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Implementing SCM Partnerships: Opportunities for SMEs

This article explores the benefits and challenges of implementing supply chain management partnerships for small and medium-sized enterprises (SMEs), with a focus on environmental improvement and cost savings. It discusses the methodology and initial results of the Supply Chain Management Partnership Program in Mexico and Brazil.

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Implementing SCM Partnerships: Opportunities for SMEs

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  1. Implementing the SCM Partnerships: Opportunities for Environmental Improvement and Cost Savings for SMEs World Environment Center Roundtable “The Supply Chain Management Partnership Program in Mexico and Brazil: Methodology and Initial Results” Mark Oven and Bill Meade, PA Government Services November 30, 2004

  2. Introduction to PA • PA Consulting Group • 3,000 employees in 40 offices in 20 countries worldwide • $500 million/yr in sales • Consulting strengths: strategy; market development; business transformation; energy; environment; pharmaceuticals; IT • PA Government Services • Focus on international development, $30 million/yr in sales • USAID, multilateral development banks, international organizations, governments, private sector • Over 10 years experience in pollution prevention, environmental management, cleaner production in virtually every industry subsector

  3. Design of the WEC SCM Partnership Project • Objective: • Utilize donor seed money to catalyze and leverage private sector commitment and investment in improving environmental performance of supply chains • Key areas of focus: • SMEs • Developing countries; development • Cleaner Production, in the initial stage • Use of local in-country resources for implementation • Approach: • Pilot projects led by WEC members

  4. Evolution of Environmental Improvement Compliance Best practices (EMS) ISO 14001 Certification Corporate Social Responsibility - - - - - - - - - - - - - Sustainable Development - - - - - - - - - - - - - Cleaner Production

  5. The Cleaner Production (CP) Umbrella Pollution prevention Process improvement Energy efficiency Materials procurement Waste minimization Water use efficiency Recovery and recycling Housekeeping improvements

  6. CP as Excellent Tool to Identify Cost Savings:Results of Cleaner Production Audits in Mexico Results of program financed by USAID/México; implemented by CMP+L

  7. CP Identifies Short-Payback Savings:Results of Cleaner Production Audits in Mexico Results of program financed by USAID/México; implemented by CMP+L

  8. International Development Agenda for CP • Establishment / Strengthening of National Cleaner Production Centers in over 30 developing countries • Develop technical capacity for CP audits • Promote and do (sell) audits • Promote implementation • Provide training, information, and other technical assistance to industries, primarily SMEs • Main donors: UNIDO, USAID, Denmark, Switzerland, Holland, others • Over US $1 million per developing country over 5-8 years

  9. The Many Challenges for the National CP Centers • Funding and resources • Donor money limited • Local support (chambers, universities, govt.) also limited • Maintenance of technical quality • The umbrella is pretty broad; need critical mass of activities • Marketing and sales • Need to develop track record, credibility • Industries, especially SMEs, have little money for consulting • Sustainability of effects • How to ensure ongoing implementation and continuous improvement

  10. If only there were a driver…. • How to promote industry’s investment in a good thing? • Compliance? • ISO 14001 Certification? • Funding, low-cost financing? • A law obligating Cleaner Production??? • In fact, CP Centers worldwide have found that, despite its potential attractiveness, CP is a very hard sell, especially to SMEs.

  11. WEC’s SCM PartnershipCreates a Private Market Driver Corporate clients are actively looking for ways to effect supply chain improvements • ISO 14001 principles • Corporate social responsibility principles • Improvements in supply chain management • SMEs comply fully with client conditions in order to maintain market share • SMEs invest in quality, occupational safety, timeliness, documentation… • Why not in meeting environmental conditions?

