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June 05, 2008

Envisioning the Sustainable Supply Chain
    by Anne Moore Odell

Innovative collaborations between suppliers, retailers and consumers need to be forged so future supply chains support businesses and the environment. -- With the rise of the Internet and the rising cost of energy, the world seems at once larger and smaller. Hopping into the car for a drive to the mall, or driving a partially full delivery truck are choices. The impacts of those choices, both environmental and financial, are being examined anew by consumers, retailers and suppliers alike.

Visit the
Prospectus Ordering Center"Future Supply Chain 2016," a report released by Capgemini and Global Commerce Initiative (GCI) looks to the near future and sees new concerns for companies to solve in their global supply chains, from traffic congestion to carbon emissions to Internet sales.

The report was released as part of the Future Supply Chain project in which 24 companies, and industry organizations, lead by GCI and Capgemini, examined different sustainability issues in the supply chain. GCI is a working group of manufacturers and retailers that works to enhance the supply chain. Capgemini provides consulting, IT, and outsourcing services.

"Increasing political momentum around issues such as resource scarcity, climate change, security, and new regulations brings to light critical challenges that our industry will face in the coming years," said Sabine Ritter, general manager for GCI. "The 2007 Bali Treaty and other political initiatives are driving the industry to come up with breakthrough solutions. Such solutions require new thinking, new approaches and new collaboration on infrastructures."

The key, the report puts forth, to a more sustainable supply chain is sharing. Companies need to share warehouses, transportation, and, most importantly, information to help reduce carbon footprints and cut costs.

Ritter explained, "The coming years will see a new era for industry collaboration, which will become an important factor for future success. In many cases, this will require companies to rethink their areas of competitive advantage. Some business areas that are now considered to be core differentiators may well become candidates for non-competitive collaboration with competitors, such as replenishment in inner cities. In addition, industry collaboration will be essential to encourage governments to enact more appropriate regulations."

"Regulations, as well as resource scarcity, climate change, security, require new thinking, new approaches and new collaboration on infrastructures," said José Luis Duran, chairman of the management board, Carrefour Group, and GCI co-chairman.

Older supply chain models use on-shelf availability and cost efficiency as the top measures of effectiveness. While these are still important, the paradigm has shifted. With consumers shopping 24 hours a day online, on-shelf availability and delivery models need to be updated. Consumers are also helping to drive the push toward sustainability. The growing consumer awareness of climate change and dwindling natural resources is changing the way people shop and determine what products to buy.

Companies working in collaboration with each other would see, the report projects, reductions in transportation costs and lead time, a growth in on-shelf availability and lower carbon emissions. Collaboration would also positively impact the environment, shrinking companies' carbon footprints and energy costs.

"While individual examples of these concepts already exist, the key to their broader implementation across the industry will be improved collaboration," said Xavier Derycke, director of Flux Groupe, Carrefour, and co-chairman of the study's work team. "Improving such collaboration demands new ways of working together in the physical supply chain, a framework for which has been developed by GCI and continues to evolve."

With just over half the world's population living in urban areas, the report divides supply chain end-users into urban and non-urban, each with its own challenges. Growing traffic congestion is a one major difficulty in urban areas. Traffic congestion could be addressed with shared city replenishment hubs, communal warehouses and shared transportation to reduce vehicles on the road, energy consumption, and carbon emissions.

Non-urban areas could be served with regional consolidation centers where products from multiple companies are docked and distributed.

The "Future Supply Chain 2016" report grew out of an earlier report by the GCI entitled "2016: The Future Value Chain."

Organizations taking part in the Future Supply Chain Project included AIM/ECR Europe, Black & Decker, British American Tobacco, Capgemini. Carrefour, Colgate-Palmolive, Crown Europe, Freudenberg Household Products, GlaxoSmithKline, Groupe Danone, GS1US, Johnson & Johnson, Kellogg Europe, Kraft Foods, Loblaw Companies Ltd, L'Oreal, MGL METRO Group Logistics GmbH, Nestlé, Philips, Procter & Gamble, Reckitt Benckiser, Royal Ahold, Sara Lee International, SCA Packaging, Symrise, Unilever, and Wal-Mart Stores.

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