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Managing Suppliers using a Sustainable Business Network Approach

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Presentation to the 2012 PMI Great Lakes Symposium

Presentation to the 2012 PMI Great Lakes Symposium


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  • 1. Newport Consulting Group, LLC April 2012 Discussion Document Managing Global Suppliers Using a Sustainable Business Network Approach Presentation to PMI Great Lakes Symposium William Newman, MBA, CMC, SA April 24, 2012Newport Consulting Group, LLC
  • 2. Contents The Changing Global Environment Today’s Sustainability Mandate Enterprise Risk Management and the Supply Chain Creating “Value Chain 2.0” Working Examples and Case Studies Key Take-away Points Summary and DiscussionNewport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 3. A Brief Introduction … William D. Newman, CMC, MBA, SA – ASUG Recognized Influencer EPM, GRC, Sustainability – Member, SAP Sustainability Executive Advisory Council – Certified Management Consultant (since 1995) – Over 25 years in industry, professional services – Professional Speaker (ASUG, SAP Insider, TEDx, Sustainable Business Forum, Michigan Assn. of CPAs) – Adjunct faculty, Northwood University (International Management) – Adjunct faculty, University of Oregon (Sustainability Leadership) – Management Consulting Taskforce (Michigan Assn. of CPAs) – Author (Understanding SAP BOBJ EPM) – Numerous articles on program oversight, stakeholder engagement, mobility, strategy, sustainable supply chain – Twitter (@william_newman) – Google+ (+William Newman)Newport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 4. Contents The Changing Global Environment Today’s Sustainability Mandate Enterprise Risk Management and the Supply Chain Creating “Value Chain 2.0” Working Examples and Case Studies Key Take-away Points Summary and DiscussionNewport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 5. The Changing Global Environment / 1 (cc) Library of CongressNewport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 6. The Changing Global Environment / 2 (cc) Elizabeth SwiderNewport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 7. The Changing Global Environment / 3Newport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 8. The Changing Global Environment / 4In today’s global marketplace it is not enough to know what you make and how you make it, but alsowhat your suppliers make and how they make it, and their suppliers, and so on … and so on … Tier 1 Suppliers Tier n Suppliers Product Materials What do they make? Social Performance How do they make it? Quality and Price Product Materials What do they make? Social Performance How do they make it? Quality and Price What do I make? How do I make it? Product Materials What do they make? Social Performance How do they make it? Quality and Price Brand / OEM Manufacturer Product Materials What do they make? Social Performance How do they make it? Quality and PriceNewport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 9. The Changing Global Environment / 5The Dow Jones Sustainability Index (DJSI) created in 1999 represents over $US 9 billion in totalmarket capitalization. The DJSI STOXX40 has outperformed the nominal DJ STOXX50 by 7.5%through Q3 2011 (and up to 15-20% during the period preceding the financial crisis). The DJSI comprises publicly traded organizations that follow the Global Reporting Initiative (GRI) for Sustainability reporting The investment community is giving increased weight to Corporate Sustainability to guide rating and investment decisions.Source: SAM Sustainability Annual Review, September, 2011Newport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 10. Contents The Changing Global Environment Today’s Sustainability Mandate Enterprise Risk Management and the Supply Chain Creating “Value Chain 2.0” Working Examples and Case Studies Key Take-away Points Summary and DiscussionNewport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 11. Today’s Sustainability Mandate / 1The Challenge: A Real World Story Photo: Sulekha.comNewport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 12. Today’s Sustainability Mandate / 2The Challenge: A Real World Story Photo: Sulekha.comNewport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 13. Today’s Sustainability Mandate / 3 Sustainability trends in the global supply chain demonstrate a “shift” in demeanor and interest from telling and mandating, to collaborating and improving. This is a positive transformation across brands.Key Sustainable Supply Chain Trends: Increasing use of “Strategic Suppliers” Working with suppliers to build internal capacity More training, less auditing All industries struggling with how to manage sub-contractors Collapse of recognized company boundaries – Acceptance of full supply chain responsibility Integrating social compliance into sourcing operations and performance measurements Shift from “the stick” to “the carrot”Source: Social Accountability International (SAI, www.sa-intl.org)Newport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 14. Today’s Sustainability Mandate / 4 According to a survey of global CEOs conducted by the UN Global compact over 90% of those surveyed considered sustainability issues either important or very important to the future success of their business. But what does sustainability really mean? It depends on your framework.Newport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 15. Today’s Sustainability Mandate / 5 The University of Oregon Sustainability Leadership Program is tracking over 50 emerging standards, guidelines andframeworks in the area of sustainability.Source: University of Oregon, Sustainability Leadership ProgramNewport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 16. Today’s Sustainability Mandate / 6So, how are we doing? I thought you might ask… Well, if you were to ask me the global 1,000 