Energy, Resource, Sustainaqsdfqsdfbility and Environmental Trends That Will Impact The Future Success of Global Supply Chains

This research note is restricted to the personal use of Stephen Oudet (Soudet@deloitte.fr).
Energy, Resource, Sustainability and

Environmental Trends That Will Impact the
Future Success of Global Supply Chains
9 May 2013| !"#002$%9&2
Stephen Sto'es
Our 2013 trend scan identified 1$ of the top ener(y) resource) sustaina*ility and
en+iron,ental trends. Supply chain e-ecuti+es) strate(ic planners) and ./! and *usiness
leaders should plan their current and future *usiness operations to reflect the i,pact.
vervie!
"ey Findings
0 1opulation (ro2th) de,o(raphic transition) (lo*ali3ation and ur*ani3ation re,ain as
unifyin( ,e(atrends that 2ill continue to *e catalysts for lar(e4scale econo,ic and
societal transfor,ation.
0 !i+ersification of hydrocar*on ener(y sources and T4ena*le,ent of ener(y
efficiency are already si(nificantly shiftin( supply chain and ,anufacturin( ener(y
policies and strate(ies.
0 5 ,ore detailed analysis of resources and resource scarcity is re6uired) one 2hich
incorporates non,aterial resources) as 2ell as physical co,,odities and ra2
,aterials.
0 #lo*al cli,ate and en+iron,ental chan(es) and their i,pact on production)
sustaina*le lifestyles and consu,er choices) are *ein( incorporated into standard
supply chain strate(ies and policies.
Recommendations
0 ncorporate an increasin( cross4section of factors) trends and ris's relatin( to
ener(y) resources) sustaina*ility and the en+iron,ent into the outside4in +ie2 of
your supply chain.
0 Supply chain and *usiness leaders ,ust re+ie2 these e,er(in( trends throu(h the
lens of their o2n strate(ic plans and as part of their o2n trend scan on a re(ular
*asis.
0 7onsider the li'ely i,pact of these trends on your industry) and the e-tent to 2hich
further in+esti(ation) product) or process inno+ation trials or deploy,ents ,eets
*usiness o*8ecti+es and ris' tolerance9,ana(e,ent.
0 5+oid the te,ptation of e+aluatin( a sin(le trend in isolation.
Table of Contents
5nalysis
O+er+ie2
:ey ;indin(s in ;ull
.eco,,endations in ;ull
<o2 to =se This .esearch
:ey Trend 7lusters
Societal Transfor,ation) #lo*ali3ation) >,er(in(4Mar'et #ap and
=r*ani3ation as O+erarchin() Stron(ly 7onnected Me(atrends
1opulation #ro2th) !e,o(raphic Transition and #lo*ali3ation
;orces and !ri+ers
,plications95ctions
The On(oin( =r*ani3ation and >,er(ence of Me(acities
;orces and !ri+ers
,plications95ctions
>ner(y ;utures
5d+anced >ner(y Technolo(ies and Mana(e,ent
;orces and !ri+ers
,plications95ctions
=ncon+entional ?atural #as
;orces and !ri+ers
,plications95ctions
#lo*al >ner(y Mar'et !yna,ics
;orces and !ri+ers
,plications95ctions
.esources and 7onsu,ption
?atural .esource Scarcity) !e,and ncreases and 1rice @olatility
;orces and !ri+ers
,plications95ctions
.etail Transfor,ation" 7onsu,eri3ation) 1ersonali3ation) ncreased
7o,ple-ity and the ,pact of the Online 7hannel
;orces and !ri+ers
,plications95ctions
Offshore @ersus ?earshore Manufacturin(
;orces and !ri+ers
,plications95ctions
