The fragile Arizona desert ecosystem served as an ideal backdrop for AMR Research to test its latest theme: Supply Chain Management as a profit generator and environmental and social defender.

On the surface, the concept that supply chain management can be used for good may sound more DC Comic’s Justice League than Harvard Business School. (Indeed, main stage and sidebar discussions suggest that AMR’s veteran showman Bruce Richardson may be too much of a Reaganomics supply-sider to fully endorse the idea.)

However, the parade of examples of enviro- and socially-responsible supply chain practices from companies like Hewlett-Packard, Proctor & Gamble, and Siemens offered inspiring glimpses of how the theory can and is working in practice. And former President Bill Clinton drove the concept home when he described how, as part of the Clinton Global Initiative, world and business leaders have stepped up to provide more than $2.5 billion to fund improvements in healthcare, social understanding, and sustainable growth around the globe.

It was on this latter point that Clinton showed a keen understanding for what will really drive businesses to invest in environmentally and socially sustainable supply management strategies, such as developing supplier capabilities in emerging markets, incorporating more recycled content into new products, and using energy efficient and environmentally responsible manufacturing and distribution strategies. 

“We won’t get the kind of change we need [from businesses] unless we change the rules and the incentives,” Clinton told the more than 850 supply chain and technology executives attending AMR’s Supply Chain Executive Conference. “Businesses won’t make the kind of investment we need [in sustainability] unless there’s an economic or profit incentive for them to do so.”

The President and other presenters at the conference made a compelling argument that motivations and incentives for supply chain strategy focused on sustainable growth are beginning to emerge. In fact, AMR estimates that the developing world represents a potential $13 trillion marketplace. How’s that for motivation? “The developed world is not going to buy more toothpaste than we already buy,” AMR president and CEO Tony Friscia told the audience. “But the developing world is a huge opportunity to be served by the best companies.”

In future blogs, I will highlight some of the sustainability strategies presented by enterprises. However, to be fair to my hosts, I wanted to feature AMR’s four trends for supply managers to watch in this area:

1. Compliance: AMR estimates that businesses will spend $30 billion on compliance initiatives, including $3 billion for supporting technologies, such as RFID and contract management automation. New environmental regulations such ROHS and WEEE will require manufacturers to be more diligent in manufacturing and product traceability. And financial regs will make businesses more open (and hopefully consciencious) in their dealings. But the winners, according to AMR, will be those companies that use environmentally and socially responsible products as a competitive advantage. (Look for more examples on this subject in future blogs.)
2. Risk: AMR estimates that only one-third of large companies have a comprehensive supply risk management strategy in place. This is a issue I first highlighted early last year when CPO’s for the first time began citing sustaining supply and mitigating risks as their group’s leading function. This point was driven home later in the year when my study on risk management revealed that more than 80% of supply managers experienced multiple supply disruptions within the previous 12 months. And that was before Hurricane Katrina.
3. The Fortune at the Bottom of the Pyramid: The developing world is growing faster than the first-world in terms of manufacturing and high-tech exports. The developing world will also represent 99% of the world’s population growth and, as noted above, a huge potential market opportunity. It is not a question of when your company will source and develop supply in emerging markets, it’s a question of how quickly and effectively can you do it?
4. The Fortune at the Top of the Pyramid: Possibly fueled by a little self-reflection, Friscia argues that the buying power in the first-world is going to aging Baby Boomers who, as they hit the final phase of their lives, will force businesses to to be more environmentally responsible. Whatever Tony’s motivation, his point is clear: figure out a way to develop and source products that satisfy both fashion- and environmentally-conscious side of the Boomer generation. It’s too big a market to overlook. 

With the recent news furor over energy efficiency and global warming, the Supply Chain Saves the World is a concept whose time may have finally arrived. (One thing is for certain, the theme has much more marketing cache in the mainstream than the esoteric Demand Drive Supply Networks (DDSN) concept AMR house has been stumping for the past few years.) Are you ready to embrace it?

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