Traditional supply chains mean business too

Global business is under pressure with sluggish growth or recession in the developed world and huge potential in emerging and developing markets demanding the infrastructure and skills to deliver sustainable growth. There are industries led by MNCs (Multi National Corporations) that straddle frontiers characterised by modern, high tech and consolidated operators and others that remain local, traditional, low tech and fragmented. And yet, there is more to be gained by seeing these extremes as part of a continuum and not as opposing forces to explore mutually beneficial initiatives that can enable us to understand better how supply chains function in all sorts of traditional, modern or hybrid contexts.

This story picks up momentum on a beach in Rushikonda, just 13 kms from Vishakhapatnam on one of the best rated beaches on the south east Indian coast. One morning Rob Bell was walking the beach and, having taken a photo of a fishing boat on its way back to the shore continued the sequence on to the beach; unloading the nets; sorting the species and sizes and then, as the women arrived to trade with agents, an idea took shape …

Off to market

 

Dabawallas keep supply chains simple

On Monday near Church Street, Mumbai I met one of my supply chain heroes. He is a member of a team that has been invited to Prince Charles wedding; lauded by Bill Clinton; followed by Sir Richard Branson and accorded the Six Sigma Award for their superlative delivery performance. One of the protagonists in Salman Rushdie’s novel Satanic verses, Gibreel Farishta, was born to a Dabbawallah and, TL would add another tribute describing them as a master class in a simply modal approach. So, there I was talking to Shaurya who had just finished delivering tiffin boxes to teachers in an International School. He was keen to try his English – he is doing a course at the moment “because many address can’t read without it.” We turned the corner and there they were maybe fifty Dabawallas interchanging tiffin boxes with their symbols and colour codes designed to be read by men who had little schooling.

Five fingers of one hand pack the supply chain punch

 

Transforming the Indian leather industry

Years ago I worked in a company called Irish Leathers in a place called Carrick-on-Suir in Ireland. I followed the process through from the livestock in the surrounding fields; the slaughter house; raw skin collection and then, the production of wet blue hides before the finishing process began. The colouring and plate machines would give the hides texture either to be sent off to agents for sale elsewhere or, to local workshops to make into bags, jackets or other fashion items. This week in India, I mapped the core process from end-to-end with someone from the industry in Tamil Nadu and, the parallels were clear. The process was the same but the circumstances for the industry in each place utterly different. Irish Leather, formerly known as Plunder & Pollack, is no more whilst Indian leather is gathering momentum to be a catalyst and a beacon industry transforming branding, operations, the environmental agenda and livelihoods in India and other Emerging and Developing economies.

The Indian Leather industry is vital for the Indian economy with its substantial export earnings and strong growth potential. Revenues have grown from $2,495 million in 2004-5 to $ 3,598 million in 2008-9 and, the industry employed 2.5 m people rising to an estimated 3.5 million this year – most of whom are in the highly fragmented primary processing and flaying phase. An estimated 75% of this production capacity is from small scale cottage and artisans – the informal sector; and this needs to be addressed in terms of skills and the financing of much needed technological and environmental improvements.    

 

Transforming waste in the supply chain

Last week, Wiseman Dairies, who control one third of the milk market in the UK announced a serious profits warning; their bottom line will be reduced by £7 million less this year and £16 million next. The shareprice fell to 330p (16/09/10) from a high of 536p in July. This is a 20 per cent fall and, though competitors Dairy Crest differ on the reasons for such competitive trading conditions it is likely that such an impact is due to the intensification of a price war between the major multiples – supermarkets and convenience stores. The three leading suppliers in the UK milk market have a 90 per cent market share and yet, they have absolutely no control over the price and very little control over short term retail tactics that are destroying shareholder and stakeholder value alike.

It may seem perverse to link this plunge in share price to food and drink waste but, here goes.

