Chickens & Eggs: How to Build A New Green Supply Chain
It’s the classic supply chain problem – you want to switch to a more sustainable material/component/vehicle but the supply chain for that option is immature – featuring high costs, poor quality and/or low volumes. An example of a chicken and egg situation* if there ever was one – without demand, there is no supply, without supply, there is no demand.
So what do you do? Resign yourself to business as usual?
No, the key to accelerating the adolescence of a green supply chain is to create demand, which you can do in the following ways:
- Forward commitment procurement: by saying you will buy a certain amount of that item several years in the future, suppliers will know the demand will be there and gear up the supply in anticipation – particularly if you are announcing you won’t be buying any of their old product after that time;
- Collaborate with others to create cumulative demand. The European Postal Services did this to accelerate the commercialisation of hydrogen vehicles by announcing a joint forward commitment;
- Lateral thinking: find other uses of that item internally to create demand. Marks & Spencer started buying low grade recycled polyester fibre in bulk for uses such as cushion filling – this demand brought down the price of the high-grade recycled fibre they were after for clothing by getting material flowing through the loop in the first place.
A fourth technique is to invest directly in the supply chain to smooth out kinks and improve processes. While this can help speed up the process, the new supply chain will only survive if the demand is there. So at the end of the day, you must create demand.
* And, yes, I know the egg did come before the chicken in reality (think dinosaurs), in the same way as demand must always precede supply.
My latest book, Building A Sustainable Supply Chain, is available from DoSustainability. Use the code BSS15 to obtain a discount before 6 December 2013. You can read an extract here and join in our free webinar on 27 November 2013 to celebrate the book’s publication.