apics-pwc joint research study on supply chain sustainability...• report findings of the first...

10/21/2013

1

Sustainability Delivered —

Interpreting and Executing the

Vision for Tangible Benefits

APICS-PwC Joint Research

Study on Supply Chain

Sustainability:

Panel

Rocco P.

Ciccolini

PwC

Operations

Advisory

Manager

Nic

Delaye

PwC

Sustainable

Business

Solutions

Director

Jonathan

Thatcher

APICS

Director of

Research

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Introduction & today’s session objectives

In today’s session, we will:

• Share our perspective on supply chain sustainability (SCS)

• Provide real-life examples of SCS in action

• Report findings of the first phase of a multi-series APICS-PwC joint

research study aimed at exploring how supply chain professionals

interpret and deliver on their company’s sustainability vision

• Provide an interactive forum for you to share your perspectives

• Offer actionable next steps to drive SCS initiatives in your role

3

Corporate sustainability is about improving the societal impact of an

organization in a way that is meaningful, measurable, and makes

business sense and the supply chain is a key aspect

Supply Chain Sustainability

Overview

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Companies are facing multiple supply chain

sustainability challenges…

Environmental

• Resource scarcity and price volatility

• Energy/greenhouse gases

• Hazardous materials/waste

• Water quality/quantity

• Weather volatility & other climate risks

• Biodiversity impacts

• Transportation/logistics/ packaging

Social

• Forced labor/ child labor/ trafficking

• Workplace health & safety

• Freedom of association

• Overtime, wages & benefits

• Discrimination, worker diversity

Economic

• Job creation

• Use of local workforce and suppliers

• Fair pricing

• Supplier diversity

• Increasing consumer income disparity

• Chronic labor market imbalance

Ethical

• Conflict minerals

• Bribery and corruption

• Intellectual property

• Privacy and confidentially

• Misrepresentation of product

5

2%

5%

6%

11%

12%

20%

22%

22%

26%

28%

34%

38%

41%

47%

53%

Cyber attacks

Telecommunications outages

Other

Counterfeiting

Unplanned IT disruptions

Change in technology

Geopolitical instability

Supplier/partner bankruptcy

Rising labor costs

Raw material scarcity

Environmental catastrophes

Energy/fuel prices volatility

Market changes

Currency fluctuations

Raw material price fluctuation

…many of which they see as the greatest risks to

the supply chain

6

Source: “PwC and the MIT Forum for Supply Chain Innovation,” 2013

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Not surprisingly, supply chain sustainability

challenges are resulting in greater executive

scrutiny…

Source: PwC’s 16th Annual Global CEO Survey, 2013

7

plan to

increase

investment in

natural

resources over

the next three

years

are concerned

about energy and

raw material

costs and say

energy costs are a

threat to growth

42%of US CEOs

are not satisfied

with their firm's

framework for

ethical behavior

50%of US CEOs

35%of developed

market CEOs

52%of emerging

market CEOs

…and are causing sustainability to become the

fastest growing supply chain trend

8

Source: “PwC Global Supply Chain Survey 2013”

+34%

+31%+26%

+19%

+19%

+18%

+15%+14%

+14%

+12%

+10%+6%

2015 vs 2013 growth

0% 25% 50% 75% 100%

Reducing total SC cost

Managing profitability

Responding to regulatory requirements

Meeting customer requirements

Preparing for volume flexibility

Ensuring supplier performance

Responding to competitive pressure

Acquiring/developing talent

Supporting emerging market demand

Automate and increase transparency

Managing SC security and risk

Making supply chain more sustainable

Critical/Moderate in 2013Same Importance/Increase in Importance by 2015

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Supply chain sustainability requires a multifaceted

approach

Design & Plan Source Make Deliver Use & Return

Environmental Practices

Economic Practices

Ethical Practices

Social Practices

• Supply chain sustainability minimizes risk, reduces costs and drives

growth through positive environmental, social, economic and ethical

practices

9

Manage impacts of owned, upstream and downstream operations on

living and non-living natural systems, including ecosystems, land, air,

and water.


economic conditions of stakeholders and on economic systems at local,

national, and global levels.


social systems, including labor practices, human rights, society, and

product responsibility.


applicable laws, regulations, and moral systems.


