Category Archives: In The Press

5 critical ways the UK needs to view supply chains differently

Jan Godsell on keeping Britain at the heart of global manufacturing with the help of supply chain companies.

Keeping Britain at the heart of global manufacturing with the help of supply chain companies

Jan Godsell, Professor of Operations and Supply Chain, WMG at University of Warwick, has provided Procurious with her thoughts on the importance of Britain needing to have a greater understanding of its supply chains across industry.

Jan says: “Today, many supply chains are misunderstood, neglected but brimming with potential, much to the detriment of the UK’s entire industrial base. Big opportunities that could set the UK on the path to becoming an important hub for international supply chains are currently being ignored.”

As evidence continues to mount that production is increasingly being re-shored back to the UK, certain questions spring to mind: Does Britain have the right logistical and communication structures in place to support a new wave of manufacturing activity? Are supply chains integrated and streamlined enough for smaller companies to operate leanly and efficiently? What are the restrictions on the supply side and how can they be broken down? And, what are the opportunities in the UK and abroad if businesses develop their supply chain capacity to reach their full potential?

Professor Jan Godsell covered these key issues during the Crimson & Co’s annual supply chain academy on 27 April, which is dedicated to sharing worldwide best practice across the end-to-end supply chain. Jan also noted her insights on the issues affecting global supply chains in the recent APMG Term Paper.

“The supply chain has been de-scoped to focus primarily on procurement and supply management. In today’s globalised world, such a narrow perspective can be damaging to the UK industry. It’s about recognising global demand and configuring the right global supply chains to meet this demand effectively (meeting the customer requirements in terms of cost, quality, time and increasingly environmental and social sustainability). Failure to do so will see the UK become increasingly marginalised with no recognised role or expertise to contribute to the global supply chain network. The good news is that it’s not too late for the UK.”

Godsell explains that with the aftershock of the global financial crisis still reverberating and traditional models being challenged by the internet, the time is right to revisit the role that the UK plays in global supply networks. Whether this be local supply to meet the demands of the UK market, regional supply for the European market or global supply for the world. To capitalise on this opportunity and redefine the UK’s role at the heart of the global supply chain network, there are five critical ways in which the UK needs to view supply chain’s differently.

Jan continues:

1. Functional to holistic perspective

“The UK needs to return to the origins of the supply chain and view it more holistically. Within a company, this means recognising the full scope of all the operational processes that define the supply chain. The core processes are Planning, Procurement, Manufacturing, Logistics and Return (which covers reverse logistics, repair, remanufacture and recycling). These processes are used to understand customer demand and translate it into effective and efficient supply.

2. Manufacturing to planning centric

“If the UK wishes to maximise the role that it plays within a global supply chain network, it needs to consider the different ways in which the UK can contribute to manufacturing. The success of a global supply chain network relies on the correct positioning of the factories, suppliers and warehouses around the globe, to serve different markets. Planning is the “glue” that holds the supply chain together yet it is poorly represented. There is a huge opportunity for the UK to continue to develop a full range of supply chain planning capabilities, and to position the UK as the supply chain planning hub of the world.

3. Re-shoring to right-shoring

“Manufacturing is returning to the UK and one of the main reasons why this is happening is because businesses have started to look at their cost base more holistically and in relation to their competitive priorities. They are no longer fixated with production costs (and labour costs in particular) but are taking a more holistic view of the total cost of sourcing. The challenge for organisations is identifying the most appropriate supply chain network to support their business in order to determine which elements of their production should be made locally, regionally and indeed globally. It’s not about re-shoring but right-shoring. We should enable our businesses to right-shore, as it allows them to understand their strategic priorities and core capabilities, to develop the right global supply chain network and essentially to ensure the success of individual businesses and the UK economy.

4. ‘After thought’ to an integral part of strategy

“UK businesses need to ensure that supply chain strategy is an integral part of their business strategy and find innovative ways to both increase sales today and reduce costs tomorrow. This will require increased presence of those with supply chain expertise at the board level.

5. Specialist function to a pervasive part of our social fabric

“All roles in the supply chain are equal, as a supply chain is only as strong as its weakest link. We need a nation where our boards have good supply chain representation and have congruent strategies to enable competitiveness today whilst building capability for tomorrow, where everyone in the UK understands the importance of our supply chains and the critical role that each and everyone plays in supporting our nation. Together, we have the opportunity to put the UK back at the heart of the network of global supply chains, back at the heart of the global economy.” 