;ood Security and ;ood 52areness
;orces and !ri+ers
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Ta*le 1. ;uel Technolo(ies) @ehicle Technolo(ies and Syste,
Opti,i3ation Opportunities to .educe >ner(y 7onsu,ption and
#<# >,issions ;ro, Truc' and .ail Ao(istics Modes
Ta*le 2. .ecent >sti,ates of as Bet =ndisco+ered 7on+entional #lo*al
Oil and #as .esources
;i(ure 1. 5+era(e 5nnual 1ercenta(e #ro2th .ate of #!1 ;ro, 1990 to
2003 and 1redictions of ;uture #ro2th .ates (in =.S. Cillion
!ollars) ;ro, 2010 to 2030
;i(ure 2. Dorld and .e(ional 1opulations) !e+elop,ent Ae+el 1opulation
and 1opulation #ro2th) 19%042100
;i(ure 3. >-a,ple 1opulation 1yra,ids !e,onstratin( 7han(in(
1opulation 5(e Structures for the Dorld) the =.:.) 5sia and
?i(eria for the 1eriods 19%0) 2010) 20%0 and 2100
;i(ure $. 1ro8ected 7han(es in the Si3e of the #lo*al Middle 7lass)
Su*di+ided *y :ey .e(ions
;i(ure %. <istorical and ;uture (2010 to 2100) 1ro8ections of #lo*al
=r*an and .ural 1opulations) and =r*an 1opulations *y Ma8or
.e(ion
;i(ure &. #eo(raphical !istri*ution of 7ities Dith at Aeast 1 Million
nha*itants) and 7urrent and 1ro8ected (2030) =r*ani3ation
.ates) Su*di+ided *y :ey #eo(raphies
;i(ure E. Si3e and 1opulation !ensity 7haracteristics of Ma8or Dorld
7ities
;i(ure F. 7ontrastin( 1o2er !e,and !ata Cet2een 7on+entional and
>ner(y4>fficient9S,art Cuildin(s) and Cest47ase Scenario
Si,ulation >ner(y Sa+in(s and 5+oided #reenhouse #as (#<#)
>,issions
;i(ure 9. >fficiency ,pro+e,ents for Select ,pro+e,ent 1ro8ects
>-pressed in Ter,s of 1ercenta(e ;inancial and >n+iron,ental
.O
;i(ure 10. Aar(est4:no2n .eco+era*le #as .esources) 2011 >sti,ates (in
Trillion 7u*ic Meters GT7MH)
;i(ure 11. ?atural #as ,port 1rices (I=S9Million Critish Ther,al =nits
GMCtuH)) 19F$42011
;i(ure 12. ?atural #as ,port 1rices (in I=S 2009 per MCtu) J
5ssu,ptions =nder the 5>Ks #as Scenario
;i(ure 13. <istorical and 1ro8ected !iesel and ?atural #as Transportation
;uel 1rices Throu(h 203%) =sin( the =.S. !epart,ent of
>ner(yKs <ea+y4!uty @ehicle (<!@) .eference 7ase
;i(ure 1$. 1redicted ;uture >ner(y !e,and =nder the >5 #as Scenario
;i(ure 1%. .ecent <istorical and 1redicted #lo*al .esource >-traction
.ates (in Cillion Tons)
;i(ure 1&. :ey Ma8or Metals and Their =ses
;i(ure 1E. >sti,ated Bears of Supply of #lo*al ron Ore) 5+aila*le 7opper)
1otash and 7o'in( 7oal) Dith Su,,ary of Total >sti,ated
5+aila*le Supply
;i(ure 1F. .ecent >sti,ates of >nd4of4Aife (1ostconsu,er) .ecyclin( .ates
(=pper Aeft Trian(les) and #lo*ally 5+era(ed .ecycled 7ontent
(Ao2er .i(ht Trian(les) for &0 Metals
;i(ure 19. <eat Map of >47o,,erce ,pact and .ate of 7han(e
Su*di+ided *y ndustry
;i(ure 20. 5ctual and ;orecast ncreases in the Case 1ay of Lunior4Ae+el
Dor'ers at ;o-conn Technolo(y #roupKs Shen3hen ;acility and
1redictions of ;uture (Short4Ter,) Da(e ncreases
;i(ure 21. Top Three .easons for Sourcin( ;ro, 5sia O+er the 1eriod
2012 to 201%M Manufacturers to ?ot Shift Sourcin( 52ay ;ro,
5sia
;i(ure 22. 1redicted ncreases in Dorld Mar'et ;ood 1rices .elati+e to
2010 (1ercenta(e)
;i(ure 23. Median Total Meat 7onsu,ption for Selected nco,e 7ate(ories
