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Simple Steps to Tackle Complex Supply Chain Sustainability Issues

<p>The supply chain director at the world's third-largest apparel company explained in a recent webcast how Philips-Van Heusen works with suppliers to maintain their environmental and social performance.</p>

Philips-Van Heusen has what Kiku Loomis, its Director of Operations & Licensee Compliance, Global Human Rights and Social Responsibility, calls a "medium-sized supply chain." This despite the fact that, as the world's third-largest apparel company, parent of brands like Calvin Klein, Van Heusen, Izod, Tommy Hilfiger and many others, PVH has 750 active vendors, 1,750 active factories, and conducts around 3,000 audits per year.

It can, as you might imagine, become quite a burden to manage the daily activities of this supply chain, but whether your supply chain is significantly larger or significantly smaller than PVH's, the same challenges persist: Gathering all the relevant data from suppliers, auditing suppliers' performance, and working with stragglers to protect a company from operational and reputational risks.

In order to take a look at the ways that PVH and other companies are managing the increasingly complicated supply chains driving the global economy, last week convened a free webcast on reducing supply chain risks and achieving environmental, social and regulatory compliance.

The webcast, sponsored by Enablon, brought together Paul Baier of Groom Energy; Kiku Loomis; and David Hoffman, Enablon's Responsible Supply Chain Specialist. The three talked about the main drivers of supply chain management across industries, and then looked at how Philips-Van Heusen has put Enablon's RSC software to work in its global supply chain.

To begin, Baier laid out the five key drivers that are still moving companies toward comprehensive supply-chain management -- despite the negative impacts on the market from the recession, climategate, the lack of cap-and-trade legislation, and a general diminishing of consumer green sentiments. The drivers are:

  • Requests from top customers (Walmart, P&G, Pepsi, etc.)
  • Improved brand- and company-level images
  • Cost savings -- energy and carbon are the flip sides of the same coin
  • Investor pressure
  • GHG regulations, like California's AB32

A poll of the the audience of the live webcast (the presentation is archived and still available for free viewing for a year) found that the top driver for supply chain performance management is to identify and mitigate supplier risk (50 percent), followed by enabling cost savings (36.3 percent) and reducing your carbon footprint (31.8 percent).

Enablon's David Hoffman walked the audience through the challenges, old and new, around increasing transparency within an organization's supply chain. Whether employees are facing old challenges like a lack of resources and overwhelming complexity or new challenges like carbon footprinting or product traceability, the latest generation of supply chain software can help make the project more manageable.

But more than anything, the first step to addressing the challenge of supply chain management is to change how your company focuses on sustainability.

"Sustainability more than anything is a cultural change," Hoffman told the audience, "and is often overlooked as one of the biggest obstacles to overcome when trying to create a more sustainable organization. In America, we have the mentality of 'if it ain't broke, don't fix it -- I've been doing this for 20 years, so why change now?'"

Kiku Loomis offered a compelling reason why supply chain management programs have a big payoff. In the apparel industry, which has long had a sharp eye focused on its manufacturers in overseas factories, keeping a good relationship with suppliers and stakeholders means that when the inevitable problems with individual suppliers arise means that your company is viewed not as a potential target, but as a partner, Loomis said.

PVH has been conducting some form of sustainability accoutability management since 1994 -- see the chart below for the evolution of its efforts -- the company engages in its supply chain management efforts not for a bottom-line ROI but in order to align with the company's social conscience, the simple fact of being able to more quickly and easily address potential supply chain risks makes it a worthwhile endeavor.

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In addition to a detailed walkthrough of how PVH uses Enablon's software to manage its supply chain, the question and answer session during the webcast offers some tips on how to work with suppliers at various levels to get the best data, and how to audit and track the veracity of the data.

The full webcast, "Sustainability Without Borders: How to Reduce Your Risks and Achieve Compliance Across Your Supply Chain," is archived and will be available for free viewing until April 2012.

Photo CC-licensed by photohome_uk.

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