© Copyright E2open, Inc. 2010. Agenda Framing the Challenge The Green Context of Supply Chain Operations The Need for a Public/Private Partnership 11

© Copyright E2open, Inc. 2010

Thoughts on Carbon as the New MudaThoughts on Carbon as the New Muda


Agenda

Framing the ChallengeFraming the Challenge

The Green Context of Supply Chain OperationsThe Green Context of Supply Chain Operations

The Need for a Public/Private PartnershipThe Need for a Public/Private Partnership

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Case Studies and Best PracticesCase Studies and Best Practices4444


The Need for a Paradigm ShiftAnd Why It Has Not Taken Place Yet!

The ImperativeThe Imperative The RealityThe Reality

TheQuestion / Dilemma

TheQuestion / Dilemma Can Green & Lean Co-Exist?Can Green & Lean Co-Exist?Can Green & Lean Co-Exist?Can Green & Lean Co-Exist?

Tell Me How You’ll Measure Me, I Will Tell You How I Will Behave!

Tell Me How You’ll Measure Me, I Will Tell You How I Will Behave!The Interpretation

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Why is Supply Chain Management a Good Starting Point?

Source – http://www.eia.doe.gov/emeu/aer/pdf/aer.pdf


Unfortunately, the Green SCM Revolution Remains Elusive

Fortune 500Fortune 500 2222

# of Fortune 500 companies that have initiated some Green

SCM strategy

# of Fortune 500 companies that have approached this with their trading partners

0

JANUARY 2010

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Achieving this Paradigm ShiftRequires a Perception Change of CO2 as a Decision Variable

Defects Inventory Waiting Excess Motion

Over Production Over Processing Transportation CO2 / GHGCO2 / GHG

1 2 3 4

5 6 7 88

Carbon in the Business Environment Needs to be De-MystifiedCarbon in the Business Environment Needs to be De-Mystified

Introducing Carbon as the 8th MudaIntroducing Carbon as the 8th Muda

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There Are Some Good Signs


Agenda




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Where is the Carbon in the Supply Chain?

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Everywhere! Supply Chain activities create significant carbon emissions, making supply chain an important focus for clients

seeking to reduce their carbon footprintSuppliers &

ManufacturersCustomers &

Channels

• Design for the Environment

• Carbon footprint thinking throughout product lifecycle design

• Design for the Environment

• Carbon footprint thinking throughout product lifecycle design

• How can the total network be optimized considering service, cost, “green” tradeoffs

• What CO2 impact is there from various inventory concepts & planning methodologies

• How can the total network be optimized considering service, cost, “green” tradeoffs

• What CO2 impact is there from various inventory concepts & planning methodologies

• How can we best measure a supplier’s carbon impact (product, packaging, upstream logistics) and ultimately compliance with carbon reduction requirement?

• How should we evaluate carbon offsets?

• How can we best measure a supplier’s carbon impact (product, packaging, upstream logistics) and ultimately compliance with carbon reduction requirement?

• How should we evaluate carbon offsets?

• What operations strategy (facility location, operating model) provides the best trade-off between cost, service, carbon?

• Is there a role for sustainable factory / facility mgmt?

• What operations strategy (facility location, operating model) provides the best trade-off between cost, service, carbon?

• Is there a role for sustainable factory / facility mgmt?

• What distribution network strategy (facility locations, sizes, transport modes) provides the best tradeoff of cost, service and carbon?

• How can packaging be reduced and recycled?

• What distribution network strategy (facility locations, sizes, transport modes) provides the best tradeoff of cost, service and carbon?

• How can packaging be reduced and recycled?

• How can field service operations reduce carbon footprint with better routing and parts inventory tracking?

• Feedback loop to engineering to reduce impact

• Various strategies to reduce impact throughout lifecycle

• How can field service operations reduce carbon footprint with better routing and parts inventory tracking?

• Feedback loop to engineering to reduce impact

• Various strategies to reduce impact throughout lifecycle

Flows: Product, Process, Information, Cash

SC StrategySC StrategySC StrategySC Strategy ProcurementProcurementProcurementProcurement LogisticsLogisticsLogisticsLogisticsIntegrated OpsIntegrated OpsIntegrated OpsIntegrated Ops Integrated OpsIntegrated OpsIntegrated OpsIntegrated Ops

PlanPlanPlanPlan SourceSourceSourceSource MakeMakeMakeMake DeliverDeliverDeliverDeliverDesignDesignDesignDesign Service & Service & End-of-LifeEnd-of-LifeService & Service &

End-of-LifeEnd-of-Life

Asset Management

Finance

Sustainable facilities management: Green building & renewable energy; carbon footprint asset management; Asset utilization (Real-time data on energy usage; Carbon dashboard)

