Great companies and brands almost inevitably have great supply chains - and understand that the same programs which drive economic value also drive sustainability within them. So why do so many companies take a reactive stance as opposed to proactive in managing their supply chains? By Phil Berry

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Our company spends much of our collective time helping large companies and green brands improve the management of their supply chains. Some of this work is to reduce risk. Some is to reduce waste, energy, time and cost. Some is to forge the link between Lean Manufacturing and sustainability. We spend substantially less time designing and building truly sustainable supply chains and take-back schemes. From years doing this work, we have a few collective observations and opinions about the way companies are approaching this work and how they are, or are not, gaining meaningful value from their supply chains.

In our work we see a lot of different supplier locations in all parts of the world: factories, farms, airports, distribution centers, logistics providers, retail stores, kitchens, laundries, electrical generating facilities, and more. We talk to many managers of the traditional supply chain functions: price, quality and delivery. We talk candidly with their suppliers. Increasingly, we talk to the corporate and the product levels brand managers. We often work with the sustainability people who are trying to get the attention of all of these “non-sustainability” functions.

Over the years this experience has taught us a lot about what enables supply chains to create more, or less, economic value and what makes them more, or less, sustainable. Among our clearest learnings: the same programs and projects that maximize the economic value and resilience of a supply chain can also be used to facilitate the growth of sustainability in the supply chain. Better supply chains create greater economic value and business stability. New ways of working with suppliers can also foster sustainability efforts. Great companies and great brands almost inevitably have great supply chains. Those supply chains help leading companies become leaders in sustainability. The link is no coincidence.

Because that link is so clear to us, one of our greatest frustrations as a consulting organization is that many companies do not really understand or actively manage their supply chains in any strategic sense. Instead they react. They react to trends they perceive from their industry and the news. They react to what their competitors are doing, or what they think their competitors are doing. They react to an incomplete understanding of their own costs. They react to customer demands rather than developing an understanding of customer needs. They react to risk instead of opportunity. They react to pressure from non-governmental organizations rather than pausing for a deeper conversation to define the issues. They react to dogma about the inability of suppliers to contribute value to the innovation process.

A lot of this “reactivity” occurs because a supply chain exists outside a company’s owned operations. Whether to manage issues outside their owned operations is a choice companies can legitimately make. Supply chains exist within the sphere of influence but outside the sphere of control. The difficulty of managing even the most basic issues in a supply chain is compounded by the problem of obtaining data. You don’t own your supply chain so you can only get limited data. You only have limited trust in the data you can get.

The absence of reliable data makes measuring progress toward a goal, even a cost-related goal, problematic. Why even try to manage what you know cannot be effectively measured? As a result, companies and brands have a long history of choosing to manage only the most basic elements that they believe they can measure and control: price, quality and delivery.

As supply chain consultants I suppose it is not terribly surprising we disagree with this approach. Supply chains are systems. Systems consciously designed, or unconsciously built, by companies to contribute to the creation of value. And because they are complex we choose to only manage part of the system? That is not a rhetorical question. I’m still looking for a genuinely valid answer, instead of a rationalization, from a company that does not actively manage its supply chain.

Which leads us back to sustainability. Why should any business want to implement sustainability in a supply chain? Not simply to find ways to be good or to do good. Supply chains are systems and sustainability is an excellent methodology for identifying and managing issues in complex systems. We use sustainability process tools to find risk, waste, true cost, opportunity, potential partners and innovation potential in a supply chain. These are contributors to real value far beyond what can be delivered by the old measures of price, quality and delivery.

In this space we will discuss supply chain issues from sustainable sourcing, supply chain design, why the price, quality and delivery model violates basic business logic, and more productive ways of working with suppliers.

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Phil Berry has worked for more than 30 years in the field we now call corporate sustainability. Much of his work has focused on implementing sustainability in complex business supply chains, both in the U.S. and Asia. Phil currently consults to a series of large U.S. and Chinese companies. His work helps them create business value by defining and reducing the environmental and social impacts of their products, operations and supply chains. Prior to consulting, Phil spent 12 years as Director of Sustainability for Nike Footwear. Prior to Nike, Phil spent 10 years working for a variety state, federal and international governments. From the late 1970s through the mid 1980s, Phil worked as Environmental Manager for a series of corporations. Phil has a Bachelor’s Degree in Social Science from Portland State University. He lives with his wife, youngest daughter and three dogs in Brooks, Oregon, in the heart of the agricultural Willamette Valley, an hour south of Portland.