SUPPLY CHAIN STANDARD SEPTEMBER 2008
www.supplychainstandard.com
SOURCING
Doing the right thing
Now that financial pressures are weighing heavily on companies, where do we
stand on environmental and ethical sourcing issues? Has the distraction of fighting
harder for a share of consumers’shrinking discretionary spend put the corporate
green agenda on the back burner, or are these two objectives complementary?
According to research by Transport Intelligence, for Kewill, corporate
environmental enthusiasm is set to continue despite the economic downturn.
However, cost savings are clearly a high priority, with two thirds of respondents
identifying the‘win-win’of green initiatives bringing operational efficiencies. But
where extra costs are encountered most expect their sub-contractors to pick up
the bill, which might be a cause for concern for contract logistics service providers.
An encouraging initiative on the ethical sourcing front is the emergence of a
new kind of business model used to bridge the gap between major global
retailers looking for ethical products and developing world producers. Ethical
agents act as a link between retailers and small-scale developing world producers,
helping producers to build capacity and to meet market standards.
The Shell Foundation is behind the development of these ethical agents that
have been established in South Africa and India, so far. In partnership with retailer,
Marks & Spencer, the initiative has helped the production of goods made from
Fairtrade cotton while at the same time improving the livelihoods of more than
1,500 Indian farmers. Ethical sourcing is one area that must not be impeded by a
renewed and sustained focus on cutting costs.
COLLABORATION
Delivering best value
We are always looking for best value when arranging deals with suppliers, but now,
as consumers’purse strings tighten, the temptation is to default to the flawed
notion that pushing for the lowest cost delivers the best value.
Taking a long-term view, when competition is tough and margins are under
pressure, is far from easy. However, key to delivering the best value to customers
and shareholders alike is to work collaboratively with suppliers, and that can only
be achieved through a long-term relationship built upon trust that has been
earned over a reasonable time period.
Along with trust, a collaborative relationship with a supplier requires stability
and an understanding of mutual benefit. This offers confidence to share data and
to look for ways of reducing cost by understanding each partner’s business needs.
Seeking the lowest cost option may work on a widely sourced commodity item,
but where the item forms a key element of your product offering, then cost should
be considered only as one element of the value proposition.
As sustainability issues continue to be high on the corporate agenda, attention
will fall on delivering results, and core to achieving these results, will be good
collaborative arrangements with suppliers. A new report from Oracle highlights the
point that companies recognise the need for collaboration to achieve sustainable
supply chains but only seven per cent of respondents want to consider advanced
forms of collaboration with partners, distributors and competitors.
Just how deep a collaboration you enter into is a difficult question to answer
and no doubt depends on the value that is derived from the relationship. But
Oracle points to limitations in current systems as a possible root cause for the
reluctance to embrace deep collaboration. Almost half of respondents (45 per
cent) said they only receive data from parts of the supply chain they own. Another
15 per cent complained that they are unable to make real-time changes, as the
information they receive is out of date and varies according to its source, while 11
per cent said the reporting mechanisms they use are fragmentary and do not offer
the coherent picture they require. Hopefully, despite the harsh trading
environment, companies will continue to see the benefits of working closely
together with suppliers to deliver value.
IN BRIEF
ENVIRONMENT
Shrinking margins is
biggest SC pressure
Infor has released the findings of its
latest research, which reveal that
supply chain professionals are calling
upon the UK government to help
reduce the industry’s carbon footprint.
Two thirds (67 per cent) of supply
chain professionals surveyed, believe
their environmental initiatives should
be subsidised by the state.
The research, which polled 100 supply
chain professionals within UK
companies, highlights that 82 per cent
of supply chain professionals are
concerned about reducing their
carbon footprints. Other major
concerns include the need for better
supply chain visibility (96 per cent);
shrinking margins (90 per cent);
introduction of new products (89 per
cent); and escalating consumer
expectations (89 per cent).
47 per cent stated cost as a barrier to
implementing green initiatives, while
32 per cent claimed the inability to
measure results hindered progress.
The research also shows the need to
address environmental issues is at an
unprecedented level as supply chains
become more global and complex.
Traditionally, companies with global
supply chains moved products
through low cost countries to keep
labour and shipping costs down. Now,
the environmental cost must be
balanced with a focus on decreasing
carbon emissions from land, sea and
air transport, meaning supply chains
can no longer be measured purely on
economic costs.
When asked about the length of
supply chains, three quarters of
those polled said their supply chain’s
geographic reach had increased in
the last two years. In fact almost half
(43 per cent) claim their supply chain
now incorporates the UK, Asia-
Pacific, The Americas, Eastern Europe
and Western Europe.
67 per cent say they are more likely to
offshore parts of their supply chain
compared with two years ago. While
Asia-Pacific would be the offshore hub
of choice for 47 per cent, 53 per cent
lean towards Eastern Europe as their
90% of SC pros worry about
shrinking margins
preferred destination.
“These findings demonstrate the
mounting pressures facing supply
chain professionals in 2008. As green
initiatives continue to be placed at
the top of supply chain agendas, they
will compete for being prioritised
along with traditional business issues
such as margin improvement and
customer service levels,” said Andrew
Kinder, director, industry and product
marketing, supply chain
management, Infor.
TECHNOLOGY
SCS:NEWS 05
Honeywell buys
Metrologic
Honeywell has acquired bar code
scanner manufacturer Metrologic
Instruments for some £367 million
($720 million). Metrologic will become
part of Honeywell’s Imaging and
Mobility division, which already
encompasses Hand Held Products
following its acquisition by the
company last year.
By strengthening its imaging and
mobility portfolio Honeywell aims to
reinforce its distribution network and
increase its global presence.
TECHNOLOGY
Gondrand Group goes
for integrated freight
Gondrand Group, a leading transport
and logistics company with a global
footprint, has selected Kewill,
provider of global solutions for the
dynamic supply network, to supply
an integrated freight forwarding
solutiontosupportthegroup’s
strategic goal to become the
premium global logistics provider.
The new solution, Kewill Forwarding,
will allow the Gondrand Group to
rationalise international services by air,
sea and road, worldwide.
This will enable the company to
enhance collaboration between
customers, agents and carriers,
minimise transaction costs, shrink
delivery schedules and improve
visibility and monitoring of goods
throughout the entire export and
import process – using a fully
integrated system.
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