Future of Sourcing - Original Equipment Manufacturers https://futureofsourcing.com/tags/original-equipment-manufacturers en The Mindset Required for Sustainable Supply Chains https://futureofsourcing.com/the-mindset-required-for-sustainable-supply-chains <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://futureofsourcing.com/sites/default/files/articles/The%20Mindset%20Required%20for%20Sustainable%20Supply%20Chains.jpg"><a href="https://futureofsourcing.com/sites/default/files/articles/The%20Mindset%20Required%20for%20Sustainable%20Supply%20Chains.jpg" title="If a purchased good is not sustainable, then waste, or money for that matter, is left on the table." class="colorbox" rel="gallery-node-2097--X61yWUR778"><img typeof="foaf:Image" src="https://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/The%20Mindset%20Required%20for%20Sustainable%20Supply%20Chains.jpg?itok=J7U6kC5g" width="624" height="325" alt="If a purchased good is not sustainable, then waste, or money for that matter, is left on the table." title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <p><em>Even if your company doesn&rsquo;t pay for waste immediately, says IndustryStar CEO William Crane, a lack of sustainable processes, parts and products within the value chain should be acknowledged as a supply risk.</em></p> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/crafting-a-kpi-playbook-to-enhance-supply-performance">Crafting a KPI Playbook to Enhance Supply Performance</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>Supply chain and sustainability are two sides of the same coin. A standard teaching practice within supply chain is &ldquo;lean thinking&rdquo; that advocates for minimalist, one-piece flow to the tune of an ever-present waste reduction drumbeat. Unfortunately, this drumbeat isn&rsquo;t always heard. The prevalence of waste in far-reaching corners of supply chains is in large part due to the sheer global scale of many manufacturers.</p> <p>Simply put, the end-to-end automotive value chain size and complexity can create more siloed than required systems thinking. After all, it is the sum of all processes from handling to assembling at all stakeholders from OEMs to suppliers that determine how efficient, or inefficient, value is delivered.</p> <p>Exacerbating matters further are elongated automotive supply chains that expanded with wide-scale global sourcing in the early 1990s. Our push for lower-cost parts was accelerated by synergistic desires to outsource unsavory processes to achieve ISO 14001 environmental management system certification in North America and Europe starting in 1996.</p> <p>The net result is that we greened our facilities at home but passed the waste buck to factories abroad in China and elsewhere. Perpetuating this linear thinking solely on small internal continuous improvements stands to curtail teams&rsquo; innovation potential. This approach is more troubling for manufacturers today, as breakthrough thinking will be required to realize new opportunities as the industry rapidly shifts toward sustainable mobility technologies and models.</p> <p>As professor Stuart L. Hart pointed out in 2008 in his trailblazing book <strong>Capitalism At The Crossroads</strong>, &ldquo;In the long run, the dynamics of creative destruction will work against firms that rely only on incremental improvements and fail to change the fundamental manner in which they provide products, processes and services.&rdquo;</p> <p>For many, the contemplation of reshaping the future has been interrupted by the present barrage of crises from raw material supply shortages to pricing volatility. The longer workweeks have reinforced the value of fostering more resilient business models. More than ever, we need to care not just about what the cost is of the parts that go into our products but how those parts are made and where they end up. We need to delve deeper than the historical industry best practice of <a href="https://sig.org/total-cost-ownership-introduction-whole-life-costing" target="_blank">total cost of ownership</a>, which strives in theory to quantify risk and disposal costs. Did these models properly account for the prolonged pandemic? Case rested.</p> <p>Looking ahead, we must go beyond attempting to compartmentalize our organizations&rsquo; cost. Our true product costs are much broader and deeper. Luckily the analysis, at least conceptually, is equally as straight forward, but it involves a fundamentally different way to approach supply chain work.</p> <p>We must transition from cost czar to value enabler. It requires that we strive to eliminate waste in its expanded form of non-sustainable waste. If a purchased good is not sustainable, then waste, or money for that matter, is left on the table. Thus, by definition, supply chain&rsquo;s cost optimization historical pursuits are aligned with fostering sustainable business models.</p> <h2>Building a Bias Toward Action</h2> <p>The sad truth is that often our words do not always align with our supply chain actions. There is still too much incremental improvement. An all-new electric truck, while better for the environment than its internal combustion engine predecessor, is still packed full of virgin plastic resin destined for landfills. Bringing sustainable parts and assemblies to market requires disruptive thinking to kickstart all-new ways of working. It requires widening our supply chain lens to include not just immediate suppliers, but all stakeholders up and down the value chain.</p> <p>Detroit-based innovative startup Pivot Materials blends agricultural waste materials such as bamboo fibers, rice hulls and even coffee hulls into resin feed stock to enable more sustainable plastic injection molded parts. Replacing even a portion of virgin resin with lightweight sustainable material alternatives can reduce part weight from 7% to 20% on average in parts ranging from A pillars to ducting.