(:ilocalories G:calH per 7apita per !ay)
;i(ure 2$. #artnerKs <ierarchy of Supply 7hain .esources
;i(ure 2%. (a) @irtual Dater Calance .elated to Trade in 5(ricultural and
ndustrial 1roductsM (*) >sti,ates of O+erall #lo*al Dater
,plications95ctions
?on,aterial .esource ;ocus
;orces and !ri+ers
,plications95ctions
Dater" Scarcity) !istri*ution) 5+aila*ility and Nuality
;orces and !ri+ers
,plications95ctions
Sustaina*ility and the >n+iron,ent
7li,ate 7han(e and @aria*ility
;orces and !ri+ers
,plications95ctions
#reen 7onsu,eris, and Sustaina*le Aifestyles
;orces and !ri+ers
,plications95ctions
Supplier .eportin() .esponsi*ility) Sustaina*le and >thical
1rocure,ent
;orces and !ri+ers
,plications95ctions
.eco,,ended .eadin(
#ist of Tables
#ist of Figures
;ootprint of 1roduction) 199& to 200%M and (c) 7ontri*utions of
1roduct 7ate(ories to >sti,ated #lo*al @irtual Dater ;lo2s
;i(ure 2&. ncreasin( ncidence of ;loodin( *y Ma8or .e(ion) 19%0 to 2000
;i(ure 2E. 5 ;our41hase ;ra,e2or' for Or(ani3ational and Supply 7hain
7li,ate 7han(e Strate(ies
;i(ure 2F. ;inancial Modelin( of >n+iron,ental ,pacts in the =pstrea,
and nstrea, Supply 7hain of Aoc'heed Martin
$nalysis
vervie!
t has *een said ,any ti,es *efore that the con+er(ence of technolo(y ad+ances)
(lo*ali3ation) resource scarcity) and econo,ic and de,o(raphic transition) as 2ell as other
factors) ha+e forced an inflection point that re6uires su*stantial redesi(n) reconfi(uration)
and transfor,ation of (lo*al supply chains and the products they supply. 5lthou(h these
and other disruptions ha+e played an i,portant role in cataly3in( or pro+o'in( inno+ation
and chan(e) the Otsuna,iO of (lo*al transfor,ation that is ta'in( place durin( the early
decades of the 21st4century 2ill ,a'e pre+ious con+er(ent forces and their conse6uences
see, li'e ,ere ripples.
The chan(e a(ents of our current (lo*al transfor,ation are ,ultiple and) in ,any cases)
hi(hly interdependent"
0 The on(oin( (ro2th of the (lo*al population) 2ith the su*stantial ,a8ority of that
(ro2th occurrin( in e,er(ent and pre4e,er(in( ,ar'ets
0 .a,pant ur*ani3ation) and the correspondin( creation of ne2 infrastructure and
ne2 centers for inno+ation and co,,ercial acti+ities
0 7han(in( population a(e structures that shift the *alance of the 2or'in( and
non2or'in( population se(,ents
5lso critical is the e,er(ence of the ne-t phase of the nfor,ation 5(e) a phase in 2hich
the ?e-us of ;orces is dri+in( social) ,o*ile) infor,ation and cloud4*ased co,putin(
styles) resultin( in the creation) analysis and distri*ution of data on an e-ponentially
unprecedented scale. Ae+era(in( this *i( data into critical infor,ation and insi(ht is
e,po2erin( (o+ern,ents) supply chain leaders and the Oco,,on citi3en)O all of 2ho,
no2 e-pect efficiency) transparency) tracea*ility) resiliency) and adapta*ility as core
*usiness co,petencies and ,ini,u, re6uire,ents. 7usto,ers and supply chain partners
e-pect e+er4increasin( ser+ice le+els and *usiness continuity) despite the tectonically
chan(in( en+iron,ent in 2hich supply chains are operatin( and e-pandin(.
