Rethink your supply chain!

As I mentioned earlier, the October 2010 issue of the Harvard Business Review has a spotlight on supply chain sustainability. Most of the content is not really new, but interesting is that most authors argue that companies should take a holistic approach to sustainability in their supply chains.

Hau L. Lee from Stanford Business School gives some recommendations from his extensive research on supply chain sustainability of various large companies (e.g. Esquel (the author is in the board), Mattel, Starbucks, Posco, H&M). Companies should not take a “piecemeal” approaches to supply chain sustainability (e.g. swapping one location for another), because such an approach can generate unanticipated consequences and can thus get your company into trouble. Instead, companies “should take a holistic approach to sustainability and pursue broader structural changes” … “much earlier than most currently do” (p.64f). He illustrates his recommendations with examples from his research. Here are some of his central conclusions/recommendations:

  • “Sustainability is no longer a secondary issue. It has become a competitive concern and should be handled accordingly.” Treat sustainability as an integral to operations!
  • “Connect the dots between your own operations”. Understand better your (extended) supply chain and identify where social and environmental problems could occur. Regard your suppliers as partners.
  • “Work with your suppliers’ suppliers” and your customers’ customers. Tell them why transparency is needed and how the information will be used – and also support them.
  • “Reinvent your manufacturing process”. Think bigger and different and try to innovate processes or structures.
  • “Look beyond your enterprise’s networks”. Collaborate with your competitors – and also NGOs – on sustainability issues. You do not make your company sustainable without them, particularly, if you cannot achieve scale on your own.

The article is followed by an interview with Peter Senge from MIT. He argues that three challenges must be overcome to make a business more holistic from end to end: (1) To understand the larger system they’re in. (2) To learn to work with people you haven’t worked with before (e.g. NGOs). (3) Regard sustainability as a more ambitious vision and not only as being less bad.

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