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Last Thursday, April 10th, saw the GS1 UK annual conference, the second hosted at Leicester City Football Club. Malcolm Bowden, GS1 UK’s Business Development Director, in his letter of welcome said, “This annual event aims to show you (our members) how GS1 UK and the GS1 System of standards can improve the effectiveness and efficiency of your supply chain”. In a series of three articles, I will share my understanding of what the speakers at the conference presented. In this, the first, I will look at the opening keynote session on sustainability strategies (developing green, lean and mean supply chains).
James Spittle, Chairman of GS1 UK, opened the session by introducing the topic of sustainability. He said, “Sustainability is rapidly becoming a critical business strategy. Investors and consumers are increasingly considering a company’s record in protecting the environment as part of their buying decisions. Government, too, has set targets to recover 70% of consumer packaging waste by March 2010”. He explained that there is growing evidence of sustainability strategies driving enterprise and shareholder value and delivering positive returns. Spittle then introduced each speaker in turn and put their presentation into perspective of this introduction.
The first speaker was Mathew Stephenson, a Partner at Deloitte. Stephenson is responsible for Deloitte’s consulting practice in the South West of England and Wales, and leads Deloitte’s relationship with GS1 UK. Sustainability strategies cover three intersecting areas of economic, social and environmental programmes. A wholly sustainable strategy company increases value to itself and its shareholders through the application of sustainability practice across the entire activity platform. Stephenson explained that winning businesses will be participants in sustainable, collaborative value chains built on lean principles. This meant that a company operated in a pull mode rather than a push one that was built up on lean principles. The company was likely to be sharing transportation and to have a policy of distribution centres close to the neighbourhood they served. The key enabler to achieve sustainability was collaboration and this was totally dependant on standards being in place to achieve the goals with ease. Stephenson explained that the drivers for sustainability were:
- Competitive advantage
- Cost reductions
- Risk management
- Investor pressure
In fact, nothing new. These are normal business pressures, but they now have green connotations. The typical areas of focus of companies implementing sustainability strategies were, in Stephenson’s experience:
- Transport and distribution: Focuses on fewer and friendlier miles through investing in greener engine technology, investing in high cube vehicles and maximising internal and external fleet integration
- Green buildings: Looking at building new high-performing facilities which take into account all of today’s construction industry green thinking
- Green IT: A new area to many people at the conference but one that is starting to be a major conference topic. This is about creating an IT culture through education, energy management, power-efficient hardware and cooling redesign & upgrade
- Recycling of packaging: This is not only in terms of better returns management and the use of biodegradable packaging but also into the use of returnable packaging where, of course, RFID will help
- Improving the transparency of financial reporting: To some extent this is about automating the process across company boundaries, therefore an IT-based solution—but one of long standing!
Stephenson closed by discussing how Deloitte were working with a number of companies on creating what he termed “sustainability shareholder value maps” to help promote green initiatives. What this work had proved was that sustainability can be used to drive shareholder value, but it needs to be carefully managed.
The second speaker was Ian Hall, Director of Logistics for Nestlé UK and Ireland. Hall looked at the issue of sustainable transportation, both from a UK and Nestle viewpoint. He quoted figures from a recent DEFRA report on the Food Industry in the UK; the industry is responsible for:
- 14% of energy used
- 10% of water used by industry
- 10% of industry and comercial waste
- 25% of HGV miles
- 20% of greenhouse gas emissions
- 19% of household waste is food waste
DEFRA created, in 2006, The Food Industry Sustainability Strategy (FISS). This covers a number of factors including: corporate social responsibility, ethical trading, water usage, waste management, energy and climate change and food transportation. A target of a 20% reduction in environmental impact by 2012 has been set. To achieve this, the industry has set up a “Champions Group” consisting of retailers and CPG manufacturers. This group has identified “The Big Six” initiatives and set up working parties to investigate how to best achieve them; they are
- Greater capacity vehicles: likely to achieve 5.3% improvement
- Engine specification: 3.5%
- Transport collaboration: 3.2%
- Telematics: 3.0%
- Logistic systems redesign: 2.3%
- Out-of-hours delivery: 2.0%
Each of these has had a committee set up chaired jointly by a retailer and a manufacturer. Hall is the joint chair of the Transportation collaboration working group. The results of these working parties have to be implemented in 3 different streams: firstly through government and industry bodies; secondly through individual company activity; and finally through collaborative inter-company initiatives, such as Efficient Consumer Response (ECR). The second part of the presentation looked at what Nestle themselves were doing around transportation collaboration. Hall explained that transportation costs were now a significant part of production costs for manufacturers. The big challenge for Nestle was vehicle utilisation. Hall explained that the company was looking at a number of ways to improve this utilisation, including:
- Combined loads with both other parts of the company and third parties
- Working with the retailers on order size
- The make-up of loads
- The use of double-decker trucks
- Relating package design and development directly to use on a pallet
- Controlling empty running by maximising multi-drops
Hall stated that “A collaborative approach to business is at the heart of efficiency and sustainability, but collaboration needs a standards-based platform to ensure the free flow of accurate data throughout the supply chain”. He ended his talk by saying that Nestle had improved their vehicle utilisation by 6.5% over the last 2 years and reduced the annual mileage by some 0.5million miles! Impressive!
The final speaker was Michael Bowden of GS1 UK. He opened his talk with following quote from Thomas L Friedman in The New York Times on 26 September 2007, “…green is not just right for the world, it is better, more profitable, more healthy, more innovative, more efficient, more successful…” Bowden then asked a rhetorical question of his audience: who owns the sustainability agenda in your organisation. He went on to explain that the answer should be your Board. But how do you go about the process of introducing sustainability? He argued that companies do not have any other choice than to do something about sustainability—your customers are asking if you are green and the proof is coming in that it is efficient too. Bowden recommend that you take a structured approach starting with some baseline comparisons followed by looking at small things. He also stressed the importance of collaboration, particularly on data, which needs standards. It was important to have a plan and also to introduce measures that can be used to check where you are.
So there we have it—being green and lean can not only be ethically viable but also have serious monetary impact. In the UK we have major retailers and manufacturers working together to achieve government targets around sustainability and it is paying off! The key to success is collaboration and to make this happen it is necessary to have standards in place. These are designed to accelerate the connection between actions a company can take and shareholder value. It focuses on the things that matter most and then choosing practical ways to get them done.