How a Supply Chain Planning System Drives Total Value, Part 1
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One of the difficulties of environmental policies and corporate social responsibility (CSR) practices is measuring a return on investment (ROI). When such ideas are first pitched, the encouragement for compliance is more about the money you’ll avoid spending on things such as fines than on the rewards you will reap.
Some policies, such as RoHS, are not voluntary. The electronics industry adopted RoHS whether products were bound for the EU or not. Nobody said – aloud, anyway – that the amount of lead found in most electronics products was minuscule, or that the cost of developing lead-free solders ran into the hundreds of millions of dollars. Green is good—no question there -- and corporations historically have been the biggest polluters of the environment. Laws had to be passed to curb abuses.
Electronics companies embraced RoHS and early adopters sought to educate their customers about RoHS as well as sell compliant products. The toll on component makers was heavy: some had to produce parallel products (leaded and lead-free) until a full transition took place. Distributors had to double their storage capacity for a while and created programs to differentiate the leaded version of a part from the non-leaded. If suppliers didn’t change their products numbers, a distributor had to re-name the unleaded versions and then re-name it so it matched the customer’s BOM.
In retrospect, it all seemed to go pretty well. There were few – if any -- disasters related to the wrong component getting into an end-product. I was recently talking with an industry executive that was in charge of much of this process at the time of conversion. I asked what kind of feedback they got regarding the transition, their level of compliance, and customer awareness of all the programs the industry had adopted. “Well,” the executive said, “we never lost an order over [RoHS].”
RoHS was not a choice for the industry, but what about the initiatives that are? If everything is equal between two vendors, do buyers choose a vendor based on their carbon footprint, their labor practices or the partners they choose? My guess is as follows: did Apple lose any business after labor abuses at partner Hon Hai (Foxconn) came to light? The answer is “no.” Hon Hai did, when Apple began losing its edge in smartphones with the iPhone 5. But there is no indication that fair-minded consumers boycotted Apple because of a less-than-perfect partner.
So how about it buyers—does your company reward partners for their corporate social responsibility? And as a private consumer, do you vote with your pocketbook?
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