Research Study

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2012 APICS Sustainability Research Summary

Key Takeaways:

Maturity in Practice

11

53%

Said employer

sustainability history is

unknown or less than

5 years old

62%Said sustainability risks are

creating more supply

chain complexity or cost

57%

Could not quickly determine

relative sustainability

performance of major

supply chain partners

Despite an increase in sustainability maturity for supply chains from 2011, responses revealed several areas for growth opportunities:

• Gaps persist between senior management and supply chain and operations management

• Practical support is sometimes missing

• Risks and challenges remain

Why do these

challenges continue?

2013 APICS-PwC Joint Sustainability Research Study

• Intrigued by the results of last year’s supply chain

sustainability study, this year’s study was designed to

examine the following supply chain sustainability factors:

– Challenges impeding wide-spread implementation

– Perspective and commitment differences between

different management levels

– Existence and pervasiveness of messaging, training, and

metrics

– Differentiating factors that led to tangible business value

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Survey demographics spanned multiple leadership

levels, company sizes, and industries

13

9%

9%

48%

34% Executive/Senior Leadership

Director

Manager

Asst. Manager or Below

6%7%

17%

23%

24%

8%10,000-24,999

5,000-9,999

1,000-4,999

250-999

25-249

Fewer than 25

• No single industry

represented more than

13% of respondents

• Respondents’ roles also

varied, including:

engineering, planning,

production, sourcing, and

warehousing. No one

group represented more

than 21%

• Over 40% of respondents

had direct responsibility

for managing supply

chain initiatives

• No single industry

represented more than

13% of respondents

• Respondents’ roles also

varied, including:

engineering, planning,

production, sourcing, and

warehousing. No one

group represented more

than 21%

• Over 40% of respondents

had direct responsibility

for managing supply

chain initiatives


Research Study: Barriers and Voice of the Practitioner

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Top challenges encountered with regard to

implementing supply chain sustainability initiatives

Ranked as the #1 obstacle to supply

chain sustainability

“Leadership does not provide the mandate,

incentives, and resources to turn

sustainable strategies into action.”

Generally marked as a challenge by

larger ($1bn+) companies

“The impact on shareholder value is not

measurable”

Respondents were less likely to

indicate an increase in supply chain

sustainability focus for the next 3 years

“Our customers are not asking for it”

The clearer a company’s strategy and

goals are, the more likely the company

achieves value from sustainability

“There is significant confusion about the

scope and company goals on sustainable

supply chain”

Respondents indicated that ethics and

compliance are the major

sustainability drivers

“Compliance drives the majority of actions”

15

Question: Check all the applicable challenges within your organization, then rank the top three

challenges with regard to implementing sustainable supply chain initiatives. (N=109)


Research Study: Management Level Perspective Differences, Messaging &

Metrics

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Very supportive leadership

Supportive leadership

Neutral leadership

Unsupportive leadership

Don’t know

42%

48%

10%

0%

28%

42%

23%

3%4%

• 90% of Executives and Directors say that they are supportive of staff ideas

• 26% of Managers and Assistant Managers say that their leadership is neutral or

unsupportive of staff ideas

Executive & Director Manager & Below

Executives/directors say they are enthusiastic about

staff ideas towards sustainability, but managers and

below see it differently

17

(N=29) (N=114)

Strategy does not exist

General discussion exists, but the corporate

strategic approach is not documented

Strategy does exist, but the plan is not

communicated to all levels of the organization

Strategy exists and is fully communicated

across the organization

• More managers say that an SCS strategy does not exist at their companies

• Almost half of respondents, regardless of level, don't have a documented SCS

strategy


The perceived existence and communication of

sustainability strategy differs between levels

18

(N=20) (N=85)

