Edition January 2011   Deutsche Ausgabe

Dear Reader, Did you have a good start in the New Year? We are starting on track: with two articles on sustainability ("This small paradise" and "It is sustainable, but is it good?"). Things are happening! More so than I, as the perpetual optimist, would have ever thought. Those people, who still consider sustainability as a marketing gag or a PR trend, must have missed out on world happenings. The market is sending out clear-cut signals: As a new study demonstrates, three out of four companies are integrating sustainability measures in their core business. That means, among others: In case the next economic crisis hits, this budget item is protected from being knifed. Is there a better litmus test to prove the significance of the topic? And we are right in the middle. If anything: ahead of the others. The large study from our own Center for Sustainable Supply Chain Management will be published in the spring. We have already solved one of the greatest mysteries of the world: "How does Cola make its way to your fridge?" The brown soft drink is one of the most universal brands in the world: Everyone knows it, everyone likes it, everyone drinks it — because the sparkling beverage is distributed to the most remote corners of the world. How do the Americans manage to do it? Didn’t we ask ourselves that as students? Another argument for studying Supply Chain Management... I always appreciate the pertinent suggestions from SMI Executive Education — and I am not alone. Due to their daily dirty work in the business practice of talent management, they can identify many latent risks before they become viral: for example, in establishing a Corporate University or an international training programme. In contrast to the widespread "blah, blah" in meetings, our experts are observing that not enough is being said about these two issues. And that can be expensive. The helpful keyword is: competent marketing (see "Chat first, then train"). Those of you, who would like to know what is happening in the Asian Empire, should read through "BMW record in China". The article illustrates a typical picture of the successful collaboration of SMI and its partners. Especially in such dynamic markets as in emerging countries, the old saying in adapted form applies: Knowledge brings market power.  Christopher Jahns

This small paradise

Five popular myths about sustainability

Prof. Dr. Julia Wolf, Dr. Andreas Potzner, Center for Sustainable Supply Chain Management

We have everything and can buy anything. Actually, we are living in paradise. How long will it last? Who shall save us? Logistics?

Since the flow of goods throughout the world grew twice as fast as the production of goods, logistics became the world saviour overnight. A number of myths have cropped up about this rescue role.

Myth #1: Green is sustainable

"Green Logistics" is not an appropriate term. Most people think of ecology and a very short-term type of sustainability: They only harvest the so-called "low hanging fruits". Proper sustainability is more, three times as much: It encompasses the ecological, plus the social, plus the often neglected economical sustainability.

Myth #2: Less emissions is sustainable

Many logistics service providers are currently modernising their car fleet with new, low-emission vehicles. They are also optimising their storage space: energy-saving heating, better insulation, optimal lighting for less electricity consumption. These measures are, without a doubt, necessary and sustainable. However, sustainability is not only emission reduction.

Myth # 3: We have to get better at it!

Yes, but it is much more important that we change. Genuine sustainability not only demands the gradual improvement of old procedures but also the principal renunciation of old ways of thinking. Nowadays, many companies are — rightly — proud of their high level of customer service. However, do customers really want deliveries within 12 hours in times of sustainability? Probably not. The claim all over is: De-speed your supply chain! Make the supply chain slower and thereby more sustainable! Move away from luxurious service levels. That is the type of innovation, which creates sustainability.

Myth # 4: Companies have to become more sustainable!

Not only companies, but entire supply chains have to become more sustainable: It goes beyond the corporate gate! All partners along a supply chain, from supplier to manufacturer, all the way to retailers and end customers, have to be put under an umbrella of sustainability. The sustainability champions, such as Wal-Mart or BMW, are able to do so in an outstanding way.

Myth # 5: We need more sustainability!

Also — but above all, we need more supply chain sustainability management. Better insulation for the warehouse here, a sign saying "Turn off the lights!" there — without a doubt: These are all ideal measures, but these are only selective measures, not comprehensive, holistic, and systematic management. If the logistics service provider has one (or several) Sustainability Manager(s), he immediately realises: We need to make it through two more phases!

The 3 phases of sustainability

Authentic sustainability passes through three phases of development. Phase 1: Emission avoidance, such as a low-emission fleet of vehicles. Phase 2: Innovation offensive, for example reduced level of service. Phase 3: Integration of the supply chain. Only after traversing this last phase can genuine, comprehensive sustainability be achieved — and the salvation of paradise. ^ 

It is sustainable, but is it good?

Latest SMI study takes a closer look at sustainability

We all want to be green and socially correct. We want to produce, distribute, purchase and consume sustainably. But why? The Center for Sustainable Supply Chain Management at SMI is investigating the background of political correctness on behalf of Logica Deutschland GmbH & Co. KG.

