27 May 2019

Going green brings great opportunities for the supply chain

With the news that Audi is dropping its highly successful TT sports car and replace it with an electric vehicle as part of its plan to take the fight for the premium EV segment to Tesla, Opel revealing pictures of its sixth-generation Corsa small hatchback, which will be available in battery-electric, gasoline or diesel variants, and Volkswagen and Mercedes recently citing EVs and CO2 reduction generally as the defining criteria for their new vehicle strategies, the switch from i.c. powertrains to EV and hybrid is really hotting up.

What does this mean for purchasing and the supply chain? Volkswagen recently announced that it would award more business to suppliers that focus on sustainability and punish those that do not. Performance rating suppliers is nothing new, as we were reminded by last week’s GM and Ford supplier awards but VW’s concentration on sustainability and its plans to also focus specifically on each supplier's effort to reduce carbon dioxide emissions.

Going by the last figures I could find, from 2017, VW's global footprint and purchasing budget was close to $200 billion. So going green-er in every field of activity is a logical and natural move for the group, who have suffered paying out some $31 billion in fines over the diesel emissions cover-up scandal. The move to present itself as having greater environmental awareness fits with the friendly, Apple-like image that VW used to have with the original Beetle and the Golf and it is also very good news for the supply base and the group’s logistics providers. Removing as much carbon as possible from its supply chain will be very good news for the players in the supply chain, as from my experience talking to tier suppliers and logistics providers while writing for our magazines and chairing sessions in our conferences, I am frequently impressed by the efficiency, in environmental and connectivity terms, of the inbound and outbound supply chain.

Efficiency through intelligent re-use of containers, packaging, stillages etc, connectivity that extends from embedding RFID chips into boxes and other containers, to electronic monitoring of train, ship and truck performance and driver/operator behavior, to active avoidance of any form of transport running empty by using the Internet to find return loads and share resources; a carmaker such as VW will learn a lot from the global supply chain’s intelligent management strategies.

The German carmaker says it will give equal weight to sustainability and environmental management, alongside the traditional measures of cost, quality and on-time delivery performance. This is tier suppliers’ and the supply chain’s chance to shine - and profit - from actions and initiatives that are good for the planet - and good for business.

Simon Duval Smith

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