Posts tagged supplychainexcellence

Unearthing Opportunity in the Linear Approach Toward Clothing

Executive Summary

This analysis examines the interconnectivity between human behavior, industrial elements, and natural elements across the linear processes in the textile and clothing system. Using a systems-level perspective, it shows how biological and technical resources are wasted in material extraction and harvesting, the production of goods, and consumption or use by humans. The analysis of waste focuses on the material flows of non-energy related materials.  The impact to natural systems and energy-related materials is not emphasized.

System Introduction

The linear economy adopts an approach of take, make, use, dispose without considerations to comprised systems, each containing an interconnected set of elements organized around some purpose (De Vries, 2013). A broad understanding of system behavior explains the dependencies, influences, and potential consequences of each decision as it relates to the whole (Holling, 2001). Though the textile and clothing system is primarily concerned with the design, production and distribution of yarn, cloth and clothing, the intricacies and system dynamics specific to the fashion industry are far from basic (Amed, Berg, Brantberg, & Hedrich, 2016). The fashion industry fuels a linear economy with waste greater than $460B of value each year through unsustainable disposal of clothing (Ellen MacArthur Foundation, 2017). This analysis will explore the system described as textile to garment through depiction of linear process, flow of materials, and types of waste by each actor across the supply chain (Franco, 2017).

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Human Perspective

With a population projected to reach 1.2B by 2025, consumerism has played an integral role in the evolution of industrialization, mass production, and values that marry progress and prosperity with compulsive acquisition (Goodwin, Nelson, Ackerman, & Weisskopf, 2008). Consumption signals a supply chain, and it responds through the acquisition of materials, manufacturing, and distribution of goods, creating inefficient use of natural resources, pollutants, and waste (Shah, 2014).

Abraham Maslow, renowned professor of psychology and human behavior, classifies all human efforts as an attempt to fulfill one of five needs. Humans require clothing to fill basic physiological and safety needs. However, the dynamics and influences that connect the linear economy and textile and clothing system are complex because economic performance is tied to human behavior, assessed by the growth and level of real output per person (McAlphin, 2014). Reciprocally, employment is a vital means to realize the income necessary for consumption, both individually and in aggregate terms (McAlphin, 2014). Over twenty-seven million people worldwide are employed in the textile and clothing industry (Amed, Berg, Brantberg, & Hedrich, 2016). Moreover, the system represents seven per cent of the world’s exports in terms of sales: a combined two thirds in North America and Western Europe, and one quarter in China (Cardoso, 2013).

Linear Process

The linear economy embodies a linear process because materials flow in one direction, with sub-optimal utilization of materials and energy, and a shortened life cycle (Varney-Wong, 2016). The textile and clothing system is a linear process as depicted in Figure 1, in which 53 metric tons of fibre are extracted annually to produce clothes that are often used for a short time, after which 73% of the materials are mostly sent to landfill or incinerated (Ellen MacArthur Foundation, 2017). Actors in the textile and clothing system supply chain include: supplier in the extraction and harvesting of raw materials, manufacturer in the production of goods, distribution and transportation as a conduit to the customer, and lastly the consumer who uses and disposes the goods, sustainably or unsustainably (De Vries, 2013). Although design and product commercialization are inputs to the linear process, it is not in the scope of this analysis.

In the United States, clothes are worn one quarter of the global average (Ellen MacArthur Foundation, 2017). The global average life cycle of a garment is two years (WRAP, 2017). The system is characterized by a complex supply chain and is considered to be one of the most polluting industries in the world, with more than 1.2B metric tons a year in greenhouse gas emitted during production alone which is greater than the emissions of end-to-end logistics (Ellen MacArthur Foundation, 2017).

 

Figure 1: Linear Process Model in Textile and Clothing System (Varney-Wong, 2016)

Biological and Technical Resources

The first actor, the supplier, is responsible for raw materials that are categorized as natural and manmade fibres as shown in Figure 2. Raw materials are inputs to processing and manufacturing using the biological resources sun, water, energy, and land to produce non-toxic materials that can biodegrade and safely feed environmental processes. Key biological resources are cotton and wool where yields are more than 26 mega tonnes and 2 mega tonnes respectively (Cardoso, 2013). Manmade or technical resources are not suitable for the biosphere and cover synthetic materials such as nylon, a polyester derived from petrochemicals, or regenerative cellulose materials that are manufactured from wood fibres (Cardoso, 2013). Technical resources include design, equipment and machinery, capital, data, and labor as inputs to create manmade fibers (Maia, Alves, & Leao, 2013). Blends are also used to give the fabric desirable qualities like breathability,

 

Figure 2: Raw Materials, Biological, and Technical Resources (Cardoso, 2013)

The volume of the world’s fiber production for the textile and clothing system in 2012 was approximately 88.5 mega tonne, from which 56 mega tonne were manmade, of which 40% was polyester, and 32.5 mega tonne natural fibre, of which 80% was cotton (Cardoso, 2013). The use of manmade fibre represents 64% of overall production, primarily by low cost clothing or fast fashion, and propensity to consume in developed countries (Cardoso, 2013). It is predicted that by 2030, the fashion industry will use 115 million hectares, a 35% increase in land for cotton, forest for cellulosic fibers, and grassland for livestock (Snoek, 2017).

The second actor comprises production and manufacturing, that includes processing to fibre raw materials, spinning, weaving, knitting, coloration, finishing (cutting, sewing, quality, pressing), packaging materials, and staging delivery to the consumer. This step uses technical resources of machinery, labor, capital, technology, and data with biological resources like water, energy, and land, yielding a thirty-six percent loss of material waste as a percent of total production as depicted in Figure 3 (Varney-Wong, 2016). Across the industry, only 13% of the total material input is in some way recycled after clothing use (Ellen MacArthur Foundation, 2017).

 

Figure 3: Material Waste as a Percent of Total Production (Varney-Wong, 2016)

The third actor, the consumer, is responsible for use and disposal. Use is defined as washing, drying, ironing, and utilizes biological resources of raw materials, water, and energy. The disposal of clothing has the largest impact on the natural environment via landfill or incineration (Rosa, 2016). While natural fibers like cotton and wool produce methane gas, polyester, the most common non-biodegradable synthetic fiber used in the clothing, can remain in landfill soil for several decades (Rosa, 2016).

Wastes

There are eight types of wastes common to Lean Six Sigma methodologies, a widely adopted best practice in efficient production of goods (Maia, Alves, & Leao, 2013). Across a linear process, T.I.M.W.O.O.D.U. characterizes wastes in transportation, inventory, motion, waiting, over production, over processing, defects and underutilizing knowledge management and people (iSixSigma, n.d.). Additional wastes include untapped human potential, poor design, inappropriate systems, and wasted natural resources (Maia, Alves, & Leao, 2013). All of these wastes are present in the linear process of the textile and clothing system.

The textile and clothing industry relies predominantly on 98 million tonnes per year in non-renewable resources; this includes oil in synthetic fibres production, fertilizers to grow cotton, and chemicals to produce, dye, and finish fibers and textiles (Ellen MacArthur Foundation, 2017). During the growing and extraction of raw materials, 93 billion cubic metres of water annually are consumed, contributing to water scarcity  (Ellen MacArthur Foundation, 2017). During the ‘take’ process step, other wastes include: transportation (energy in picking, extraction to production), inventory (use of land, pesticides, water, energy), motion (inefficient utilization of human labor), waiting (watering takt time, equipment, and human labor), over processing (excessive pesticides, preservatives), defects (waste water pollution, air emissions, poor demand forecast biased by mass-consumption, data quality, poor design), and underutilization (poor bio-design and poor use available technology to aid in harvesting and extraction) (Maia, Alves, & Leao, 2013) (Cardoso, 2013).