5t the sa,e ti,e) this already4co,plicated landscape is further challen(in( supply chains
due to the con+er(ence of ener(y4) resource4) en+iron,ent4 and sustaina*ility4related
factors) ,any of 2hich are closely interrelated. 7oncerns relatin( to ra2 ,aterials scarcity)
ener(y price +olatility) and the incorporation of a raft of pre+ious en+iron,ental
e-ternalities as co,pliance re6uire,ents and) in ,any cases) a cost of doin( *usiness
present an additional di,ension of 2holesale (lo*al chan(e.
Cut itKs not all *ad ne2s. The esti,ated dou*lin( of real) (lo*al #!1 o+er the ne-t t2o
decades represents the sin(le lar(est *usiness (ro2th opportunity since the
co,,ence,ent of the ndustrial .e+olution. 5s ,ore e,er(in( ,ar'ets co,e OonlineO and
are fully inte(rated 2ithin the (lo*al econo,y) (lo*al corporations 2ill *e e-posed to
potentially unprecedented (ro2th opportunities. 5s nations de+elop an additional three
*illion connected ,e,*ers of the ,iddle class) consu,ers 2ill *e see'in( a co,*ination of
(lo*al (oods) as 2ell as authentic re(ional consu,er and product e-periences. On top of
this) ,ore than one *illion consu,ers *elo2 the ,iddle class 2ill see' lo24cost products)
and first42orld aspirations and e-pectations. Supply chain leaders 2ill o2n the tas' of
efficiently deli+erin( and achie+in( this future (ro2th opportunity.
5lthou(h there is no one4si3e4fits4all solution) supply chain leaders 2ill need to de+elop
,ore structured approaches to trend scannin() and predictin( the nature and style of
(ro2th) in addition to the chan(in( character) of the ,ar'ets in 2hich they operate. This
research is part of a series that 2ill co+er the supply chain of the future) and our
assess,ent of ho2 co,panies can continue to succeed and e-cel. 1rior to *uildin( a plan
or strate(y to cope 2ith future disruptions) it is necessary to consider the nature of the
trends and their li'ely e,er(ence o+er relati+ely lon( ti,e hori3ons) co,pared to those to
2hich supply chain practitioners are accusto,ed. #artner pro+ides a su,,ary of 1$ 'ey
resource) en+iron,ental and de,o(raphic trends that ha+e the potential to radically
i,pact future supply chain perfor,ance.
;or this analysis) ener(y) resources) sustaina*ility and en+iron,ental trends that ,atter
are O,ultiyear chan(es to re(ional or (lo*al ,ar'et characteristicsM ener(y and ra2
,aterial inputs) throu(hputs or outputs of productionM en+iron,ental conditions or
re(ulationM or corporate *eha+iors that are li'ely to lead to ,aterial differences in the
,idter, to lon(4ter, position) as 2ell as in the perfor,ance of (lo*al supply chains and
their co,petitors.O
These are not short4ter,) transient trends associated 2ith *usiness or other cycles) *ut
the secular and directional trends that transcend it. They are li'ely to result in (radual or
a*rupt chan(es that 2ill su*stantially and) in ,ost cases) per,anently i,pact supply chain
operations and outco,es.
"ey Findings in Full
0 1opulation (ro2th) de,o(raphic transition) (lo*ali3ation and ur*ani3ation re,ain as
unifyin( ,e(atrends that 2ill continue to *e catalysts for lar(e4scale econo,ic and
societal transfor,ation.
0 !i+ersification of hydrocar*on ener(y sources and the T4ena*le,ent of ener(y
efficiency are already si(nificantly shiftin( supply chain and ,anufacturin( ener(y
policies and strate(ies.
0 There ha+e *een hei(htened concerns relatin( to resource constraint and scarcity)
2hich is in part dri+en *y increased de,and fro, 7hina and other e,er(in(
,ar'ets. The reality is that a ,ore detailed analysis of resources and resource
scarcity is re6uired) one 2hich incorporates non,aterial resources) as 2ell as
physical co,,odities and ra2 ,aterials.
0 #lo*al cli,ate and en+iron,ental chan(es) and their i,pact on production)
sustaina*le lifestyles) and consu,er choices) are *eco,in( incorporated into
standard supply chain strate(ies and policies.