UK Automotive Sector To Leave Other Supply Chains In The Dust

Healthy UK Automotive Industry

New investments, economic recovery, overseas demand and continued technological advances, all point to continued substantial increases in UK vehicle production in the coming years.

This means significant opportunities for those domestic suppliers able to respond.  (Currently only 40 per cent of components are sourced from the UK).

To ensure the industry is equipped with the right skills to support this growth, the Automotive Industrial Partnership – the recently formed body that brings the industry and government together to secure the sector’s skills pipeline – is conducting the biggest ever survey of its kind aimed at vehicle manufacturers and the 2,0002 UK based supply chain employers.

Jo Lopes, Chair of the Automotive Industrial Partnership is calling upon the industry to grasp this opportunity and participate to the full.

“This initiative is unprecedented,” said Jo.

“There have been many other surveys covering the engineering and manufacturing sectors as a whole – but none that drill down to this level of detail and meet the unique needs of automotive manufacturing industry.

“It’s vital that we know the views of employers of all sizes if we are to take the right action now to ensure an effective pipeline of future talent – from new entrant technicians through to the specialist engineers and managers we will need.

“By working together we have the opportunity to mould the future of our industry – and address the very real challenges that we face.”

The findings will be used by the Automotive Industrial Partnership to determine where, when and how future skills investment should be prioritised. In turn, this will inform the development of learning solutions that are relevant and accessible to the whole industry, including smaller employers.

Among the household names driving the Automotive Industrial Partnership are; Bentley, BMW, Ford, GKN, Honda, Jaguar Land Rover, Nissan, Toyota and Vauxhall.

Interested? Take part in the survey by visiting automotiveip.co.uk

We knew about reshoring manufacturing, but now business processes too?

new_shoring_made_in_usa_products

Earlier this year Barack Obama brought reshoring into the media spotlight when, in his state of the union speech he claimed:

“More than half of manufacturing executives have said they’re actively looking to bring jobs back from China, so let’s give them a reason to get that done.”

The stats add up as well. America is seeing somewhat of a resurgence in its manufacturing sector. According to a study by the Boston Consulting Group, 54 per cent of executives are planning on or considering reshoring roles they had previously moved overseas. This figure is a marked increase on 2012 numbers where only 37 per cent suggested they we considering making such moves.

It’s not all talk either. While the figures above refer only to intentions of reshoring, the same BCG study outlined that more firms are actively reshoring workers than in previous years. In 2012, only 7 per cent of firms reported they were reshoring roles, the latest study suggests that 16 per cent of firms are currently bringing jobs back to US soil.

The Wheels Turn Again

After a decade of decline starting around 2001, US manufacturing employment hours and earnings have begun to steadily climb in recent years. There are a number of proposed reasons attributed to this resurgence.

Firstly, the cost of producing in the traditional outsourcing hubs of China and India has been rising over the past decade. As these markets mature and more citizens move towards a middle class existence this trend is likely to continue.

The cost of producing at home has also contributed to the increases in manufacturing activity in the US. Energy costs in the US, one of the greatest cost drivers in the manufacturing industry, have dropped greatly in recent years. This is thanks in part to fracking, which provides cheap energy and has the US on track to once again become the world’s largest oil producer by 2017.

The shift to home production has also been catalysed by consumer preferences. Large retailers like Walmart and Costco have made commitments to source more products from the US in order to match consumer sentiment, which is showing a preference for domestically produced goods.

Manufacturing Sure… But Business Services?

New research from The Hackett Group is suggesting that the tendency to reshore is not limited to the manufacturing sector. The report highlights that decreased labour costs, lower employee turnover rates and proximity to company headquarters are sparking a drive for US firms to bring finance, IT and other business services back to home soil.

