Tag: supply chain

Can blockchain and the Internet of Things mitigate supply chain reputation risk?

Supply chains are complex, unwieldy beasts, which are notoriously hard to tame, but a solution could be in the offing, using Blockchain, and Internet of Things technologies.

“Mommy, I want to be a supply chain manager when I grow up”, said no-one. Ever.

Supply chain management has to be one of the most difficult, thankless jobs in business. In this globalised age, it becomes increasingly complex, all the more so, the bigger an organisation becomes.

Getting a company’s supply chain right, can transform a company’s fortunes. Witness Apple Computers, a large part of Apple’s resurrection was due to having the best supply chain in the world (as ranked by Gartner for the last 5 years in a row).

Getting you supply chain wrong on the other hand can have serious consequences. Tesco saw €360m knocked off its value overnight when it was discovered that it’s beef burgers were found to be 29% horse meat. Investigations subsequently showed that the horse meat entered the supply chain without Tesco’s knowledge, but the issue still had significant implications for people’s trust in the brand.

In another famous example, taken from the Economist Intelligence Unit’s  Managing supply-chain risk for reward [pdf] report it noted

Nearly a decade ago, lightning struck a Philips microchip plant in New Mexico, causing a fire that contaminated millions of mobile phone chips. Among Philips’ biggest customers were Nokia and Ericsson, the mobile phone manufacturers, but each reacted differently to the disaster. Nokia’s supplychain management strategy allowed it to switch suppliers quickly; it even re-engineered some of its phones to accept both American and Japanese chips, which meant its production line was relatively unaffected. Ericsson, however, accepted Philips’ word that production at the plant would be back on track in a week and took no action. That decision cost Ericsson more than US$400m in annual earnings and, perhaps more significantly, the company lost market share. By contrast, Nokia’s profits rose by 42% that year.

And then there is the issue of conflict minerals. These are natural resources (such as cassiterite (for tin), wolframite (for tungsten), coltan (for tantalum), and gold ore) mined in a conflict zone and sold to help finance the fighting. These minerals are required for the manufacture of electronics such as tablets, laptops, and mobile phones. Coincidentally, Apple announced yesterday that it is now auditing 100 percent of its suppliers for the use of conflict minerals.

How best to gain and enforce transparency into supply chains? Traditionally this has been done with audits, a resource intensive process if carried out correctly.

However two more recent technologies may help significantly improve this procedure – blockchain, and the Internet of Things.

Blockchain, the technology which underpins cryptocurriencies like bitcoin, is basically a cryptographically secure, immutable record of transactions. And recently it has been used to set up and enforce smart contracts for things such as managing community energy exchange transactions in New York, to issue equity to drivers in a cooperatively owned ride sharing platform, and to authenticate users, and manage the billing process when charging electric vehicles in Germany.

If every item in your supply chain is part of a blockchain, then it has a proven provenance. Add to this always-on traceability using Internet of Things technologies, and you suddenly have a robust, transparent, virtually bullet-proof supply chain.

Has anyone rolled this out for their supply chain yet? Not that I know of, but it can only be a matter of time (did I mention supply chains are complex?).

 

Photo credit Neville Hobson

Apple, cloud computing, and enterprise supply chain management

Solar power

Apple’s recent announcements around renewables and supply chain transparency, put the major cloud providers to shame.

Apple had a couple of interesting announcements last week. The first was that they were investing $848m in a 130MW solar farm being built by First Solar in California. With this investment, Apple enters into a 25 year power purchase agreement with the solar farm, guaranteeing income for the solar farm, and securing Apple’s energy bills for the next 25 years in California. According to First Solar this is the largest agreement in the industry to provide clean energy to a commercial end user, and it will provide enough energy for Apple to fully power its headquarters, operations and retail stores in California, with renewable energy.

For it’s data centers, which hosts Apple’s iCloud, App Store, and iTunes content, Apple uses 100% locally generated, renewable energy. It’s Maiden, North Carolina data centre, for example, uses a combination of biogas fuel cells and two 20‑megawatt solar arrays — the largest privately owned renewable energy installation in the US, according to Apple. And it is now investing another $55 million in a third, 100-acre 17.5MW plant for the facility. You can find details of Apple’s other data centre facilities, and how they are powered by renewables, here.

Apple's Maiden Data Center Solar Array

The second announcement from Apple was the publication of its 2015 Supplier Responsibility Progress Report (highlights here, full PDF here). Apple has been criticised in the past for workers rights violations in its supply chain, so it is good to see Apple taking very real steps, positive, to address this. The amout of detail, the steps taken, and the levels of transparency in the report are impressive.

On underage labour, for instance, Apple’s policy requires that

any supplier found hiring underage workers fund the worker’s safe return home. Suppliers also have to fully finance the worker’s education at a school chosen by the worker and his or her family, continue to pay the worker’s wages, and offer the worker a job when he or she reaches the legal age. Of more than 1.6 million workers covered in 633 audits in 2014, 16 cases of underage labor were discovered at six facilities — and all were successfully remediated.