21%

34%

28%

17%

5%

40%

25%

30%

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We have no measurement or tracking in place

for supply chain sustainability initiatives

We have specific metrics and goals for

individual supply chain sustainability initiatives,

and they are measured periodically

We have an aggregation of functional supply

chain sustainability initiatives only, which have

associated targets to meet

Sustainable supply chain initiatives are

measured functionally and built into a

company-wide scorecard

• Unlike Managers & below, Executives believe their company has specific metrics

and goals – confirming that SCS plans are poorly communicated and monitored

• Additionally, managers have little measurement or tracking mechanisms in

place to handle sustainability initiatives


Executives/Directors believe there are more metrics

and goals in place than staff below them

19

(N=20) (N=85)

15%

45%

20%

20%

45%

25%

14%

16%

We do not receive sustainable-specific training

or education

We are provided passive training and

education through company website, informal

communications

We are provided general training and

education on sustainable supply chain

concepts and how they can impact our

function

We are provided tangible, job-specific training

and education which should improve our

performance

• Executives have exposure to additional sustainability education, but in general,

all levels feel that education is inadequate

• Other questions show that all levels feel that their companies do not provide

sufficient budget and incentives for SCS initiatives


There is a pervasive feeling that education and

training is inadequate

20

(N=20) (N=85)

25%

40%

25%

10%

44%

27%

15%

14%

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Research Study: Tangible Business Value Enablers

21

The likelihood of revenue gains or cost reductions

drops if there’s no clear mandate from leadership

26%

54%

10%

29%

0%

15%

30%

45%

60%

Revenue gains Cost reduction

With Mandate Without Mandate

• 38% of respondents indicated that

“Leadership does not provide the mandate,

incentives, and resources to turn supply

chain sustainability strategies into action.”

• Within that group:

51% Had no measurement or tracking in place for

supply chain sustainability initiatives

72% Saw a lack of responsibility within the

organization or had unclear goals

67% Had no supply chain sustainability strategy or

the strategic approach was not documented

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A strategy does not exist

General discussion exists, but the corporate

strategic approach is not documented

A strategy does exist, but the plan is not

communicated to all levels of the organization

A strategy exists and is fully communicated

across the organization

• 77% of those who did not achieve value from sustainability said their strategy

does not exist or strategic approach is undocumented

− “Realized value”: those who indicated revenue gains, cost reduction, market share gains, market size

gains, or environmental impact reduction from sustainability efforts

− “Others”: those who did not indicate value achieved in any of the five areas above

Realized Value Other

Those who realized value from sustainability efforts

were far more likely to have an established strategy

23

(N=60) (N=35)

8%

34%

35%

23%

37%

40%

14%

9%

We have no measurement or tracking in place

for supply chain sustainability initiatives

We have specific metrics and goals for

individual supply chain sustainability initiatives,

and they are measured periodically

We have an aggregation of functional supply

chain sustainability initiatives only, which have

associated targets to meet

Supply chain sustainability initiatives are

measured functionally and built into a

company-wide scorecard

• Two thirds of companies who have not realized value from supply chain

sustainability do not measure or monitor performance

− “Realized value”: those who indicated revenue gains, cost reduction, market share gains, market size

gains, or environmental impact from sustainability efforts

− “Others”: those who did not indicate value achieved in any of the five areas listed above

• Value from monitoring and measurement can be achieved even with

broad/aggregated targets that are monitored periodically

Realized Value Others

Measurement and monitoring, even broadly, is a

key enabler to driving value from SCS initiatives

24

(N=60) (N=35)

22%

38%

18%

22%

66%

17%

8%

9%

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Companies with individual and functional

sustainability metrics are more likely to achieve

value from SCS initiatives

37%

59%

30%

11%

48%44%

0%

12%

37%

10%

4%

29%

18%

31%

0%

15%

30%

45%

60%

Revenue gains Cost reduction Market share gains Market size gains Environmental

impact

Customer

satisfaction

None

Companies with individual and functional metrics

Companies without individual sustainability performance metrics

• The biggest barrier to SCS success is "deploying individual and company-

wide functional metrics"