The Hackett Group’s study takes a further step of analysing potential locations across the US for reshoring activities to take place. In the company’s own words, the report is deigned:

To reflect the decision criteria used by companies today to select a destination for establishing Global Business Services centres, The Hackett Group’s Global Research Centre analyses 42 countries based on more than 30 key indicators. Five principal dimensions are taken into consideration when calculating factors that may be used to determine location choice. These are:

  1. Economic considerations: Location choice is primarily determined by labour arbitrage. In addition, office rent, telecom costs and other major cost components are considered.
  2. Business environment: Ease of doing business, wage inflation, economic health, tax burden and quality of life.
  3. Workforce quality: Availability and quality of the labor force in the context of factors such as the flexibility and business-friendliness of local labour laws and regulations.
  4. Infrastructure: Although greatly improved over the last decade, infrastructure quality (office, electricity, transport) may still inhibit location attractiveness when travel time is excessive, services are unreliable or costs are prohibitive. Though weighted to a lesser extent, this dimension is also taken into consideration.
  5. Risk assessment: Factors that may be hurdles to reliability and costs, such as potential for fraud, risk of political and social unrest, weak protection of data and intellectual property.

To access an abstract of the Hackett Group report click here.

As a postscript, it’s important to note that this recovery is only moderate and we are unlikely to see manufacturing employment numbers in the US rival those of the 80’s and 90’s (we’ve got technology to thank for that), but the developments are certainly encouraging for US job seekers.

Fallout Still Being Felt After Strikes At Port of Los Angeles

West Coast Port Strikes Start to Play Out

Port of Los Angeles Strike Effects

Earlier this year we covered a story about delays caused by industrial action at ports on the US West Coast. This week, the Port of Los Angeles has released some troubling statistics that point to the long-term impact of this action.

Despite a significant rise in container volumes for the month of March, cargo volumes at the port have dropped drastically in April.

Expectations of a full recovery were bolstered by strong showings in the month of March, after an agreement was finally reached with West Coast port employees and the longshore workers union. The agreement led to the clearance of a backlog of ships that had been present at the Los Angeles port for months.

March was in fact, the second busiest month in history for the Los Angeles Port facility. However, the huge 11.8 per cent drop in cargo volume recorded in April suggests that the increased activity was merely clearing the backlog and that cargo figures may remain low on an ongoing basis.

Major US ports have long been seen as an indicator of the health of the US retail sector. Normally, when shipping volumes are decreasing the retail sector follows and starts to slow. However, further highlighting the concerns of West Coast ports, is the fact that cargo volumes at Los Angeles are falling at a far greater rate than at other ports across the nation. This suggests that rather than broad sectoral problems, this issue is specific to the port and the industrial action.

It is thought that during the months-long dispute (where work essentially ground to a halt), many firms made alternate arrangements and instead shipped into Mexico, Canada or ports on the US east coast.

It will likely take some time to determine exactly where the chips will fall in this matter. Major importers will be reluctant to walk away from the huge infrastructure and warehousing investments they’ve made near the Port of Los Angeles and will likely return to shipping goods through the port. However, the many small and medium sized firms that established alternate shipping routes to deal with the delays brought on by industrial action may be less inclined to return to the port.

Supply Chain Disruption – When Rockets Blow Up

Stick a rocket up your supply chain…

Exploding rockets in your supply chain

When we talk about supply chains, we often discuss the ‘critical path’. The term is used to give firms an understanding of the earliest and latest a certain activity can take place without having an impact on a projects overall timeline. It is also used to point out areas of importance and concern within a supply chain.

Earlier this week, Inmarsat, a British provider of global satellite communications, saw a significant issue reoccur on its critical path. The rockets the firm uses to deliver its satellites into space keep blowing up!

On Monday, the firm was forced to announce a further delay to the launch of a third satellite for its global broadband service, Global Xpress, (designed to provide high speed broadband to users at sea, in the air, and in remote regions). The delay was due to an ongoing investigation into a Russian supplier that provides the firm with the rockets used to put its satellites into orbit.

The supplier has faced numerous issues with its 53m tall Proton-M rocket in the last five years. The most recent of which occurred last week when a Proton-M rocket (the same model used by Inmarsat), carrying a Mexican satellite, exploded shortly (eight minutes) after take off. Fortunately, the explosion took place at an altitude where any debris was burnt off before returning to earth.

This is the third time Inmarsat has faced delays due to issues with Russian rockets. In 2013 the second satellite in the program was delayed after a similar explosion cast doubt over the mission.

The recent issues have forced the Russian Space Agency to postpone all activities until a full investigation has been carried out. As suggested by Inmarsat CEO, Rupert Pearce, these investigations could take some time and will have a significant impact on when the Global Xpress programme can resume.