Paperwork Reduction; Environmental Cost Accounting; Environmental Tax Benefits Tracking

PLMPLMPLMPLM


Carbon Distribution ModelCarbon Analysis needs to be seen from a total Product Lifecycle View

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Design &Sourcing

Inbound Logistics

InternalOperations

OutboundLogistics

Service and Use

Time

SCM Carbon Distribution ModelPhased Product Lifecycle View

Our goal can be formulated rather simply:Lower the Outer Edge


Sustainable Supplier Strategy Development

Volume

DistanceCarbon Impact

Unit Cost

Mexico

China

As-IsAs-Is

To-BeTo-Be

New “Green” Value Equation = Actual Cost (Production + Transportation) + Corresponding Carbon Cost

ABC, IncABC, Inc

Classic Value Equation = Least Production Cost despite the Transportation Cost

ABC

ABC

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The Need to Embrace Carbon as a New Decision Variable


The 3 Primary Supply Chain Variables…taken from a Green Perspective

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John D.C. LittleInstitute Professor

IInventory

LLead-Time

TThroughput

Supp

liers

Supp

liers

Customers

Customers

Lead TimeLead Time

TTRaw MaterialsRaw Materials Component

SuppliersComponent

SuppliersEMS PartnersEMS Partners

OEM’s / Brand Owners

OEM’s / Brand Owners Warehouse(s)Warehouse(s)

RetailersRetailers

Your CompanyYour Company

• Cost and Environmental concerns are likely to create a trend for “supply chain collapsing / localization”• Incentives need to be put in place to encourage creation of local and sustainable supply chain networks

ObservationsObservations


A Value Chain Network View

Carbon Reduction Needs to be a Value Chain Affair

PrevailingView

Our View

Leverage ++––

What is a fabless company Carbon Footprint?What is its environmental responsibility?

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Noise in the Supply Chain is Neither Lean nor GreenThe Carbon Reverse Bullwhip Effect

Extended Supply Chain ViewExtended Supply Chain ViewE

nd C

ustom

ers

Suppliers RetailersPlants

Caron Buildup Process

Classic Bullwhip

Effect

True Customer Demand

InventoryProduced

Amount of Inventory

Inefficiencies

CarbonProduced

Amount of Carbon

Inefficiencies

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Value of a Network Approach

BOM AnalysisTier2+ Partner Selection

Channel / Distribution

Reverse Operations

Supply• Substitutable

components• Sourcing choices• Location choices

Inventory policy• Safety stocks• Lot sizes• Replenishment

VMI/VMR

Packaging• Package size

options• Package recycling

options• Corrugated box

Energy• Embodied Energy• GHG Regulatory $

Impact

Transportation• Modes• Shipment

frequency• Load consolidation• Carrier routing

Processing• Manufacturing

process• Quality control

Processing• Repair /

refurbishment process

• Shipment process• Quality control

Processing• Order fulfillment• Shipment process• QC process• Organizational

management process


Provide performance KPI’s to customers

Provide performance KPI’s to customers

Associate compliance to Orders & Inventory

Associate compliance to Orders & Inventory

Automate Compliance Data Collection

Automate Compliance Data Collection

Sustainability & SC Integration

Sustainability & SC Integration

Implementing a Network Solution

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The Need for a Public / Private Sectors PartnershipRegulatory Setups Under Consideration

Your Company3PL / 4PL3PL / 4PL

CustomerCustomerTier 1 Supplier(e.g. CM, EMS)Tier 1 Supplier(e.g. CM, EMS)Tier 2 Supplier

(Components)Tier 2 Supplier(Components)

4 Scenarios

Supply Chain Generated Carbon Footprint

Penalty Zone

CO2

Strict Cap

Supply Chain Carbon Quota

Tax Zone

CO2 CO2 CO2

ABC, Inc. Actual

ABC, Inc. Quota

ABC, Inc. CO2 Savings

XYZ, Inc. Quota

XYZ, Inc. Actual

XYZ, Inc. Excess CO2

Trade Transaction

XYZ, Inc. Quota

XYZ, Inc. Actual

XYZ, Inc. Excess CO2

A – Strict Cap B – Carbon Tax C – Cap & Trade D – CO2 Offsets


Some of the Key Questions that Need a Global Approach

CCXCCXCCXCCX

ECXECX

APAP

OCEOCE

Observation # 1

• Proliferation of CO2 trading platforms will delay properly tackling the problem

• Carbon trading should be approached as a global commodity

Observation # 2

• Local and Regional Models need to be encouraged (less carbon footprint and less inventory as a result of reduced lead times)

Local Model

RegionalModel

GlobalModel


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Epson’s Green Factory 2010 Project will reduce production energy consumption through scalable minimum Fabs