25

Summary of findings• Challenges continue to prevent the wide-spread adoption of

supply chain sustainability practices

– The most common barrier to success was deploying individual &

company-wide functional metrics

– Education and training is often inadequate

– In many cases, leadership does not provide the mandate, incentives &

resources to turn sustainable strategies into action

– There is significant confusion about the scope and company goals on

supply chain sustainability

• Interestingly, SCS perspectives vary by management level

– The perceived existence and communication of sustainability strategy

differs between levels

– Executives/directors say they are enthusiastic about staff ideas

towards sustainability and believe there are more metrics and goals in

place, but managers and below see it differently

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Summary of findings

• Business value is achieved through supply chain

sustainability practices when there is…

– Clear mandate from leadership

– Existence of a formal SCS strategy

– Individual and functional metrics

– Measurement and monitoring processes in place

Business value includes revenue gains, cost reduction,

market share gains, and market size gains

27

Actionable next steps• Leadership:

– Develop a communication plan, engage practitioners, and clearly

articulate your strategic vision for SCS and business value goals

– Develop and cascade education & training

– Set specific supply chain sustainability goals which align with broader

supply chain / operations goals

– Incentivize staff and lead by example

– Define metrics at both the company- and individual-levels

• Practitioners:

– Seek training & development opportunities

– Take ownership of an idea, articulate the business case, and execute

on the plan

– Think horizontally – your idea may impact product design or disposal,

and may drive business model / product innovation

– Continuously engage leadership to align on goals and expectations

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For additional perspectives on supply chain

sustainability, please visit:

• APICS

– http://www.apics.org/sustainability

• PwC

– http://www.pwc.com/sustainability

– http://www.pwc.com/us/sustainability

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For a copy of today’s presentation, survey data, and

complementary SCS thought pieces, please visit:

• 2013 APICS Conference App

– http://www.APICSconference.org/app

Questions?

Comments?

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Survey

31

www.tinyurl.com/lc3s3fm

Thank You!

Please complete the evaluation for this session by QR code or paper form

Panelists Contact information

Nic Delaye

San Jose, California

PwC, Sustainable Business Solutions Director

[email protected]

Rocco P. Ciccolini

Florham Park, New Jersey

PwC, Advisory Operations Manager

[email protected]

Jonathan Thatcher

Chicago, Illinois

APICS, Director of Research

[email protected]

10/21/2013

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Appendix

33

Additional Thought Pieces

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Additional PwC Supply Chain Sustainability Thought Pieces

35

Sustaining the supplychain, 2012 (link)

Next-generation supply chains, 2012 (link)

Driving CO2 out of the supply chain, 2012 (link)

Value of sustainable procurement, 2010 (link)

Supply chain risk management, 2009 (link)

How integrity can transforma supply chain, 2008 (link)

Eco-efficiency, 2013 (link)

Sustainability valuation: An oxymoron?, 2012 (link)

Environmental and social risk, 2012 (link)

Research Study:

Survey Data

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19

Which best describes the operations function to which your role is

aligned within the organization?

12

13

8

18

3

0

2

6

35

16

32

5

0

4

2

7

0 5 10 15 20 25 30 35 40

Other

Warehousing and Distribution

Training

Sourcing/Procurement

Sales & Marketing

Research & Development

Quality

Professional Services

Planning

Materials

Manufacturing & Production

Information Technology

Human Resources

Forecasting

Finance

Engineering

Total Responses: 163

37

Which best describes your current role?

15

15

77

55

0 10 20 30 40 50 60 70 80 90

Executive/Senior Leadership

Director

Manager

Asst. Manager or Below


38

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20

Please select the industry which best describes your company.

