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Hodgson_PPT_JLI-2008.ppt

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Hodgson_PPT_JLI-2008.ppt

  1. 1. Canadian Supply Chains and Managing Environmental Risks -- and Opportunities? JLI Conference Calgary June 10, 2008 Glen Hodgson, Senior Vice-President & Chief Economist [email_address]
  2. 2. Supply Chains and the Environment <ul><li>Growing awareness among Canadian leaders of : </li></ul><ul><li>Supply chains: </li></ul><ul><ul><li>Increased dis-aggregation of production outside the firm and across borders </li></ul></ul><ul><ul><li>FDI a key driver </li></ul></ul><ul><ul><li>Era of “Integrative Trade” </li></ul></ul>www.conferenceboard.ca
  3. 3. Supply Chains and the Environment (cont.) <ul><li>The environment and sustainability </li></ul><ul><ul><li>Firms are becoming aware of disruption risk from environmental impacts </li></ul></ul><ul><ul><li>Policies in flux: carbon tax, cap and trade and regulation now all part of the CO2 debate </li></ul></ul><ul><li>But still early days in putting the two concepts together -- “Sustainable supply / value chains” </li></ul>www.conferenceboard.ca
  4. 4. Measuring Canada’s Fit into Global and Regional Supply Chains <ul><li>Original Conference Board analysis just published </li></ul><ul><li>Estimates country supply chains from buyer’s perspective – recuts trade data by entry level, intermediate and final goods </li></ul><ul><li>Measures international trade in real terms – price increases eliminated </li></ul><ul><li>Top 25 goods exports and imports, by region </li></ul><ul><li>Services not included due to data problems </li></ul>www.conferenceboard.ca
  5. 5. What Did We Find? <ul><li>Trade integration took off after FTA, until 2000 </li></ul><ul><li>But we are now stuck in neutral </li></ul><ul><li>Real trade volumes have declined with the U.S. since 2000 </li></ul><ul><li>Share of trade in inputs has not progressed </li></ul><ul><li>Some progress still being made with emerging markets </li></ul><ul><li>Huge increase in imported parts from Asia </li></ul>www.conferenceboard.ca
  6. 6. Canada’s Exports to the World Top 25 Goods Share (%) Volumes (billions of 2002$) Source: Calculations from Industry Canada Trade Data Online.
  7. 7. Canada’s Imports from the World Top 25 Goods Share (%) Volumes (billions of 2002$) Source: Ca lculations from Industry Canada Trade Data Online.
  8. 8. Canada’s Exports to the U.S. Top 25 Goods Share (%) Volumes (billions of 2002$) Source: Calculations from Industry Canada Trade Data Online.
  9. 9. Canada’s Imports from the U.S. Top 25 Goods Share (%) Volumes (billions of 2002$) Source: Calculations from Industry Canada Trade Data Online .
  10. 10. Canada’s Exports to Europe Top 25 Goods Share (%) Volumes (billions of 2002$) Source: Calculations from Industry Canada Trade Data Online.
  11. 11. Canada’s Imports from Europe Top 25 Goods Share (%) Volumes (billions of 2002$) Source: Calculations from Industry Canada Trade Data Online.
  12. 12. Canada’s Exports to Asia Top 25 Goods Share (%) Volumes (billions of 2002$) Source: Calculations from Industry Canada Trade Data Online .
  13. 13. Canada’s Imports from Asia Top 25 Goods Share (%) Volumes (billions of 2002$) Source: Calculations from Industry Canada Trade Data Online.
  14. 14. Integrative Trade Trends: Canadian Exports to Asia ($ CND billions) Source: The Conference Board of Canada, Statistics Canada, UN Comtrade.
  15. 15. <ul><li>Business literature is now drawing a sharper difference between “supply” chains and “value” chains </li></ul><ul><li>Supply chain: linear process where parts and inputs are formed into a final product brought to market </li></ul><ul><li>Value chain: circular process involving the creation, development, production and distribution of a product, creating value at each step -- regular feedback from suppliers and buyers about the value they are deriving </li></ul>From Supply Chains to Value Chains www.conferenceboard.ca www.conferenceboard.ca
  16. 16. <ul><li>Environmental effects can subtract from, or add value to, the production process </li></ul><ul><li>The environment represents an important sources of disruption and reputation risk; but also opportunities </li></ul><ul><li>Environmental disruptions / opportunities can arise from: </li></ul><ul><ul><li>within the firm </li></ul></ul><ul><ul><li>with its suppliers </li></ul></ul><ul><ul><li>the sector or jurisdiction </li></ul></ul><ul><ul><li>from an external source </li></ul></ul>Adding the Environmental Dimension www.conferenceboard.ca www.conferenceboard.ca
  17. 17. What Does Our Supply Chain Research Suggest re: Environmental Impacts? <ul><li>Trade integration in North America is both deep and stalled </li></ul><ul><li>Need for clear North American regulatory standards </li></ul><ul><li>Huge increase in imported parts from Asia and from other emerging markets </li></ul><ul><li>Translates into enhanced disruption risk </li></ul><ul><li>Points to need for greater clarity on global environmental standards and impact assessment for these inputs </li></ul>www.conferenceboard.ca