Textile and clothing manufacturing demands huge amounts of energy and water, particularly in wet processing. Wastewater must be properly treated from discharge to remove hazardous chemicals, including mutagens, carcinogens, and teratogens, that cause serious environmental damage including exhaust gases, waste water, and the fabrics (Franco, 2017). Also, synthetic fibers, mainly out of petrochemical base, lead to resource use and GHG emissions from processing fossil fuels (Cardoso, 2013). Poor labor standards and conditions pervade global textiles supply chains including ethical issues of child labor, poor safety infrastructure, forced labor, in addition to low wages and extended work days (Franco, 2017).

During the ‘make’ process step, other wastes include: transportation (energy moving products and information, distribution to consumer), inventory (use of land, chemicals, water, energy, fibre, parts, safety stock, working capital, packaging), waiting (between processes, and for human labor execution), over production (water, energy, noise pollution, dust emissions), over processing (water, energy, excessive chemicals, preservatives), defects (waste water pollution, air emissions, poor demand for energy and water, scrap, data quality), and underutilization (poor leadership making unsustainable decisions, unethical treatment of trading partners, poor bio-design, poor use available technology to aid in smart manufacturing) (Kupsala, 2013).

The consumer may send a waste-ridden demand signal that feeds the linear process during use and disposal. Underutilization of information pertaining to sustainable purchasing, sustainable disposal methods, and total costs of ownership in proper care for clothing, can lead to waste in water, energy, and use of chemicals in washing. Less than 1% of material used to produce clothing is recycled into new clothing, denoting a loss of more than $100B worth of materials each year (Ellen MacArthur Foundation, 2017). High costs are associated with disposal and land filling clothing and household textiles; in the UK the annual cost is approximately $108M (Ellen MacArthur Foundation, 2017). Other wastes include: transportation (energy moving products for early disposal and in landfill), inventory (use of land, water, energy, fibre, working capital tied to having too many garments), and defects (waste water pollution, air emissions, synthetic fibre impact in landfill)(Franco, 2017).

 

Conclusions

The large and growing global population has a predisposition to mass-consume with systems in place to inefficiently manufacture clothing, placing an extreme strain on materials, resources, and natural systems (Funkhouser, 2012). Emphasis is needed to highlight the extent that supply chains can contribute to global sustainability improvements and waste reduction in textile and clothing systems. As pressure for natural resources and price volatility intensifies, system focus must shift to recovery of materials and blends, water and energy usage, reducing hazardous chemical use, and ensuring ethical human rights (Franco, 2017). Ultimately, industry must leverage more efficient and sustainable practices through material lifecycle management, including shrinking or decreasing use, slowing, or closing material loops (Ellen MacArthur Foundation, 2015).

 

References

Amed, I., Berg, A., Brantberg, L., & Hedrich, S. (2016, December). The State of Fashion. Retrieved February 19, 2018, from McKinsey & Company: https://www.mckinsey.com/industries/retail/our-insights/the-state-of-fashion

Bove, A., & Swartz, S. (2016, November). Starting at the Source: Sustainability in Supply Chains. Retrieved February 15, 2018, from https://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our-insights/starting-at-the-source-sustainability-in-supply-chains

Cardoso, A. (2013). Life Cycle Assessment of Two Textile Products: Wool and Cotton. Universidade Do Porto, Environmental Engineering.

Chan, T., & Wong, C. (2012). The Consumption Side of Sustainable Fashion Supply Chain: Understanding Fashion Consumer Eco‐fashion Consumption Decision. Journal of Fashion Marketing and Management, 16(12), 193-212.

De Vries, B. (2013). Sustainability Science. Cambridge: Cambridge University Press.

Ellen MacArthur Foundation. (2015, December 9). Towards a Circular Economy: Business Rationale for an Accelerated Transition. Retrieved February 13, 2018, from https://www.ellenmacarthurfoundation.org/assets/downloads/TCE_Ellen-MacArthur-Foundation_9-Dec-2015.pdf

Ellen MacArthur Foundation. (2017, January 12). Retrieved February 13, 2018, from https://www.ellenmacarthurfoundation.org/publications/a-new-textiles-economy-redesigning-fashions-future

Franco, M. (2017). Circular Economy at the Micro Level: Dynamic View of Incumbents’ Struggles and Challenges in the Textile Industry. Journal of Cleaner Production, 168, 833-845.

Funkhouser, D. (2012, April). Population, Consumption, and the Future State of the Planet. Retrieved February 15, 2018, from http://blogs.ei.columbia.edu/2012/04/27/population-consumption-and-the-future/

Goodwin, N., Nelson, J., Ackerman, F., & Weisskopf, T. (2008, January). Consumption and the Consumer Society. Retrieved February 19, 2018, from http://www.ase.tufts.edu/gdae/education_materials/modules/Consumption_and_the_Consumer_Society.pdf

Gracey, F., & Moon, D. (2012, October 7). Valuing Our Clothes: The Evidence Base. Retrieved February 19, 2018, from http://www.wrap.org.uk/sites/files/wrap/10.7.12%20VOC-%20FINAL.pdf

Gutierrez, L. (2010, October). Retrieved February 19, 2018, from PelicanWeb Journal of Sustainable Development: http://www.pelicanweb.org/solisustv06n10page1supp3.html

Holling, C. (2001, August). Understanding the Complexity of Economic, Ecological, and Social Systems. EcoSystems, 4(5), 390-405. doi:10.1007/s10021-001-0101-5

iSixSigma. (n.d.). 8 Wastes of Lean. Retrieved February 20, 2018, from https://www.isixsigma.com/dictionary/8-wastes-of-lean/

Kupsala, H. (2013). Eco-Effective Fashion Theory: How to Implement Cradle-to-Cradle Concept Into Fashion and Clothing Design. University of Lapland.

Liu, J., Dietz, T., Carpenter, S., Alberti, M., Folke, C., & Moran, E. (2007, September 14). Complexity of Coupled Human and Natural Systems. doi:10.1126/science.1144004

Maia, L., Alves, A., & Leao, C. (2013). Sustainable Work Environment with Lean Production in Textile and Clothing Industry. International Journal of Industrial Engineering and Management , 4(3), 183-190.

Marino, A., & Pariso, P. (2016, May). From Linear Economy to Circular Economy: Research Agenda. International Journal of Research in Economics and Social Sciences , 6(5), 270-281.

McAlphin, D. (2014, September 10). U.S. Population and Its Impact on the Environment: Why Curbing Per Capita Consumption Is Not Enough. Retrieved February 15, 2018, from Progressives for Immigration Reform: http://progressivesforimmigrationreform.org/publication/u-s-population-and-its-impact-on-the-environment-why-curbing-per-capita-consumption-is-not-enough/

McAuley, I. (2007, February). Behavioural Economics and Public Policy: Some Insights. Retrieved February 9, 2018, from http://www.ianmcauley.com/academic/bepubpol.pdf

Rosa, A. (2016). Circular Economy in the Clothing Industry: Challenges and Strategies. KTH Industrial Engineering and Management.

Rydberg, A. (2016). Circular Economy Business Models in the Clothing Industry. Uppsala University, Department of Earth Sciences.

Sandvik, I. (2017). Applying Circular Economy to the Fashion Industry in Scandinavia Through Textile-to-Textile Recycling. Monash University, School of Social Science.

Shah, A. (2014, January). Consumption and Consumerism. Retrieved October 10, 2017, from http://www.globalissues.org/issue/235/consumption-and-consumerism

Shankar, A., & Pavitt, C. (2002, July). Resource and Public Goods Dilemmas: A New Issue for Communication Research. The Review of Communication, 251-272.

Snoek, S. (2017). Circular Economy in the Textile Industry. Sweden: Environmental Policy Group.