  12. WEC’s SCM Partnership: Design Elements • Led by Corporate Client • Adapted to client company processes and vision • Advice by WEC and PA Consulting Group Menu of Possible Interventions / Requirements by Corporate Client • CP Training sessions for suppliers • Visits to suppliers’ facilities • Assignment / documentation of supplier’s CP Working Group • Diagnostic (assessment) of CP potential • Environmental management and CP implementation plan • Results reporting • Meetings and information transfer • Follow-up visits to suppliers’ facilities • Recognition scheme for SCM Partnership participants

  13. WEC’s SCM Partnership: How to get it right… • Begin slowly: Don’t expect overnight results • Several-year horizon; gradual tightening of conditions (continuous improvement) • Balance the fine line between demands and capabilities to respond • Share in the cost: Provide technical guidance and assistance • Integrate into company processes and existing structures • Offer input, support suppliers efforts • Build sustainability: Incorporate into on-going procurement requirements • Add CP elements to the annual quality or environmental compliance audits • Develop circle of quality or continuous improvement approaches to help maintain suppliers’ focus on CP activities • Current pilots will identify additional success factors.

  14. Environmental Assessment Application of the EMS Approach to CP Commmitment at highest levels • Process analysis What have we achieved? How much have we saved? • Energy Environmental Policy • Water • Materials • Wastes Inicio I Supervision and Results Evaluation Environmental Indicators VII II Initial values Continuous Improvement How much are we reducing, and when? Documentation Goals and Objectives VI III Programs, forms and procedures V IV Environmental Management Programs Assignment of Responsibility; Training How will we do it, and what do we need? Who will do what?

  15. Funding: potential for cost-sharing and leverage • Example of Johnson & Johnson Janssen-Cilag Puebla pilot project • USAID support $ 70k • J&J corporate staff time $ 12k • Janssen-Cilag Puebla staff time $ 22k • 9 supplier SMEs staff time $ 90k • 9 supplier SMEs investment in measures $175k • Total $373k • A small donor amount provides more than a 4-to-1 private sector investment, with an annual savings stream 3 times the donor amount.

  16. Back to the National CP Centers… • CP Centers have excellent resources and capabilities to bring to bear to the SCM Partnership. • The SCM Partnership can help increase the market for CP services, benefiting the CP Centers. • Thus, the SCM Partnership offers a way for donors to recover or leverage the large amounts invested in CP Centers to date and ensure their long-term survival.

  17. Further Leverage from Pilots: Mexico Example • As a result of the initial pilot activities in Mexico over the last year: • PEMEX, the largest company in Mexico, has written SCM based on CP into its Sustainable Development Program • CESPEDES, the business association for sustainable development is interested in a CP-based SCM project through one or more of its members • PROFEPA, the compliance enforcement arm of the Federal Environment and Natural Resources Secretariat, is considering CP-based SCM in the development of its voluntary program of certification of industries.

  18. Is this really such a novel idea? • World Bank Supply Chain Greening, Monterrey and Guadalajara • Focus on promoting ISO 14001 certification • Difficult to achieve in SMEs, more difficult to sustain • GEMI Greening Supply Chain Manual “Forging New Links” • How-to, including varied case studies of different approaches • More focus on larger industries, broader EHS issues • Tourism Supply Chain Examples • Tour Operators send questionnaires to accommodation suppliers on EMS and best practices. • The SCM Partnership is a deliberate approach, highly replicable, and initially focused on cost-attractive CP measures, as a way to facilitate supply chain response and involvement.

  19. SCM Partnership Pilot Projects • Mexico • Janssen-Cilag, Puebla • Alcoa-Fujikura, Monterrey and others Brazil • Johnson & Johnson, Sao Paulo state • Dow Brasil, Sao Paulo state • The Dow Brasil pilot is a client-chain rather than a supply chain project. Instead of establishing supply chain requirements, Dow is offering to organize and monitor voluntary CP activities among its main clients, as a service to maintain close relationships.

  20. Summary: Key Attributes of the SCM Partnership • Limited to CP so far • Market-based, private-sector driven • Characterized by successful initial pilot projects • Leverages private funds for staffing and implementation • Good chance of sustainability of measures through eventual integration into client processes • Taps into and strengthens previous donor investments in CP Centers • Potential to go beyond CP to CSR, broader community involvement, environmental education and awareness • Potential to work in the client chain, in addition to supply chain

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