Improving Supply Chain Profit, Production & Sustainability
Elevating the discussion around sustainable supply chains, Microsoft recently announced it will mandate supplier sustainability disclosure in 2013. As Environmental Leader reported, Ford has also announced that it has more than tripled the size of its program aimed at understanding and measuring its suppliers’ carbon footprint and toy manufacturer Hasbro also stepped up its game and has directed suppliers to stop using paper coming from unsustainably managed forests.
With a growing number of large, international and well-known companies currently investing in and incorporating sustainability plans and procedures into their operations, companies of all shapes and sizes will eventually follow suit. However, while the ripple effect has already begun, there is a need to move much more quickly towards fully integrated, sustainable supply chains, especially as natural resources are an increasingly scarce resource.
The first step toward any project is the hardest, yet when done correctly, neither the profit margin nor the environmental asset has to be sacrificed for the other to succeed.
Demonstrating that Environmental Sustainability, Supply Chain Optimization & Profitability Are Not Mutually Exclusive
Look at Suzano, one of the world’s largest paper and pulp companies, as an example of a company that has a proven commitment to sustainability, and has embraced spatial optimization and other technologies to improve their productivity across the entire supply chain and ensure sustainable forest practices and chain of custody certification at the same time.
Suzano has an 87 year history and an impressive record on the sustainability front. Case and point, the company plants 425,000 seedlings per business day and 40 percent of their total forest area is earmarked for protection. Additionally, Suzano holds the largest range of forestry certifications in the world – from ISO to the Forest Stewardship Council. In order to accomplish this, Suzano needs to continually prove that it is practicing sustainable forestry stewardship and certifying its chain of custody. Otherwise, there is no guarantee that Suzano products were in fact produced with raw materials that respect both the natural environment and the local communities.
The business of forestry is complex – best practice involves long-term modeling and optimization of the interwoven threads of growth and harvest against the constraint map of evolving regulation and volatile timber markets. The complexity of these models is far greater than what you might see in most manufacturing or production planning situations where variables are more stable, geographic distances less relevant and time horizons typically shorter.
Similarly, Suzano’s supply chain is incredibly complex. The company must manage all aspects of its production operations, from seedling to the mill, and must coordinate these efforts with several contract partners.
Optimize From the Beginning – Growing and Harvesting
The company’s goal is to have the right seedling planted at the right site, at the right time, which must coincide with harvesting and manufacturing schedules. Ensuring the optimal seed is matched to the right site (which can vary based on tree species, density, mortality, growth rate and site availability for planting) is critical to Suzano’s operations because seedling performance varies depending upon soil composition and site climate. This requires Suzano to align nursery production schedules with harvest planning schedules to maximize seedling and tree clone performance.
Suzano’s research team saw that nursery production of seedlings did not always meet field requirements; this was a red flag that warranted a new approach. Suzano recognized that by optimizing the coordination of planning schedules and seedling allocation, they could improve productivity, pulp production and ultimately profit.
Embrace Asset Lifecycle Optimization – Throughout the Supply Chain
By using advanced analytics and smart spatial modeling technology (in this case, specifically asset lifecycle optimization technology) across the supply chain – and ensuring that all activities and schedules were interconnected – Suzano was able to meet its goal of getting the right seedling to the right site at the right time. This yielded denser wood in trees and higher productivity from the same growth area, resulting in millions gained for the bottom line.
For companies not familiar with asset lifecycle optimization, it is an element of business intelligence, which at the most basic level, simplifies complex, high-variable decisions to fuel long-term sustainability. By incorporating the technology and practice into strategy, organizations can meet critical objectives while ensuring that all business and regulatory constraints are met.
By integrating sustainability considerations across the entire supply chain and embracing optimization and spatial planning technologies to enable it, Suzano gained the ability to evaluate any forest planning situation including inventory projections, long-term harvest schedules, land or silviculture investment queries, and even compliance certification standards – together, in the same model.
Imagine if you had one model that represents your entire supply chain, you can quickly calculate and understand the impacts of changes to your operations for any reason. At the very least, this would improve your organization’s long-term planning and its ability to maximize million dollar decisions and investments.
While the financial benefits are monumental, there are several softer benefits that impact Suzano’s complex supply chain. These include the ability to improve communications between the nursery team, harvesting team and production team; the ability to evaluate and assess strategic business decisions such as whether to expand mill production or build a new mill; and the decision of whether to dispose of or acquire new land.
Suzano’s optimization technologies allowed them to show senior managers and stakeholders realistic operational plans that incorporated input from across the company. The company had the ability to illustrate what would happen to overall revenue under many different scenarios. For instance, what if harvesting activities were conducted differently, if thousands of seedlings were destroyed by disease, or if the company needed to meet higher GHG emission standards.
With the advanced analytics and smart spatial modeling technology Suzano had in place, the company could drill down on any one of these scenarios and show – and back up with data – what would happen to its global supply chain and what needed to be done to maintain productivity, profitability and sustainability.
No matter the industry or project, be it harvesting, oil & gas discovery, carbon management, or road maintenance, incorporating long-term sustainability into the supply chain begins at the source. The domino effect of optimization and sustainability – as seen with Suzano from seedling to planting, and harvesting to distribution – can be achieved with a holistic business strategy, strong analysis and spatial planning tools combined with smart technology (and specifically in this case, asset lifecycle optimization). This will enable your organization to make better decisions, be more efficient and improve its cost structure in a way that doesn’t have a negative affect on the supply chain or the business itself.
Doug Jones is vice president of Forestry at Remsoft, Inc., (www.remsoft.com) the world’s leading provider of asset lifecycle optimization solutions for land-based and infrastructure assets. Under Doug’s leadership, Remsoft’s Forestry Group continues to support customers and partners across the globe. Doug is also a former professional hockey player who played with teams in Sweden, Denmark and Italy.
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