Recommendations in Full
0 Bour outside4in +ie2 of your supply chain ,ust incorporate an increasin( cross4
section of factors) trends and ris's relatin( to ener(y) resources) sustaina*ility and
Page ( of 29 Print Document
the en+iron,ent) 2hich are increasin(ly contri*utin( to dyna,ic co,ple-ity in
current and future ,ar'ets. ?ot doin( so 2ill result in si(nificant disruptions and
*usiness discontinuities.
0 Supply chain and *usiness leaders ,ust re+ie2 these e,er(in( trends throu(h the
lens of their o2n strate(ic plans and as part of their o2n trend scan on a re(ular
*asis. This research pro+ides a useful) initial startin( point for that e-ercise.
0 7onsider the li'ely i,pact of these trends (positi+e) ne(ati+e or neutral) on your
industry. =nderstand the e-tent to 2hich further in+esti(ation) product or process
inno+ation trials or deploy,ents ,eet *usiness o*8ecti+es) as 2ell as ris' tolerance
and ,ana(e,ent.
0 5+oid the te,ptation to e+aluate a sin(le trend in isolation. Many trends are
su*stantially interdependent and cannot *e disentan(led. 7u,ulati+e i,pacts are
li'ely to *e si(nificantly (reater as a result of a confluence of trends.
0 =se these trends to de+elop scenarios) rather than tryin( to predict or forecast one
particular future.
0 .ead this research in con8unction 2ith pre+ious reports on technolo(y) *usiness and
societal trends (see OTechnolo(y Trends That Matter)O OSocietal and >cono,ic
Trends That MatterO and OCusiness and Mana(e,ent Trends That MatterOM note"
so,e of these docu,ents ha+e *een archi+edM their content ,ay not reflect current
conditions). These 2ill ha+e an additional cu,ulati+e effect on the i,pact of the
ener(y) resources) sustaina*ility and en+iron,ental trends.
%o! to &se This Research
These trends 2ill i,pact supply chains) or(ani3ations) industries and so,e (eo(raphies
differentially. Ai'e2ise) the rate and e-tent of upta'e (that is) the i,pact) 2ill +ary
considera*ly. <o2e+er) as supply chain and *usiness leaders 2or' throu(h their strate(ic
plannin( processes to address (ro2in( pressures fro, a 2ide ran(e of sta'eholders to
deli+er ne2 re+enue) (ro2th and inno+ation) as 2ell as to produce increasin(ly efficient
and sustaina*le product and *usiness outco,es) these trends should for, the startin(
point for their Otrend scannin(O e-ercise.
Studyin( indi+idual trends ,ay *e +alua*le and infor,ati+e) *ut it is essential to loo'
across the (a,ut and at the confluences of ,ultiple trends. The co,ple-ity i,plied *y
these relationships is further co,pounded 2hen additional technolo(y) *usiness and
societal trends are also considered. Thus) it is i,portant to +ie2 all trend infor,ation in a
holistic ,anner) rather than atte,ptin( to loo' at a sin(le trend and understand its
*enefits in isolation.
"ey Trend Clusters
Societal Transformation, Globali'ation, Emerging()ar*et Gap and
&rbani'ation as verarching, Strongly Connected )egatrends
+opulation Gro!th, ,emographic Transition and Globali'ation
Forces and Drivers
1opulation (ro2th) de,o(raphic transition and (lo*ali3ation are closely lin'ed trends that
ha+e and 2ill continue to radically reshape (lo*al society and econo,ic ,ar'ets. >,er(in(
,ar'ets 2ill continue to de+elop at an increasin(ly accelerated pace) fuelin( the ,a8ority
of (lo*al econo,ic (ro2th *et2een no2 and the ,iddle of the century.
#lo*ali3ation has caused supply chains to len(then and *eco,e ,ore co,ple-) aided *y
the relati+ely lo2 cost of production and transport) as 2ell as the efficiencies (ained fro,
lar(e4scale operations and offshorin( (see the Offshore @ersus ?earshore Manufacturin(
section). O+er the ne-t t2o decades) real) (lo*al #!1 is predicted to dou*le fro, =SI&$
trillion to =SI129 trillion (see ;i(ure 1). One to t2o *illion citi3ens 2ill *e added to the
(lo*al population) and the (lo*al ,iddle class 2ill (ro2 in si3e fro, 1.F *illion to $.9 *illion
*y 2030. >,er(in(4,ar'et consu,ption 2ill (ro2 *y I30 trillion *y 202%) presentin( the
(reatest (ro2th opportunity since the ndustrial .e+olution.