Strahle, J., & Muller, V. (2017, October 30). Key Aspects of Sustainability in Fashion Retail. Retrieved from Springer Link: https://link.springer.com/chapter/10.1007/978-981-10-2440-5_2

Varney-Wong, J. (2016). The Circular Economy. Retrieved February 16, 2018, Retrieved from http://ingienous.com/sectors/economy/a-new-economic-paradigm-of-prosperity-without-growth/circular-economy/

WRAP. (2017, July). Valuing Our Clothes:The Cost of UK Fashion. Retrieved February 19, 2018, from http://www.wrap.org.uk/sites/files/wrap/valuing-our-clothes-the-cost-of-uk-fashion_WRAP.pdf

Yawson, D., Armah, F., & Pappoe, A. (2009, November). Enabling Sustainability: Hierarchical Need-Based Framework for Promoting Sustainable Data Infrastructure in Developing Countries. Sustainability, 946-959.

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Is Circular Progress in Fashion Moving Forward or Far Away?

Introduction

The fashion industry fuels a linear economy with waste greater than $460B of value each year through unsustainable disposal of clothing (Ellen MacArthur Foundation, 2017). Characterized as one of the most polluting and wasteful industries, it consumes 98 million tonnes in non-renewable resources, 93 billion cubic metres of water, and 53 metric tons of fibre to produce clothes used for a short time, after which 13% of the total material input is recycled and 73% of the materials are sent to a grave via landfill or incineration (Ellen MacArthur Foundation, 2017). One estimate suggests that as global population grows to 16% by 2030, the mass-consumption of clothing will grow 65% as 3 billion people move into the middle class (Rosa, 2016).

Reimagining the current take-make-dispose linear process, a circular economy (CE) model demonstrates an opportunity to prevent value leakage by decoupling economic activity from the consumption of finite resources, including shrinking or decreasing use, slowing, and closing material loops as depicted in Figure 1 (Ellen MacArthur Foundation, 2015). This analysis will explore circular approaches that collectively address system-level waste in the textile and clothing system, and the effectiveness of each approach in the acquisition of materials, production of goods, consumption, and disposal.

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Figure 1: Outline of a Circular Economy (Ellen MacArthur Foundation, 2017)

Circular Economy Approaches

According to the Ellen MacArthur Foundation (2017), “A circular economy is restorative and regenerative by design and aims to keep products, components and materials at their highest utility and value at all times, distinguishing between technical and biological cycles.” It represents a paradigm shift in the way products are designed, manufactured, used, and recovered, beyond reducing the negative impacts of the linear economy (Lacy & Rutqvist, 2015). The following CE approaches, particularly when used together, can reduce waste and impact to natural systems throughout the entire textile and clothing system.

Product Design

CE starts with designing products with zero waste, understanding material inputs and dynamics, planning for asset recovery, and considering the total cost of ownership in a product’s lifecycle (Rydberg, 2016). Design also includes development of product lines that meet demand without deteriorating assets. CE design must source material from within regenerative loops, rather than from linear flows and enable businesses to develop a revenue model that generates value across the supply chain as depicted in Figure 2 (PWC, 2017). This may include designing products to last longer, with higher quality specs, and that are easily repairable by the customer.

Figure 2: Value Leakage in Linear v. Circular Economy Model (PWC, 2017)

Recovery and Recycling

CE views recovery and recycling waste as a resource holistically integrated into the business model, not as an external problem (Rydberg, 2016). Upcycling converts an old product or material into something of higher valuable, while downcycling deconstructs the properties of a material for reuse (Lacy & Rutqvist, 2015). Conceptually, reuse enables the mining of resources from current products, repurposing material inputs previously funded (PWC, 2017). One variation includes recovering end-of-life products that recapture value in an actor’s own closed loops or any actor’s open loops as depicted in Figure 2 (PWC, 2017). A second variation recovers waste and by-products from a company`s own production process and operations to recapture value (Marino & Pariso, 2016). Therefore, the CE model can generate a revenue stream from large amounts of inefficiency in waste and disposal that are valuable to the broader supply chain or another actor (Marino & Pariso, 2016).

Raw Materials and Innovation

Disassembling a garment for reuse and recycling can be labor intensive and ineffective (Rosa, 2016). Current linear business models rely on large quantities of natural resources. Little or no control over price and supply of commodities forces companies to accept the risk of fluctuations affecting raw material acquisition and production, and mitigate risk or remove it from the supply chain (PWC, 2017). Integrating CE in sourcing and procurement risk management strategy provides, “a more predictable, long-term, cost-effective source for the energy or materials” (Lacy & Rutqvist, 2015, p. 36). Additionally, advances in raw material innovation fuel eco-design and feed CE loops across the supply chain. Examples of innovation include: a dissolving thread called Smart Stitch that aids in recycling, Crop-A-Porter that makes fabric out of crop waste, a compostable clothing called Algae Apparel, and a design that uses mycelium to grow clothing (Sandvik, 2017).

Product Life Extension

Product Life Extension (PLE) lengthens a product’s useful lifecycle by generating revenue through longevity instead of volume; an example is selling a product second hand, or repurposing it until worn out. Manufacturers leverage human behavior and consumerism in the form of trade-in or buy back models. Additionally, companies help customers extend PLE with repairs, maintenance services, care guidelines, and DIY repair alternatives.

Policy and Regulations

Governments and regulators, particularly in Europe, are rallying to enable the CE. Broad changes include eco-design directives, green public procurement, extended producer responsibility, and taxation mechanisms. Promoting longer product lifetimes, defining sustainable performance criteria, a standard of labeling, metrics to define circularity, and avoiding hazardous substances progress the CE model through legislation and compliance.

Sustainable thought leader Walter Stahel suggests leveraging policy and taxation, “That legal considerations, especially taxing systems have to be reconsidered. If we had ‘sustainable taxation’, a tax on non-renewable resources and no tax on renewable resources, where human labor is a renewable resource, it would give activities of the circular economy an immediate incentive” (Sustainable Taxation, n.d.). As depicted in Figure 1, the smallest loops create the highest social benefits because they are labor intensive (Ellen MacArthur Foundation, 2017). Another key component of sustainable taxation is value added tax (VAT). Since all the activities of a circular economy inherently maintain value, actors who adapt CE approaches should not have to pay VAT. “This concept has been accepted in principle by the UK treasury and several other European countries, such as in Scandinavia, where there is 25% VAT. By not levying VAT on repairs, re-marketing or re-manufacturing of goods, you would create a clear signal to business that it’s beneficial to get involved in the sustainable activities of the circular economy” (Stahel, 2013, p. 2).

Certifications play a major role in CE because they validate the quality and sustainability in the complex, multi-tier process of a fabric (Sandvik, 2017). Although a single commodity is certified, there are factors that influence the total life cycle assessment of feedstock. Several organizations including the Global Organic Textile Standard, Oeko-Tex, Made in Green, and the Better Cotton Initiative define high-level requirements in environmental criteria, technical quality, and minimal social criteria in the supply chain of organic textiles’ to be certified. Standardizing disclosures and labels for eco-compliant products facilitate trust between actors upstream in raw material acquisition through production, and downstream to distributors, retailers, and consumers (Rosa, 2016). Alignment of power and incentives between actors is critical to improve cross-cycle and cross-sector performance.

Sharing Platform and Product as a Service

The sharing platform business model simplifies ownership through channels of renting, sharing, swapping, lending, gifting, or bartering of resources and allows businesses to expand into new markets (Lacy & Rutqvist, 2015). Consumers choose sharing platforms for convenience, diversity, lower price, and better product or service quality (Lacy & Rutqvist, 2015). The product-as-a-service (PaaS) model offers an alternative for products with high costs and high operating costs where consumers are users not owners. PaaS user adoption influences include infrequent use, lack of capacity, and unaffordability. Product design and quality are critical to performance because “quality degradation, short lifespan, low utilization rate and low recycling or return can directly impact a company`s bottom line” (Lacy & Rutqvist, 2015, p. 103).