41

2

2

1

7

6

3

22

5

9

5

12

7

5

8

10

6

3

8

0 5 10 15 20 25 30 35 40 45

Other

Utilities

Transportation

Textiles (Apparel)

Software & Hardware

Retail

Plastic & Rubber

Pharmaceuticals & Medical Devices

Oil & Gas

Metal Fabrication

Healthcare

Food & Beverage

Electrical Equipment

Distribution

Defense

Consumer Goods (non-electronic)

Consumer Electronics

Communications

Chemicals


39

How many employees does your company have?

23

10

11

27

37

38

13

0 5 10 15 20 25 30 35 40

25,000+

10,000-24,999

5,000-9,999

1,000-4,999

250-999

25-249

Fewer than 25


40

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Describe your company's annual revenue for fiscal year 2012.

41

16

22

16

28

17

0 5 10 15 20 25 30 35 40 45

$1bn+

$500m-$999m

$100m-$499m

$50m-$99m

$10m-$49m

Less than $10m


41

How supportive do you feel your company's leadership is towards the

following supply chain sustainability pillars?

Very

SupportiveSupportive Unsupportive

Very

Unsupportive

Ethics and Compliance 106 36 1 1

Environmental Performance 74 61 7 1

Social Performance 84 46 12 1

Economic Performance Issues 65 70 6 2


42

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Do you currently have direct responsibility for managing supply chain

sustainability initiatives?

Yes 58 41%

No 85 59%


43

Support for Sustainability

37

72

34

0

# %

Increase significantly 37 26%

Increase somewhat 72 50%

Stay about the same 34 24%

Decrease somewhat 0 0%

Decrease significantly 0 0%

44

62

29

44

# %

Very supportive 44 31%

Supportive 62 43%

Neutral 29 20%

Unsupportive 4 3%

Don't know 4 3%

How supportive do you feel your company's leadership is towards supply chain sustainability

ideas and initiatives generated by managers and front-line staff? (not from leadership)

How do you expect your company's focus on creating more supply chain sustainability to

change during the next three years?


44

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Which of the following do you feel are currently barriers in your

organization to supply chain sustainability success? (Select all that

apply)

53

41

55

50

45

58

25

0

10

20

30

40

50

60

70

The existence and

communication of a

sustainable supply chain

strategy

An organization with clear

responsibilities

Measurement and

monitoring

Providing education and

training

Investment in sustainable

supply chain initiatives

Aligning performance

measurement and

incentives to sustainable

supply chain results

None of the above


45

Choose the option which most closely represents your company’s

approach to sustainability

19

3829

21

# %

Strategy does not exist 19 18%

General discussion exists, but corporate strategic approach is not documented 38 36%

Strategy does exist, but plan is not communicated to all levels of the organization 29 27%

Strategy exists and is fully communicated across the organization 21 20%

29

34

23

19# %

Nobody in our organization feels that they are responsible for green supply chain initiatives 29 28%

We have been given responsibility for the goals, but the goals are not clear or measured 34 32%

We have specific roles regarding green initiatives and they are measured, but the responsibilities

are not at an appropriate level.23 22%

Strategy exists and is fully communicated across the organization 19 18%

Organizational responsibilities

The existence and communication of supply chain sustainability strategy

41

30

16

18

Measurement and monitoring

46

# %

We have no measurement or tracking in place for supply chain sustainability initiatives 41 39%

We have specific metrics and goals for individual supply chain s sustainability initiatives, and they

are measured periodically30 29%

We have an aggregation of functional sustainability initiatives only, which have associated targets

to meet16 15%

supply chain sustainability initiatives are measured functionally and built into a company-wide

scorecard18 17%

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Choose the option which most closely represents your company’s

approach to sustainability

42

31

18

14

# %

We do not receive sustainable-specific training or education. 42 40%

We are provided passive training and education through company website, informal

communications.31 30%

We are provided general training and education on supply chain sustainability concepts and how

they can impact our function.18 17%

We are provided tangible, job-specific training and education which should improve our

performance.14 13%

44

17

27

16

# %

Sustainability initiatives are required to be implemented within existing budgets. 44 43%