1 )2
Figure -. $verage $nnual +ercentage Gro!th Rate of G,+ From -//0 to
1002 and +redictions of Future Gro!th Rates 3in &.S. 4illion ,ollars5
From 10-0 to 1020
Source6 Gartner, the World 4an* Institute 3W4I5, the International )onetary Fund 3I)F5,
the )illennium Ecosystem $ssessment and Standard Chartered 3)ay 10-25
Aeadin( ,anufacturers are already de+elopin( production net2or's that are specifically
focused on e,er(in( ,ar'ets. 5ccordin( to a recent #artner sur+ey) $EP of co,panies
2ere plannin( on *uildin( capacity in e,er(in( ,ar'ets to support local de,and 2ithin
the ne-t fi+e years.
#lo*ali3ation is the process of international inte(ration) arisin( fro, the interchan(e of
2orld +ie2s) products) ideas) co,,erce and culture. 5d+ances in transportation)
teleco,,unications and infrastructureM (lo*al ,o*ilityM and the e-plosi+e e-pansion of the
nternet and infor,ation a+aila*ility) (enerally) are ,a8or factors in (lo*ali3ation. They
precipitate further interdependence and de+elop,ent of econo,ic and cultural acti+ities.
1hases of accelerated (lo*ali3ation) li'e the one currently occurrin() are lin'ed to super
cycles of hi(h) (lo*al econo,ic (ro2th) dri+en *y increasin( trade and 2ealth creation)
hi(h rates of in+est,ent) ur*ani3ation) and technolo(y inno+ation (see The On(oin(
=r*ani3ation and >,er(ence of Me(acities section). 5ccordin( to the Dorld Trade
Or(ani3ation (DTO)) the +olu,e of (lo*al trade increased in the 1% years to 200% *y a*out
2$0P) 2hile the (lo*al econo,y e-panded *y a*out 1%0P in the sa,e period.
3
1ersistent) hi(h4population (ro2th rates in de+elopin( and e,er(in( econo,ies continue
to increase o+erall (lo*al population (see ;i(ure 2). This) in turn) dri+es increased
de,ands for (oods) food and resources.
Figure 1. World and Regional +opulations, ,evelopment #evel +opulation
and +opulation Gro!th, -/70(1-00
This fi(ure ori(inally appeared in the =nited ?ationsK (=.?.Ks) !epart,ent of >cono,ic and Social
5ffairs) 1opulation !i+ision report ODorld 1opulation 1rospects" The 2010 .e+ision)O 2hich is
retrie+a*le fro, esa.un.or(92pp.
Source6 &.8. 3$pril 10--5
5ccordin( to the =.?.Ks !epart,ent of Social and >cono,ic 5ffairs report ODorld
1opulation 1rospects" The 2010 .e+isionO"
0 Dorld population is e-pected to increase fro, &.9 *illion in ,id42011 to 9.3 *illion
in 20%0) and to reach 10.1 *illion *y 2100.
0 5sia 2ill re,ain the ,ost populous re(ion in the 2orld durin( the 21st century) *ut
5frica 2ill (ain (round as its population ,ore than triples) passin( fro, 1.0 *illion in
2011 to 3.& *illion in 2100 (2hich is an annual (ro2th rate of 2.3P and ,ore than
dou*le that of 5sia).
0 The populations of all other ,a8or areas co,*ined (the 5,ericas) >urope and
Oceania) a,ount to 1.E *illion in 2011) risin( to nearly 2.0 *illion in 20&0. The
>uropean population is pro8ected to pea' around 0.E$ *illion in 202%) 2ith Aatin
5,erica (ro2in( to 0.E% *illion in 20%E. ?orth 5,erica and OceaniaKs populations
2ill continue slo2ly increasin(.