</p> <p>&ldquo;Just recycling isn&rsquo;t enough anymore. Our focus is on upcycling, which takes waste materials such as leftovers from farming and gives them a new life. Depending on the application, we are able to replace 10% to 100% of traditional plastics in automotive parts and shipping pallets,&rdquo; says Pivot Materials co-founder and CEO, Kylee Guenther.</p> <p>Putting the moral point of view aside, it is supply chain&rsquo;s job to ensure the most efficient flow of value possible. Even if your company doesn&rsquo;t pay for waste immediately, <a href="https://futureofsourcing.com/procurements-increasing-csr-role">a lack of sustainable processes</a>, parts and products within the value chain should be acknowledged as a supply risk. Fortunately, today&rsquo;s sustainability price is becoming more quantifiable. Electric startup vehicle manufacturer Rivian&rsquo;s IPO on November 10, 2021, resulted in a $91 billion market cap which surpassed General Motors&rsquo; $86.4 billion market cap.</p> <p>The track records, revenue forecasts, and operational scale differential between the OEMs is substantial. However, the stock market, as a barometer for future cash flows, is clearly stating that a pure play sustainable automaker is more valuable than a legacy OEM on a journey to becoming more sustainable.</p> <p>As a counter narrative, a lesser discussed aspect is General Motors&rsquo; 2020 Sustainability Pledge, which outlines the company&rsquo;s requirement that 35% of vehicle parts will be made from sustainable materials by 2035. This positive step forward highlights the immense sustainability impact established OEMs and suppliers can have now through spend influence.</p> <p>According to the American Chemistry Council, &ldquo;Today&#39;s vehicles on average contain 50% plastics by volume and 10% by weight.&rdquo; At over 300 pounds of plastic per vehicle and 6.8 million vehicles sold in 2020, General Motors and their suppliers stand to replace north of 2 billion pounds of plastic resin annually with sustainable material alternatives.</p> <h2>Where to Start</h2> <p>The harsh reality is that much of the input data that goes into assemblies isn&rsquo;t known by buyers. This goes beyond simply knowing Tier I suppliers toward building an expanded digital Plan For Every Part. An example is documenting your Tier II and III supplier&rsquo;s inbound packaging and logistics carriers, which have remained largely invisible.</p> <p>This may seem absurd; most know raw materials, purchased parts and piece prices in depth. However, do you know the total weight of your spend that ends up in a landfill? As we have seen, few automotive Tier I suppliers track this level of data about their Tier II suppliers. Reasons vary, but in short it can be a lot of work. Put another way, the answers to the questions might also be unsettling.</p> <p>There are parallels between the continuous improvement and creative destruction mindsets in that both are required paths toward elevating supply performance. It is important to acknowledge supply chain sustainability continuous improvement results as small wins along the journey to build momentum.</p> <h2>Making Meaningful Impact</h2> <p>We must not celebrate incremental improvement too prematurely as to award ourselves green trophies for a job completed. Measuring our impact in the context of what we could realize offers a clearer lens from which to pursue future impactful results.&nbsp;&nbsp;</p> <p>To accomplish this, sustainability must move from reactive to proactive thinking to maximize impact. True sustainable supply chains must be pursued from day one in partnership with all stakeholders. &ldquo;Cradle to Cradle&rdquo; thinking, as outlined by architect William McDonough and chemist Michael Braungart in their 2002 book <strong>Cradle to Cradle: Remaking the Way We Make Things</strong>, needs to start at new product creation and be realized during sourcing to maximize impact. Thus, the mindset is more principle than method.</p> <p>Results take upfront and persistent engagement inside and outside the organization. This is a different way to manage and execute supply chain work for most professionals. It is through bold thinking and purposeful actions that profitable sustainable business models, and the supply chains that power them, can take hold to enabler a better future for all.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/industrystar" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">IndustryStar</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/original-equipment-manufacturers" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Original Equipment Manufacturers</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/renewable-materials" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Renewable Materials</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="The Mindset Required for Sustainable Supply Chains - Future of Sourcing" addthis:url="https://futureofsourcing.com/the-mindset-required-for-sustainable-supply-chains"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Sun, 19 Dec 2021 17:00:00 +0000 William Crane 2097 at https://futureofsourcing.com https://futureofsourcing.com/the-mindset-required-for-sustainable-supply-chains#comments A Focus on the Value and Virtue of Supply Chains https://futureofsourcing.com/a-focus-on-the-value-and-virtue-of-supply-chains <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://futureofsourcing.com/sites/default/files/articles/A%20Focus%20on%20the%20Value%20and%20Virtue%20of%20Supply%20Chains.png"><a href="https://futureofsourcing.com/sites/default/files/articles/A%20Focus%20on%20the%20Value%20and%20Virtue%20of%20Supply%20Chains.png" title="In 2021, supply chain sustainability is likely to be more important than ever." class="colorbox" rel="gallery-node-1925--X61yWUR778"><img typeof="foaf:Image" src="https://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/A%20Focus%20on%20the%20Value%20and%20Virtue%20of%20Supply%20Chains.png?itok=631sDDS7" width="624" height="325" alt="In 2021, supply chain sustainability is likely to be more important than ever." title="" /></a></div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/achieving-greater-supply-chain-transparency-through-digital-transformation">Achieving Greater Supply Chain Transparency Through Digital Transformation</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <h1>A Focus on the Value and Virtue of Supply Chains</h1> <p>After a historically disruptive year, Original Equipment Manufacturers (OEMs) are waking up to the fact that the measure of a supply chain is much greater than its landed costs. Meanwhile, consumers are more vocal than ever about the virtue of the companies from which they purchase. They want products, solutions, and supply chains to reflect their own ideals and aspirations related to sustainability, inclusion and fairness.