 Changes in Human Behavior

Customer behavior is evolving and demand is increasing for sustainable and responsible products. Manufacturing quality products coupled with access to new CE business models transforms the perception of clothing as a disposable item to being a durable product as described in Figure 3, ‘Customer Personas and Access Model Types in a New Textiles Economy’ (Ellen MacArthur Foundation, 2017). Shifting the consumption of fast fashion to purchasing green garments, while increasing garment lifecycle and the number of wears, could be the most powerful way to capture value, reduce pressure on resources, and decrease negative impacts. For example, if the number of times a garment is worn is doubled, on average GHG emissions would be 44% lower (Ellen MacArthur Foundation, 2017).

Figure 3: Customer Personas and Access Model Types in a New Textiles Economy (Ellen MacArthur Foundation, 2017)

Collaborative Supply Chains

Adopting a circular model is gaining momentum as actors across the supply chain agree to share the cost and benefits of innovation and product design (Lacy & Rutqvist, 2015). To optimize material flows, supply chain actors must improve how they trace material flows, which includes in-depth information sharing, often times with competitive overlap that includes design, pricing, costs, volumes, lead times, and supplier terms. The Higg Index is a “self-assessment tool that empowers brands, retailers and facilities of all sizes, at every stage in their sustainability journey, to measure their environmental and social and labor impacts and identify areas for improvement” (Sustainable Apparel Coalition, 2018). “Using the Higg Index is the most adapted and reliable way to measure textile value chains, manage their impact and to finally create a common language on sustainability practice” (Sustainable Apparel Coalition, 2018).

Circular Approaches: Moving Forward or Far Away?

The Ellen MacArthur foundation estimates that “CE could deliver $1.8 trillion for Europe by 2030” (2017) with “savings in materials alone could exceed $1 trillion a year by 2025”. Although the CE approaches outlined herein are beneficial, when applied separately in a global trading environment, they are insufficient to move forward because they address only certain parts of the transition, products, process, policy, or actor in the supply chain. Largely, the textile and clothing system is directed by compliance rather than innovation, with exceptions like Levi’s, Nike, and Patagonia to name a few. Many companies try to be “less bad” by optimizing the wrong system, using less input, less energy, and less hazardous materials, striving for eco-efficiency (Braungart & McDonough, 2002).

Consumerism and mass-production create bad demand and economic signal inputs that do not encourage efficient resource use, pollution mitigation, or space for CE innovation. In developing countries, mass production of cheap, fast fashion creates Gross Domestic Product and influences the quality of life for citizens. Globalization and cost competitiveness force production economies of scale, while unethical labor conditions and unsustainable business practices are necessary to compete. Developing countries lack strict standards, environmental laws, and institutions to reinforce sustainable measures. So, the traditional linear economy still has many economic advantages for actors because businesses can still externalize the cost of risk, non-compliance, and waste (Lacy & Rutqvist, 2015).

There are two key challenges: maintaining the quality of resources and keeping ownership rights to high-quality resources (Franco, 2017). Secondly, controlling the return flow and maximizing the quality of recovered resources through improving waste separation, inspection, processing and refining. For example in downcycling, fibres are recovered into materials of lower quality. At some point, fibres cannot be further cascaded and retire to a landfill (Franco, 2017). Downcycling is therefore only a mitigating factor. Product design, raw material innovation, and cooperation across the supply chain is critical for progress.

Other challenges that delay the scale and adoption of CE include insufficient skills and investment in circular product design and production that could facilitate greater re-use, remanufacture, repair and recycling (Anderson, 2016). There is an insufficient investment in the CE recycling and recovery infrastructure, which further propagates a lock-in linear mindset. Scale economies for PaaS, sharing platforms, production and recovery technologies are still comparatively immature to alternatives (Lacy & Rutqvist, 2015).

Current policies do not promote widespread end-to-end adoption of CE, slowing and closing resource flows. There are weaknesses in policy compliance in bioenergy and waste management. Potential policy actions include economic incentives, targeted and increased funding, efforts to engage and link actors across the supply chain. Collaborative supply chains have limited information, and lack no-brainer economic incentives to encourage repair and reuse (Gam, Cao, Farr, & Heine, 2008). Other policy improvements include taxes on aggregates of unsustainable materials and products, CO2 and waste disposal taxes, and landfill taxes.

Conclusion

To disrupt the current linear process for clothing, new models to access and maintain clothes are essential. Economic opportunities already exist for these approaches, and are achievable through refocused marketing, scaling sharing models, making higher quality and durability more attractive, and increasing clothing utilization further through brand commitments and policy (Sandvik, 2017).

References

Anderson, R. (2016). The Firms Planning on Making Less and Recycling More. Retrieved March 18, 2018, from http://www.bbc.com/news/business-35755492

Braungart, M., & McDonough, W. (2002). Cradle to Cradle. New York: New Point Press.

Cardoso, A. (2013). Life Cycle Assessment of Two Textile Products: Wool and Cotton. Universidade Do Porto, Environmental Engineering. U.Porto.

De Vries, B. (2013). Sustainability Science. Cambridge: Cambridge University Press.

Ellen MacArthur Foundation. (2015, December 9). Towards a Circular Economy: Business Rationale for an Accelerated Transition. Retrieved March 19, 2018, from https://www.ellenmacarthurfoundation.org/assets/downloads/TCE_Ellen-MacArthur-Foundation_9-Dec-2015.pdf

Ellen MacArthur Foundation. (2017, January 12). A New Textiles Economy: Redesigning Fashion’s Future. Retrieved March 20, 2018, from https://www.ellenmacarthurfoundation.org/publications/a-new-textiles-economy-redesigning-fashions-future

Franco, M. (2017). Circular Economy at the Micro Level: Dynamic View of Incumbents’ Struggles and Challenges in the Textile Industry. Journal of Cleaner Production, 168, 833-845.

Gam, H., Cao, H., Farr, C., & Heine, L. (2008). C2CAD: A Sustainable Apparel Design and Production Model. International Journal of Clothing Science and Technology, 21(4), 166-179.

Harrington, L. (2013, September). Fashion Unleashed: The Agile Fashion Supply Chain. DHL Supply Chain.

Lacy, P., & Rutqvist, J. (2015). Waste to Wealth: The Circular Economy Advantage . New York: Palgrave Macmillan. Retrieved 2018, from https://www.forbes.com/sites/tomiogeron/2013/01/23/airbnb-and-the-unstoppable-rise-of-the-share-economy/#729b2ccfaae3

Maia, L., Alves, A., & Leao, C. (2013). Sustainable Work Environment with Lean Production in Textile and Clothing Industry. International Journal of Industrial Engineering and Management , 4(3), 183-190.

Marino, A., & Pariso, P. (2016, May). From Linear Economy to Circular Economy: Research Agenda. International Journal of Research in Economics and Social Sciences , 6(5), 270-281.

PWC. (2017). Spinning Around: Taking Control in a Circular Economy. Retrieved March 22, 2018, from https://www.pwc.com/gx/en/sustainability/assets/taking-control-in-a-circular-economy.pdf

Rosa, A. (2016). Circular Economy in the Clothing Industry: Challenges and Strategies. KTH Industrial Engineering and Management.

Rydberg, A. (2016). Circular Economy Business Models in the Clothing Industry. Uppsala University, Department of Earth Sciences.

Sandvik, I. (2017). Applying Circular Economy to the Fashion Industry in Scandinavia Through Textile-to-Textile Recycling. Monash University, School of Social Science.

Stahel, W. (2013, July). The Circular Economy. Retrieved from http://www.makingitmagazine.net/?p=6793

Stahel, W. (n.d.). Sustainable Taxation. Retrieved March 27, 2018, from http://www.progressiveeconomy.eu/content/sustainable-taxation

Sustainable Apparel Coalition. (2018, March 27). Retrieved from The Higg Index: https://apparelcoalition.org/the-higg-index/

Sustainable Brands. (2015, September 25). NIKE Commits to 100% Renewables, Partners With MIT Climate CoLab on Materials Innovation. Retrieved from http://www.sustainablebrands.com/news_and_views/products_design/sustainable_brands/nike_commits_100_renewables_partners_mit_climate_

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Moving Towards a Circular Economy

When you think about accelerating impacts and long-term solutions to current supply chain challenges that impact the 3P’s (people, planet and profit), we need to adopt and develop sustainable frameworks with a holistic life-cycle perspective. There is a ton of innovation happening in the CPG space (Levi’s, Unilever, PepsiCo, etc.)