0 n ,ore de+eloped re(ions) the population 2ill re,ain lar(ely unchan(ed to 2100.
n contrast) populations of the least4de+eloped countries are e-pected to ,ore than
triple) passin( fro, 0.F% *illion in 2011 to 2.E *illion in 2100.
n addition to o+erall population totals chan(in() the co,in( decades 2ill see si(nificant
shifts in de,o(raphics) particularly in relation to the population a(e structures of
de+elopin( nations and disposa*le inco,es) 2hich 2ill rise as de+elop,ent continues (see
;i(ure 3).
Figure 2. E9ample +opulation +yramids ,emonstrating Changing
+opulation $ge Structures for the World, the &."., $sia and 8igeria for
the +eriods -/70, 10-0, 1070 and 1-00
This figure originally appeared in the U.N.'s Department of Economic and Social Affairs, Population
Division report !orld Population Prospects" The #$%$ &evision, 'hich is retrieva(le from
esa.un.org)'pp.
Source: U.N. (April 2011)
Through the development cycle, an initial pyramid shape reflects high rates of infant
mortality and short life e*pectancy. A more typical triangular shape follo's, reflecting high
fertility rates and declining infant mortality, as 'ell as a relatively small and youthful
'or+ing,age population. As development proceeds, (irth rates reduce, the -uality and
availa(ility of healthcare gro', life e*pectancy increases, and a more uniform population
age structure evolves. .hanges to the population age structure have important
implications for economic development and productivity, 'or+force capacity, and,
ultimately, the support of an increasingly aging population.
Population pyramids provide aggregated insight into e*isting and future demand patterns
from the various gro'ing or shrin+ing segments of pre,, post, or 'or+ing,age populations.
/or e*ample, note the pre,#$0$ decline of 'or+ing,age citi1ens in Asia. 2t 'ill increase the
emerging trend of s+illed la(or scarcity in .hina and, li+e'ise, continue to significantly
drive up relative 'age costs. Also consider the ongoing e*plosive population gro'th and,
correspondingly, the relatively youthful population of Nigeria. This country, among others,
'ill serve as an important and large gro'th mar+et, as 'ell as a potential po'erhouse of
post,3&2. 43ra1il, &ussia, 2ndia and .hina5, relatively lo','age 'or+ers 4see /igure 65.
Figure 4. Projected Change in the Si!e o" the #lo$al %iddle Cla&
Su$di'ided $( )e( *egion
15/01/2014 http://my.gartner.com/portal/server.pt/gateay/P!"#$%&0&2''656(&(5(&2'0&()62...
This figure originally appeared in the Standard .hartered report The Super,.ycle &eport, 'hich is
retrieva(le from '''.standardchartered.co.id)7documents)press,releases)en)The8#$Super,cycle8
#$&eport,%#%%#$%$,final.pdf .
Source: Standard Chartered (No'e+$er 2010)
Implications/Actions
E*ecutives and supply chain leaders from all sectors must develop or refine glo(ali1ation
strategies that drive their organi1ations to ma*imi1e ne' gro'th and revenue
opportunities, 'hile managing ris+ at the same time. 2n particular, they must rethin+
emerging economies as su(stantial ne' mar+ets, rather than simply as locations for lo',
cost production.
The pronounced and rapid development of the 3&2. nations 'ill (e follo'ed (y a second
'ave of development from other Asian and 9atin American countries. African nations 'ill
follo' in a third 'ave to'ard the middle of the century.
.onsider the follo'ing"
: Supply chain leaders must rethin+ and anticipate ne' supply chain net'or+
configurations and the glo(al geography of end,consumer mar+ets. The innovation
and commerciali1ation of some products 'ill (e re-uired to more precisely map to
the geographical and cultural specificity, as 'ell as the demographics, of ne'
mar+ets.
Approaches to net'or+ planning and logistics must (e rethought 'hen 'or+ing 'ith
the less 'ell,developed infrastructure in emerging mar+ets. /ragile and limited
infrastructures 'ill continue to challenge supply continuity for manufacturers
choosing to offshore production and supply chains selling in these mar+ets.
: At least some of the ne' infrastructure 'ill re-uire pu(lic,private partnerships,
'hich 'ill present opportunities to technology and other vendors, as 'ell as
opportunities for interaction and lo((ying (y manufacturers.