Apple also has strict policies around work week hours, health and safety, sourcing of conflict minerals, and the environment. In order to increase its transparency, Apple publishes its Supplier Code of Conduct, its Supplier Responsibility Standards, its Conflict Minerals Standard, as well as a list of its smelter suppliers and its top 200 suppliers amongst other documents. And Apple’s comprehensive list of environmental reports are published here.

What does this have to do with cloud computing and the enterprise supply chain management?

Well, Apple recently partnered with IBM in order to expand its userbase into the enterprise space. And it has opened its iWork office suite to anyone with an Apple ID, no Apple device required – though this was long overdue.

Comparing Apple’s cloud offerings to actual enterprise cloud players (or any cloud players, for that matter), you see there’s a yawning chasm in terms of transparency, reporting, and commitment to renewables.

Of the main enterprise cloud players:

  • Microsoft publish their Citizenship Report here [PDF]. And while it is a decent enough report, it doesn’t go into anything like the level of detail that Apple does. On page 53 of this report Microsoft mention that 47% of the energy it purchases is renewable. It does purchase renewable energy certificates for the other 53% so it can report that it is carbon neutral.
  • Google doesn’t produce a corporate sustainability report. Instead it has this page which outlines some of the work it does in the community. Information on Google’s energy breakdown is sparse. What is published is found on the Google Green site, where we find that although Google has many investments in renewable energy, and Google has been carbon neutral since 2007, Google’s actual percentage of renewables is only 35%.
  • IBM has a good history of producing corporate reports (though it still hasn’t published its report for 2014). However on the energy conservation section of IBM’s corporate report, IBM reports that sources 17% of its electricity came from renewable sources in 2013. However, they go on to note that this does not include the energy data of Softlayer – IBM’s cloud platform.

Cloud Providers Energy and Transparency

  • And finally, Amazon, who have arguably the largest cloud computing footprint of any of the providers, is the worst performer in terms of reporting, and likely in terms of emissions. The only page where Amazon mentions emissions, claims that it has three carbon neutral regions, but fails to say how they have achieved this status (or whether they are third party audited as such). The same page also claims that “AWS has a long-term commitment to achieve 100% renewable energy usage for our global infrastructure footprint” but it fails to give any time frame for this commitment, or any other details on how it plans to get there.

Taking into account last November’s historic deal between the US and China on carbon reductions, and the upcoming Paris Climate Change Conference in December this year (2015), where there are very likely to be binding international agreements on carbon reductions. This will lead inevitably to increased requirements for CO2 reporting from the supply chain.

With that in mind, including the % renewable energy as one of the factors when choosing a cloud provider, would be a very wise move.

UPDATE:
As pointed out to me on Twitter:

In that case, you could always go with GreenQloud. GreenQloud bill themselves as a drop-in AWS replacement and being based in Iceland their electricity is 100% renewable.

(Cross-posted @ GreenMonk: the blog)

Lack of emissions reporting from (some) cloud providers is a supply chain risk

Pollution

We at GreenMonk spoke to Robert Francisco, President North America of FirstCarbon Solutions, last week. FirstCarbon solutions is an environmental sustainability company and the exclusive scoring partner of CDP‘s (formerly the Carbon Disclosure Project), supply chain program.

Robert pointed out on the call that there is a seed change happening and that interest in disclosure is on the rise. He noted that carbon scores are now not only showing up at board level, but are also being reported to insurance companies, and are appearing on Bloomberg and Google Finance. He put this down to a shift away from the traditional regulation led reporting, to a situation now where organisations are responding to pressure from investors, as well as a requirement to manage shareholder risk.

In other words the drivers for sustainability reporting now are the insurance companies, and Wall Street. Organisations are realising that buildings collapsing in Bangladesh can have an adverse effect on their brand, and ultimately their bottom line.

So transparency in business is the new black.

Unfortunately, not everyone has received the memo.

We’re written previously about this lack of transparency, even ranking some cloud computing providers, and the supply chain risk as a result of that lack of reporting. Amazon and SoftLayer being two prime examples of cloud computing platforms that fail to report on their emissions.

However, SoftLayer was purchased by IBM in 2013, and IBM has a reasonably good record on corporate reporting (although, as of July 2014, it has yet to publish its 2013 Corporate Responsibility report). Hopefully this means that SoftLayer will soon start publishing its energy and emissions data.

Amazon, on the other hand, has no history of any kind of environmental energy or emissions reporting. That lack of transparency has to be a concern for its investors, a risk for for its shareholders, and a worry for its customers who don’t know what is in their supply chain.

Image credit Roger

(Cross-posted @ GreenMonk: the blog)

Cloud computing meets supply chain transparency and risk

Supply chains? Yawn, right?

While supply chains may seem boring, they are of vital importance to organisations, and their proper management can make, or break companies.

