Chapter 17 • Sustainability and the Supply Chain 559

CASE STUDY
Sustainable Supply Chains—Indian Efforts
Sustainable supply chains are those that ensure environ- in India and evidence of the same is to be seen in the
mental compliances, fulfill their social responsibilities, increasing adoption of micro and drip irrigation. In
and adopt good economic practices. While there would Punjab, nearly 15,000 farmers have taken to micro irriga-
be innumerable ways in which sustainability of supply tion. Central and state governments together provide
chains can be ensured, conservation of essential resources 75 percent subsidy to farmers willing to set up drip or
would certainly be among the top concerns in realizing sprinkler systems under the Centre Sector Scheme of
these purposes. In the existing global environment where Micro Irrigation (CSSMI). In another instance two hun-
water conservation has become an imperative necessity dred smallholder farmers, involved in growing gherkins
for survival, every measure to minimize wastage of water have adopted drip irrigation that will boost their yields
from the lowest to the highest levels of consumers is to and cut water use. Unilever funded initial trials for the
be seen as a step towards sustainability. The message system, and now supports it financially and by means of
seems to have reached both large and small-scale farmers technical assistance.

CASE STUDY
HUL—A Sustainable Supply Chain
Along with supporting a sustainable supply chain prac- At the grass root level, its Project Shakti has helped
tices Hindustan Unilever (HUL) has also been successful create livelihoods for rural women and improved their
in sustaining its own long standing and best known sup- living standards besides extending its reach and penetra-
ply chains in India. This has been possible its popular tion into the rural markets substantially.
and competitively priced quality household products Some of the initiatives that have helped HUL to
available almost in every part of the country. attain and retain leadership position—besides its cost
Building on the core country advantage and on its driven strategies and lean and agile value chain—are:
own well-established leadership position, it has developed
1. Continuous organizational restructuring
a viable and highly competitive sourcing base for Unilever
2. Steady implementation of cost cutting practices
on a global scale in home and personal care, foods and
over the years
beverages categories of products and emerged as the global
3. Focus on fixed asset productivity
marketing arm for select licensed Unilever brands.
4. Competitive procurement of raw material
HUL is known for its high customer-service level
5. Minimisation of total working capital
besides its agility and responsiveness thorough out the
6. Improved cash flows through lesser number of
supply chain. Its organizational structure is tailored to
debtors days, increased number of creditors days
support its best supply chain practices which have led to
and decreased number of stock days
its sustainable growth.
Some of the best practices which can be seen in its It has improved its ability to compete through a
strategy, planning, and operation are: lean and agile value chain based on better demand fore-
• A lean organization casting, higher labor flexibility, optimal deployment of
• Speed of response and agility inventory throughout its distribution networks and stan-
• Partnership with suppliers, network with 3500 dis- dardized manufacturing and process inputs.
tributor points Their Project Shakti started in 2001, has already
• Enabling proactive and collaborative forecasting been extended to about 80,000 villages in 15 states.
which helps in avoiding stock out losses. Shakti has more than 25,000 women entrepreneurs in its
fold till date. A typical Shakti entrepreneur earns a sus-
All this factors have led to Unilever Sustainable tainable income of about ` 700–1,000 per month, which
Living Plan is double their average household income. Shakti is thus
560 Chapter 17 • Sustainability and the Supply Chain

creating opportunities for rural women to live in volatility, network redesign, direct deliveries, and prod-
improved conditions and with dignity and also improv- uct formulation conceived and strategized by its vision-
ing the overall standard of living in their families ary leadership.
HUL’s profitability has improved through imple-
mentation of contemporary IT tools to manage demand