Shifting from the current ‘take-make-waste’ linear model to the circular economy is critical for businesses to continue to thrive and meet society’s needs. Waste volumes are projected to increase from 1.3 to 2.2 billion tons by 2025, and with nearly 9 billion consumers on the planet including 3 billion new middle class consumers by 2030. The challenges of addressing waste and meeting increasing demand are unprecedented. Therefore it is imperative businesses continue to re-evaluate raw materials, design, manufacturing, consumption, and end of life to keep materials and products continuously flowing through closed loop systems.

How is your company innovating in product life cycle management from design and inception to sustainable product packaging? How are you personally adopting a sustainable mindset in your home, the daily choices you make as a consumer to move toward a circular economy? The bigger question is how are YOU INFLUENCING this change?

The Surprising Habits of Original Thinkers

How do creative people come up with great ideas? Organizational psychologist Adam Grant studies “originals”: thinkers who dream up new ideas and take action to put them into the world. In this talk, learn three unexpected habits of originals — including embracing failure. “The greatest originals are the ones who fail the most, because they’re the ones who try the most,” Grant says. “You need a lot of bad ideas in order to get a few good ones.”

Blockchain: Revolutionizing the Global Supply Chain by Building Trust and Transparency

Introduction

The history of Supply Chain Management has evolved since its’ roots in the early 1900s. From improving labor processes of basic material handling and freight transportation, to more sophisticated approaches of balancing cost and efficiency trade-offs, the concept of a supply chain is no longer siloed. It requires integration of supplier-customer relationships, process synchronization, and data harmonization in a complex, dynamic network that is susceptible to vulnerabilities in a global environment. Critical processes to this relationship include real-time communication, collaboration, trust, and transparency that yield mutually beneficial outcomes and competitive advantage. In today’s world, there is a growing prevalence in leading firms advancing toward the adoption, development and implementation of Blockchain technology as a backbone of business operations. This case dives a bit deeper into Blockchain, a novel technology with the strong potential to revolutionize the Global Supply Chain. The goal of this analysis is to discuss: 1) the key technical and economic aspects of Blockchain, 2) the current Blockchain innovators, barriers, and obstacles to Marketplace acceptance, 3) the business case for Blockchain, and 4) future applications and implications of Blockchain technology.

Click here to read the research: Blockchain_Revolutionizing the Global Supply Chain by Building Trust and Transparency

Sourcing Complex Professional Services in a Competitive Supply Chain

 

A Review of GlaxoSmithKline Case Study  

Quality is one of the most important factors for companies in the relationship between suppliers and customers (Ackerman, 2007). It requires integration of processes and data harmonization in a complex, global environment. Critical processes and strong relationships develop mutually beneficial outcomes, trust, strength and competitive advantage. We live in a time where globalization has forced industries to adopt cost efficiency strategies in order to compete. Top-line spend is being scrutinized and the legal industry is no exception to the new normal. In 2012, more than 25% of companies in the U.S. and UK spent over $5 million annually on litigation costs, and among healthcare companies that proportion was estimated to be 30%–40% (Gardner, H., & Silverstein, 2016).

Because professional services have become such a prominent cost of business, executive leadership has pressured the supply chain function to enhance the efficiency of spending. Professional services like legal counsel have historically been defined as too complex to transition to alternative billing arrangements that were ordinarily reserved for predictable, simple items. Complex legal services hinge on quality and explicit expertise that are determined on a case-by-case basis.

This case study examines an organization’s process for introducing competition and alternative billing arrangements for complex professional services using innovative sourcing techniques and Six Sigma methodology to monitor and control performance.  The goal of this analysis is to: 1) evaluate alternative sourcing and the utilization of reverse auctions, 2) examine the successes and gaps of the GlaxoSmithKline (GSK) sourcing and procurement model for legal services, 3) determine if the GSK model can be applied towards other complex services, and 4) recommend improvements using the case study of GlaxoSmithKline: Sourcing Complex Professional Services (Gardner, H., & Silverstein, 2016).

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Situation Audit

In recent years, the legal industry has experienced a global paradigm shift in the delivery model for legal services (Kane, 2017). This includes a consolidation among law firms, change in size, culture, and regulatory policies that encourage more competition and new entrants. While legal expertise is a necessary expense of organizations, it is historically viewed as a cost center. The 2008 economic downturn created additional competition among law firms as pressure to reduce costs increased and inadvertently diminished client loyalty. As described in the business case, “the size of the legal services market in the U.S. had increased by 4%–5% annually in the years preceding the economic crisis, it contracted by 3% in 2009” (Gardner & Silverstein, 2016).

In September 2008, the GSK law department appointed a new General Counsel who was a proponent of change and believed that the hourly-rate billing system inherently promotes inefficiency. His goal was simple: to reduce costs while increasing quality and value creation. The department’s focus scaled to include a Global External Legal Relations Team (GELRT) and an Outside Counsel Selection Initiative (OCSI). GELRT moved over three-fifths of outside counsel assignment to value-based fees (VBF) which is an incentive based payment structure that encourages integrity and six sigma efficiency in billing monitored and controlled through defined KPIs. Within 2 years it achieved a savings of nine figures (Silverstein, 2014). The over-arching message was that “if firms are willing to put some ‘skin in the game’ to help us meet cost savings goals” they should be rewarded with the value they provide to GSK (Salopek, 2012).

The focus of OCSI was to leverage best practice in e-Sourcing and Procurement using an e-reverse auction program. Based on case-specific criteria, GSK uses a mini-RFI tool that allows it to view an outside firm’s qualifications for the intended case. GSK Legal can then aggregate KPIs to ascertain the firms’ quality as well as their ability to adhere to VBFs. Additionally, the OCSI reverse auction process or “Sourcing Room,” attempts to neutralize aggressive fee competition among the qualified law firms by elevating value creation and fit per case assignment (Salopek, 2012).

In the context of this analysis, GSK has been served with a complaint wherein “A patient, Catherine Whitmore, died of an aortic aneurysm while on our blood pressure medication,” and the responsive pleading is due in just 20 days; an extension allowing more time to prepare a response is unlikely (Gardner & Silverstein, 2016).  A recently hired attorney must act quickly and within the defined processes adopted by GSK including preparing for a reverse online-auction as part of the OCSI process. Throughout the case and while awaiting responses from the “Sourcing Room”, she questions the purpose, process, integrity, and intended outcomes of GSK’s way of working:

“This system reminds me of buying office supplies or landscaping services. Can it really be applied to a complex legal case like this one? Why can’t we just engage the same firm that we worked with last time? Why would this new system encourage firms to use their best lawyers and ask for less? How could law firms suddenly afford to devote more work from their top brass for less money? Where would all of these savings come from? Even if the reverse-auction system saves money, we are paying it back in increased risk as we sit on our hands and watch our response date inch closer. I thought I’d return as the hero who doles out work, not the villain who pushed the legal industry into online bidding wars.”

Problem Identification

The fundamental questions that must be answered are: 1) does the reverse auction system reduce costs while ensuring quality,  2) what are the risks in using reverse auctions for sourcing and procuring professional services, and 3) can reverse auctions be applied to complex legal cases and yield successful outcomes? To better understand the framework of reverse auctions, the impact of compensation models on cost savings will be examined. This includes the impact on supplier relationships and how GSK’s processes may be applied to other complex services.

