It all started with yogurt. When Lindsay Azim, director analyst with Gartner’s talent and sustainability team, took to the stage at the Gartner Supply Chain Planning Summit in London, you’d think her topic was food waste, given the emphasis on yogurt cartons.
Azim recalled a recent conversation she had with an executive at a food company who implemented an ambitious net zero strategy. “He essentially wanted to take the packaging that their yogurt containers came in and reduce it to hit their [greenhouse gas] emission goals,” she explained.
The team spent half a year planning, but when it came time to implement, nothing worked. “There was yogurt falling everywhere, waste increased, they had an uptick in customer complaints, and [greenhouse gas] emissions also increased,” she said.
Azim wasn’t at the conference to talk about yogurt-y messes, though. Instead, she was offering a comparison for avoiding other “costly, unintended consequences”—in this case, how to build sustainability goals into the sales and operations planning process.
The primary key, in her eyes, is having your planning team “at the table early and at the right time.” Among a number of key strategies, like intentionally building sustainable practices into existing processes, she stressed the importance of planning with constraints in mind, rather than merely as an afterthought, and it’s a message CFOs should take to heart.
Over the next 10 years, “44% of supply chain leaders expect climate change to create challenges related to security and supply” of raw materials, Azim stressed. For finance teams, that's a vulnerability that will affect organizations' resilience—and one that can be avoided when material constraints are explicitly factored into planning.
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Wondering what this looks like when done right? “Look at Intel,” Azim explained. A few years ago, Intel was grappling with limitations on everything from labor to equipment. “They didn’t have a choice” but to plan around current constraints, she noted.
To try to get on top of the problem, team members “went to a test factory in Vietnam, and they said, ‘We want to look at how we’re processing substrates. We have a capacitor on one side of the substrate. We want to double that and put it on both sides, because we want to increase the throughput,’” Azim said.
The payoff was clear. “What they saw was an 80% increase in how quickly they were able to assemble their chips,” Azim said. And here’s the real kicker for finance folks: “While their competitors were struggling, they realized over $2 billion in revenue from a slight adjustment they made to design out of constraint. Planning was at the table already, ready to make adjustments based on a higher throughput, and they saw a decrease in energy usage.”
It might sound obvious (Prepare for the worst! Understand current and future constraints!) but in the planning world, these small tweaks can amount to Intel-level cost-savings opportunities.
Azim added that supply chains are typically “optimized for efficiency and cost savings,” explaining, “that’s why we’re mostly reactionary when these disruptions come up.”