&nbsp;</p> <p>In 2021, supply chain sustainability is likely to be more important than ever. As consumers become increasingly concerned with where things are made, the impact on the environment and the kind of companies they buy from, this will in turn lead brands to consider these issues when selecting their supply chain and manufacturing partners.&nbsp;</p> <p>According to &ldquo;<a href="https://hbr.org/2020/03/a-more-sustainable-supply-chain" target="_blank">A More Sustainable Supply Chain</a>,&rdquo; published by the Harvard Business Review, multinational corporations will ideally use a combination of approaches to encourage sustainable practices throughout their supply networks. A recent <a href="https://www.ibm.com/downloads/cas/EXK4XKX8#:~:text=Nearly%206%20in%2010%20consumers,this%20jumps%20to%2077%20percent." target="_blank">IBM and National Retail Federation study</a> found that &ldquo;nearly six in 10 consumers surveyed are willing to change their shopping habits to reduce environmental impact&rdquo; and &ldquo;nearly eight in 10 respondents indicated sustainability is important for them.&rdquo; While price still has the biggest impact on supply chain decisions, we may be getting closer to a demand tipping point in consumer behavior that will shift which types of products get made and where.&nbsp;</p> <h2>Design for End of Life</h2> <p>It is never too early in the product lifecycle to consider where that product might end up. Most products end up in landfills at their end of life and last for decades or even centuries. End-of-life considerations need to be designed into the product itself. While manufacturers can provide feedback to the designer, the product designer owns the specifications of the product and they must ask some important questions: Are the materials recyclable? Is the product designed for easy disassembly and repair?</p> <h2>Material Selection</h2> <p>Material selection is a huge part of building sustainability. Of course, the best materials are no materials. For all products, we need to evaluate every single part and every single feature and ask ourselves whether it is necessary or superfluous. Unnecessary parts translate into additional material usage and more carbon emissions.</p> <p>For the remaining design, recyclable materials are key to building with end of life in mind. Design teams need to ask themselves whether the materials they choose can be reground or melted down for reuse in another product. The motto remains reduce -&gt; reuse -&gt; recycle.</p> <h2>Process Selection</h2> <p>The manufacturing process itself is also important to consider. For example, in simple terms, additive processes like 3D printing create less waste than subtractive processes like CNC machining. But sustainability is rarely that simple, and things like energy used in production or the nature of a specific material could make a process that initially seems more sustainable actually less so.</p> <h2>Sourcing and the Supply Chain</h2> <p>What&rsquo;s more, the whole supply chain has to be considered, not just the directly visible part. Are the raw materials sustainably and responsibly mined or manufactured? How far, and by what method, have those raw materials been shipped? What impact are those materials having on local communities? Getting the whole sustainability picture together is a complex process.</p> <p>COVID-19 and global trade wars have forced companies to re-evaluate their sourcing strategies and, in many cases, shift to regional manufacturing closer to the point of consumption, ultimately reducing carbon emissions. Taking care to consider the supply chain and logistics is essential when considering the environmental impact of a product. In simple terms, shorter supply chains are likely to do less environmental damage.</p> <p>While arguments can be made for many different entities to bear the burden of sustainability, the reality is that today it falls to the consumer. Regulation, consumer sentiment and corporate CSR programs could all shift that dynamic over time.&nbsp;</p> <h2>The Value of Sustainability</h2> <p>Consumers care, and they should! We have only one planet and we need to be manufacturing and enjoying products that do not put that planet at risk. It seems highly likely that sustainability will play an increasingly important role in the future development of products, manufacturing ecosystems and of supply chains.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/original-equipment-manufacturers" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Original Equipment Manufacturers</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/sustainability" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Sustainability</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/csr-programs" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">CSR programs</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/covid-19" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">COVID-19</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="A Focus on the Value and Virtue of Supply Chains - Future of Sourcing" addthis:url="https://futureofsourcing.com/a-focus-on-the-value-and-virtue-of-supply-chains"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Wed, 24 Feb 2021 02:00:00 +0000 Dave Evans 1925 at https://futureofsourcing.com https://futureofsourcing.com/a-focus-on-the-value-and-virtue-of-supply-chains#comments