The cost of the carbon tax on supply chain managment
As if data quality and stockouts weren’t enough of a day-today worry for CIOs, added pressure to serve demanding online customers and keep up with changing legislation are creating new challenges. With several retail giants lumbering online and the looming introduction of the government’s new carbon tax, CIOs need to be working with procurement, financial and other business leaders to ensure supply-chain systems are up to today’s new challenges.
Where they would have been focusing on massive ERP implementations in the past, forward-looking CIOs are now working to build out analytics platforms, often complemented by mobile software tools that help managers make the most of the information in those systems, says Kevin Farrington, director of supply-chain consultancy, 3pi.
Read Part 1 of Supply Chain Management in Australia.
“You can overcomplicate this but in reality it’s quite simple,” he explains. “It’s granular data, focused on metrics that represent the outcomes of the strategies and tactics you’ve put in place. Use it to adhere to your operating rhythm, make sure your velocity of extracting and converting data is adequate, and look at empowering the value leaders in the business. You’ll then have people who can spend their time making value-added decisions and collaborations rather than spending time crunching Excel spreadsheets.”
Continuing vagaries around carbon-accounting policies mean companies still have some time up their sleeves to integrate those challenges into their supply chains. However, it’s never too early to start planning.
Governance will be a key part of realising the benefits, with actual supply-chain data used to cost carbon-trading initiatives and incorporate them into daily operations.
“At the end of the day, it’s just about using what you’ve got today, better,” says Trevor Barrows, principal consultant for sustainability with Fujitsu, which recently published a survey that found Australia’s businesses are well behind their global counterparts when it comes to supply chain-related initiatives around carbon pricing and other environmental initiatives.
One key focus should be improving reporting and sharing of information with supply-chain partners, says Barrows, who highlights the importance of baselining the current situation so companies have a point of comparison in the future.
“Now it’s a lot easier for the bigger end of the supply chain to open up, externalise and integrate systems online,” he explains. “This enables collaboration with suppliers and the middle market, integrate them into the supply chain, and capture sustainability efforts. It’s a new dimension that has to be put in the profit and loss accounting; we did it with GST, and were going to have to it with carbon.”
The change doesn’t have to be hard, however; companies may find they already have all the data they need to work out the carbon cost of their supply chains, thanks to energy conversion factors for diesel fuel and the like.
Read Part 2 — Parking the Rolls.
“Companies don’t realise they already have the data, and just need to do a bit of maths,” says Barrows. Nishant Singh, lead analyst for Ovum’s market intelligence team, believes companies should be moving to accommodate carbon imperatives and other pressures by the end of this year.
“The whole workforce needs to be trained in the use of ERP solutions that allow them to manage the supply chain better, and suppliers will be rushing to adopt more compliant solutions so the whole link and ecosystem is maintained,” Singh says. Enterprises adopting online sales will rush to change their supply chains, and competitors will adopt similar models. It’s a challenge, although not a huge one.”
Read more in Supply Chain Management 101.