CASE STUDY
Future of Supply Chains Fuelling the T&L Sector
We conclude by reproducing with the kind permission of Oil price volatility is a significant risk for the sector, but
Price Waterhouse Coopers, the Executive Summary of soaring oil prices are unlikely to be the primary driver
their Study Report on “How will supply chains evolve in for fundamental change. Alternative energy may take up
an energy-constrained, low-carbon world?”. This study some of the slack engendered by diminishing oil
drew upon a rigorous mix of desk research and the results reserves; while the experts on our panel do not believe a
of a Real Time Delphi Survey “Transportation & Logistics major energy turnaround will be achieved by 2030, they
2030”, Volume 1, involving 48 selected subject matter do expect to see notable growth in renewables. New reg-
experts from 20 countries around the world. The findings ulation and ambitious targets being set in a growing
are relevant as these present a peep into the future shape number of countries around the globe may provide the
of supply chains to come and may help strategic plan- underpinning necessary to drive significant technologi-
ning of businesses and supply chains both at the domes- cal change in this area, although there is substantial con-
tic and global levels. troversy around what direction developments will take
and how rapidly advances can be achieved. Oil prices
Executive Summary will increase and so will the use of alternative fuels;
How will supply chains evolve in an energy-constrained, however, neither are likely to revolutionise T&L but
low carbon world? For one thing, they will go much fur- they need to track, document, and allocate the cost for
ther in the direction of ensuring that the cost of emis- emission just may. One area where there is consensus
sions is paid by those who reap the benefits, spurred not among panelists, however, is around carbon emissions.
only by regulation, but also by changes in consumer We see reducing emissions as posing a greater challenge
behavior. Supply chains will benefit from improvements to T&L companies over the next twenty years than
in technology which enable significant real-time con- obtaining a sufficient supply of energy. Our panel antici-
trol, allowing greater flexibility. And although in some pates that by 2030, systems will be in place to ensure
sectors regional supply chains are likely to grow in that the cost of carbon is allocated to the causer; further,
importance, overall the supply chain of 2030 will remain most of the experts we surveyed see this development as
primarily a complex global system—but one where a positive one for the sector. Whether or not they see it as
transport costs and emissions are increasingly key con- a business opportunity, logistics providers will most
straining factors. These are some of the key takeaways likely need to track, document and disclose their caused
of the first release of our T&L 2030 series. This study CO2 emissions in the future. Tracking carbon emissions
conducted by Pricewaterhouse Coopers and the Supply may only be the first step, though. In the more distant
Chain Management Institute is based on a multifaceted future, logistics service providers will need to document
analysis of the ramifications of energy scarcity for the all types of emissions, such as noise and nitrogen oxide,
transportation and logistics industry. The methodology in order to measure the full environmental impact of
draws upon a rigorous mix of desk research and the their activities over the long-term. The need for a sus-
results of a Real Time Delphi survey among 48 selected tainable supply chain, which tracks and documents
experts from 20 countries around the world. Interviews emissions, has numerous ramifications. On the company
with two top industry CEOs provide an additional prac- level, introducing mobility accounts may provide one
tical perspective. way to reduce the carbon footprint of employees. Com-
 Chapter 17 • Sustainability and the Supply Chain 561

panies may also be able to monitor total emissions, and likely to live in environments which more fully integrate
eventually manage these in such a way to reduce the car- work, leisure and everyday activities, reducing some of
bon footprint of the organisation and by extension its their need for transport on a day-to-day basis. Business
customers. One of the first steps will be providing infor- and leisure travel may also decline, as communication
mation on the carbon emissions generated during the technologies improve and the population ages. A look
logistics process; this may prove critical to customers if forward suggests that some companies may wish to take
“carbon tickers” documenting the sustainability of indi- a close look at their business models and consider how
vidual products proliferate, particularly for consumer they position the company for the long-term. In some
goods. Companies with significant, documentable industries and regions, “local patriots” may be able to
expertise will likely be rewarded by the financial mar- capitalise on increasing regionalisation of supply chains.
kets, as they will achieve higher “sustainability ratings” Increasing urbanisation may give rise to home delivery
once external measures become popular. They may also specialists able to negotiate the congested last mile in
be able to offer customers “green credits” for more sus- urban environments. Logistics service providers may
tainable transportation options, or share their own exper- also want to consider whether to position themselves as
tise as eco-consultants. low cost logistics providers, where customers can select
just the services they need, or as high-technology provid-
How consumers may Reshuffle the Cards for T&L ers offering highly sophisticated real-time control of the
Operators flow of goods.
While current and future regulations will certainly have Transport Modes—More Automated, but
an important impact on the industry, some of the push Marginal Modal Shift
towards ensuring sustainable supply chains is likely to
come directly from the end-user. Consumers are the pri- How products get from the assembly line to the con-
mary users of many means of transport, and their pur- sumer is also likely to change. The heated debate around
chasing decisions have a strong influence on the balance between different transport modes looks
manufacturing supply chains. Individual mobility differs unlikely to cool. Logistics service providers will have to
significantly between developed and developing coun- cope with a different transport architecture, as transpor-
tries. While in developed countries, we observe a rethink- tation networks will need to change in response to these
ing of individual mobility patterns with respect to the ultra-large transport modes. More bundling efforts will
associated carbon footprint, it seems likely that in devel- be required, and the modal split may also be altered. Fur-
oping and emerging countries people will become more ther advances will become necessary as infrastructure
mobile, rather than less so, over the next decades. Our bottlenecks, such as congestion in megacities, impede
panelists assume that more eco-aware consumers will growth. Government-mandated local monopolies look
show a greater preference for locally produced products. unlikely, so companies may need to look for other solu-
They will also continue to demand greater control over 8 tions. Collaboration is also critical to maintaining flexi-
Transportation & Logistics 2030 the logistics process, bility; T&L operators may profit from developing
and will more actively intervene in the delivery process research projects along the supply chain, or sharing
of the goods they do order. This will increase the com- resources with competitors. The latter option, known as
plexity of logistics processes, making necessary a highly “co-opetition”, could have cost-saving potentials—
sophisticated technical infrastructure, which may require options could include sharing warehousing, transport
investments in hard and software as well as skilled work- networks, or last mile delivery solutions in crowded
force. This may sometimes hinder efficiency, so logistics urban centers. Greater use of autonomous and self-con-
providers will need to make the carbon footprint of vari- trolled systems may provide some other options.
ous choices transparent to their customers so that they
can make a contribution to the sustainability of their con- Supply Chains Achieve Greater Efficiency
sumption patterns in this area as well. Patterns of mobil- Technological advances will also underpin some devel-
ity vary in different regions; however, concerns about opments in the supply chain. In particular, supply chains
cost and carbon footprints will spur individuals to reduce will continue to become more efficient through the
holiday and business travel and consume more locally development of continuous real-time control of the flow
produced goods. Greater numbers of consumers are of goods. Real-time control systems enable logistics
562 Chapter 17 • Sustainability and the Supply Chain