“This is the third time our Global Xpress programme has suffered launch delays because of Proton launch failures. Although in the past, Proton has returned to flight within a few months of a launch failure, it will not be possible to determine the length of the delay in the launch of I-5 F3 until the cause of the Centenario launch failure is established. Customers are understandably anxious to see the delivery of GX services on a global basis, and as soon as we have sufficient information to ascertain the new launch date for I-5 F3, we will make the information public, as well as comment further on the impact of the delayed launch of I-5 F3.” He said.

The issues and delays caused by the faulty rockets have caused the organisation’s share price to slip and no doubt are causing significant headaches for the company’s operational team.

The challenges holding back true collaborative working in enterprise

Challenges must be overcome before true collaborative working becomes a reality in the enterprise

There is a growing awareness in the enterprise that collaborative working could deliver business benefits such as greater agility and reduced time to market. But there are challenges that first need to be overcome, and the first concerns what we really mean by collaborative working…

Facebook inside your business is not the answer. And neither is Yammer or any other Enterprise Social Network. They have their place in certain use cases, but they were not built to change how we work; just offer an alternative communication channel. To change how we work in the enterprise today is a far more challenging subject to tackle.

Change Managers are hampered by the fact that for the last 25 years, workers have been conditioned to working on a desktop PC; a pre-internet invention. The desktop and its attendant file and folder based working approach actively prevent collaboration, as content authoring is done in a silo before the secondary act of sharing occurs.

The second big issue to consider concerns organisational structure and the relationship desktop working has with it.

Teams within an organisation are tasked with specific remits and outputs, but they are also part of the same common goal; the company output. Often referred to as the Critical Path, the process of coordinating different teams’ activities to deliver company output reliably and on time can be a fraught process as, too often, one team doesn’t know what another is doing. This lack of visibility, despite ongoing efforts to restructure team reporting, can be traced to a body of critical work being authored in silos, with no obvious way of sharing in real time changes in plans and processes that often occur in day to day business.

Start with selfishness

In order for the promise of “collaboration” to be delivered on, it needs to be clear what specific collaborative processes need to be introduced and for whom. How can we recreate a sense of ‘synchronicity’ for businesses that have teams in different offices, often spread across multiple sites, and maybe even different countries?

It is not enough for just one team to introduce a collaborative working platform; the whole business needs to be networked in order to work synchronously and deliver on an optimum Critical Path. In order to create this ‘network effect’ businesses need to appeal to their employees’ most selfish instincts.

Before they change their behaviour, most individuals will want to know what’s in it for them – so businesses need to promote the benefits of collaborative working not just for the group, but for each employee. Start by showing how these new tools can make each person’s workload easier, for example, and how it can support their learning and development. More effective collaboration will also make them more productive and showcase their personal successes more clearly.

Forget about the file

The modern workplace also needs to reflect the world it operates in. Internet connectivity and speed have improved significantly in recent years, paving the way for on-demand content services and cloud storage. Firms like Spotify and Netflix have already smashed Apple’s iTunes dominance of the music and film market by negating the need to download a file before playing it. You just stream it when you want it.

We have this reality in our personal lives, and as a result, employees are starting to expect an application to deliver their work directly to the audience that needs to see and interact with it. Imagine if you had to write a Facebook update, upload it, notify people that it is available and then send them a link to go and read it – who would bother? Today’s workers want to work within a ‘followable’ environment that enables seamless, real-time information sharing automatically.

Share actions, not words

Businesses need to appreciate that collaboration is a behaviour, but one that struggles to work well with the wrong tools. Teams working within the same business are completely dependent on each other, and ‘cc’ emails, file sharing and social network postings are all blunt tools for keeping everyone up to date on what has been done and, more importantly, what needs to be done.

These forms of communication can lead to information overload via cc’ing, version control confusion through file sharing and channel fatigue through another social network. As a result some employees are left out of the loop and others buried under a deluge of information they don’t actually need to see. The next step along this inefficient path is then the ‘team meeting’, which tends to focus on what teams have been doing, rather than what they are doing or need to do.

Effective collaborative working removes communication lag and enables teams to see what is happening right now. It also has the knock-on effect of making it much easier to measure performance of teams across the enterprise. After all, it’s nearly impossible to measure productivity and effectiveness accurately when work is only being shared after it is completed. By comparison, if work is being measured and evaluated in real-time, within a cloud-base working environment, it is very easy to gain useful and actionable business intelligence.

