Value Chain Innovation

Recent posts to this blog [1] have discussed the World Business Council for Sustainable Development’s Vision 2050, a business agenda for attaining a sustainable world by 2050 [2]. Vision 2050 lists about 40 “must haves by 2020”, each requisite to success by 2050. Each of those “must haves” also presents significant business opportunities. This post is the second of several posts that addresses some of those opportunities.



Second “Must Have by 2020”:



Value Chain Innovation — Improving materials utilization across the Value Chain.




Building a sustainable business — one capable of “thriving in perpetuity” — requires new dimensions of strategic thinking, as well as new levels of resources utilization efficiencies. For smaller manufacturers especially, confronting this can be a daunting task. Making time to attend to working on the business means taking time from working in the business. Unfortunately, neglecting the bigger picture, regardless of the urgency for doing so, does have consequences.




Happily, “zoom lens” thinking can be applied to working on the business, as well as to working in the business [3].




To illustrate this, consider this simplified view of your Value Chain [4]:








The fully “zoomed out” Value Chain comprises the entire manufacturing sequence and provides a convenient map for disaggregating by “zooming in” on the various steps. The overall manufacturing sequence begins with sourcing of raw materials, usually from the natural world, all the way to the end of the product’s useful life. The various links in this Chain may be performed in-house, or by others (e.g. suppliers, suppliers’ suppliers, customers or third parties). The specifics of your Value Chain may vary from product group to product group.




Also keep in mind that the Value Chain represents a dynamic situation — each of the links in the Value Chain is constantly changing. Further, the relationships among the links in the chain may be as significant as the condition of the links themselves.




The Opportunity




Vision 2050
maintains that materials utilization efficiency across the entire Value Chain can be improved by multiples of 4 to 10! That means between four and ten times as much useful end product produced per unit of material consumed. Remember that Vision 2050 takes a fully “zoomed out” view, not that of any particular industry or manufacturing establishment.




Are 4x – 10x Improvements Possible?




This is not as crazy as it sounds. Start by drawing a box around the entire Value Chain diagram. Then consider all of the materials that originate in the natural world (usually mine, field, forest or sea), then go into that box — not just the obvious. Include solvents, packaging materials, paint, labels and so on at each link in the Chain. What comes out of the box consists of useful products and wastes. By “zooming in” on each link in the Value Chain, Lean Manufacturing techniques can be applied to systematically reduce the waste.




Then notice the various recycling lines on the diagram and draw similar lines from each link in the Value Chain. Materials can be recycled from any link in the Chain to any link upstream. Especially, notice the End of Product Life Cycle link. Materials recovered from finished goods that have ended their useful life don’t come directly from the natural world. They just go around again — twice, three times, or even more. Product design for recovery and judicious choice of raw materials — up and down the Value Chain — can expedite recovery after the end of useful product life. Moreover, it is possible to go outside of your Value Chain to source recovered materials from others. Cooperation and coordination are necessary, both within your Value Chain and without.




Obviously, this is much easier to do with some products than for others. However, sourcing raw materials from nature can be expected to become increasingly difficult and expensive as global competition for limited resources intensifies. At the same time, incorporation of recycled materials into new product has become a virtue, rather than the stigma it once was.




The sustainable world that Vision 2050 anticipates will have over two billion more people than today, all, on average, considerably wealthier than today. To meet the demands of such a population, world industrial output will need to approximately double. Availability of raw materials from nature will be a critical constraint. Innovative recovery methods, applied across entire Value Chains, are a big part of the answer.



Chuck and Joan - FranceThoughtful comments and experience reports are always appreciated.




…  Chuck Harrington
(Chuck@JeraSustainableDevelopment.com)




P.S
. — When it is time for your firm to seriously pursue Sustainability, contact me — C.H.




Note
: This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome. New blog posts are published on Wednesday evenings.









[2] Learn about Vision 2050 at the WBCSD website, www.wbcsd.org. The entire Vision 2050 document and/or a summary are available for free download in about 10 languages. There are also PowerPoint presentations and visual aids available.


 



[3] See Green and the Zoom Lens Mind, an earlier post to this blog: http://blog.jerasustainabledevelopment.com/2012/02/22/green-and-the-zoom-lens-mind.aspx


 



[4]  The term “Value Chain”, as used here, has as much in common with the Lean Manufacturing “Value Stream” concept as with “Value Chain” as Harvard’s Professor Michael Porter introduced it in his business classic, Competitive Advantage. Those interested can learn more on the distinction between “Value Chain” and “Value Stream” at: http://www.bptrends.com/publicationfiles/FOUR%2004-009-ART-Value%20Chains-Brown.pdf