Supply chain disruption is now the new norm.
This mega trend is creating a new and higher degree of risk and costs for businesses around the world.
Here’s just a few examples:
- Beijing China now faces water shortages that are curtailing supply, as well as the related supply of hydro-electric power
- Food production is constricted from both drought and floods around the world including the U.S., China and Brazil
- Civil unrest has curtailed supplies to an already demand-stressed global oil market.
A related impact is the instantaneous and global messaging capacity that places all business activity before the eyes of consumers. A recent example is the explosion at an iPad factory in China that resulted in three deaths.
The growing numbers of industry accidents, from BP deep sea oil wells to an exploding iPad factory, exemplifies:
- The branding damage created when consumer expectations on safety and environmental protection are violated. The consumer backlash in lost sales and competitive advantage creates measurable and serious negative financial results.
- These events also have a residual regulatory cost. Governments around the world are increasingly under pressure to minimize the societal risk of poor business behavior.
In response a new trend is emerging where multi-national corporations establish global health, safety and environmental standards for their supply chain suppliers! Evidence of this mega-trend includes companies like Walmart and Coca-Cola adopting global standards on safety, water efficiency and carbon-based emissions.
For “consuming nations” like the U.S. there is the potential for increased regulation of the global supply chain to align with consumer (voter) expectations on worker safety, environmental protection and product safety.
A related question, ”Can any businesses offering a branded product continue to pursue least cost manufacturing supply chain strategies in today’s social and mass media environment where the consequences of lower-levels of safety or environmental practices are exposed with damaging negative consequences upon consumer loyalty and purchases?”
Sustainability is a best practice path for mitigating “unsustainability’s” impacts upon a business’ supply chain.
Sustainability offers these business opportunties:
Design. Designing products in a manner that result in less waste/emissions and lower safety/environmental unintended consequences is a path for achieving lower cost.
Buy Local + Smart Manufacturing. Buy Local mitigates the risks of extended supply chain logistics. Smart manufacturing offers a path for competitively produced, high quality production conducted in a manner aligned with human safety and environmental protection.
Relative Strength Price Management. Relative price strength of commodities is compelling. Their prices are going up and they are going up fast compared to other goods and services. Sustainability affords a solution. Using less is part of that solution. Material science holds the potential for winning true competitive advantage.
A sea-change is taking place
- Costs are going up for less sustainable supply chains
- Cost volatility is going up for less sustainable supply chains
- Unintended consequences for less sustainable supply chains are eroding consumer loyalty and revenues
- Sustainable best practices in supply chain management are emerging
- Sustainability’s best practices will enable economic development for local communities that can offer a green supply chain infrastructure
- Green supply chains are creating competitive advantages for companies through design innovations, commodity cost/risk mitigation and operating/logistics efficiencies.
- Sustainable companies are growing revenues and brand equity by aligning with the customers’ search for goods and services that align value with values.
Bill Roth is the founder of Earth 2017, a website that posts analysis and trends on the emerging $10 Trillion smart, healthy and green global economy. His book, The Secret Green Sauce, profiles best practices of businesses making money going green.