Oracle study reveals the shape of tomorrows supply chain

Oracle has released a study, conducted by future trends consultancy The Future Laboratory, which highlights the vast transformation that sustainable business practices is unleashing on worldwide supply chains. 

In the report UK supply-chain professionals express confidence in their current sustainability policies. However, global experts on sustainable supply and procurement models question whether they are comprehensive and effective enough with the suggestion that the industry is cherry-picking initiatives.

Demanding a Framework for the Science of Sustainability

The report recognises the difficulty in identifying the limits of responsibility and control of supply chain operations, as companies could be counting processes in a never-ending chain. For instance, where does measurement of the carbon footprint in food production end? Should assessment include the emissions produced making the machines that farm the crop? 

In the report there is some support for the idea of a framework to respond to these complex questions. Adrian Dickinson, innovations director at DHL Logistics and one of the global experts interviewed for the second stage of the study, says there is a role for the accounting profession to create a set of clear and transparent rules for everyone to abide by: Technology will no doubt play a part in collecting the data, but at the moment we are missing the framework to put the data into.

Oracle Corporation believes there is a need to break-up the challenge into three stages, giving companies a framework to simplify the process and quantify the criteria for success.

The stages are: 

• Level one: the basics, such as the introduction of recycling, turning off building lights and travelling less. Many companies already have successful schemes addressing these points
• Level two: sees organisations learning to think sustainability, beginning to assess their impact across a broad range of operations and to make the appropriate adjustments.
• Level three:  the science of sustainability, where the emergence of regulations and consistent standards provide a global framework governing sustainable supply chain operations and clarity about the impact of specific actions.   

Dave Food, Supply Chain Director, Oracle UK added: If Dark Green is the nirvana then supply chain operations must understand that it will require an integrated change management programme, which places a combined emphasis on business processes and changing the behaviours of people with the building of a sophisticated technology platform. For all firms working through these stages, it is vital they have in place flexible systems that can adapt as the principles of sustainable and collaborative business practices become established. 

Mixed Messages on Sustainability

Preliminary research of 56 UK supply chain professionals constituted the first part of the study and found sustainability to be the top business priority, selected by more than a third of respondents compared to 23% who prioritised value.  Furthermore, three-quarters of those polled (75%) said their organisations had clear and proactive policies regarding sustainability. Of these, 62% were benchmarked across all areas, including performance in supply chain management and procurement. 

And yet further questioning revealed that many industry professionals were failing to treat the issue with the necessary rigour and to appreciate the full impact of supply chain operations on the carbon footprint and public perception of a business.  Just under half were not interested in gaining consumer intelligence and a third did not consider gaining a more holistic view of the wider, non-supply related marketplace to be a priority.  This suggests there is little desire to anticipate consumer need or create a demand-driven supply network.  

John Gattorna, professor of supply chain management at Macquarie Graduate School of Management, Sydney and author of The Living Supply Chains, said: We are running around worrying about technology and infrastructure, but we are missing 50% of what drives a supply chain: human behaviour. 

Collaboration Should Be the Buzzword

At the heart of achieving Level Three supply chain organisations will have to agree to work more closely with their competitors. Most of the respondents to the survey agree that collaboration is vital to ensure a sustainable supply chain. The largest group (36%) selected collaboration ahead of legislation (32%), technology (13%) and pressure from investors and consumers (11% and 4% respectively).   

However, only 7% wanted to consider advanced forms of collaboration with partners, distributors and even competitors sharing information relating to the supply chain. This clearly shows there is some way to go before organisations are willing to adopt the key trends outlined in the report, which are very reliant on co-operation between the links in the chain. 

Further responses revealed that the reluctance for greater collaboration may stem from the limitations of current systems.  Almost half of respondents (45%) said they only receive data from parts of the supply chain they own. Another 15% complained that they are unable to make real-time changes, as the information they receive is out of date and varies according to its source, while 11% said the reporting mechanisms they use are fragmentary and do not offer the coherent picture they require. 

Dave Food commented: The study shows that as regulatory and consumer pressure continues to mount, supply managers will be forced to rethink their traditional business models and embrace newer collaborative ways of working. But we also cannot underestimate how much of a cultural challenge this will be for companies, such as the supermarkets, who have built their business around the competitive advantage of their supply chain. 

The Shape of Things to Come

Driven by ever more intense scrutiny of their green credentials from consumers, the media, investors and NGOs, along with the rising cost of energy, businesses will increasingly seek to derive competitive advantage from their sustainability initiatives.  Given these pressures, the study predicts the emergence and growth of the following trends:

• Slowgistics increased use of Britains canal and rail networks and coastal shipping routes for distribution along with the re-introduction of airships as supply professionals weigh up the benefits of sustainability versus speed
• Supply chain orchestrators rather than making products of their own, these companies will, on behalf of their clients, oversee everything from product development and the source of raw materials, to production planning and management and distribution
• Reversal of the supply chain the distribution networks of the future will be designed from the customer backwards, rather than outwards from the factory
• Shared distribution networks companies will collaborate in delivering and retrieving products to reduce the surplus capacity of half-empty trucks on British roads and the occurrence of multiple van deliveries to one location.
• Virtual bazaars a boom in virtual marketplaces where companies with niche offerings come together to sell their wares
• Return of local factories with the cost of manufacturing falling while the cost of transportation soars, globally distributed factories feeding into lengthy supply chains will no longer make commercial sense
• Growing produce in transit successful experiments have already been conducted with producing mushrooms en route to their ultimate destination 

A Clear Appetite for Technological Assistance

There was a clear appetite among the supply professionals for tools that could enable them to better assess the sustainability of their supply chain operations:  48% of respondents wanted predictive software to allow them to calculate the impact of their decision or those of their suppliers; 41% expressed interest in smart containers or RFID technology that can provide information about the movement of products, or of energy usage through a supply pipeline.

The Difficulties in Assessing Environmental Impact

The study also finds that there are significant challenges to be overcome in the assessment of the environmental impact of the production and transport of goods.  There is a lack of standardisation for benchmarking success with a growing number of industry bodies supporting sustainability reporting, such as the Global Reporting Initiative, the Carbon Disclosure Project and a new social responsibility standard, the ISO 26000 expected from the International Standardization Organization in 2010.