Sustainable Supply Chains in Chinese Factories
Enjoy this 2013 interview from the SSC archives: An increasing number of companies are implementing sustainable supply chain programs. These programs usually include requests to suppliers to fill out long surveys, track and report data, and develop internal management systems to improve factory-level sustainability performance. At Strategic Sustainability Consulting, we believe that effective supply chain engagement on sustainability is critical to manage risk and leverage opportunities, but we also know that suppliers are often overwhelmed at the requests they are getting from their customers. To get some insight into the challenges facing suppliers, we recently interviewed Nate Sullivan of Efficiency Exchange (EEx). We've worked with EEx, a provider of sustainability software and services to Chinese factories, for many years, and believe they have their finger on the pulse of the Chinese supply chain. SSC: You specialize in working with Chinese factories. What are you seeing in these factories with regard to supplier questionnaires? Nate Sullivan: Supplier questionnaires and worksheets are not a new thing -- factories have seen them for decades. They've always had to fill out spreadsheets and word documents with tons of information about their facility -- from general company information, to detailed labor practices and customized quote sheets. However, they complain that the only ones that seem to have a real impact are the quote sheets, because they're about price, and that's ultimately what customers care about in practice. Now they are being asked to fill out sustainability questionnaires full of data, which requires a full time job to compile and document (around 40 hours a month). Most of the time they don't even know why the customer is asking for the data, and they say that they rarely hear much back after submitting the information. So basically it's another hoop to jump through that doesn't appear to influence purchasing decisions, and keeps factories from focusing on what they do well -- which is making stuff. SSC: What are the biggest obstacles to effectively measuring and managing sustainability impacts (like energy, waste, and water) at the supplier factory level? NS: The biggest problem, by far, is accuracy. People really need to realize that there's a tremendous amount of bad, inaccurate data out there that is useless no matter how you look at it, because it simply doesn't reflect reality. That's almost entirely due to how and why it's collected, which is usually through required self-reporting, without any incentive for suppliers that what they provide is true. Unless you're going to sit there in every facility, forever, and actively track what's happening -- which isn't practical for any retailer we've met, no matter how big -- you simply have to find a better reason for suppliers to track and truthfully report what's going on than "because I say so." And that doesn't even address the fact that suppliers have lots of customers who all have their own elaborate set of disclosure requirements, or that factories have no idea how to measure many of the things they're asked to report. SSC: Your company, Efficiency Exchange, has developed software and services that aim to overcome these challenges. Can you explain the 3-4 most important elements that supplier factories should be looking for in sustainability programs and tools? NS: The number one thing factories should be looking for is something that helps their business. Manufacturing is a tough gig; it's not like these guys have huge margins they can afford to cut into an order to look good for potential customers. So the most important characteristic of any kind of factory facing tool is that it provides direct business value to that factory. Any investment that is going to provide that kind of value to a factory needs to be easy to use, and inexpensive not only to buy, but to operate, understand, implement, etc. In our experience, what's missing from every tool we've looked at is simplicity and clarity. There are lots of systems that are really powerful and complex, but they're usually designed to be all things to all people -- utilities, retailers, manufacturers- and anybody who could conceivably buy it, really. With any kind of typical enterprise software, you end up buying this incredibly expensive, super-capable system, and then a bunch of consulting services, training, and support on top of that. (Then you have to) whittle it down and customize it into something that's actually useful to you. Factories don't have the time or money or expertise to deal with any of that. So any tool that's going to make sense at the factory level has to strip away all of that extra nonsense, and focus on being something that's lightweight, useful, and solves a problem right out of the box. That means it can't necessarily be all things to all people -- it has to be built specifically for factories that need help with this kind of stuff, and it has to provide that help in a really direct way. If you're a factory looking at any kind of sustainability or operational improvement tool, just stop and think about how the tool is going to affect what you do all day. Are you going to get a dashboard or a weekly report? What are you actually going to do with that? Are you going to print it out once a month and put it in a file cabinet? If so, that tool doesn't make sense for you. Anything that's going to be useful needs to go from login, all the way to the part where you're saving money, or getting new business, or removing some obstacle that slows down your growth. Everyone talks about intelligence versus just data, but "actionable intelligence" versus just intelligence is just as important of a distinction, especially for factories. Whatever tool you're investing in needs to take you from software to actually doing something inside your facility that helps your business. How is sustainability saving Chinese textile mills money? Read about it here!