Sustainability, Supply Chain Management, and AMD

We just published a fascinating guest article from EcoShift Consulting's James Barsimantov. With a background in environmental economics, policy, and natural resource management, Barsimantov succinctly addresses the sustainability field's "elephant in the room" -- supply chain management. More specifically, he addresses the fact that few companies have effectively examined their supply chains as part of the process to achieve greater environmental efficiencies. But one company, Advanced Micro Devices (AMD), has dove right into sustainability and the supply chain.

This article is worth a read. Excerpts are below and the full article is here.

"Despite the high impact of supply chains and the potential benefits from addressing them, most companies have still not looked closely at the issue. CDP [the Carbon Disclosure Project] reports that, of the 57 companies participating in their supply chain initiative, 87% have GHG reduction targets but only 45% of these include supply chains. 

"Which companies are diving in? From our experience, companies that have a high level of accountability to stakeholders and have more public visibility are feeling more pressure to act. In addition, companies that can more easily influence their suppliers find it easier to act and reap the benefits. ...

"But which approach is right to take for your company? The key is to understand how your supply chain is structured and use that to find opportunities.

"When a firm has a large number of suppliers, when competition between potential suppliers exists, or when the final product is a commodity with infrequent innovations, developing reporting systems to grade suppliers is a promising approach. CDP call this ‘Buyer Advantage’, since buyers can pick and choose suppliers. ...

"On the other hand, when a firm has fewer suppliers, when each supplier fills a critical role that would be difficult to replace, when relationships with suppliers are longer and deeper, or when supplier innovation is critical to maintaining market advantage, the ‘threat’ of a scorecard system is less of an option, and enhancing communication with suppliers may be the best way forward. This is often called ‘Supplier Advantage’ (CDP) or a relational approach in a responsive supply chain (Parmigiani et al.).

"This is precisely AMD’s situation. A relatively small number of foundries produce AMD wafers, and these suppliers make up the lion’s share of supply chain risk. Over the past two years, the AMD Corporate Responsibility team has established quarterly reviews with these foundries. During these reviews, the foundries report several key metrics to track progress, such as GHG emissions, energy use, water consumption, waste volume, and environmental regulatory compliance.  For other suppliers, sustainability is integrated into existing supply chain processes by leveraging the strong existing relationships and close communication between lead source managers and suppliers. ... According to AMD’s Corporate Responsibility Manager, Heather O’Cleirigh, 'through this process, and due to strong existing relationships, AMD and our suppliers work together to reduce environmental and social impact.' ...

"Given the complexity of the issue, it isn’t surprising that there is no one-size-fits-all solution. For us, there are three key steps in any comprehensive supply chain initiative."

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