Optimal supply chain sustainability

Another application of an Optimized Income Statement (OIS)  was suggested by Lora Cecere, founder and President of Supply Chain Insights, during a meeting while back.  She suggest the C-level executive who would most likely be interested in OISs functionally would not necessarily be the C-level executive with responsibility for finance or the supply chain or sales and marketing.  Specifically, apropos CFOs, her feeling was they were they are too siloed-focused on tradition financial control activities.

Rather, because of an OIS has the ability to simultaneously 1)  observe sustainability constraints which will reduce profit AND 2) restore some or all of the lost profit by relaxing the assumption of a fixed forecast, it would be the C-level executive focused on simultaneously optimizing  the profit and “greenness/zero waste” of the supply chain.”

Elaborating, by adding an OIS to the firm’s current suite of  planning applications,the firm is assured the current suite (e.g., FP&A, S&OP, marketing-mix modeling) will be aligned with  1) a projected income statement that is maximally profitable, a supply chain that is  2) optimally  feasible and 3) optimally sustainable.  The result is an optimally sustainable income statement OSIS).

Thus, as called out in the firm’s “corporate social document” the OSIS would be the responsibility of C-level executives with titles such as:

  • Chief Customer Officer
  • Chief Strategy Officer
  •  Social Responsibility Officer
  • Chief Sustainability Officer
  • Maybe, Chief Operating Officer

She concluded suggesting “minimizing waste” or “green” was going to get more important over time as a supply chain focus item, adding:

  • There is a corporate sustainability officers web site: http://www.corporatesustainabilityofficers.com
  • An article entitled “Chief Officer of Corporate Social Responsibility–a study of its presence in the Top Management Team” is available in the Journal of Business Ethics.

In conclusion, the “optimally sustainable” functionality mentioned above was recently announced by INSIGHT for both it’s network design product, SAILS, and INSIGHT Enterprise Optimizer (IEO) which is the software that creates an OSIS.  These sustainability enhancements included:

  • Ability to simultaneously measure and report energy consumption and carbon emissions for the entire supply chain, including procurement, manufacturing, warehousing and transportation activities, thereby supporting shareholder, management and government compliance reporting requirements.
  •  Ability to report ton-miles (or equivalent), which is useful for estimating energy efficiency and carbon emissions for various transport modes.
  •  Ability to optimize the network with respect to cost, time, energy or carbon, while simultaneously reporting all other measures, thereby enabling the user to directly compare network designs across scenarios with varying optimization criteria (i.e. what is the least expensive network, the most energy efficient network, the network with the least carbon emissions, etc.).
  •  Incorporation of innovative research from the University of Rhode Island supply chain management program with respect to carbon emissions of various manufacturing processes.

Further, in recognition of INSIGHT’s contribution to the art and science of more sustainable supply chains, it was awarded the Green Supply Chain Award by Supply and Demand Chain Executive magazine in November, 2014.  INSIGHT’s technology saved the global cpg client 14,000 tons of CO2 annually.  This is a good example of an OIS being used for annual supply chain planning and not strategic.