corporations, you know, how many of them are sincere and seriously about sustainability and long-term value creation, our own implementation survey and other leading think tanks would probably suggest we are probably at 15 percent. - George Kell, Director United Nations Global CompactSource: American Public Media, Marketplace Morning Report (April 18, 2012)Newport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 17. Contents The Changing Global Environment Today’s Sustainability Mandate Enterprise Risk Management and the Supply Chain Creating “Value Chain 2.0” Working Examples and Case Studies Key Take-away Points Summary and DiscussionNewport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 18. Enterprise Risk Management and the Supply Chain / 1A series of parallel yet unrelated studies confirms a disturbing executive trend when it comes toenterprise risk management – everyone believes it’s important, few are satisfied or have theunderstanding to do it. This is what we call the practitioner gap in the industry. Discontinuity of risk management practices, in terms of demand, satisfaction, and board level understanding (various sources): The Economist Intelligence Unit Survey, Ascending the Maturity Curve (March, 2011); McKinsey Global Survey, Governance since the Economic Crisis (March, 2011); Report on the 2011 Accenture Global Risk Management Study, (February, 2011)Newport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 19. Enterprise Risk Management and the Supply Chain / 2Two main areas of enterprise risk management for the supply chain: (1) reporting and disclosure ofvarious positions in sustainability, and (2) operational effectiveness. Visibility and transparency are key.Reporting and Disclosure Operational Effectiveness Global Reporting Initiative  ISO 9000 / 14000 DJSI  Timing, quantity of delivery Integrated Reporting (IIR)  Profit Margin EPA / EU Mandates  Smart Delivery, Packing – US EPA MMR, CA EPA Title 27 – ROHS, WEEE, ELV  Traditional “Top 10 / Bottom 10” – REACh Supplier Management Practices – UN Global Compact Frank-Dodd Act Company Code of ConductNewport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 20. Enterprise Risk Management and the Supply Chain / 3One of the challenges in the field of sustainability is the vast reporting and disclosure spectrum thatorganizations – from small not-for-profit associations to F1000 global enterprises – may choose from. Formality of Statement Company UN Global DJSI / 10K Sustainability Compact Statement Plan Code of Complex GRI Report Conduct Simple Statement of Intra-company Sourcing Direction Scorecards Audits Complexity of DisclosureSource: Newman, William. “Disclosure and Green Marketing for Sustainability,” Sustainable Business Forum (2012); MACPA briefings (2011)Newport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 21. Enterprise Risk Management and the Supply Chain / 4A Statement of Direction – Similar to a 10K President’s Message – is a publicly communicated intentto address particular goals, mandates, or targets. This is generally non-binding and can be confusedwith company “green washing” of marketing efforts. A Statement of Direction is a document intended to convey to the public, customers, shareholders, analysts and other stakeholders the position of the organization and its intent.Newport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 22. Enterprise Risk Management and the Supply Chain / 5A Code of Conduct is a statement of policy which governs how the company will behave inside itsbusiness ecosystem, as well as the individual behavior expectations of its employees andstakeholders. Codes may be binding from a performance management perspective. A Code of Conduct is interpreted by organizations abiding by them in the form of policies, procedures and guidelines.Newport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 23. Enterprise Risk Management and the Supply Chain / 6Pre-defined, quantified Key Risk Indicators (KRI) linked to KPIs can automatically trigger preventive orrecovery responses when risk events threaten or actually do occur. EXAMPLEKRI Design KPIsPurchases of goods from non-preferred Business Process  Market Sharevendors. Specify tolerance as % of  Customer Satisfactionspend. Trigger when ≥5%.  Earnings Supply Chain Planning and Execution Drivers Impacts Import / export custom Decline in Number of Customers restrictions (Market Share) Purchases from non-preferred Logistics Late Product Deliveries vendors Disruption (Customer Satisfaction) Hostile waters / ports or poor Increased Costs and Expenses weather and shipping routes (Earnings)Key Risk Indicators (KRIs)  1.1 Average time to clear customs  1.2 # of restricted goods held in customs  2.1 % of purchases from non-preferred vendors Responses  3.1 Trends in weather and route requirements Preventive responses Recovery responses reduce probability reduce impact of event Accept Avoid Transfer Mitigate Control of eventSource: SAP America (as modified by Newport Consulting Group)Newport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 24. Contents The Changing Global Environment Today’s Sustainability Mandate Enterprise Risk Management and the Supply Chain Creating “Value Chain 2.0” Working Examples and Case Studies Key Take-away Points Summary and DiscussionNewport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 25. Creating Value Chain “2.0” / 1Conventional value chain management activities include a number of manual activities, includingquestionnaires, phone calls, and surveys. Information is rolled into central reporting databases foruse across the value chain - other times not. The risk of error and non-compliance is high. EXAMPLE A variety of information sources across multiple suppliers in the value chain creates a high degree of uncertainty and error with very complex substance structures.Source: Newman, William. Increase Supplier Compliance with Sustainable Business Networks, GRC Expert, July 18, 2011Newport