service providers and their customers to monitor and Both interviews highlight the importance of the role of
control many business processes through Internet inter- collaboration, be it with governments, or with custom-
faces. Some of our experts also see opportunities for cli- ers, to achieve environmental goals. Harry Hohmeister,
ent intervention in the logistics process stemming from CEO of SWISS explains how his company is doing their
the so-called “Ubiquitous computing” being an impor- part to reduce carbon emissions, for example by updat-
tant part of real-time control and of the entire logistics ing their fleet of aircraft. He calls for governments to do
future. Supply Chain design, including the location of their part as well in ensuring that the aviation industry is
production sites, will need to take energy and emission able to fly as efficiently as possible. CHEP EMEA’s Tom
costs related to logistics processes into account. There Gorman discusses how his company collaborates with
will be no reverse globalization, but many supply net- customers, for example by offering Total Pallet Manage-
works will be established at regional level. Unfortu- ment on premises to reduce transportation costs and the
nately it won’t result in supply chains that are resistant carbon footprint, helping them achieve greater sustain-
to external shocks. Implementing an existing plan is ability. The report also includes a section “extreme sce-
generally far more effective than scrambling to react to narios” where we encourage a broader perspective by
a crisis, so devising scenarios around various contingen- showcasing how two of these areas (the oil price and
cies makes good sense. Transportation costs will be a consumer buying behaviour) may interact in four possi-
predominant criterion in determining where to set up ble visions of the future. And what is in it for transporta-
production sites, and the minimisation of energy con- tion & logistics operators? Some 20 promising future
sumption will be a paramount criterion in overall supply opportunities for transportation and logistics operators
chain design, rather than cost efficiency and speed. have been identified and showcased in our “opportunity
These trends will not result in purely local supply radar” based on the findings of the Delphi survey.
chains, but one point seems clear—most companies will
look to reduce energy consumption and the cost thereof. Prospects
Logistics service providers will need to balance energy Logistics companies should bear in mind for the years to
efficiency together with speed to support supply chains come that logistics networks will change, sometimes
which take into account both factors, as well as other dramatically, as their environments change. Climate
cost concerns such as access to raw materials and labor. change and CO2 emissions will continue to gain urgency
Logistics service providers should observe how the and consumers are likely to make more sustainable pur-
sourcing strategies of manufacturing companies evolve chase decisions. New ways of doing business such as co-
over the years. Whatever strategies manufacturers use to opetition and bundling co-operations will help increase
manage their sourcing costs, it is clear that improving efficiency, and completely new areas of operation such
efficiency and reducing the cost of global sourcing by as fabbing supply chains may emerge. These develop-
reconsidering the location of production sites—whether ments offer new opportunities for logistics companies
from emerging markets like China, Vietnam or Central that are informed about upcoming events and flexible
and Eastern Europe or developed markets—will be a enough to adapt their businesses accordingly. Scenario
key challenge to achieving global competitiveness in the planning and management strategies may provide an
future. edge in keeping one step ahead of the pack as the world
in general, and the T&L industry along with it, meet the
Broadening the Perspective
challenges of the future.*
Interviews from two of the sector’s top CEOs suggest
some of the ways today’s executives are already thinking
about increasing sustainability to prepare for the future. *Text reproduced with permission from Price Waterhouse Coopers