Some recent examples of where poorly managed supply chains caused at best, serious reputational damage for companies include the Apple Computers child labour and workers suicide debacle; the Tesco horse meat scandal; and Nestlé’s palm oil problems.

What does this have to do with Cloud computing?

Well, last week, here in GreenMonk we published a ranking of cloud computing companies and their use of renewables. Greenqloud, Windows Azure, Google, SAP and Rackspace all come out of it quite well.

On the other hand, IBM and Oracle didn’t fare well in the study due to their poor commitment to renewables. But, at least they are reasonably transparent about it. Both organisations produce quite detailed corporate responsibility reports, and both report their emissions to the Carbon Disclosure Project. So if you are sourcing your cloud infrastructure from Oracle or IBM, you can at least find out quite easily where the dirty energy powering your cloud is coming from.

Amazon however, does neither. It doesn’t produce any corporate responsibility reports and it doesn’t publish its emissions to the Carbon Disclosure Project. This is particularly egregious given that Amazon is, by far the largest player in this market.

Amazon’s customers are taking a leap of faith by choosing Amazon to host their cloud. They have no idea where Amazon is sourcing the power to run their servers. Amazon could easily be powering their server farms using coal mined by Massey Energy, for example. Massey Energy, as well as having an appalling environmental record, is the company responsible for the 2010 West Virginia mining disaster which killed 29 miners, or Amazon could be using oil extracted from Tar sands. Or there could be worse in Amazon’s supply chain. We just don’t know, because Amazon won’t tell us.

This has got to be worrisome for Amazon’s significant customer base which includes names like Unilever, Nokia and Adobe, amongst many others. Imagine what could happen if Greenpeace found out… oh wait.

Just a couple of weeks ago US enterprise software company Infor announced at Amazon’s Summit that it plans to build it’s CloudSuite offerings entirely on Amazon’s AWS. As I tweeted last week, this is a very courageous move on Infor’s part

All the more brave given that Infor will be using Amazon to host the infrastructure of Infor’s own customer base. “Danger, Will Robinson!”

This lack of supply chain transparency is not sustainable. Amazon’s customers won’t tolerate the potential risk to their reputations and if Amazon are unwilling to be more transparent, there are plenty of other cloud providers who are.

This post was originally published by Tom Raftery on GreenMonk.

Image credits failing_angel

Can corporate social responsibility affect your company’s bottom line?

Nestlé share price drops

Your company’s share price can be negatively affected if you fail to behave responsibly in your business practices.

I have written here a couple of times about environmental risks companies could potentially face. This first time I wrote about this it was in reference to FaceBook’s decision to source the power for their new data center from a utility which uses coal-fired power primarily.

I followed that up with a post about how the EPA, the SEC and institutional investors are becoming more interested in environmental risk, asking companies to report on risks which may impact on a business’ sales, properties or even their reputation.

The importance of this has been driven home forcibly over the last couple of days as GreenPeace launched an international campaign targeting Nestlé. Why? Because it turns out Nestlé is purchasing palm oil from companies whose plantations cause deforestation of Indonesian rainforests with all the attendant knock-on effects this has (massive CO2 emissions, indigenous communities destroyed, and devastation of the Orang-utan’s habitat to name but a few).

As part of the campaign, Greenpeace launched a report called Caught Red Handed [PDF] outlining the connections between Nestlé, their suppliers and habitat destruction in Indonesia. As part of the launch campaign, Greenpeace had people on the ground at Nestlé offices in Orang-utan costumes publicising the report and they posted a spoof video on YouTube.

Unfortunately Nestlé, decided that instead of fixing their supply chain, that they should go down the censorship route. They quickly contacted Google and had the video removed from YouTube. Nestlé didn’t reckon with the Streisand effect though and in very short order the video was posted on vimeo and promptly re-posted on many other sites.

Nestlé’s lawyers quickly abandoned the take-down option realising they’d merely be playing a game of whack-a-mole if they continued. The storm of publicity which ensued even spread as far as CNN and within 24 hours Nestlé was forced to backtrack . The video is now back up on YouTube.

Nestlé censoring comment on FaceBook

As these things do, the debate took place on FaceBook and Twitter too with many people calling for a boycott of Nestlé products! In a classic social media shot to the foot Nestlé warned people:

we welcome your comments, but please don’t post using an altered version of any of our logos as your profile pic – they will be deleted.

Now, in any social media forum (or any forum for that matter), threatening people with censorship is definitely not a way to win friends or influence people. And predictably this threat inflamed an already upset audience. The censorship threat went viral and Nestlé’s reputation went into freefall.

The end result, as you can see at the top of this post, Nestlé’s stock price fell too.

This was eminently preventable.

And it is a clear demonstration of the need to be fully aware of all the potential risks in your supply chain.

If Nestlé was utterly transparent and ethical in its business practices, then it couldn’t have been ambushed by Greenpeace.

If Nestlé had ensured that its supply chain was completely free of controversy it would have avoided the pr storm, the reputational damage and the financial losses from loss of sales and the fall in its share price.

by-sa