A few weeks ago, one of the UK’s celebrity chefs held a Charity Dinner for VIPs. On the menu, dishes were made exclusively out of throw away food. You see, Britain is a land of leftovers. Over eight million tonnes of food and drink are thrown away and wasted each year and five million tonnes of that could have been avoided. According to the UK Department for Environment, Food and Rural Affairs we throw away 440,000 tonnes of meat and fish; 400,000 tonnes of potatoes; 560,000 tonnes of dairy products; 390,000 tonnes of cereal products, 610,000 tonnes of fruit; 630,000 tonnes of bread and 730,000 tonnes of vegetables; 250,000 tonnes of desserts, cakes and sweets and 140,000 tonnes of alcohol – only 6 per cent of the total. In terms of retailers, Tristram Stuart’s important book Waste estimates that Sainsbury’s send an estimated 60,000 tonnes and Asda 75,000 tonnes to landfill every year. According to UN figures the food and drink wasted in the UK in 2009 could have fed 35 million flood victims in Pakistan for a year. Estimates vary between £400 to £700 per family per year.

From field to ... landfill

Why do we waste so much? T L sees these price wars as part of the problem. Here’s why. 

 

A closer look at ethics and the diamond supply chain …

In an earlier post, From mine to mall or mayhem, we looked at the issue of supply chains that work with valuable commodities and minerals. Paul Collier is one commentator who has covered the issue of blood diamonds. See the book “Wars, Guns and Votes” and, the seminal paper, Greed and Grievance. Here´s a closer look at the ethics of the diamond supply chain … 

Diamond ethical supply chain deconstruction 2010

View more presentations from Platipus.

 

Thoughts on Ethics and the Supply Chain

Writing on the abolition of the British slave trade in 1807, G.M. Trevelyan, the historian, called it “one of the turning circumstances in the history of the world”. As we look to Logistics to make a more transformative impact on global business practice, we could turn to the campaign waged by William Wilberforce and the Abolitionists for inspiration in the quest for an ethical supply chain. Here, T L explores ideas around an inclusive, sustainable and ethical value chain moving goods from source to the consumer; linking it back to ideas set in train by a four hour speech given in the House of Commons in the momentous year of 1789.

Transparency is a must

Globalisation has forced companies to develop better, cheaper and faster routes to market – continuosuly. This has generated huge pressures on companies to shorten lead times; place smaller orders with few longer term commitments and, become footloose in search of lowest cost operators. We have seen the growth of Corporate power – many of the majors bigger than the countries they source from and, the move to outsource non core operations creates layers of suppliers that add capacity to Tier 1 but reduce any chance of transparency and challenge ethical consistency down through the tiers.

 

Transformational logistics means building inclusive value chains …

Fields, Factories and Workshops (1899) was written by the Anarchist Prince, Peter Kropotkin but it was not written for an exclusively anarchist audience. Made up of a series of articles, he explores alternatives to the crowded cities; the sweatshops and dark satanic mills of his day. He offers ways in which industry can combine with agriculture and, how the informal economy – characterised as choosing to earn money on one side of a bar instead of spending it on the other – is entirely the creation of fiscal policy and not a moral issue. Many of the ideas that are developed strike a chord today with population growing from 6 to 9 billion by 2050 and 75 per cent of this number living in urban space. This demographic explosion, the accelerated depletion of scarce resources and, environmental impacts is forcing an examination of assumptions that were shaped by the developed world. Above all, the global push for better, cheaper and faster supply chains is challenged by notions of inclusivity and, human values over value and the race to the bottom price.

Here we go again ...

Globalisation may have connected producers with consumers but, value addition usually goes to the most powerful link in the chain such as the major International Retailers; High Street brands or, even local agents aggregating capacity and pricing to producers and farmers upstream. These small scale actors do not have the know how, the technology or the market access that can secure their position. Few of these suppliers have any notion of the full price that consumers are paying in the developed world and, few consumers have any notion of the conditions under which their purchases are sourced and produced.