Alternatives

  1. Competitive Pressure

The legal industry presents complexities in procurement requiring sophisticated coordination of suppliers based on specialized criteria. Competitive pressures are forcing traditional law firms and corporate legal departments to minimize costs, increase flexibility and expand their in-house capabilities. Participation in legal process outsourcing (LPO) has become vital to controlling costs (Kane, 2017). It transfers the work of attorneys, paralegals and other legal professionals to external suppliers, both onshore and offshore. Therefore, “supplier and customer relationship management processes can enhance or inhibit competition” (Sadikoglu, 2014). Using a more agile e-sourcing and procurement strategy, GSK has achieved price advantages by leveraging a Six Sigma approach to managing costs and quality, and using alternative fee agreements, reverse auctions, and VBF to form value-add partnerships. Within lean constraints and a “buyers market”, GSK must quickly respond to changing market needs with no room for error. Overall efficiency increases because “each firm in the supply chain can maximize its competitive advantage through strategically focused resource allocation” (Christopher, 2011). Lastly, competitive pressure introduces a need for increased awareness and intelligent, real-time information flow.

  1. Operational Pressure

The aforementioned process coordination of procuring firms with highly specialized areas of expertise adds a layer of complexity that makes quality and cost control more difficult. In a time-sensitive environment, using a reverse auction process may contradict the need for greater speed and efficiency. GSK must support powerful mobile devices, software-as-a service, and secure, web-based technology to facilitate its way of working and global infrastructure. Advanced communication solutions that align with the “virtual firm” are becoming increasingly necessary in the legal market (Gehrke, 2007). The efficiency of process management emphasizes activities not results, where “proactive approaches to quality management to reduce variations in the process and improve the quality of the product” comes with a cost (Littlefield, 2012). Balancing the costs of operational efficiency can create pressures for GSK in obtaining quality legal services.

  1. Financial Pressure

The stability of the Pharmaceutical Industry and Financial Institutions can affect the financial health of GSK and its supply chain. Competing in a global environment has forced many companies to closely monitor their suppliers’ economic viability (Littlefield, 2012). GSK depends on timely responsiveness and counsel from suppliers. If in the event firm deadlines are missed due to disruption, GSK is left vulnerable.

Additionally, GSK faces pressure not only to reduce costs, but it must transform the perception of a corporate legal department from a cost center to value-add activity. As the cost of legal services continues to rise, GSK faces pressure to innovate legal delivery models, while closely monitoring their efficiency.  Utilizing e-sourcing and reverse auction techniques can provide “higher cost efficiency, larger scale, and possibly lower financial costs such as borrowing costs and tax rates” (Fishell, 2012). However, setup and ongoing costs, any skilled labor costs, and the total costs of quality and risks should be considered, which may increase GSK’s total costs for legal services.

  1. Regulatory & Ethical Pressures

“Domestic law firms are expanding across borders, collaborating with foreign counsel and forming intercontinental mergers, erasing traditional boundaries on the geographic scope of law practice” (Kane, 2017). Technology and globalization are disrupting the speed at which automation of legal processes and emerging e-sourcing and procurement tools are being adopted to remain competitive.  This exposes GSK to a broader Regulation of the Pharmaceutical Industry and legal sector, including quality and safety, ultimately increasing pressure for the company. As referenced in the case, “new governmental policies favoring deregulation and liberalization, such as the Legal Services Act 2007 in the UK, encouraged more competition in the legal market and provided a new route for consumer complaints about lawyers” (Gardner & Silverstein, 2016). GSK faces ethical pressure by engaging in foreign territories with suppliers that may have differing business practices. Moreover, GSK must have full-disclosure of possible defects in its products, some of which may be unknown at the time of release. The catalyst for the complaint in this case is the possibility that a GSK product contributed or caused a patient’s death. While GSK can use legal contracts to try and shield itself from any financial liability due to product implied guarantees or misuse, it still has a regulatory and ethical obligation to ensure product conformance to protect human life including all costs associated with auditing, monitoring, and ensuring product quality compliance

Critical Issues

A critical component of GSK’s success not only lies in its processes and use of DMAIC, but in its creation of a framework in which institutional change can thrive. This takes leadership, vision, structure, and engagement. Despite the assurance from GSK staff that the OCSI approach drives down costs and improves the quality of work by systematically increasing the rigor in the procurement process, the new attorney insisted on analyzing and comparing the competing firms’ bids. Her uncertainty speaks to the critical issues in this case: 1) organizational leadership in institutional change, 2) the utilization of reverse auctions in complex services, and 3) qualitative analysis of cost savings, supplier value, and risks.

Leadership is a critical component of Sourcing & Procurement because it influences, directs, and manages the resources of a supply chain, ultimately impacting a firm’s profitability. The problem for many organizations is that procurement is often perceived as a tactical function rather than a strategic function. For example, even in the P2P process, procurement professionals begin sourcing after a need has been identified. As quoted by GSK’s new General Counsel in 2008, “Before I came to GSK, legal spend had not been managed centrally, and individual lawyers responsible for the matters often didn’t have budgets. The firms often knew more about what GSK spent with them than GSK knew about what it spent at the firms, so GSK was not leveraging its spending power” (Gardner & Silverstein, 2016).  The transformation of how professional services were managed involved detailed planning and managing through process and KPIs. Resistance to change can make it difficult for organizations to adopt new strategies such as redesigning work processes, adopting new organizational reporting structures or establishing new pricing strategies. In addition, many firms are set in the “we’ve always done it that way” mentality that inhibits creative alternatives to procuring professional services.

Analysis

In the context of sourcing and procuring professional services, the GSK model for strategic action and leadership involved promoting a vision, setting strategies, defining goals, providing direction, and adopting a Six Sigma approach to performance management. A scorecard was thoughtfully crafted for each matter, weighting key firm selection factors including matter-specific credentials, experience in jurisdiction, along with pricing (Salopek, 2012). GSK’s e-reverse auctions involve a competitive bidding process where multiple law firms compete for the same project. This can drive price competition for large-scale legal projects such as mergers and tax filings. While there are risks of collusion and price tampering amongst competing firms, the over-arching mantra is that if the prices are expected to be lower, then firms “need to be increasingly savvy with their resources in order to compete” (Clarke, 2015). GSK viewed reverse auctions as an opportunity to create value and govern productive partnerships, not focus just on price which is seldom representative of total cost. The lowest bid was not always selected (Salopek, 2012).

e-Reverse auctions can be used to source and procure any complex professional service. It takes leadership (aforementioned), framework and process, and robust analytics. Using the GSK model, the RFI tool provided conditions around expertise and quality performance, where suppliers derived clear scope to propose solutions to an expected and known end result. When coupled with performance measures to help drive delivery value, satisfaction, and opportunities for improvement, these internal control mechanisms – by design- minimized mistakes, promoted sound decision making backed by data, and rewarded good performance both within and outside the organization (C.I.P.S., 2017).

By the end of 2011, more than 68 percent of GSK’s external spend was through VBFs, resulting in major savings. “One reason for this success was Dan Troy’s <new General Counsel> tone from the top,” (Salopek, 2012). He backed his VBF directive by connecting the annual bonus objectives of law department personnel to GELRT’s quantifiable cost savings. He also participated in global broadcasts to the Law Department communicating progress toward goals. This level of engagement was crucial to OCSI’s success, where the willing participation of all parties was needed in the e-reverse auction process. Since its launch, 57 OCSI events have been completed to date, resulting in total estimated savings of over $32.6 million when the winning firm’s budget (based on hourly rates) is compared to its final VBF offer, and over $21 million in savings when the winning firm’s initial VBF offer in the Sourcing Room is compared to its final VBF offer. These savings are a subset of overall, even more substantial VBF savings” (Salopek, 2012).

