Creating a systems environment to manage and enable sustainable supply chains takes a bit of forethought -- and...
in today’s vendor landscape, some creativity. Given all the unique ways manufacturers can approach frameworks for supply chain sustainability and for flowing down requirements into their supply chain, it’s no wonder a one-size-fits-all solution doesn’t exist.
To define the system requirements needed for a sustainable supply chain, it is helpful to return to the concept of life cycle analysis (LCA), which is at the root of all sustainability initiatives. LCA is governed by three steps that can essentially be broken into three sustainability functions applied to the supply chain:
1. Assessing supplier impacts based on triple bottom-line (TBL) frameworks.
2. Analyzing these impacts for how they affect the organization and supply chain.
3. Improving the LCA ecosystem and identifying how suppliers can contribute.
With an LCA approach, a landscape of systems can be constructed to support how organizations can best engage with their suppliers to create sustainable TBL results across all three sustainability areas: financial, environmental and social.
Green manufacturing source systems include green supply chain management
To accomplish the first LCA task, an organization must do a bit of housekeeping and create a profile of the cumulative and specific impacts of its suppliers’ business activities. This requires gathering data from questionnaires and discussions and from information sources that show the history of supplier activities. These systems are known as source systems.
Source systems are nothing more than the systems of record we have all been using for years to record and manage our businesses. Typical source systems include
- ERP systems, which govern the products or services the organization creates, how they are made and distributed and the financial models surrounding them.
- Product lifecycle management (PLM) systems, which define the engineering bill of materials (BOM), and often the manufacturing and service BOM for part creation and servicing. PLM systems store the material and component topologies and can also show which suppliers are providing the components.
- Purchasing and supplier relationship management systems for maintaining the record of contracts, pricing and volumes between an organization and its supplier. This can also include histories of supplier performance against contracts and performance comparisons of suppliers of similar components.
- Supply chain management (SCM) systems -- including green SCM -- govern how the actual components come together, the logistics between the organization’s and the suppliers’ facilities, and demand planning.
Source systems can be treacherous because even in homogeneous environments, they may all have different roles and different ownership structures. One of the first principles I often suggest to organizations is the “principle of sharing”: Information and systems are assets that belong to the entire organization. Often the IT department builds strong barriers around source systems, which makes the information difficult to extract and ensure for accuracy.
Business intelligence environments and data warehouses reduce some of this complexity, particularly in heterogeneous system environments. But even with such aids, it is necessary to have a handle on what exactly is being measured. Organizations should also know how best to capture those measurements in tactical metrics and roll them into time-bound performance indicators that accurately reflect the organization’s current position compared with its target objectives.
Creating management systems for supply chain sustainability
While source systems may be good for managing business processes, they are rarely adequate for sustainability initiatives, which affect more specialized management areas, such as the organization’s carbon footprint and social “fingerprint,” and how those affect financial performance.
Management systems in this context are focused exclusively on the analysis and management of specific supplier records that are needed for sustainability or for performance analytics against TBL targets. Depending on the organization, different systems may be invoked for different outcomes. A California-based manufacturer may use a number of documents to report into the California Environmental Protection Agency system or identify the number of OSHA incidents to report for environmental health and safety (EHS) considerations. These systems can be simple spreadsheets or more elaborate performance management applications that let business function and process owners report into a central database, minimizing the hassle and errors involved in maintaining multiple spreadsheets.
Several software vendors have made bold moves into enterprise performance management (EPM), initially to assist organizations with business planning and financial management. EPM systems have now expanded to consider strategic initiatives such as sustainability and the impact of suppliers on TBL metrics in purchasing and logistics. These management systems draw from source systems in a variety of areas of the business to map and aggregate information, which helps to judge internal and supplier performance against the sustainability program's objectives.
Companies can also use human capital management (HCM) systems to track the training and education records of employees and key suppliers. Our partners at Social Accountability International (www.sa-intl.org) use a learning management system (LMS) to measure and improve the corporate social responsibility of brands and their suppliers. Since the early 1990s, corporate social responsibility has become a popular approach for making sure organizations engage in appropriate labor practices with their global suppliers. SAI's Social Fingerprint is a program of ratings, training and tools designed to help companies develop and implement the necessary management systems.
SAI’s corporate programs and training manager, Kate Critchell, explained that given the variety of systems required by its business model, an LMS seemed the best approach.
"We needed to be able to categorize and track multiple learning events, training and information exchanges between suppliers and their business customers, often specific brands and manufacturers,” Critchell said. “By managing all of the records centrally, we can then provide consistent ratings and metrics across our member companies." Brands and manufacturers get the LMS information to use in their own HCM systems.
Relying on sustainability reporting systems
The old adage “If you don’t measure it, it can’t be improved” gets at the heart of the third leg of LCA: the need for improvement.
Reporting systems, the third major IT element in supply chain sustainability, can be functions of source or management systems or stand on their own. In the latter case, the system is organized to allow structuring and presenting reports on the product compliance, EHS incidents and financial performance of suppliers. Many large platform makers of both source and management systems also provide a wide array of reporting systems and even predefined templates for key government and industry reports. Rating systems like Social Fingerprint and the Global Reporting Initiative’s GRI G3.1 Guidelines provide more sophisticated ratings reports that companies can use to benchmark and improve their own performance.
Reporting systems come with their own basket of issues. Engaging a supplier in an improvement activity only to find that the data feeding into the reporting system is inaccurate because of a misaligned template can jeopardize supplier relations. At a minimum, such mishaps can be horribly embarrassing to the manufacturer. Care must be taken to ensure that reporting system templates are managed and tested accordingly, like any other core production system.
ABOUT THE AUTHOR
William Newman is managing principal of Newport Consulting Group, an independent management and technology consulting firm based in Clarkston, Mich. Contact him via email at firstname.lastname@example.org or follow him on Twitter (william_newman).