The main benefit of this approach, however, is that more work actually gets done, instead of just being talked about. By having immediate access to different teams’ knowledge, work and progress, it is possible to create a truly dynamic working environment on a global scale. Businesses that are ready, willing and able to adopt this enlightened approach to collaboration will therefore continue to grow and flourish in the years ahead. Alternatively, you could just post an update about this article to your Enterprise Social Network.

The article was written exclusively for Procurious by Tristan Rogers, CEO of Concrete, the global enterprise collaboration platform used by retailers including J Crew, Gap, Kate Spade, Tesco F&F, George and Marks & Spencer.

The ISM Mastery Model: what is it and how does it work?

A bold move to standardise roles on behalf of the profession.

The ISM Mastery Model

Standardisation. The supply chain profession is crying out for it, but it’s very difficult to achieve. If you’ve ever worked with procurement teams from more than a handful of organisations, you’ll have seen that people don’t speak the same language when it comes role titles and the competencies they entail. It’s day two of ISM2015 and I’m attending a press conference with some of ISM’s top brass – Thomas Derry (CEO), M.L. Peck (Senior VP Programs and Product Development), Cecilia Mendoza (Director Education and Training) and Tony Conant (COO). As the cameras zoom and flash, Derry clears his throat and announces his organisation’s biggest initiative of the year so far: the ISM Mastery Model.

This year ISM celebrates its 100th birthday and is using this milestone to create a model that will drive standards into the next millennium. ISM has plenty of experience in this area – they’ve been the hand at the tiller of the US supply chain profession since 1915, setting the standards and moving the professional boundaries as the responsibilities and expectations of procurement professionals grow at an incredible pace. As Derry says, “Procurement has moved so fast we’ve almost outstripped the ability to have formalised career structures.”

So, what is it?

The ISM Mastery model represents ISM’s bold move to standardise roles on behalf of the profession, with the goal that the model will become an integral part of the hiring process and career development for supply chain professionals. The model was built by drawing on ISM’s own experience over 100 years in the sector, including 50 years as the USA’s leading provider of supply chain certification. Two dozen supply chain professionals took part in validating the thinking behind the model. It creates a crystal-clear career path for young people, or rather a number of possible career paths by detailing the competencies required and how they can be achieved. The model is scalable and configurable to different companies’ needs, and surprisingly, it’s free.

Here’s how it works: the model is organised into 16 major competencies; namely business acumen, category management, corporate social responsibility, cost & price management, financial analysis, legal, logistics management, negotiation, project management, quality management, risk, sales & operations management, sourcing, supplier relationship management, supply chain planning, and systems capabilities & technology. There’s a mix here of core or “hard” competencies, and what we traditionally call “soft” skills, such as negotiation. Derry comments that it’s time to change this label to “critical skills” to reflect the importance of hard-to-learn competencies, as you’ll absolutely need these skills to advance in modern-day procurement.

The major competencies are then broken down into highly detailed sub-categories, in what Derry proudly calls “the world’s greatest collection of job descriptions”. The detail is superb, laying down in the plainest language what is required to master that competency. Take business acumen as an example – ISM has determined that procurement professionals will need to come to grips with no fewer than 10 sub-categories, ranging from business intelligence to strategy development. The model then lays out the expectations for these sub-categories at four different career levels – essentials, experienced, leadership and executive leadership. That’s 40 detailed competency descriptions under business acumen alone. The final piece of the puzzle is found on the website – I click on the competency “business acumen”, the sub-category “change management” and the “essential” experience level, and I’m directed to the ISM certification programs (online courses, podcasts, articles, seminars and more) that will equip me with this skill.

Who will the Mastery Model benefit?

  • Individuals – build your career path, identify the gaps in your knowledge and create a business-case to request training or personal development.
  • Managers – map out the skill-set of your team and pinpoint the exact training required to fill gaps. Create a clear roadmap for ongoing investment in training. Lock in key checkpoints for career advancement using this model.
  • Global organisations – use the ISM Mastery Model to raise your decentralised team to common levels of proficiency.
  • Private equity firms – use this model to assess the procurement functions of your portfolio of companies.
  • Recruitment organisations – use the Model to help identify the right candidates and speak the same language across every procurement organisation.