While the qualitative analysis of cost savings appears favorable, one must consider the supplier value and risks in using reverse auctions. The two most commonly voiced criticisms directed against reverse auctions are that they do not support strategic goals and do not encourage long-term supplier engagement.  In fact, many might argue that suppliers do not like them. Typically, reverse auctions are designed for routine or predictable purchases that “feature little collaboration, shorter term contracts, products with common specifications and little complexity, and purchases where there are savings opportunities” (Gehrke, 2007). Some view reverse auctions as transactional in nature and, contrary to GSK’s mindset, highly focused on obtaining favorable pricing where “strategic relationships with suppliers rarely meet these criteria” (Clarke, 2015). However, at some point, particularly in the search for specific know-how and execution, price will cluster and a baseline will emerge. If consistent pricing at market-value is assumed, I’d offer that reverse auctions are the perfect forum to steer focus toward expertise and value-add services. This would, for all intents and purposes, be the perfect marriage for e-sourcing complex services.

Recommendations

This case illustrates a deep-seated challenge for procurement departments: how to strike the subtle balance between quality, cost and managing complexity. GSK considered new ways to generate efficiency by integrating leadership, DfSS processes and rigorous control systems, and by improving the way it leads interaction with global suppliers and trading partners. GSK’s integrated processes ensure quality specifications are met on a per-case basis. With active management, it can assume best practice processes and guarantee a process control system (measure, analyze, improve, monitor, control) and favorable outcomes based on a proven track-record.

Communication and connectivity are a vital component of its strategy. A challenge specific to GSK’s legal department is to maintain its success through the necessary conduit of infrastructure…SRM, CRM, voice, data centers, and connectivity. Before GSK makes this investment, I’d recommend prioritizing where the highest percentage of interaction takes place and where a solution can have impact across multiple areas (cost savings, revenue growth, and increased productivity). For example, GSK can consume communications services on a utility pricing model or proven lower TCO with leasing, deferring a pricey capital investment. This would provide scalability and faster expansion of infrastructure as needed and give GSK advanced communication technology to sustain competitiveness.

GSK leadership should continue to support initiatives with its suppliers that promote teamwork, close internal communication, and developing a cooperative culture that fosters trust and collaboration. As supply chain complexity and off-shore outsourcing continues to increase, the need for visibility will require even more enhanced collaboration and real-time data to measure GSK’s performance. This may be difficult for GSK to achieve because relationships, particularly across global and cultural boundaries, are the most difficult to manage (Fishell, 2012).

Lastly, I’d recommend GSK scale its methodology for all professional services. It should continue to embody procurement best practice as described by the Chartered Institute for Purchasing & Supply where, “The supplier-buyer relationship between supply chain members requires that quality start at the top. That is, it is imperative that company visions, goals and strategies be aligned for the betterment of both companies. Joint projects, shared technology, buyer-supplier councils, and collaborative relationships can enhance the relationship. The end result is a culture of continuous improvement throughout the supply chain, and as a result, a highly effective, competitive one.” (C.I.P.S., 2007)

Conclusion

The sourcing and procurement of complex professional services continues to be an on-going area of development for many organizations. Evolving market demands, the shifting legal marketplace, deregulation, and cost reduction are all contributing to the need for innovative solutions in a digitized world. With increased competition across the legal landscape, utilizing e-reverse auctions is a way to achieve cost savings, but not at the expense of service and value differentiation.  In this fair forum, clients like GSK are empowered with the pricing of legal matters, where previously these decisions were dictated by law firms. Just like globalization of other goods and services, “a ‘buyer’s market’ for legal services is bringing increasing demands from clients,” and forcing the legal firms to evolve into a “more nimble, leaner competitors with greater pressures for efficiency” (Abbott, 2016).

 

References

Abbott, M. (2016, January). Georgetown Law Review: 2016 Report on the State of the Legal Market. Retrieved April 19, 2017, from h https://www.law.georgetown.edu/news/2016-report-on-state-legal-market.cfm

Ackerman, K. (2007).  Relationships for Supply Chain Success. Retrieved April 19, 2017, from http://www.supplychainquarterly.com/topics/Strategy/scq200704book/

Christopher, M. (2011).  Logistics and Supply Chain Management, 4th Edition. Harlow: Pearson Education Limited.

Clarke, P. (2015, June). Reverse Auctions are Here to Stay for Law Firms. Retrieved April 19, 2017, from http http://blogs.findlaw.com/strategist/2015/06/how-to-deal-with-a-competitive-bidding-process.html

Fishell, J. (2012, May 31). Maintain Quality in a Complex Supply Chain With Better Information Management. Retrieved April 22, 2017, from http://www.supplychainbrain.com/content/general-scm/sc-analysis-consulting/single-article-page/article/maintain-quality-in-a-complex-supply-chain-with-better-information-management/

Gardner, H., & Silverstein, S. (2016). GlaxoSmithKline: Sourcing Complex Professional Services. Harvard Business Review, Harvard Business School. 9-414-003.

Gehrke, A. (2007, January). Reverse Auctions: Crusade or Curse? Retrieved April 19, 2017, from http://www.appliedclinicaltrialsonline.com/reverse-auctions-crusade-or-curse

Ideson, P. (2016, May). Crack the Code to the Successful Procurement of Legal Services, with Silvia Hodges Silverstein. Retrieved April 19, 2017, from http://artofprocurement.com/legalservices/

Kane, S. (2017, April). 10 Trends Reshaping the Legal Industry. Retrieved April 19, 2017, from https://www.thebalance.com/trends-reshaping-legal-industry-2164337

Littlefield, M. (2012, April). Supplier Quality Management: A Risk Based Approach. Retrieved April 19, 2017, from http://blog.lnsresearch.com/bid/136869/Supplier-Quality-Management-A-Risk-Based-Approach

Sadikoglu,  E.  (2014). The Effects of Total Quality Management Practices on Performance and the Reasons of the Barriers to TQM Practices. Retrieved April 23, 2017, from https://www.hindawi.com/journals/ads/2014/537605/

Salopek, J. (2012). ACC Value Challenge: Committed Leadership Combined With Technical Innovation. Retrieved April 22, 2017, from https://www.acc.com/valuechallenge/valuechamps/2012champ_profile61.cfm

Silverstein, S. (2014, May). Buyers, Influencers, and Gatekeepers. Retrieved April 20, 2017, from http://www.silviahodges.com/wp-content/uploads/2011/09/2014-NYLJ-Legal-Procurement-.pdf

The Chartered Institute for Purchasing and Supply (2007). Contract Mangement Guide. Retrieved April 22, 2017, from https://www.cips.org/documents/CIPS_KI_Contract%20Management%20Guidev2.pdf

 

 

 

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Going Green or Greenwashing?

 

Sustainable, much like organic, is used loosely as a marketing ploy. More often than not, countless companies use a concept called “green-washing.”Green washing is when a company, government or other group promotes green-based environmental initiatives or images but actually operates in a way that is damaging to the environment or in an opposite manner to the goal of the announced initiatives. This can also include misleading customers about the environmental benefits of a product through misleading advertising and unsubstantiated claims.

I use this greenwashing index greenwashingindex.com/about. There are more robust reporting initiatives, but this site is simple and give tips to the basic consumer on how to spot greenwashing and outlines the methodology behind the index. I highly recommend EcoVadis for larger organizations looking to integrate a desktop, cloud-based sustainable compliance solution. EcoVadis operates the first collaborative platform providing Supplier Sustainability Ratings for global supply chains. With a focus on maintaining quality and integrity, EcoVadis has managed to also grown quickly to meet this increasing need. Since its founding in 2007, EcoVadis has become a trusted partner for procurement organizations in more than 150 leading multinationals worldwide including Verizon, Nestlé, Johnson & Johnson, Heineken, Coca-Cola Enterprises, Nokia, L’Oréal, Bayer, Alcatel-Lucent, ING Bank, Air France-KLM, Centrica/British Gas, BASF, and Merck. Combining People, Process and Platform, EcoVadis has developed the industry-leading team, innovative technology, and a unique CSR assessment methodology that covers 150 purchasing categories, 110 countries, and 21 CSR indicators. More than 30,000 companies use EcoVadis to reduce risk, drive innovation and foster transparency and trust between trading partners. EcoVadis is driven by a diverse team of over 300 talented professionals from 40 nationalities committed to a real impact on the environmental and social practices of companies around the world.

