Prediction: Corporate social responsibility will become a much greater concern of global supply chains, said Mark Buck, MOD global supply chain and procurement leader at Bio-Rad Laboratories, Inc. But the growing pressure for compliance won’t come from traditional regulatory sources. Instead, it will be felt in new governance guidelines that affect publicly traded companies in the area of sustainability. Think about the new conflict-mineral reporting rules dictated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, and policed by the U.S. Securities and Exchange Commission. (Are you ready to begin reporting by May 31, 2014, on the presence in your supply chain of conflict minerals from the Democratic Republic of the Congo?) Or the earlier Restriction of Hazardous Substances (RoHS) directive of the European Union, which has had a huge impact on anyone shipping high-tech and other types of product within that region of the world.
Buck said companies should get acquainted with the acronym ESG, for Environmental, Social and Governance. Next year, he said, they’ll have to begin conforming to the work of the Sustainability Accounting Standards Board, which is laying out a template for responsible behavior by U.S. public companies. In the process, the SEC is bound to become a “third arm” of regulation. “It is coming,” Buck said.
Response: Disagreement from some of Buck’s fellow panelists, including Michael Hester, head of planning, allocations, distribution and logistics with BevMo, and Kerry McCracken, vice president of business architecture and delivery with Flextronics. “I don’t think the government agencies at this point are ready to give up that kind of regulation,” McCracken said. “I don’t know that they would ever give that up.”
Jim Miller, vice president of worldwide operations with Google, Inc., agreed that sustainability requirements will place new compliance pressures on companies, but noted that the SEC has no capability to enforce the rules. (The conflict-minerals provision of Dodd-Frank contains no fines or other sanctions for companies that fail to comply. The consequences would come in the form of public condemnation and damage to one’s brand image. Or so the theory goes.) Buck agreed that the rule will be “pretty weak” in its first two years of existence, but said companies eventually will have to disclose, both in SEC filings and on their websites, their use of conflict minerals.
Prediction: Hester repeated a current favorite of many business visionaries: 3D printing. The technology “is going to have a huge impact on distribution-center operations,” he said. Instead of having to manage large parts inventories, D.C.s can sell the right to make a given item on a 3D printer, then do the job overnight. The result will be significant savings on the cost of standing inventory. But Hester doesn’t believe that 3D printing is just around the corner. He sees it becoming commonplace within the next five to 10 years.
Response: Buck said Bio-Rad already uses the technology to a limited extent, although the speed of production is slow. He sees a time when 3D printing is used regularly for “low-lying” products, such as plastic vials. But Hester said the real value will come from deploying it for specialized parts that are otherwise hard to obtain and in short supply.
3D printing makes sense in the medical sector, McCracken agreed, although she said the business model doesn’t yet exist. “It will mature,” she added, “but it’s not there yet.”
Prediction: The next couple of years will see a flurry of new technology – so much, in fact, that companies won’t possess the required expertise with which to embrace it, McCracken said. The task of technology management will therefore become more distributed, with an even greater reliance on outsourcing, and the use of partners with application-specific expertise. She envisions multi-entity IT partnerships that will “transform the way companies work together.” In the process, the role of individual chief information officers will lessen – at least with respect to the oversight of in-house systems.
Response: Hester suggested that the scenario is already a reality. He spends a good deal of time acting as a “lubricant” between finance, marketing and other disciplines with BevMo – “trying to make all those gears not grind so much.” Miller agreed that the role of the CIO is changing dramatically. “It will be a while,” he said, but I do think that technology is driving much more outsourcing.”
Buck said Bio-Rad’s CIO now reports to marketing, even though he sees that individual’s role as becoming elevated in future. “Marketing people have never really worked in operations,” he said. “They can’t understand how these things work.”
Prediction: Miller pronounced himself “shocked” by the wave of electronic devices that dominate society today. “I think there’s a growing recognition that we consume resources – that we’re really not sustainable,” he said. “There’s no way that we can continue on this journey.”
Miller sees an opportunity to create a “circular economy” that recognizes how products are sourced and made, and how their contents can be recovered in a responsible manner. The next two to three years, he said, will see a “major shift” toward greater social responsibility among producers of high-tech goods.
Response: McCracken disagreed – at least to the extent that a circular economy would come about from each company’s stand-alone efforts. “An industry is going to be created around that,” she said. Individual consumers and businesses simply aren’t that focused on the recycling of old, unfashionable products.
Buck foresees the advent of new Federal Trade Commission rules on recycling. But he also predicted that companies will wake up to the issue when they realize they can’t get access to enough raw materials to make their products. “That circular economy is going to have to happen.”
Hester likened the effort to the push for sustainable and organic wines. “Between cost pressures and consumer demand,” he said, “I think we have to eventually get there.”
Keywords: supply chain, supply chain management, green supply chains, sustainable supply chains, supply chain sustainability, supply chain planning, retail supply chain, 3D printing, inventory control, conflict minerals, corporate social responsibility