Consulting Group, LLCNewport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 26. Creating “Value Chain 2.0” / 2The use and reporting of management processes, components and substances is further complicatedby the use of certain critical raw materials – some of which are known as “conflict materials” –throughout the global manufacturing landscape. All these items require transparency and reporting.Source: iPoint, GmbH (2011)Newport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 27. Creating “Value Chain 2.0” / 3Rather than each manufacturer or organization agency managing its own network, the concept of asustainable business network is gaining acceptance as a way to share, exchange, and developmentsimilar materials across multiple industries and supply chains.Source: Newman, William. Increase Supplier Compliance with Sustainable Business Networks, GRC Expert, July 18, 2011Newport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx 26
  • 28. Creating “Value Chain 2.0” / 4What is a Sustainable BusinessNetwork? A Sustainable Business Network consists of supply chains that provide financial, environmental and social value. It thus 1. returns profit, or at least does not run unprofitable, 2. enhances the lives of people involved in it, or at least does not create disadvantages for them, 3. enhances environmental health, or at least does not harm the environmentSource: SAP ResearchNewport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx 27
  • 29. Contents The Changing Global Environment Today’s Sustainability Mandate Enterprise Risk Management and the Supply Chain Creating “Value Chain 2.0” Working Examples and Case Studies Key Take-away Points Summary and DiscussionNewport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 30. Working Examples and Case Studies / 1 A number of initiatives based on TBL for residence, communities (CTVs), and Businesses. Initiated a pilot study of three contiguous cities for broad bio-diversity and land-use planning. Leverages both County ERP purchasing / vendor sources and large stores of Geographic Information Systems (GIS) data to help map land-use to area plot and what providers can be used for specific public initiatives in each locality.Newport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 31. Working Examples and Case Studies / 2 Software company SAP has developed a sustainable business network for supplier management analysis. Leverages: – Value chain membership – Member questionnaire responses – Purchasing histories per member (planned) – Location in-flows / out-flows (planned) – Library of existing best practices (data instruments, business improvement programs) – Other information (as potentially modified) Solution is in limited ramp-up available to SAP customers and used internally. Info video (You Tube) http://youtu.be/crTeFxIpBcESource: University of Oregon, Sustainability Leadership ProgramNewport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 32. Working Examples and Case Studies / 3Source: SAP ResearchNewport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx 31
  • 33. Contents The Changing Global Environment Today’s Sustainability Mandate Enterprise Risk Management and the Supply Chain Creating “Value Chain 2.0” Working Examples and Case Studies Key Take-away Points Summary and DiscussionNewport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 34. Key Take-away Points Sustainable within value chains can have many forms and uses – Simple supplier look-up and coordination – Deep embedded use of processes, functions across 3BL domains – Broad business network compliance and reporting Determine what is needed by your organization – Focus on what guidelines, methods and frameworks apply – Integrate into both supply chain and enterprise risk management issues – Align to the strategy of your organization, not just compliance Look for solutions and industry groups that promote openness, collaboration – Chances are there will be many, many information sources across the value chain – You will not have all of the answers when you start, and neither will your suppliers – If you consider a management solution look for one that is open across multiple principles, domains, platforms and industriesNewport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx 33
  • 35. References Psycho-sustainability: A Model for Personal Sustainability, TEDxFlint, October 11, 2011 Increase Supplier Compliance with Sustainable Business Networks, GRC Expert (July 18, 2011) Best practices for managing sustainable supply chains, searchManufacturingERP.com (July 14, 2011) Mastering the IT demands of a sustainable supply chain, searchManufacturingERP.com (July 7, 2011) A Framework for Social Media in Sustainability Programs, Sustainable Business Forum (February 22, 2012) Strategic Intent for Green Marketing and Disclosure using Social Media, Sustainable Business Forum (March 30, 2012) Leverage ERP for a Greener Supply Chain, Sustainable Business Forum (January 14, 2012) Sneak Peek: Sustainable Procurement as an Embedded Process in Supplier Management Activities , GRC Expert (December 1, 2010) Comply with the EPA’s MRR Standard with SAP Carbon Impact OnDemand, GRC Expert (January 7, 2011)Newport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx 34
  • 36. Contents The Changing Global Environment Today’s Sustainability Mandate Enterprise Risk Management and the Supply Chain Creating “Value Chain 2.0” Working Examples and Case Studies Key Take-away Points Summary and DiscussionNewport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 37. DiscussionNewport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx
  • 38. Contact Newport Consulting Group, LLC William Newman, CMC, MBA, SA Managing Principal wnewman@newportconsgroup.com 7286 North Village Drive O 248-978-2000 Clarkston, MI 48346 USA M 248-635-9902Newport Consulting Group, LLC PMI GLC Symposium - Managing Suppliers Using Sustainable Business Networks 2012-0424 vF.pptx