Operations or Supply Chain Excellence?

I’m sharing great insights from Innovation Enterprise via Micha Veen who explains simple tips to master supply chain excellence pinned Operational Innovation.

Source: A Refreshing Innovative Approach To Supply Chain Excellence | Articles | Chief Supply Chain Officer | Innovation Enterprise 

Operational or Supply Chain Excellence has been one of the buzzwords that is often heard around senior Supply Chain Execs. However, is excellence the right terminology, or do we need to rename ‘excellence’? Due to globalization, continuous creation of new small ‘global’ businesses that can compete with established organizations, leading supply chain organizations have started to look beyond ‘operational excellence’, best-in-class, benchmark data and industry metrics, towards using a combination of their own internal and tailored external relevant data to continuously review, assess, and adopt evolving leading-edge processes, technologies and behaviors to stay ahead in this ever increasing competitive business landscape. This new approach, named Operational Innovation, has become an effective methodology to deliver transformational impact through the following elements…

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Innovative solution design

Instead of spending a lot of time and effort in designing the optimal operational and supply chain solutions, successful organizations focus on creating a solid solution foundation, which is constantly reviewed and improved with cross functional teams to deliver cross-divisional, fit-for-purpose solutions.

Close collaboration

Instead of phased hand-offs between subject matter experts, technology specialists, operational teams, sales, finance, etc., leading innovative supply chain solutions should be created through continuous close collaboration with all impacted process participants at every stage of the supply chain journey.

Use of Robotics and Blockchain Technologies

A recent article (How will manufacturing robotics change in 2017) describes how robotics will change the industry as early as 2017. The article describes how by 2019, 35% of leading companies in logistics, health, utilities, and resources will start implementing robotics to automate their operations. Additionally, supply chain blockchain technology has started to be utilized in supply chain organizations to deliver additional benefits. A recent article describes clearly the impact that Blockchain has on Supply Chain.

End-to-end Solution integration

The key to delivering true Supply Chain Innovation is the manner in which organizations integrate end-to-end processes, technologies, data, and internal vs. external organizational units. Due to the external focus on innovative technologies, many organizations are still only focused on technology integration, but leading businesses have started to explore how different cloud solutions can be integrated across their partners and customers, creating hybrid learning organizational models which go beyond the traditional joint venture organization models.

Continuously generate value

In supply chains it’s crucial to continuously generate value. Through the use of innovative technologies, solution partnerships, operational models, etc. leading supply chain organizations are known to continuously review, adapt and improve their supply chain environment to deliver operational innovation. It allows supply chains to continuously deliver ‘new and improved’ excellence.

In today’s world, Supply Chain Excellence is not enough. There is no ‘end-station’. It’s critical for supply chain organizations to adopt an ongoing innovation journey, which requires people with the right mindset, experience levels, attitude and curiosity to deliver supply chain innovation….

 

Blockchain: The Best Way to Decentralize Supply Chains

 

This is a recent article written by a brilliant colleague Harry Goodnight. Great insights and perspectives on blockchain technology and why decentralization is a good thing for modern supply chains.

Source: http://www.supplychaindive.com/news/blockchain-Sweetbridge-decentralization-supply-chain-management/504362/

In business and economics, decentralization often refers to the ability to participate in a market and exchange value between peers without the interference of a third-party intermediary who most likely controls and restricts barriers of entry. As Ethereum co-founder Vitalik Buterin explains in his blog post “The Meaning of Decentralization,” blockchain is politically and architecturally decentralized, meaning no entity one controls it and there’s no central point of failure in its infrastructure. In this way, a decentralized supply chain would allow for a frictionless vehicle of business-to-business value exchange amongst even the smallest players in the industry.

Decentralization is defined as the transfer of power away from a central location or authority. As a concept, it is not new; as a business model, however, it is a powerful idea. Some sociologists claim that decentralization and centralization theories have actually been occurring in cycles for the last 4,000 years, causing the rise and subsequent fall of ruling states and empires. Throughout history, the core theory behind decentralization has remained the same: dispersing power from authorities and empowering smaller, individual entities with the ability to act in their own self-interest.

Why decentralization is necessary for modern supply chains

This is especially necessary in the supply chain industry, which has historically suffered from a number of issues that hinder its efficiency. Its main roadblock is that current supply chains are unable to become agile, which poses a significant problem in a market in which they must be able to change their configurations quickly and continually to meet the constantly-changing dynamics of supply and demand. Another major disadvantage is that methods of communication tend to vary greatly, with some companies still relying on manual paperwork. As a result, data storage becomes locked away in in proprietary systems that don’t allow for collaboration.

Supply chain companies also tend to face cultural and organizational issues, such as executing operating plans due to corporate goals, board restrictions and the competitive nature of the market. Consequently, companies have revoked social contracts, mistreated skilled laborers and underutilized their professional talent assets.

This mismanagement has serious financial consequences: for instance, $4.2 trillion is locked up in net working capital in today’s supply chains. By allowing today’s virtual supply chains to break from the company-centric, server-based environments in which they currently find themselves, they will become less brittle, more scalable and fully leverage the underutilized skills and assets available in modern-day business networks. Even a 1% improvement in Invoice-to-Cash cycle times would immediately return about $42 billion in cash to operations.

How can blockchain remedy the issues of centralization in supply chains?

When looking at its positive implications, blockchain is the most logical next step for supply chain managers and logistics providers. Blockchain was brought to the mainstream through cryptocurrencies like bitcoin and Ethereum. It creates an unchangeable digital ledger that provides a record of financial transactions in chronological order. This technology has been increasingly adapted to address gaping deficiencies in other fields, from education to voting to real estate. Through blockchain, massive networks of decentralized autonomous individuals and organizations can grow and operate seamlessly within a decentralized, distributed operating platform.

Blockchain also provides an efficient and viable solutions to the aforementioned hurdles that are restricting today’s supply chain. Specifically, it offers opportunities to synchronize processes that occur within supply networks, resulting in reduced Cost-of-Goods-Sold (COGS) and more cash freed from working capital.

The solution to many of these recurring issues in supply chain primarily involves people. By creating networks of skilled individuals and decentralized autonomous organizations, immense value can be brought to companies, supply chains, and customers. These networks align economic incentives so that everyone prospers, based on their contributions of time, skill, and intellectual property. These contributions are monitored and administered through outcome-based smart contracts on the blockchain. This new vision of decentralization has the potential to radically transform the supply chain space.

The Amazon vs. Retail Battle

 

Source: The Amazon vs. retail battle: Explained 

It’s no secret that Amazon is revolutionizing the retail industry. But what does that actually mean?

Which retailer is Amazon targeting now? Amazon newest target isn’t a retail chain at all — it’s your local convenience store.The company rolled out a new service today called Amazon Instant Pickup, which lets customers order basics like chips, soda and toothpaste. You can then pick them up from an Amazon locker in just two minutes.

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Isn’t mimicry the sincerest form of flattery? Not if you’re a retailer that wants to stay in business. Just ask Dick’s Sporting Goods (DKS). Dick’s earnings report disappointed Wall Street on Tuesday. The retailer lowered its full-year profit forecast today because of “a challenging retail environment.” Its stock fell more than 20%. Sound familiar? Last month, Amazon filed a patent to launch a competing meal-kit delivery service. Blue Apron’s shares plunged 11% following the news. And grocery stocks got clobbered after Amazon announced plans to buy Whole Foods (WFM) for $13.7 billion back in June.

Is Amazon a death sentence for traditional retailers? Not necessarily. Retailers like Home Depot (HD) are surviving by selling things you can’t buy on Amazon. Today, Home Depot reported record sales last quarter and bolstered its outlook for 2017. Home owners and professional builders alike still prefer to go to stores to test out home products, especially big ticket items like flooring and appliances.