The International Supply Chain Day 10-Year Challenge to Industry

Year One

In my last post, I suggested that the goal for the first year should be the development and adoption of an easy to use sustainability metric, somewhat like the power usage effectiveness (PUE) metric used by the data centre industry.

By June 4th 2022, we hope to make an announcement as to what that metric is, and to encourage businesses to use it and report on their numbers periodically.

Year Two

Because everything comes from raw materials drawn from the earth, it makes sense to use the second year to lay the groundwork for identifying and tracking use of minerals ores, fossil fuels, and biomass.

Even for businesses that aren’t directly involved in resource extraction, it’s important to know how many minerals we use, and how the processes that involve them affect the local and global ecology.

There are other benefits to understanding the raw materials in the products we buy from our suppliers. Businesses can use the information to find efficiencies and get a better handle on risks from potential disruptions. We can explore opportunities to form more industrial waste-to-input collaborations like the ones that are creating both ecological and financial returns in the Kalundborg Symbiosis.

Year Three

In our third year, it will be time to agree on definitions of resiliency and risk, and start working on easy, universally applicable metrics for these aspects of supply chain.

It’s possible that there is a definition already out there in the supply chain body of knowledge that we’d all like to use (perhaps the one in Daniel Stanton’s Supply Chain Management for Dummies). We’ll be putting that question out to the community to see if we can come to a consensus.

Our initial thought is that the impacts from risk correlate to need. In other words, the importance of the products, at any given time, affects the impact of disruption.

For example, think about the stranding of the Ever Given in the Suez Canal in February of 2021. The data showed that about 12% of global trade was impacted at an estimated cost of $9.6B for each day of the crisis.

We know that there were a variety of products that were impacted, including oil and natural gas. To illustrate different ways that the impact could have gone, as a thought experiment, let’s say that all those ships contained nothing but cat toys. While there may have been financial impact to the companies involved, we wouldn’t have called it a crisis. On the other hand, if all those ships had contained urgently needed medicines or food, it would have been much worse. Whether products are essentials or luxuries makes a difference to the impact to society from disruption.

In this year, we’d like to check in with the Fortune 2000 and see how they are doing in terms of having risk registers and plans for high-likelihood and high-impact disruptions. We’re also going to see what percentage of these businesses have comprehensive digital twins in place.

Year Four

Once we have some initial ideas about resiliency and risk in place, it’s time to double down by encouraging organizations to complete a full supply chain mapping exercise.

Supply chain mapping is the documentation of all levels of your suppliers, what they contribute to your supply chain, and where their manufacturing facilities are located. Most enterprises know who their tier one and two suppliers are, but they may not know who their tier three suppliers are and beyond.

Companies who engage in full supply chain mapping know, down to the raw materials, where every molecule in their products was derived. Should a disaster occur, they can put action plans to mitigate the impact from disasters.

For example, in January 2020, 70% of responding companies were still trying to assess the impact of the COVID-19 outbreak in Wuhan to their operations months after it began—in fact, they were still trying to assess if their suppliers were even located in Wuhan.

We may also work to recommend a basic framework for assessing providers of supply chain mapping services.

We know it can be done and that it helps protect businesses. Toyota recently commented that it has not been affected by the semiconductor shortage that’s been crippling a wide variety of industries post-COVID. They simply implemented better solutions after the Fukushima tragedy.

Year Five

In 2026, we’ll do a mid-point check-in on the circularity percentage of our global aggregate supply chain (as mentioned, we’re only 8% circular as of 2021, as shown in the infographic in National Geographic).

We’ll also start focusing on developing or recognizing international agreement on human rights certification in supply chain.

The goal is to give all consumers the ability to instantly know that a product they’re buying is free of child labour, forced labour, and was created in workplaces that follow essential safety standards. For example, consumers of semi-precious crystals would be able to know if shoeless workers were digging for for the crystals they buy in mud tunnels that are prone to collapse.

There are several ways that organizations are already providing some forms of sourcing information to consumers. Some grocery items, for example, allow us to scan a QR code to view the farm where the product was grown. There are other technologies that we could potentially use to track the path of a product to the buyer’s doorstep, like non-fungible tokens.

Year Six

In year six, it will be time to take a hard look at a product that we have way too much of, that no one wants, and that could be managed better if we bring it into the supply chain.

I’m talking about sewage—the solid and liquid waste that we pour into our rivers and oceans in vast quantities every day.

We’ve already found some uses for it. Properly treated, it can be used as crop fertilizer or as a source of heating fuel.

Could it also be used as a raw material for more of the things that industries need? There are many greentech firms working on ways to include materials extracted from sewage to power vehicles, feed micro-organisms that recycle plastic, and produce chemicals like urea that have a variety of industrial uses.

Year Seven

Most enterprise procurement departments automatically buy new equipment and production inventory as freshly minted goods. By our seventh International Supply Chain Day, we’re going to focus on encouraging all enterprises to report on the percentage of secondhand materials that they buy. Effectively, this is a sustainability index for procurement.

We’re hoping that procurement teams will be able to brag about their use of second-hand materials and encourage each other to incorporate more surplus assets into their projects.

We’re also going to be checking in on how 3D printing (also known as additive printing) is being used to shorten transportation routes and change manufacturing—you can learn how 3D printing is already being used in our podcast with John Bolto of Additive Now.

Year Eight

Year eight will focus on a sustainability index for disposition: effectively the percentage of equipment and surplus that you sell into the aftermarket. The interesting part is that we’re not including scrap in this index, because scrapping something marks the end of its useful life before it’s melted down. We want to encourage people to keep the ball in the air for much longer before an item is sold for scrap.

This is something that will have financial value for selling organizations, because the book market for a piece of equipment is not its market value. We know that it’s currently possible for items to get 2X or 3X their book value if it’s sold to another enterprise.

Some equipment manufacturers, like Caterpillar, have become more profitable than ever by designing equipment so it can be easily refurbished. Their CatReman division helps them sell the same product multiple times and make an excellent contribution to the circular economy.

Our goal for industry as a whole is to encourage the sharing of those numbers.

Year Nine

Just like we can all watch what winds and ocean currents are doing on this dynamic model of the Earth, by our ninth ISC Day, we should ideally be able to tune in to a real-time view of supply chain. Companies will be able to contribute anonymized and non-trade secret data, and even consumers can make updates to the databases that power the model via technologies like distributed ledgers.

Year Ten

Here’s where I’d like the global aggregate supply chain to be on June 4th 2031:

We’ve achieved at least 50% circularity instead of our current 8%.

Supply chains have become completely digitalized: no more spreadsheets or siloed systems. All Fortune 2000 executives can see what’s happening, ideally in real time—they control the lion’s share of the global supply chain.

Consumers can recycle almost everything they buy.

We’ve found a better balance between lean and resilient supply chains.

The First Decade is Just the Beginning

This may all sound very aspirational when you read it all in one article. That’s the intention. It’s not often that we sit down and think ahead to where we want to be in ten years’ time. The point is to challenge and inspire industry to make major strides towards the goals we all want to achieve.

As I mentioned at the beginning, we know that things will change along the way. But if we don’t start the journey, we won’t get anywhere. We know that if we do nothing there will be definite consequences as the world’s population grows to over ten billion people by 2050, and available resources stay constant.

It’s a challenge worthy of the brightest minds in industry today. I hope you’ll join me on what promises to be a fascinating journey towards a better future for all of us.

Earlier articles in this series:

• Stimulating the Circular Economy with an International Supply Chain Day
• Towards the Adoption of Sustainability KPIs for Supply Chain