Welcome to 2010 .

In subsequent postings I shared the first four our supply chain predictions for the coming year. You can view the previous postings in clicking the following embedded links:

Part One

Part Two

Part Three

In this posting, we will conclude this series with the fifth prediction along with a final summary and some instructions on how to receive a free copy of the total prediction series, if you desire one.

Prediction Five: There will be a new resurgence of supply chain carbon tracking along with more momentum in green and sustainable supply chain initiatives.

Even though there was general disappointment in the outcome of the recent United Nations Copenhagen climate conference, the one clear outcome was that carbon tracking and sustainability needs will remain on both global country and corporate agendas for many years to come. Although companies have not yet experienced significant pull for low-carbon or green products, it is just a matter of time before consumers actively seek-out such products and services. The cost and incremental operational efficiency benefits of sustainable supply chain initiatives have already been proven in initial activities.  Major retailers, manufacturing and services companies such as Coca-Cola, Nike, Procter & Gamble, Tesco, Wal-Mart to mention just a few, remain very active in driving supply-chain wide standards and guidelines to insure sustainability footprint in products.  Getting ahead of pending carbon regulations and a more socially responsible customer will make more business sense in the coming year.

The needs for continued cost control and sustainability have been complementary up to this point, and should remain so.  Efforts in reduction of fuel and energy consumption, packaging, and recycling of product material each add benefit.  Broader initiatives may have been hampered up to this point, because of general budget and manpower constraints.  As business begins to improve in the latter half of 2010, look to more supply chain initiatives addressing green and sustainability tracking and mitigation.  Transportation, third-party logistics and other service providers will not be immune to this momentum, and they will in-turn be forced to step-up their efforts.

Carbon tracking technology has become more widely available and can be acquired at a very reasonable cost.   Supply chain network design vendors have added carbon tracking and analysis to their existing offerings, and major ERP vendors such as SAP are actively incorporating sustainability and carbon tracking functionality within the ERP suite.  Reverse supply chain planning and control will also begin a new genesis in the coming year.

Finally, as more companies and organizations initiate broader programs, the impacts to logistics and transportation will become ever more evident.  Fewer shipments of optimized loads will negatively impact the volumes of carriers and logistics providers.  Being the lowest carbon consumption and cost transport provider may prove to be highly beneficial in 2010.  Maybe Warren Buffet was indeed a sage in his acquisition of a major U.S. railroad.

A Final Note

That concludes our predictions for 2010, a year that promises to be just as challenging as 2009, but with hopefully a bit more optimistic toward future growth and investment.  The best analogy that comes to mind for reinvigorating your management juices in 2010 is to picture yourself as a military fighter pilot. Take firm control of the joystick, maintain a 360 degree view of the cockpit, and be prepared for another wild ride of non-stop missions.  Good luck and continue to check-in with Supply Chain Matters for your mission intelligence.

As noted in this series, a detailed copy of all five of these 2010 predictions is available in a free research report in early January.  If you desire a copy, please send your request to the following email address:

bferrari at blog1 dot com.   (bferrari@blog1.com )

In your request please include the following information:

Your name

Organization and title

Email address

Best wishes for a very productive and rewarding 2010.

 Bob Ferrari

As the United Nations conference on climate change ended in Copenhagen, many received a rude reminder that the effects of global warming are indeed upon us. The timing could not have been worse, coming just before a major holiday travel period.

Over this weekend, one of the largest snowstorms in many years impacted the largest populated cities on the U.S. east coast.  Blizzard-like conditions and unusually large snowfall stranded major cities from Washington DC up the east coast to Boston.  The snowfall stranded many, cancelled more than 1600 airline flights and disrupted transportation throughout the U.S. northeast.  Today, upwards of half a million airline passengers were attempting to find alternative flights or transportation.

According to a Bloomberg article, as much as 24 inches (60 centimeters) of snow fell of Bethesda Maryland, and 23 inches of snow was recorded at Philadelphia International Airport.  Here in Boston, where I reside, in excess of 21 inches of snowfall fell on portions of Cape Cod and the southeastern coast, while moving just 20 miles inland, snowfall levels dropped off dramatically as the storm center shifted direction out to sea.  There is a foot of snow outside my window and its bitter cold as I pen this posting.

In Europe, a bitter cold snap and snowstorms have had dramatic winter impact as well.  The underground Eurostar trains between London and Paris were forced to shut down unexpectedly last week as trains stopped dead in the tunnel because of what is suspected to be the effects of condensation caused by outside cold and inside warmth.  Upwards of 60,000 travelers were left stranded for up to twelve hours in the tunnel and service has still not be restored. 