The Mastery Model is impressive, and my only concern is its sheer size seems overwhelming. Derry points out, however, that although a huge amount is expected of the modern procurement professional, we can only do so much. People can use this model to create a career path into an area of specialisation – for example, I might want to begin my career with a generalised “essential-level” skill-set, but concentrate on specialising in legal as I gain the upper reaches of the model.

The launch of the model has some interesting implications for ISM. Derry talks about the data they’ll be able collect, such as tracking a surge in interest in a particular competency in a particular industry. ISM can then research the reasons why and adjust their training programs accordingly. Derry also stresses that the model is adaptable and is expected to change over time – if procurement has altered so much between 1985 and 2015, just imagine how different the roles will be by 2030.

This model makes personalised growth possible. Having a clear roadmap and standardisation will help accelerate the development of younger teams and will be of immense benefit in attracting and retaining talent. Check it out at www.instituteforsupplymanagement.org.

Will consumers punish companies involved in supplier-driven scandals?

Survey finds that 74 per cent of respondents would be unlikely to buy products or services from a company involved in controversial supplier practices.

Consumers intend to punish companies involved in supplier-driven scandals

A newly published survey suggests that companies who are not actively monitoring the business practices of their suppliers, or who are engaged in questionable supplier practices themselves, are placing their reputations and their balance sheets in harm’s way.

The study of typical American consumers, commissioned by sourcing and procurement specialist Proxima, reveals that 74 per cent of respondents stated they would be unlikely to buy products or services from a company involved in controversial supplier practices. Furthermore, nearly 66 per cent would stop giving such a company their business even if that company was the most convenient and cheapest option.

“In recent years, we’ve seen a tremendous shift as companies are relying more heavily on suppliers for everything from their core offering to the market to back office services,” said Jonathan Cooper-Bagnall, EVP & Commercial Director of Proxima. “With this increased reliance comes increased risk and a requirement to engage suppliers with ethical and responsible track records. The results of this study suggest that companies who fail to appreciably vet and monitor their suppliers are at risk for significant commercial consequences.”

The survey, commissioned by Proxima and executed by Kelton Global, gauged the views of more than 1,000 American consumers over the age of 18 in March of this year. Other key findings of note include:

  • Even among financially-strained consumers (respondents with less than $35,000 a year in income), one in three would spend more money elsewhere to avoid patronizing a scandal-ridden company
  • Nearly a third of respondents indicated that they would proactively tell friends and family to stop spending their money with a company involved in controversial supplier practices

Cooper-Bagnall continued, “In recent years, supplier driven scandals have tainted the reputations and bottom lines of a number of well-known companies around the world. Yet, when these scandals arise, consumers are not drawing a distinction between company and supplier and are placing as much blame, if not more, squarely at the feet of the company. It is, therefore, critically necessary that companies not only vet suppliers properly before engaging them, but create a monitoring program to catch and address any improprieties before they result in public scandals.”

Walmart cops criticism over sourcing practices

WALMART criticised for sourcing water from California

Retail giant Walmart has come under fire in the US over claims the firm is sourcing water used for its bottled water products from drought stricken regions in California.

A report, compiled by a CBS affiliate in Sacramento, suggests that Walmart is sourcing bottled water stocks from Sacramento’s municipal water supply. The world’s largest retailer has drawn stern criticism for this practice given the region is in midst of a crippling four year drought that is devastating crops and forcing residents to face water restrictions.

Similar complaints have been made of coffee chain Starbucks, who were called out in a report in the Mother Jones magazine for sourcing bottled water stocks in parts of California the government has deemed as being in areas of “exceptional drought”. Since the report’s release, Starbucks has announced it will cease sourcing water from the troubled Californian regions, a commitment that Walmart is yet to have made. This lack of commitment was highlighted in the following email statement from Walmart spokesman John Forrest Ales, who outlined the company’s concerns over the drought, but stopped short of altering sourcing practices.

“The drought in California is very concerning for many of our customers and our associates. We share those concerns and are tracking it closely. Our commitment to sustainability includes efforts to minimize water use in our facilities. We have and continue to work with our suppliers to act responsibly while meeting the needs of customers who count on us across California.”

While the public outcry over this issue has been significant (a petition demanding Walmart take its activities elsewhere has garnered over 11,000 signatures), the International Bottled Water Association has been quick to stifle the issue, pointing out that bottled water accounts for less than 0.01 per cent of all water used in the US each year.