Sharp will upgrade all their plants into green factories via their 10-step green factory concept

Panasonic aims for zero emission clean factories

Ricoh will reduce CO2 emissions by 12%, far exceeding the pace agreed to in the Kyoto Protocol

Fujitsu’s Green Policy 21 Themes include: Green Factory, Green Management, Green Products, Green Solutions, Green Earth

Mitsubishi Electric uses their procurement and green factory policies to make a clear difference on the environment by eliminating the use of hazardous substances through the product lifecycle

Canon has established an eco-factory certification system and is expanding this globally

Top 5 Basic Sustainability Categories for Manufacturers:

● Material selection

● Sourcing policies

● Resource consumption and emissions

● End-of-life postponement and management

● Customer demand and fulfillment

Source: “Making Sustainability Real”, IDC Company #MI211085, March 2008

Several Leading Japanese Companies seem to be taking the Green Challenge quite seriously

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Carbon labeling (Tesco, Timberland, Patagonia, Coca-Cola, Walkers, Coors, Wal-Mart)

Standardization Will be a Key EnablerBut Challenges Remain…


Concurrently, Software Solutions are Starting to Be Developed – for Both Monitoring & Optimization


12 Ideas to Make Your Supply Chain Greener

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Exploring the Ideas

Redesign the product Reconfigure Manufacturing Shift to Green Suppliers

Shorten Distances Alter service-level agreements Shrink packaging

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Exploring the Ideas (continued)

Plan for reverse supply chain activity Consolidate shipments Plan smaller routes

Start now: define a green strategyTake a life-cycle viewCoordinate with partners

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Network Optimization Strategy

Market Demand Potential DC Locations

Classic Optimization Approach

Minimize Total Cost – select DC’s so as to minimize the total DC and transportation

costs of meeting demands

Green Optimization Approach

Minimize CO2 Emissions – objective function changes from minimization of total cost to

minimization of total CO2 emissions (equivalently, total miles traveled)

Demand Volume DC Location

Vs.

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Case Study – Network OptimizationConcurrently pursuing ‘Lean’ & ‘Green’ Objectives

100 DC’s100 DC’s100 DC’s100 DC’s 40 DC’s40 DC’s40 DC’s40 DC’s

Logistics $’s

CO2 Emissions

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About the Presenter

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Mondher Ben-Hamida, CPIM, CSCPVice President – StrategyE2open (www.e2open.com)

EducationEducationEducationEducation1997

1995

Master of Science in Industrial Engineering and Operations Research, University of Minnesota, Minneapolis, MN, USA.

Master of Engineering in Industrial Engineering, ENIT, Tunis, Tunisia

LanguagesLanguagesLanguagesLanguages• English• French• Italian• Arabic

FluentFluentFluentFluent

SpecializationSpecializationSpecializationSpecialization• Supply Chain Strategy• Global Issues in SCM• Enterprise Sustainability• Advanced Planning Tools

Experience OverviewExperience OverviewExperience OverviewExperience OverviewMondher is an Industrial Engineer and a Global Supply Chain Strategist with over 14 years of global management and manufacturing consulting experience. Primary focus has been the design and implementation of Supply Chain Management strategies and tools, Advanced Planning and Scheduling solutions and Theory-Of-Constraints initiatives. Mondher is a frequent speaker at various supply chain events (APICS, SCC, AMR, etc.) and has published a number of articles on various topics ranging from supply chain strategy to reducing the environmental impact of logistics operations. He is also a co-inventor of a supply chain carbon modeling tool (patent pending). Mondher is a universal citizen and his passion for solving global supply chain problems along with his fluency in 4 languages has led him to operate in five continents

Sample EngagementsSample EngagementsSample EngagementsSample Engagements• Helped a leading Fortune 500 with its first Green Logistics strategic initiative which led to the

development of a carbon modeling software• Helped one of the world’s largest fabless companies (wireless phone chip segment) define and

implement a comprehensive supply chain collaboration model (VMI, Consignment and Schedule Sharing) with three of its most strategic customers on 3 continents.

• Led a major supply chain strategy definition for one of Europe’s largest industrial conglomerates. Activities included assessing state of current operations model, compiling and documenting appropriate best practices and devising a novel supply chain vision that is customer centric (secured agreement on a new market segmentation) and emphasizes the agreed upon core competency (fulfillment).

• Led a major supply chain strategy redesign effort at a leading QSR company. This executive level initiative assessed competitive trends and provided a global vision for the future supply chain integration model along with a ‘playbook’ of practical steps to achieve the vision

• Served as the Make Best Practices Lead and co-author of SCOR 7.0

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© Copyright E2open, Inc. 2010. Agenda Framing the Challenge The Green Context of Supply Chain Operations The Need for a Public/Private Partnership 11