Chain of Thought

A Back-Alley Approach to Being Green

Last month we ran a news item saying that businesses' strategy to keep inventories lean was delaying the start of this year's peak shipping season. Today the Wall Street Journal reported that we may now see a ramp-up in production to make up for this conservative approach. The real validation for these trends will be how consumers respond to retailers opening their doors at midnight on Black Friday, the official opening of the Christmas shopping season. Will shoppers be stripping the shelves of the latest electronic gadgets?

I'm sure manufacturers in the high-tech/electronics industry are asking themselves the same thing. The logistics strategies they develop in the near term will tell us how they answered that question. Interestingly, the strategies of U.S. manufacturers may be quite different from those of the leading counterparts in Asia. According to an annual survey of this sector sponsored by UPS, senior-level decision makers at high-tech companies in the Asia Pacific region see sustainability initiatives as a key long-term business driver while U.S. companies put it way down on their list.

Sustainability was cited by 24 percent of the respondents and ranked above well-known issues such as cost and responsiveness.

“Sustainability-related findings indicate that companies in Asia are making an investment in corporate social responsibility,” said a UPS analysis released with the study results. “Survey results reveal that projecting a better corporate image is the top driver for companies to engage in sustainable practices. Interestingly, while sustainability is a growing priority in Asia, U.S. companies ranked it as their lowest priority in 2010 with only 19 percent of survey respondents identifying it as a top issue driving change.”

One caveat: while sustainability seems to be the top supply chain driver of change, cost reduction is the No. 1 business priority for companies in Asia, especially as costs increase within the region. The majority (63 percent) of survey respondents identified cost reduction as the top business priority for the next 18 months, and logistics will be the preferred tool for bringing it about.

"Shifts in sourcing strategies will impact high-tech supply chains throughout the Asia Pacific region as well as those in North America, creating long-term implications for the industry on a global level," said Carla Huang, UPS director of marketing, high-tech/electronics segment. "In an industry where having a flexible and efficient supply chain is essential for meeting rapidly changing customer demands, high-tech companies will need to plan ahead to ensure they have logistics strategies in place that will give them a competitive advantage in a fast-evolving global market."

That means that while these companies focus on reducing costs, they'd better not sacrifice customer service. In fact, service levels accounted for the most frequent change made over the last two years (63 percent) and the change that most companies plan to make in the next two years (67 percent), according to UPS. Balancing cost reduction against higher service levels is the big logistics challenge. Seventy-one percent of the companies responding ranked "better balance of cost and efficiencies with customer service" as a top supply chain priority over the next three to five years.

One of the biggest costs for any company is transportation. It's not going down any time soon, so can these companies—at least the ones that identified sustainability as a key business driver—combine their efforts to be green with their efforts to reduce costs? That remains to be seen. However, I saw a recent NPR report that proved this isn't just a concern of corporate America. Thieves have taken note of these big-business concerns. And what precious commodity are entrepreneurial criminals trying to leverage as a result?

Restaurant grease. Recyclers are finding ways to process the liquid leftovers from our high-fat diets into fuel for vehicles. This has created a market demand that low-rent criminals are trying to supply by ripping off barrels of the stuff that restaurants leave in their back alleys for collection. These thieves then sell it to a renderer or recycler for processing. After the grease has been processed, brokers buy it from renderers and sell it on the commodities market, where it can eventually end up in the transportation sector.

I'm not applauding this trafficking in trans-fats, but it does prove how the desires for profit and a clean environment can coexist.

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