According to a BBC News article this afternoon, additional rail, air, and road transport links are disrupted across northern Europe where snowstorms and bitter cold are impacting major areas. Parts of the continent experienced 20 inches (50 centimeters of snow over the weekend.

Of course, the timing of all of this bad weather could not have been worse, coming just before the Christmas and New Year’s holiday period where so many have travel plans, or where last-minute shopping and logistics fulfillment is in its final stages. UPS alone had expected to deliver 22 million packages today, its busiest day of the year.

There should be no doubt on whether global warming has impacted the planet, especially if you had prior or upcoming plans to travel in the U.S.or Europe for the holidays. 

To parody the movie quote from The Treasure of the Sierra Madre (1948)-

Global warming, I don’t have to show you any stinkin’ proof of global warming!

Let us all look to the glass half-full- many of us will be experiencing  a white Christmas this year.

In spite of all this dirruption, do enjoy the holidays.

Supply Chain Matters will not be publishing for the remainder of this week as I take some time to be with family and friends, and recharge.

Stay tuned for a series of new postings next week, the last week in 2009, which will feature our annual Supply Chain Matters Predictions for the coming year in supply chain.

Bob Ferrari

I had the opportunity to attend the latest session of the MIT Forum for Supply Chain Innovation on October 29^th.  The theme of this fall session was Strategies for Brand Protection, Material Assurance and Anti-Counterfeiting, and the presenters represented a cross-section of pharmaceutical industry, high-tech industry, and U.S. government and defense agencies. My takeaway from the sum total of all the presentations and discussion was that the problem of counterfeit or bogus materials infiltrating both industry and defense-oriented supply chains has become widespread, much more than even I anticipated.  In fact, many conference participants including myself, after viewing the presentations, commonly expressed ore reaction to the current problem as “sobering.” Robin Gray, Executive Vice President of the National Electronics Distributors Association (NEDA) summarized the problem as “widespread and pervasive and involving all segments of the economy.”

The reasons for increased occurrence of bogus materials within supply chains are numerous, but center upon profit motives.  Scrupulous players have found that there are more monetary and other incentives for engaging in this activity, more so than illicit drugs or other forms of organized crime.  Criminal laws covering this activity are generally weak. On the buying side, suppliers offering parts and components below current market prices lure buyers into spot buying or new contract arrangements in order to meet cost-reduction goals. And finally, suppliers and other players have discovered more sophisticated means to alter the composition or stated quality of parts, more often beyond current means to detect such deficiencies.

Incidents have occurred at all tiers of the supply chain.  In fact, a soon to be released U.S. Department of Commerce research study indicates that over half of counterfeit incidents involving defense-oriented supply chains are never reported, because of negative incentives. There is also speculation that the increased focus on green supply chain initiatives, specifically the recycling of parts or packaging materials, may be fueling a further problem.  Recycled parts make their way to unscrupulous players, mostly in China, who breakdown finished electronics to harvest internal components and later rename them as other or similar parts.  Other highly sophisticated players contract to receive original packaging materials from recycling, allowing them to both re-label and package bogus parts to look the same or even better than an original part shipment.  Amazingly, counterfeit parts are not merely focused on high-value products, or products that are no longer in active production.  The NEDA findings indicate that the most prevalent price range is $1 to $10 in unit costs, and the U.S. government was surprised to learn that current incidents are much more prevalent among parts in active production.

A lot of initiatives are currently underway in attempt to combat this problem.  Industry associations such as the NEDA are stepping-up awareness and recommending that procurement of materials been focused solely from OEM’s or their authorized distributors. Pharmaceutical companies such as Bayer AG and other partners are running European based pilot processes to test product verification and product serialization processes in preparation for more wide scale deployment. The U.S. General Services Administration, Defense Department, and associated military procurement agencies are stepping-up efforts to tighten-up procurement practices and screen both existing inventory and new shipments of electronic components. 

Much more awareness, grunt work and sophisticated technology need to be brought to bear on this problem.  The risks are huge and widespread, ranging from failed products, damage to a corporate brand or reputation, or even human safety.

My sense from this latest snapshot, compliments of MIT, is that industry and government are still not sensitized to the magnitude or growth in this supply chain risk category.  My advice to readers is to make sure your organization has its eye on the problem of counterfeit parts, and has definitive plans and timetables to address forms of mitigation.  The problem is widespread, and it is growing.

 Bob Ferrari

Earlier this week, Procter and Gamble released its “Designed to Matter” annual sustainability report.  The report, which can be downloaded here, provides an excellent reference for how sustainability goals can be established and tracked across the extended supply chain. It also notes the value of internal employees in contributing innovative or novel ideas in addressing sustainability goals.

