Improving Supply Chain Energy efficiency. What happens to the Majority World?

McKinsey have published an important insight into increasing the energy efficiency of supply chains. Starting from the fact that 15 million barrels of oil per day – that’s 20% of total production – is used to move things around globally, the study highlights six levers that can make significant impacts on energy efficiency. See: McKinsey (August 2009).

The levers work within three oil price scenarios and focus supply chain set up (from increasing value densities; reducing transport distances and switching modes) to the transport assets themselves (improve design and technology; maximise usage and improve infrastructure).

The levers are well documented. However, several issues remain untouched and the report would be improved by considering:

1. The Majority World. Let’s suppose that Brasil, Russia, India, China and other emerging economies end up with the same level of consumerism as the current developed world. We will need something like three planets to provide the raw materials. Think of the supply chains and the energy that they will use.

This Blog has covered this  point extensively. It needs to be said again in this context. As more companies outsource, companies no longer compete on their own. As Martin Christopher emphasises – supply chains do. Increasingly, this means that front line brands depend – often without knowing the full extent – on several tiers of supplier. Many tier one suppliers outsource production to increase their capacity but, in doing so, open up risks and exposure to the informal market. What does this do to the supply chain and, efforts to maximise energy utilisation and improve efficiencies? 

Specifically, the oil lobby is well organised, well funded and the apparatus of growth (rather than sustainable growth) is largely dependent on it. The renewables sector holds none of these cards – yet. What chance is there to maximise the impact of renewable energy options into an often informal economy that does not have the resources to “buy in” to the technology or, even fails to comply with legal status requirements that would allow them to access funds and subsidies to make this happen? 

This is not to demonise the informal world but to champion inclusive value chains (see the work of Professor Malcolm Harper mentioned on another recent post) and, their significant capacity for innovation and being part of the employment solution worldwide. And an inclusive value chain has to be a green one too!  

2. Skills. It is acknowledged that the major driver of energy usage is behaviour at a Corporate and an individual level. Again, as we factor in the Majority World to this energy and the supply chain equation, we add significant complexity in relation to behaviour. What happens to the skills that can improve asset utilisation and optimise energy performance?  Why not explore training on two levels:

  • Enabling skills: This could be focussed on the language, communication and core learning skills. This will start with assessment and equip people to absorb the know how that will be required at the task level.  
  • Functional skills:  Task specific and focussed on asset utilisation. If Governments are serious about renewables where will the skills come from to implement Policy? Are they to be local or, another opportunity for expensive ex pats to clean up?

Note: Consider this in a T configuration – “T” Learning. The idea was inspired by Mangan & Christopher elsewhere.  

3. Training technologies. The image of training is locked in a classroom. How can any emerging and developing economy hope to mkae things happen within a reasonable timeframe when the ability to implement the training required is hampered by the inability to scale up the delivery in sufficient numbers? Before we start to consider curriculum design – there is plenty of material out there – let’s look more closely at the technology to fast track actual front line delivery. Is enough being done to move beyond the classroom and into, say, mobile telephony as a means to deliver training or, in some cases, support decisions in the field. For example, look at the maintenance function across all sectors such as ports, power or, agriculture. What about developing a cutting edge set of tools to be used to diagnose problems; suggest solutions and then, move to a visual “how to” make a solution happen. And all of this needs to happen with people who have little or no schooling. Voice activated commands and visual material can help matters improve dramatically. Other ways to make this happen include improving the quality and scope of simulator training to be used in the field. Take the example of trucks.

Trucks are key to success in all developing and emerging economies. And yet, there is a widespread shortage of drivers and a chronic lack of insight into how to train them in any other way than on-the-job. Take India -many roads are potholed and often “bio degradable” – a pleasant way of saying that they disappear in the monsoon – and, welfare conditions are dire. Corruption is rife at border conrol areas; the Aids rate is the highest amongst the population and, general health factors are not catered for. Against this backdrop how are we going to improve truck performance and safety on the roads? Try simulators. Potential drivers can be assessed beyond their ability to hold their booze using objective criteria; all sorts of driving conditions can be worked on and, fuel and wear and tear can be reduced to zero.

This is the way to go for all sorts of materials handling assets all along the supply chain and beyond. For example, what about welding? What about any number of competency and continuous assessment schemes that can be greatly improved using objective criteria often lost on-the-job and even in the classroom. 

This emphasis on skill is crucial. Behaviour change is the only way to transform the way things are designed, are used and their productivity is improved upon.  

Years back my Father was working in Sweden when they changed the side of the road on which they drive. This innocent then seven year old asked how they did it. Cars on Monday; Trucks on Tuesday … It started a discussion on change I have never forgotten. And this is the dilemma we face with greening the supply chain. Far too little is being factored in to make an impact in the Majority World. This could be disastrous. 

The McKinsey report is useful. However, far too many reports focussing the green supply chain and “how to” improve energy efficiency shy away from tackling this massive issue – the green supply chain and the Majority World.


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One Response to Improving Supply Chain Energy efficiency. What happens to the Majority World?

  1. Pingback: McKinsey Quarterly Explores Increasing the Energy Efficiency of Supply Chains | 2Sustain

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