It is already well-known that managers would like to realise measures to improve sustainnability as cost-neutral, if not as cost-reducing, as possible. The researchers are investigating whether and to what extent this intention has led to sustainability degenerating into a short-term tool for improving efficiency or whether it is actually able to achieve long-term competitive advantage, as numerous examples from business practice demonstrate. These are questions of far-reaching significance.

It’s all about performance

The researchers are also interested in finding which of the many possible sustainability activities particularly contribute to corporate performance. In order to do so, they are measuring the corporate performance based on three pillars: economic performance, environmental competence, and social competence. It makes sense that the study was commissioned by a management consultancy: A respectable consultant can properly advise his client concerning sustainability when he can substantiate and scientifically prove the matter, unlike many politicians and columnists, who only believe that being green and social are good. ^ 

How does Cola make its way to your fridge?

Case study example of supply chain planning

Guided by Prof. Dr. Margarita Protopappa-Sieke, the MBA students at EBS recently took a closer look at one of the most well-known brands in the world. To be more exact: its supply chain planning.

The proverbial ubiquity of the brand is so far-reaching that the US Department of Defence classified the daily bottle as an important war good for the hard battling GIs in the last World War. That speaks for the brand. However, it is not only the brand, which empowers the beverage giant: It is also the distribution: How does Coca-Cola manage to distribute the distinctive bottle all over the world? And most importantly — the right quantities?

Planning is everything

The main theme of every supply chain planning is the sales forecast: How much will the consumers drink from January until December? In particular, considering current or planned advertising campaigns, summer temperatures, whether it will be a nice autumn, how long the winter will last, or whether a big sport event will take place. Arne Lauerwald demonstrated that compiling all possible influencing factors, predicting their possible effects, and then calculating the bottom line of all effects is a very challenging arithmetic problem. And not only that: Before the data can be plugged into a mathematic model, this data first has to be collected and ascertained. That means: agreement among Marketing, Market Research, Sales and Operations in order to get correct data in sufficient time.

The real life

Such a supply chain is not only quite entertaining to experience as an abstract model in the lecture, but also in real life. When a practitioner like Arne Lauerwald can embellish the story with interesting anecdotes, the learning effect is enhanced and the students are better able to retain the details. Both are essential: substantiated scientific basis and personal contact with business practice. ^ 

Discuss first, then implement qualification programmes

Talent Management needs appropriate marketing

The CEO of a large industrial firm would like to hold a several-day training seminar accompanied by external training professionals. The fees for project guidance: €17,000. The predicted return-on-education (RoE) from cost reduction, efficiency improvements, and sales stimulation: €40,000 within a one-year period. Resulting profit: €23,000. Impressive RoE? Sure. Good training? Of course. However, the proposal is rejected.

Some divisional directors and department managers of the company criticize: "We need new competence profiles for simple training? Why do we have to make everything so complicated? I don’t have time for such nonsense!" The opposition increases as it becomes clear that superiors have to pay heed to completely new skills in appraisal interviews and career development plans due to new competence profiles. Even before the first day of training dawns, the new training fails due to internal opposition. Why?

Talking before negotiating

It is naive to assume that a return-on-education of €23,000 is convincing enough. Perhaps for the management board, less so for the concerned managers. They do not envision big money at first glance. They initially perceive the new, the uncomfortable and the unknown — and nobody bothers explaining it to them! The personnel department would be a good place to start. However, the problem is: What HR department is competent in marketing: in successfully "selling" the new, innovative training in need of explanation? Second in line would be the external training service provider, who is confronted with the same request. But is he or she competent in marketing? That would be good.

One or the other

Training in rhetoric does not need to be explained. It is self-explanatory. Unfortunately, the same cannot be suggested of the modern methods of talent management. However, when effective marketing paves the way, overcomes opposition, deals with objections, changes aggrieved parties into participants — then success is assured. ^ 

BMW record in China

SMI China supports BMW’s Sourcing und Recruitment

What a year! BMW sold over 150,000 units in China in 2010. In comparison to 90,000 the year before, that is a dramatic increase. However, this exemplary expansion requires solid background work and planning.

The epicentre of the sales wave was in the industrial and metropolitan region of Shanghai, which generated approximately 30 percent of the sales volume. BMW procures around €300 million worth of goods and services in China annually — not including the factory in Shenyang. The Bavarian engine manufacturer maintains a joint venture with Bosch and Samsung for electronic components. For a good reason: Such an expansion, as BMW is currently experiencing, is only possible with expansion of the supplier base and workforce at an equal proportion. That is where SMI comes into play.

The basis of the expansion

The global citizen knows by now how "wild" and intransparent markets in foreign countries can be. Therefore, BMW commissioned the researchers at SMI to scientifically investigate the expansion of the supplier portfolio, before BMW lists new suppliers. Moreover, SMI supports the automobile manufacturer in recruiting top talents via appropriate projects in business practice. These projects are part of the MBA study programme at China European Business School (CEIBS) and run for two months — all parties benefit: the students, BMW, Shanghai, and SMI. ^