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Influencing social responsibility
through supply chain development
By Bradley A. Feuling, CEO, Kong and Allan
With the short-term economic outlook strengthening, compa- ing the throughput, the usable life of the machine was also length-
nies expanding in low cost manufacturing must turn their strategic ened, which improved the time to realize a ROI. When considering
operations focus to service level and lead time. Sourcing and sup- upstream operations, these tangible cost savings may be partially
plier management practices have evolved, yet many companies passed on to the buyer.
continue to underestimate these areas in relation to total cost
models. Each of these supply chain considerations also impor- Packaging
tantly contribute to social responsibility and sustainability. In addition, we might also consider new product and packaging
With extending global supply chains, many people and commu- development. Companies such as Procter & Gamble realize this
nities influence a product between the raw material supplier and fact. With the recent decision to concentrate Tide detergent, the
the end-customer. To better understand total costs and improve- company reduced material requirements for both input materials
ments in sustainability, one therefore needs to delve deep into and packaging leading to higher productivity, lower manufacturing
supplier development. A key focal area for each company should utilization and energy consumption.
be operational efficiency.
Cube utilization
Operational efficiency Similarly, cube utilization is becoming an important opera-
Global supply chains magnify challenges related tional metric. Fresh Daily C’s transition to rectangular box
to longer lead times. If inventory placement is not packaging increases the transportation utilization
adjusted as new suppliers are added, the risk of rate by roughly 36%. Hewlett-Packard has been a
stock-out increases. This often results in in-transit leader focusing on postponement in final pack-
expedited freight, which increases the carbon aging to reduce global freight shipments. Cost
footprint. To improve environmental sustainabil- savings are $3 million USD per month with an
ity and reduce costs, demand and production increase in cube utilization of 250%. When
planning must be synchronized. This involves considering the end-to-end supply chain im-
cycle time planning, lead time mapping, and pact, the overlapping influence is clear.
improved coordination with suppliers.
Brown-Forman Corporation is one example Sustainable cost
of a company who has tied this together. The Costs became a key factor for many
company re-evaluated their supplier network companies during the recent financial crisis.
considering inventory, lead time, and procure- Many companies are currently restructuring,
ment costs. The improvements made served to yet many of these transitions are directed at
create environmental benefits. Stronger demand internal operations instead of process and
forecast accuracy resulted in lower carbon emis-
By concentrating their Tide
detergent, Proctor and Gamble
material flow improvements. With a global
sions and fuel consumption through a decrease
reduced material requirements
supply chain, it is critically important to note
in expedited airfreight shipments.
leading to higher productivity,
how interwoven total costs and environmental
lower manufacturing utilization
and energy consumption.
sustainability are. Significant opportunities ex-
Energy Usage ist when supplier operations, material flows
Another closely related consideration surrounds CO2 emissions and sustainability are carefully reviewed.
and energy usage. If a factory improves throughput by 10% due Companies building these processes are enjoying competitive
to stronger sales and operations planning (S&OP), a direct sav- advantages and are positioning themselves well for when the up-
ings in energy consumption should be achieved. In China, most turn begins. Social responsibility is no longer being solely being
manufacturers operate around the clock believing that revenue driven by customer demand. Operational improvements are vital
and throughput are linear. With a more comprehensive view of to building a sustainable advantage as global
supply chain operations, we realize that the relationship between competition intensifies.
profit and throughput is actually parabolic.
Haworth, a global leader in office furniture applied this concept
Bradley A. Feuling is the CEO of Kong and Allan,
based in Shanghai, China. Kong and Allan is a con-
in their painting process. By increasing the throughput, the facil-
sulting firm specializing in supply chain operations
ity reduced energy usage by 9.1%. This creates a direct savings
and global corporate expansion.
contributed to utility payments and factory overhead. By increas- MJULARCH/APRIL 2009 Y/AUGUST 2009 33
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