Current budgets are supplemented if budget surplus exists. 17 16%

Typically, limited and insufficient budget exists for specific sustainability projects. 27 26%

Specific sustainability budget has been created and allocated at a leadership and functional level,

developed from the company's sustainability strategy.16 15%

Investment in supply chain sustainability initiatives

Providing education and training

42

31

13

17

Aligning performance management and incentives:

47

# %

Sustainability is not a personal or functional performance measure. No actual accountability has

been set for achieving supply chain sustainability results.42 41%

Sustainability is not a personal performance measure, but functional targets do exist. Functional

leadership is measured for results.31 30%

Sustainability is a personal and functional performance measure. Targets exist at both levels, and

both are measured for results.13 13%

Sustainability performance is measured at an organization level, and the recognition is filtered

down to both a functional and individual level.17 16%

How significant of an improvement would each of the below factors

drive for your company's supply chain sustainability performance if a

greater focus was developed?*

*Select all that apply Total Responses: 101

Significant

ImprovementSome Improvement No Improvement

Management accountability 47 48 6

A clear link from sustainability strategy into day-to-day supply chain

responsibilities50 42 9

Training and support on the business value of sustainability to the company 51 45 5

Training and support on best practices for meeting supply chain sustainability

goals52 40 9

Monitoring and measuring results through supply chain monitoring systems 45 50 6

Transparency and education of sustainability and compliance requirements

built into day to day responsibilities48 45 8

Supplier engagement on performance management on sustainability drivers 43 49 9

Sustainability metrics and targets built into function/team performance

measures46 49 7

48

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25

Check all the applicable challenges within your organization, then

rank the top three challenges with regard to implementing supply

chain sustainability initiatives.


41

36

42

32

31

38

33

43

42

31

11

0 20 40

There is significant confusion about the scope and company goals on supply chain

sustainability

No truly global or recognized standards to benchmark companies against

The impact on shareholder value is not measurable

The impact on society is not measurable

Leadership views these types of initiatives as an incremental cost of doing business, not as

a differentiator

Compliance drives the majority of actions

Leadership does not view sustainability as a priority for the business

Leadership does not provide the mandate, incentives and resources to turn supply chain

sustainability strategies into action

Our customers are not asking for it

Our investors are not asking for it

We don’t want to take the risk to lose key suppliers

18

10

12

5

4

8

9

9

8

5

4

0 5 10 15 20

5

9

11

5

9

7

5

14

9

10

1

0 5 10 15 20

12

4

9

4

9

11

6

6

11

1

4

0 5 10 15 20Applicable? #1 Challenge #2 Challenge #3 Challenge

49

In what way is your company measuring the value of supply chain

sustainability initiatives?*


28

41

19

12

42

34

14

28

35

10

17

0

5

10

15

20

25

30

35

40

45

Revenue gains

($)

Cost reduction

($)

Market share

gains

Market size

gains

Environmental

impact

(reductions in

waste, carbon,

energy savings,

etc.)

Customer

satisfaction

Employee

acquisition,

engagement,

and retention

Reduction in

supply risk

Compliance

improvement

(%)

Brand

protection and

license to

operate

None

50

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Has your company realized value from supply chain sustainability

initiatives over the last 2 years in any of the below categories?*


18

41

15

6

33

24

9

1618

8

21

0

5

10

15

20

25

30

35

40

45

Revenue gains

($)

Cost reduction

($)

Market share

gains

Market size

gains

Environmental

impact

(reductions in

waste, carbon,

energy savings,

etc.)

Customer

satisfaction

Employee

acquisition,

engagement,

and retention

Reduction in

supply risk

Compliance

improvement

(%)

Brand

protection and

license to

operate

None

51

apics-pwc joint research study on supply chain sustainability...• report findings of the first...

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