Malcolm Harper’s Inclusive Value Chains (2009) uses a series of case studies to highlight the lack of an effective interface between the informal and the formal economies – hotels lacking fresh fruit whilst street hawkers offer it in abundance outside – and, a number of illustrations of how conventional supply chain thinking falls short. A case study from ITC highlights a project integrating small farmers in Punjab with Spencers – a new format retailer. Another, illustrates how the traditional company Namdharis with its proud philanthropic traditions has developed its seed production business to link small farmers in Karnataka to markets abroad. Other inclusive value chains or streams are developed for fisheries, honey, coffee and poultry.

 

Transforming brands and the ethical supply chain

All too often, people use the term CSR as if it is a fresh perspective. Worse, it is used as a branding initiative that creates an image of commitment to the wider public good but has no real impact upon the fundamentals in the business or, the wider marketplace. This is the thinking that considers branding a matter of brochureware rather than delivering the promise. It has to be more than this and, history illustrates the point. CSR has strong historical roots with companies like Wedgwood and their line of pottery to promote the slavery movement in the early 19th century a fine example. Wedgwood was not alone.

Am I not a man and a brother

Seebohm Rowntree, a member of the eponymous chocolate manufacturing company from York, played a significant role in thinking on social welfare and the poor. His work on the founding deed of the Joseph Rowntree Trust – which is one of the great documents of the 20th century – did much to break the comforting nostrum that the poor were responsible for their own plight. You know, build a factory town, pit or steelworks; move on several generations then, shut it and expect those trapped in homes with no value and strong local family ties to get on their bike and find jobs elsewhere. This scenario strikes a chord in the contemporary world as Corporations move their facilities and sourcing from location to another in a never ending race to the bottom price.

 

Fordlandia and the folly of best practice

In the late 1920s Henry Ford was looking for ways to reduce operating costs and, against a backdrop of cartel price hikes for British (Malay) rubber he moved to set up a Brasilian plantation that would produce latex for tyres using all the best practice that the king of the assembly lines could muster. By the 1940s, the Ford Motor company had invested over $200 million (current day pricing) in the Amazon region on a spectacular failure that acts as a stark reminder of what can go wrong when developed world logic seeks to plug and play in emerging and developing markets.

And we lived at 22 Amazon Street

Fordlandia, 10,000 square kilometers of Amazon rainforest, was styled on the Mid West towns of Fords experience with a healthy lifestyle – hamburgers were the staple diet – and, moral values. Alcohol and tobacco were forbidden. Line dancing and poetry readings of Longfellow and Wordsworth were encouraged. The factory and plantations were similarly based on the one best way of Fordism and the scientific management methods of F W Taylor (1911) – that Lenin and the Bolsheviks used to turbo charge industrialisation. Industrial engineers laid out the plantations in the Amazon – there were 200 rubber plants (hevea brasiliensis) per acre versus the 7 per acre of the primal rain forest. By 1930s riots broke through the social strait jacket to wreck the town and, the close proximity of the trees facilitated tree blight whilst sap eating insects reduced the trees to useless stumps. There followed a fresh attempt to “take the white man’s magic to the wilderness” (Washington Post) at Beltera but, after producing 750 versus a planned 30,000 tonnes; Ford accepted $200,000 from the Brazilian Government and withdrew. There is one best way to disaster – ignore local context.

 

Music transforms the scope of change

In David Lean’s classic film, the Bridge over the River Kwai, an inspired Alec Guinness plays the stubborn Captain Nicholson in his battle of wills with the Japanese World War 2 Prisoner Of War camp commander Saito. The story unfolds with the obsessive Captain delivering his engineering masterpiece despite the fact that it will help the enemy and the final scenes witness him going mad as the bridge – and all that he knows – is blown to bits. In other words, a brilliant illustration of how industries lose sight of market context and the folly of clinging to ideas that have lost relevance as consumers and technology move on. Which reminds me of the global music industry …

It just had to go ...