Greenpeace report urges improved transparency from Amazon

Apple, Facebook, Google progress toward a Green Internet, but coal-heavy utilities stand in the way.

Greenpeace renewable energy report

A recently published Greenpeace report urges improved transparency from Amazon, and more engagement from all major internet companies to overcome resistance to renewable energy from monopoly utilities.

Greenpeace’s research states that major internet companies including Apple, Facebook and Google continue to lead efforts to build an internet that is renewably powered, but an uncooperative utility sector and rapid energy demand growth for the internet places those ambitions under threat. Continued resistance to renewable investments from coal-heavy monopoly utilities in data centre hot spots such as Virginia, North Carolina, and Taiwan is causing the rapid growth in the digital world to increase the demand for dirty energy.

“Tech companies are increasingly turning to the smart choice of renewable energy to power the internet, but they’re hitting a wall of stubborn monopoly power companies that refuse to switch to 21st century sources of energy. Internet companies need to work together to push utilities and policymakers to provide them with 100 per cent renewable energy and avoid the creation of a dirty internet.” said Gary Cook, Senior IT Analyst for Greenpeace USA.

The report, “Clicking Clean: A Guide to Building the Green Internet,” also highlights the continued lack of transparency by cloud giant Amazon Web Services (AWS).  AWS has taken some significant steps over the last year, including committing to power its operations with 100 per cent renewable energy, but the lack of basic transparency about its energy use is a growing concern for its customers.  Although AWS did announce plans to purchase over 100 MW of wind energy this past year, Greenpeace discovered that AWS continues to rapidly expand in Virginia. Based on an analysis of permit applications by Amazon subsidiary Vadata, AWS made investments in new data center capacity in 2014 that would increase its energy demand by 200 MW in that state, where the utility Dominion powers the grid with only 2 per cent renewable energy.

The report found that Apple continues to be the most aggressive in powering its data center operations with renewable energy. Despite continued rapid growth, Apple appears to have kept pace with its supply of renewable energy, maintaining its claim of a 100 per cent renewably powered cloud for another year, followed by Yahoo, Facebook and Google with 73 per cent, 49 per cent and 46 per cent clean energy respectively. Greenpeace found that Amazon’s current investments would deliver an energy mix of 23 per cent renewable energy for its operations.

“Amazon needs to provide more information about its data center footprint and how it will move toward 100 per cent renewable energy, as Apple, Google, and Facebook have done – its rapid expansion in coal dependent Virginia should be a concern to its customers like Netflix and Pinterest who are fully dependent on Amazon for their online operations. Increased transparency will allow AWS customers to know where they and AWS stand on their journey to 100 per cent renewable energy,” said Cook.

The energy use of our digital infrastructure, which would have ranked sixth in the world among countries in 2011, continues to rapidly increase, and is largely being driven by the dramatic growth of streaming video services like Youtube, Netflix, and Hulu. Video streaming is estimated to account for more than 60 per cent of consumer internet traffic today, and is expected to grow to 76 per cent by 2018.

Apple continues to lead the way toward a green internet with several major renewable energy investments announced in the last year, including an $850 million deal to power its operations in California – the largest ever non-utility solar deal. Google’s march toward 100 per cent renewable energy is threatened by monopoly utilities like Duke Energy in North Carolina, a major hub for data centers.

Currently, customers are not allowed to buy power from anyone other than Duke, which gets only 2 per cent of its electricity from renewable sources, but North Carolina legislators are trying to increase the options for consumers to buy renewable energy from parties other than Duke Energy.

Colocation companies, the internet landlords that rent out data center space, continue to lag far behind consumer-facing data center operators in seeking renewable energy to power their operations, but Equinix’s adoption of a 100 per cent renewable energy commitment and offering of renewably hosted facilities is an important step forward and puts the company at the front of the colocation pack.

Greenpeace contacted every company assessed in the report to request data on their energy use. When companies did not respond, as was the case with Amazon, Greenpeace estimated their energy consumption using conservative assumptions and publicly available information.

Greenpeace is calling on all major internet companies to:  

  • Make a long-term commitment to become 100 per cent renewably powered.  
  • Commit to transparency on IT performance and consumption of resources, including the sources of electricity, to enable customers, investors, and stakeholders to measure progress toward that goal.
  • Develop a strategy for increasing their supply of renewable energy, through a mixture of procurement, investment, and corporate advocacy to both electricity suppliers and government decision-makers.