First of all, let me walk you through some details about the survey population. More than 300 international manufacturing and service companies participated. These companies spanned a broad spectrum of industries (including industrial and automotive equipment, consumer goods, electronics and semiconductors, and life sciences), and while most of these firms reported annual revenues greater than $1 billion, more than 10% indicated revenues less than $100 million.
Based on the responses of this diverse population, PRTM identified several major trends that are currently driving global sustainable supply chain design and organization. Here’s a summary of their key findings:
1. A majority of survey participants said that their company has experienced issues with product safety and quality as a result of increased globalization. Interestingly, more than 20% reported that these issues are frequent and serious. Along with product safety and quality, companies in the survey identified on-time delivery of critical products and overall product/supply availability as critical concerns when globalizing their supply chains.
2. Environmental sustainability is a key consideration in the development of future globalization strategies. Today, sustainability is mainly driven by the need for regulatory compliance and satisfaction of customer demand. It is not yet considered a strategic differentiator (more on this in a future blog).
3. Product quality and safety, as well as supply chain delivery and security, are the most critical concerns when expanding the supply chain globally. Four major risk mitigation strategies were cited, in ranked order (highest frequency reported to lowest):
a. Increasing the frequency of on-site audits
b. Physical deployment of the company’s resources within the supplier’s location
c. Increased inspection
d. Increased supplier training
4. Major cited barriers to globalization include limited supply chain flexibility and the lack of internal competency to manage partners. Better visibility and management across the supply chain are important keys to overcome these barriers.
This survey validates trends I have been seeing for some time now and discussing here on 2Sustain. First, that globalization is driving increased product quality and sustainability monitoring issues. In an ever expanding supply chain, monitoring quality and sustainability practices become more and more difficult over time, not to mention riskier (e.g. “The Mattel Factor”).
The second major trend is the increasing use of third-parties to support and enforce compliance within these expanding supply chains, particularly in the area of supplier/factory audits. As we all know, managing external partners is always a challenge, particularly when they are spread across the globe. But through combinations of technology and onsite auditors companies are increasing compliance rates and improving standards with suppliers in far-flung nations. This is a trend that will surely continue as technology improves and proliferates.
The report also validates that corporate adoption of sustainable supply chain practices are still being driven by government regulations and customer demands. This indicates to me that we still have more work to do in order to prove to large global companies that sustainability helps the bottom line and that “Green is green” as GE CEO Jeff Immelt frequently says.
The PRTM report contains a detailed breakdown of survey results for each major industry category. Check it out. It’s a good read, and well worth a few minutes of your time.