and customers in the future. See Wikipedia for more on Sustainability.
Measuring Supply Chain Sustainability. If you cannot measure something, it is difficult to manage it. This is the same with supply chains. How can we measure the sustainability of a supply chain? At the macro level, supply chains can be measured by their environmental impact or ecological footprint. One way to measure environmental impact is by using the human impact I PAT formula. This formula measures Human Impact (I) on the environment. It consist of measuring population, affluence, and technology. In the case of supply chains, the human impact (I) in the I PAT formula is the supply chain impact on the environment. Using I PAT for measuring supply chain impacts consists of population numbers (P) the supply chain supports, level of consumption or affluence (A) for each person supported with a product or service, and the impact per unit of resource used which is dependent on the technology used (T). Thus, I = P X A X T.
I PAT Supply Chain Sustainability Example. A supply chain example using the I PAT formula would be as follows: a supply chain supports 10 million people a year with their paper needs (P), these people need X pounds of paper products a year (A), and the supply chain needs X acres of renewable timber lands for each pound of paper products (T). As you can see supply chain managers can best influence supply chain’s sustainability by how much they can reduce the T (the technology solution) that they apply to supporting the production and distribution of each paper product unit.
Competitive Advantage With a Green Supply Chain. Material Handling Industry of America’s article, The Green Supply Chain, provides convincing arguments that a sustainable supply chain can be a competitive advantage. Advantages include:
- New Products. The article mentions GE’s “Ecomagination program where they are focused on growing their revenue stream from environmentally friendly products to the tune of 20 billion dollars by 2010.”
- Meet Customer’s Evolving Requirements. Customers are more and more demanding environmental friendly products, and will increasingly prefer products that are supported by a sustainable supply chain.
- Reduce Costs. The Green Supply Chain article goes on to say “Sustainability can be a competitive advantage for many companies. If you can develop a sustainable supply chain think of the money that can be saved by not having to dispose of harmful by-products, reducing obsolescence, decreasing the amount of money spent on scrap and the resources spent on adhering to regulatory issues.”
- Compliance With Government Regulations. More and more governments are taking action to assure a sustainable economy now and in the future. This means businesses having to comply with regulation or be subject to fines or denied from doing business until they do comply with environmental regulations.
For more on transforming unsustainable supply chains see: Jeff Ashcroft’s The Green Supply Chain Network, and the Environmental Protection Agency (EPA) publication, The Lean and Green Supply Chain.
