Tuesday, October 18, 2011

The Three Tiers of Sustainability and Supply Chains

In 2008, The Future Laboratory produced a ranking system for the different levels of sustainability being achieved by organisations. This was called the Three Tiers of Sustainability:

Tier 1: The Basics of Sustainability

This is the firs level where companies employ simple measures such as switching lights and PCs off when left idle, recycling paper, and using greener forms of travel with the purpose of reducing the day-to-day carbon footprint. Some companies also employ self-service technologies such as centralised procurement and teleconferencing

Tier 2: Thinking Sustainably

This is the second level, where companies begin to realize the need to embed sustainability into supply chain operations. Companies tend to achieve this level when they assess their impact across a local range of operations. In terms of the supply chain, this could involve supplier management, product design, manufacturing rationalization, and distribution optimization.

Tier 3: The Science of Sustainability

The third tier involves balancing environmental, social, ethical and economic factors within a procurement and supply chain strategy. It uses auditing and benchmarks to provide a framework for governing sustainable supply chain operations. It considers agility, flexibility, and cost in the supply chain network. Moving towards this level means being driven by the current climate as well as pushing emerging regulations and standards at both an industry and governmental level.

Time and quality based competition eliminates of waste in the form of time, effort, defective units, and inventory in manufacturing distribution systems.

Two capabilities that are useful in a time and quality based competitive environment are agility and flexibility. With faster product innovations, decrease product life cycles, and rapid imitative competition, only firms that are agile and flexible will survive.

Agility is the agility to respond quickly to changes in the marketing environment. Agile firms are able to successfully market low-cost, high-quality products with short lead times in varying volumes that provide enhance value to customers through customize.

Flexibility is defined as the capability of changing from one task to another rapidly when changing conditions are defined ahead of time.

© 2011, Richard Matthews. All rights reserved.

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