P&G has produced a sustainability report since 2002, and not only tracks its internal goals and initiatives in each area of sustainability, but also reports on the green impact of its individual products it sells to consumers.

Internal supply chain and other initiatives have led to a cumulative 53 percent reduction in waste disposal, along with a 52 percent reduction in water and energy usage.  That is fairly impressive.  If you read through the detail of the report, you can note that P&G has shifted its European transportation strategies to leverage more use of rail, setting a goal to move from 10 to 30 percent rail movements by 2015.  In North America, intermodal transport has increased by 30%, saving 11 million liters of diesel fuel.

Contrastingly, in consumer product offerings, P&G acknowledges that while green products have proven to be attractive, the majority of consumers are unwilling to sacrifice value or quality in order to have a more eco-friendly product.  My translation is that in the current global recessionary environment, price apparently trumps green. 

Our community should shout out a loud applause to P&G in its obvious long-term commitment toward sustainability in supply chain.

Bob Ferrari

This week has brought continued news of positive momentum in the area of green and sustainability efforts across high tech related supply chains.

For the first time, Apple Computer released its first environmental impact study.  To no surprise, actual use of products accounts for 53% of the 10.2 metric tons of greenhouse gas emissions associated with the lifecycle analysis of Apple products, followed by 38% derived from manufacturing.  Interestingly, transportation accounts for 5%, while facilities account for 3%.  Apple attributed much of the progress related to reduction of overall greenhouse gases in its efforts to reduce the amount of toxic materials used in its products as well as more streamlined packaging.  Apple has also extended its efforts to audit more supply chain partners, including 83 facilities in 2008, up from 39 in 2007.  Overall, it was not a bad report.

At the furthest end of the high tech value chain, Taiwan Semiconductor Manufacturing Co. Ltd (TSMC), a significant producer of computer chips for many Original Equipment Manufacturers (OEM”s), announced that it has completed its Supply Chain Carbon Inventory Assistance Plan, the first company in Taiwan to complete such a study.  TSMC not only actively inventories and tracks its own greenhouse gas emissions, but also requires suppliers to do so as well. The current plan includes 36 factories and 20 partner companies in disclosure, representing a wide variety of suppliers of raw material and chemical compounds to semiconductor manufacturing.  TSMC has also embarked on an educational program across Taiwan to share its experiences in conducting a supply chain carbon inventory, in hopes of motivating other companies to initiate such programs.

I believe both companies should be applauded for their proactive efforts in tracking carbon emissions, and making more sound business cases for insuring greener supply chains.

 Bob Ferrari

IBM recently announced its Green Sigma Coalition, an industry alliance among technology oriented companies, which I believe should be applauded by our community. 

Charter members of this coalition are Johnson Controls, Honeywell Building Solutions, ABB, Eaton, Cisco Systems, Siemens Building Technologies Division, Schneider Electric and SAP, and each has indicated its willingness to work with IBM to integrate their products and services under the umbrella of a “Green Sigma” product offering. The program is further described as helping IBM Business Partners validate market and sell their offerings with an assurance that the product or service has been evaluated and demonstrated to reduce environmental impact based on customer use.

Green Sigma is an IBM approach that applies Lean Six Sigma principles and practices to energy, water, waste and GHG emissions throughout a company’s operations, which include transportation, manufacturing and distribution center operations that make-up a product’s value chain. A validation process calls for products and services to meet stringent criteria that address the reduction or use of resources such as energy, water or paper materials.  Submissions are to be reviewed by an IBM Energy and Environment Review Board.

IBM’s commitment to a sustainable supply chain includes its own internal operations.  As a founding member of the Electronic Industry Citizenship Coalition (EICC), the company accepts the EICC Code of Conduct as an equivalent and alternate to its existing Supplier Conduct Principles. IBM is also actively involved with two initiatives to analyze greenhouse gas emissions associated with its supply chain through its membership in the EICC and as a member of the Carbon Disclosure Project’s (CDP) Supply Chain Leadership Collaboration.

What I especially like is an approach that brings together real-time metering and monitoring with advanced analytics that can facilitate more-informed decisions regarding improved energy efficiencies and reduced environmental impact.

Well known and respected companies such as IBM, Hewlett Packard, and lately SAP continue to provide an active executive commitment toward more environmental sensitive products, and are now taking the lead in bringing together more environmentally sensitive technology from multiple companies. This can help in facilitating more green initiatives that involve many aspects of a company’s supply chain.  Surely other companies will follow in these efforts.  It just makes good business sense for both prospective customers as well as the companies themselves.

Bob Ferrari