  18. 18. <ul><li>Management failure or compliance failure by suppliers </li></ul><ul><li>Ongoing impacts: e.g. CO2 and other airborne emissions, water pollution, soil contamination, etc </li></ul><ul><li>A catastrophic environmental event: e.g. chemical spill, flood </li></ul><ul><li>Changes to policy: </li></ul><ul><ul><li>Externality pricing via green taxes </li></ul></ul><ul><ul><li>Green tariffs on imports? </li></ul></ul><ul><ul><li>Regulation – approvals, processes, standards </li></ul></ul><ul><ul><li>New technologies </li></ul></ul><ul><li>Lack of policy coherence across borders </li></ul>Specific Environmental Risk Elements www.conferenceboard.ca www.conferenceboard.ca
  19. 19. <ul><li>Environmental technologies and services </li></ul><ul><ul><li>Energy savings, emissions reductions, etc </li></ul></ul><ul><li>Alternative service delivery </li></ul><ul><ul><li>Use of info technology to deliver more efficiently or even virtually </li></ul></ul><ul><li>Green branding and products </li></ul><ul><ul><li>e.g. Walmart has created green product mandates, less packaging that may also cut costs </li></ul></ul>Environmental Opportunities in Supply / Value Chains www.conferenceboard.ca www.conferenceboard.ca
  20. 20. <ul><li>Full engagement and transparency of suppliers and buyers </li></ul><ul><li>Clarity on standards and expectations across supply chain </li></ul><ul><li>Feedback mechanisms and use of certification </li></ul><ul><li>Alternatives / competition among suppliers </li></ul><ul><li>Crisis management plans </li></ul>Managing a Sustainable Supply Chain: The Search for Good Practice www.conferenceboard.ca www.conferenceboard.ca
  21. 21. <ul><li>Business is starting to define good practice in sustainable supply chain management </li></ul><ul><ul><li>e.g. Global Commerce Initiative (GCI) and Capgemini, website “Future Supply Chain 2016” </li></ul></ul><ul><ul><li>e.g. IBM Institute for Business Value, recent work on “mastering carbon management” </li></ul></ul>Managing a Sustainable Supply Chain: Recent Business Research www.conferenceboard.ca www.conferenceboard.ca
  22. 22. <ul><li>Seven solution areas identified for retail supply chains: </li></ul><ul><ul><li>In-store logistics – improvements to display, shelf-ready products </li></ul></ul><ul><ul><li>Collaborative physical logistics – design and sharing of physical infrastructure in shipping and warehousing </li></ul></ul><ul><ul><li>Reverse logistics – packaging , product recycling, etc </li></ul></ul><ul><ul><li>Demand fluctuation management </li></ul></ul><ul><ul><li>Identification and labeling – e.g. barcodes use </li></ul></ul><ul><ul><li>Efficient assets – modify buildings, equipment </li></ul></ul><ul><ul><li>Joint scorecard and business plan </li></ul></ul>Managing a Sustainable Supply Chain: GCI / Capgemini Guidance on Retail www.conferenceboard.ca www.conferenceboard.ca
  23. 23. <ul><li>IBM proposes a trade-off model where businesses must balance transportation, process and inventory policies to minimize total CO2 emissions </li></ul><ul><li>IBM suggests a five step approach to manage CO2 across a supply chain: </li></ul><ul><ul><li>Diagnose and assess </li></ul></ul><ul><ul><li>Implement asset management and realize point solutions </li></ul></ul><ul><ul><li>Address emissions in supply chain functions </li></ul></ul><ul><ul><li>Find the optimal solution for integrating across functions </li></ul></ul><ul><ul><li>Collaborate with supply chain partners to realize overall potential </li></ul></ul>Managing a Sustainable Supply Chain: IBM Model for CO2 www.conferenceboard.ca www.conferenceboard.ca
  24. 24. <ul><li>Carbon tax on producers / consumers </li></ul><ul><li>Regulatory limits – major emitters, vehicles </li></ul><ul><li>Cap and trade – sets regulatory limit on CO2 produced, and uses prices to reallocate the limits </li></ul><ul><li>Investment incentives – green bonds, enviro tax credits </li></ul>Managing CO2: Big Policy Options www.conferenceboard.ca www.conferenceboard.ca
  25. 25. <ul><li>Cattle: Due to BSE, producers now track an animal through its life to monitor contamination risk </li></ul><ul><li>Retail: </li></ul><ul><ul><li>Rona and Home Depot have introduced “sustainable wood sourcing” (must be CSA approved) </li></ul></ul><ul><ul><li>Tesco (U.K.) has introduced carbon labeling for its products-- domestic only so far, since the supplier needs to be able to track CO2 across the entire supply chain </li></ul></ul>Making It Real: Some Examples www.conferenceboard.ca www.conferenceboard.ca
  26. 26. <ul><li>Energy: California and U.S. Feds / DoD have introduced a “low carbon fuel standard” -- requires refiners to meet a given carbon emission standard (that heavy oil feedstocks can’t currently meet) </li></ul><ul><li>Energy industry examining carbon capture and storage (CCS) and its economic viability </li></ul><ul><ul><li>Pricing carbon will change the incentives and create new business opportunities in the value chain </li></ul></ul>Making It Real: Energy Examples www.conferenceboard.ca www.conferenceboard.ca
  27. 27. <ul><li>Still early days for the concept of “sustainable supply / value chains” </li></ul><ul><li>But the idea is catching on with retailers, producers and service-providers </li></ul><ul><li>A risk management / new opportunity approach should capture the interest of business and policy leaders alike </li></ul><ul><li>And “sustainable value chain” management will create opportunities for stronger brands and new lines of business </li></ul>Conclusion www.conferenceboard.ca www.conferenceboard.ca
  28. 28. Visit us at www.conferenceboard.ca

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