ERP Solutions In The Green Supply Chain
This study attempts to illuminate how enterprise software is supporting manufacturers by measuring the environmental impact of their supply chain as well as conforming to the green supply chain requirements of their customers.
This is part one of a two-part series. Look for part two in Monday's MBT Mid-Day Report.
In December 2010, a study of middle market to large manufacturers was conducted by IFS North America and Affinity Research Solutions, a Boston-based research firm, among manufacturing executives and professionals to better understand how business software applications like ERP and EAM and other enterprise-wide software programs play a role in their company’s green supply chain initiatives. While much is written about environmental regulation and its effect on manufacturing, not as much is written about how large manufacturers are requiring environmental data from their vendors and using it to drive purchasing decisions. This study attempts to illuminate how prevalent this trend is and how enterprise software is supporting manufacturers by measuring the environmental impact of their supply chain as well as conforming to the green supply chain requirements of their customers.
Data was collected from manufacturing professionals on their involvement in the green supply chain, the types of environmental information they are tracking and sharing with their supply chain partners and/or customers, and the value they place on information about the environmental impact of their operations and those of their supply chain partners. In addition, the study took a close look at how data is being exchanged with suppliers on the environmental impact and chemical content of materials and products, regulation’s role in driving change and how enterprise software could be integrated to better meet green supply chain requirements today and in the future.
Beyond evaluating green supply initiatives, this study also examines a number of business models manufacturers are engaged in. Specifically, the study examined the use of manufacturing modes such as ‘make to stock,’ ‘make to order,’ and ‘assemble to order’ and how enterprise software is being used to fit these various modes. The study further looks at how well enterprise software performs in each of the manufacturing modes and the frequency and precipitating events that lead to changes in current business models.
The major areas explored in this study include:
Green Supply Chain• Manufacturers’ various roles in the green supply chain process.
• Types of environmental information shared with customers and tracked with supply chain partners.
• Value/importance of environmental information such as overall impact on organization, impact of specific products and chemical content, and impact of logistics and transportation between suppliers and their location.
• Market-based and regulatory drivers prompting companies to adopt green initiatives.
• Current methods of exchanging environmental and chemical information with suppliers and partners and how enterprise software is helping to track and share this type of information.
• How effectively enterprise software is for manage green supply chain programs and how it can be improved to better facilitate green supply chain programs.
Multi-Mode Manufacturing• Current business and manufacturing models, i.e., ‘make to stock,’ ‘make to order,’ ‘engineer to order.’
• How enterprise software fits with various types of manufacturing modes and how it can be enhanced to accommodate multiple modes.
• How enterprise software performs in various modes of manufacturing.
• Frequency of change in manufacturing modes and what is prompting the change.
The findings conclude that:
Green Supply Chain:
Manufacturing professionals consider themselves and their companies willing participants in the green supply chain movement. Close to 70% say they make purchasing and sourcing decisions based on environmental impact, carbon footprint or other non-financial requirements, or that they are part of a green supply chain where at least one of their customers require information on the chemical makeup of their products and their company’s environmental impact.
Multiple types of environmental information are being tracked and shared with supply chain partners. The most common types of information being tracked are the company’s overall environmental impact, the chemical content of individual products and/or discharges to the air, water or landfills during product lifecycle/end of life and those that are attributed to product manufacture.
Manufacturers reported sharing fewer types of information with customers than they reported tracking among their own supply chain partners. The environmental data points most frequently shared with customers were still reported by less than half of the manufacturing professionals. These include chemical content of individual products and/or discharges to the air, water and landfills product manufacturing. The environmental data least frequently shared was the environmental impact of logistics and transportation necessary to transport materials within the supply chain.
Manufacturing professionals said the most important environmental metric to have accurate information on was the chemical content of the products purchased by their organization. The environmental data least frequently requested from suppliers was environmental impact of logistics and transportation necessary to transport materials within the supply chain.
Over the next 3 years, manufacturing professionals expect green supply chain initiatives to become more important. According to manufacturing professionals, the reasons for this trend include increased government regulations, greater awareness of environmental concerns and a push from customers to be more sustainable.
When exchanging information with customers and suppliers, many manufacturing professionals are using traditional manual methods such as paper-based systems to manage environmental data. Others use a hybrid approach where they start out with hard copy but manually enter the information into an enterprise resource planning solution. Roughly 10% open up their enterprise software to their trading partners through portals to automate environmental and materials reporting through the supply chain.
Manufacturing professionals are somewhat uncertain as to how their enterprise software could be enhanced to help them better manage their green supply chain requirements. Better than four out of ten indicate that their enterprise software solution does not allow them to track and/or share environmental data.
Manufacturing professionals rate their current enterprise software solutions less than favorably in its ability to help manage their green supply chain initiative with only 5% rating it excellent.
Better than 80% say their organization uses multiple manufacturing modes with ‘make to order’ at the top of the list followed by ‘make to stock.’ Only 15% say their enterprise software suite adequately handles all of the manufacturing modes they operate in.
Current enterprise software solutions rate higher in manufacturing type modes such as ‘made to stock’, and ‘made to order’ rather than engineering type functions including ‘design, fabricate, erect,’ and/or ‘engineer to order.’
Roughly three out of four say they have added at least one mode over the past five years. There are many reasons why they add or change modes, however customer demand ranks first followed by acquisitions and/or new products.
Section I: Company’s Role in the Green Supply Chain Supply Process
The majority of manufacturing companies surveyed are involved in the green supply chain either as active participants where they make purchasing and sourcing decisions based on environmental or other non-financial requirements or they are part of the green supply chain where at least one of their customers require them to provide information on the chemical makeup of their products’ and company’s environmental impact.
Section II: Environmental Information
Almost 8 out of 10 manufacturing respondents are currently tracking and/or sharing environmental information with their supply chain partners and/or customers.
The types of environmental information being tracked and shared are numerous. Over three out of four manufacturing professionals say they track their company’s overall environmental impact and/or, the impact of specific products or subassemblies, and/or chemical content of individual products. These are not always the same bits of information they share with their customers. In fact, the type of information mentioned most often that is shared with customers is chemical content of individual products.
Other items that are tracked from their supply chain partners are: energy usage, HAACP items, MSDS, recycled material, REACh substances, castor oil, biodiversity initiatives, chemicals used in production, and product toxicity.
Importance of Accurate Information:
Manufacturing professionals believe that the most important area to have accurate information is on the chemical content of the products they buy.
Other types of information considered very important are power savings, RoHS and lead-free initiatives, formaldehyde content on particle boards, MSDS sheets, RoHS and REACh compliance, CGMP, country of origin, chemical emissions and waste remediation.
Part two will appear Monday's MBT Mid-Day Report.
For more information, visit http://www.ifsworld.com/en-us/.