Wednesday, March 14, 2012

How Just In Time became Just Not There

 Image from morgueFile
In my last blog I mentioned the demand for new business models, as a result of scarce resources. So what are these scarce resources?

Energy, (reviewed in a previous blog), minerals and metals, water and land are the naturally occurring resources that, given their finite nature, (or as a result of climate change), will show a supply shortfall within the next 30 years. 

According to PwC research on resource scarcity, execs of leading global manufacturing companies rate scarcity of minerals and metals as more important than energy or water.

What are the minerals and metals in question?.  Rare Earth Elements (REE) are a group of 17 elements that are critical to two of the fastest growing sectors – Energy and High Technology.  Tantalum for example is used in digital technology (mobile phones, computers, LCD/Plasma screens, digital audio/video players and cameras).  Tantalum has been found difficult to substitute and it has not been possible to recover it from end-of-life products.  Other Rare Earths are used for the strong magnets in wind turbines.  Ian Roderick of the Schumacher Institute reviewed 10 industries in Bristol (UK), each were dependant on finite materials, the majority of which are falling into the “extremely scarce” or “very scarce” category. 

Whilst Ian Roderick refers to shortfalls in supply in the next 30 year, 76% of respondents in an Ernst &Young survey, anticipate that their company’s core business objectives will be affected by natural resource shortages in the next three to five years.

PwC’s report suggests that renewable energy, automotive and energy and utilities industries are already experiencing instability of supply.  Aerospace, high tech and infrastructure are expecting to see a high rise in instability of supply from now until 2016.  The impact will be experienced throughout the supply chain.  The comment is made that we will move from “JIT – Just in Time to JNT – Just Not There.  This report also highlights that the economic and political drivers of scarcity are seen as more important than the physical drivers.

Proactive businesses are undertaking activities such as recycling, exploring substitution, dematerialisation and demand-side management (consumer), that lead to permanent market changes.  Organisations that respond rapidly to resource scarcity; because they have a strategy in place; will gain competitive advantage.

Some examples of companies already taking action are:

  • Electrolux:  created a portable vacuum that uses Cadmium-free rechargeable batteries and Aluminium from Bauxite in product casings.
  • Interface started leasing carpets.  Only worn sections need to be replaced and with the use of Solenium, carpets last 4 times longer – materials intensity has reduced by more than 85%.
  • Utility Trailer Manufacturing Company launched a trailer side skirt that delivers 7.45% fuel savings
  • Kingfisher sources sustainable timber
  • PepsiCo and Siemens collaborate with their supply chains on sustainability
  • BMW will be offering its electric i-cars in a similar scheme to Boris’s Bikes
  • B&Q could mainstream sharing/renting, rather than selling, suitable products
  • Dupont Building Innovations has become completely landfill-free, recycling 81 million pounds of landfill waste to zero.
  • IBM processes 36,600 metric tons of product and waste, sending only 0.6% to landfill

Recommendations from the Bristol review mentioned above suggest organisations should follow some key steps

  • the development of a knowledge sharing network
  • progressive exploration (causal loop modelling) and
  • the development of a virtual centre for excellence (bringing industrial partners together around the technological advances.

Next time I’ll be exploring collaboration through the supply chains and the use of data information to respond to risk.

1 comment:

  1. Many thanks for your comment on the CRC story on Campaign4Change (
    As I mentioned in response to your thoughts, I think Osborne’s move reflects the successful campaign that some business lobbyists have led against CRC. You can see the CBI’s reaction from John Cridland here.
    Intellect has also been strongly against CRC:
    I think there is a chance that Osborne's comments may appear to water down the Government's commitment to reducing CO2 emissions. At least that may be the perception if not the reality. My guess is that the drive for economic stimulus and to remove red tape is at least counter-balancing the drive to reduce emissions. Certainly any environmental tax will have to be red-tape free and just the opposite of how Osborne described CRC: “cumbersome, bureaucratic and imposing unnecessary cost on business.” You don't get the impression from the tone of Osborne's language that CRC is something he intends to keep.