Managing sustainable value chains

In the period from the 1960s to the 1980s, Japanese industry taught the world a lot about managing value chains. By minutely managing every aspect of the value chain for a business, from the relationship with the customer through the company functions and further into the supply chain, companies were able to remove inefficiencies, reduce costs and improve reliability and quality, ultimately satisfying their customers and winning repeat business..

The world has moved on since then but we must re-learn these lessons by managing our value chains in a more sustainable way. One such example is Marks & Spencer, using their Plan A sustainability programme, they decided to take responsibility for impacts related to the way their customers wash, dry and iron their clothes. This fundamentally re-defined the relationship between retailer and customer, it also gave rise to supply chain innovations in low temperature wash products, non-iron, low tumble-dry etc.

A lesser known example is in the oil and gas sector. FMC Technologies Ltd, launched its Greenshoots Fund  on 9th September 2009 with guest of honour, Minister for Enterprise, Energy and Tourism Jim Mather at Offshore Europe (Aberdeen); one of the oil and gas industry's largest exhibitions. An innovative scheme, Greenshoots is designed to partially mitigate the environmental impact resulting from the manufacture, sale and distribution of its core product - large installations known as subsea trees placed below sea level ? used in the extraction of oil and gas.

The scheme works by creating a fund to pay a shadow price for carbon related to air travel and the energy embodied in every stage of the manufacturing process. The money is used to invest in local projects which save carbon and deliver some local economic benefit. Although launched very recently the scheme has had a profound effect. Customers have become more carbon aware and will demand more information about the emissions related to products they buy. Suppliers asked to supply more carbon information are already questioning the efficiency of some of their manufacturing processes, reducing costs and emissions. FMC has recently gained planning consent to build a 1.5MW wind turbine to power their main premises in Scotland. In future, suppliers able to demonstrate a similarly responsible attitude will be rewarded with more business.
The ultimate vision is for the Greenshoots fund to be redundant because the whole value chain is of such low carbon it is not necessary. In the medium term it acts as a stimulus for customers, manufacturer and suppliers to focus on this issue while doing some good for society in the local community.

This will result in the company improving its reputation, having better relations with government and enabling them to attract the best young talent into the business.

Very few companies are approaching their responsibilities in this way, many are doing the minimum necessary to satisfy clients or comply with legislation. I believe that those who chose to address their value chain in this fundamental way will develop better quality and more efficient value chains over time and ultimately become more competitive.

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