: ;anufacturers and retailers should anticipate the accelerated upta+e of e,commerce
and multichannel commerce as technology,ena(led, emerging,mar+et (usinesses
and end consumers leapfrog conventional sales channels. <iven logistics
challenges, the collection of online purchases may finish at collection)distri(ution
centers, rather than at the last mile to the point of use.
: 2n addition to serving developed,'orld products to the (urgeoning glo(al middle
class, frugal innovation strategies should (e considered to serve the # (illion future,
emerging,mar+et consumers 'ith limited incomes 4see Tool+it" Energy, &esource,
Environmental and Sustaina(ility Trends That .ould 2mpact =our Supply .hain5.
This 'ill necessitate product and component redesign> ne' alternative retail
channels> communication> and payment, financing and)or support service
strategies.
,he -ngoing Ur$ani!ation and .+ergence o" %egacitie
Forces and Drivers
Understanding the city as a fundamental economic entity is critical to long,term supply
chain success, typically for the companies that see+ to 'in a su(stantial share of emerging
,mar+et gro'th.
According to recent research from ;c?insey, from #$%$ to #$#0, the <DP of the @$$ most
rapidly gro'ing ur(an areas 'ill rise (y an estimated AB$ trillion, accounting for @08 of
glo(al gro'th during that time period.
6
/our hundred and forty,four rapidly gro'ing,
emerging cities alone are e*pected to contri(ute around A#B trillion of the glo(al gro'th
4a(out 6C8 of total gro'th5. ;ore than % (illion ne' consumers 'ill (e created in
emerging,mar+et cities (y #$#0.
3y #$0$, C$8 of the 'orld's population 'ill live in ur(an environments 4see /igure 05.
Additionally, the si1e of cities is increasing. 3y #$#$, ;um(ai, Delhi, ;e*ico .ity, .airo,
SDo Paulo, Ne' =or+, Da+ar, Ea+arta and 9agos are all predicted to have populations of
more than #$ million 4see /igure @> see 9iving 4and Driving5 in Electric Dreams > note"
this document has (een archived> some of its content may not reflect current conditions5.
Figure /. 0itorical and Future (2010 to 2100) Projection o" #lo$al
Ur$an and *ural Population& and Ur$an Population $( %ajor *egion
Page ' of 29 Print Document
This figure originally appeared in the U.N.'s Department of Economic and Social Affairs, Population
Division report !orld Population Prospects" The #$%$ &evision, 'hich is retrieva(le from
esa.un.org)'pp.
Source: U.N. (April 2011)
Figure 1. #eographical 2itri$ution o" Citie 3ith at 4eat 1 %illion
5nha$itant& and Current and Projected (2060) Ur$ani!ation *ate&
Su$di'ided $( )e( #eographie
This figure originally appeared in the Standard .hartered report The Super,.ycle &eport, 'hich is
retrieva(le from '''.standardchartered.co.id)7documents)press,releases)en)The8#$Super,cycle8
#$&eport,%#%%#$%$,final.pdf .
Source: Standard Chartered (No'e+$er 2010)
Agricultural moderni1ation is a maFor push factor for ur(ani1ation. Paid la(or is a maFor
pull factor of ur(an areas, particularly for 'omen serving the ur(an service,sector,
garment and electronics industries. Ur(an areas can provide many other advantages,
including (etter education, health services, entertainment, anonymity, political
participation and freedom from traditional norms. ;ost importantly, ur(ani1ation promotes
development. Si* hundred ur(an centers, comprising one,fifth of the 'orld's population,
generate @$8 of glo(al <DP.
6
&apid ur(ani1ation across Asia in the coming decades 'ill result in the creation of higher,
density and larger ur(an centers than traditionally developed 'orld cities. 2ndeed, current
Asian cities already demonstrate e*tremely high levels of population density, compared to
other regions 4see /igure C5. Ne' cities 'ill typically (e larger in terms of overall
population num(ers, (ut 'ill (enefit from greenfield site development, as 'ell as improved
planning and design, compared to the maFority of developed 'orld cities, many of 'hich
have an inherited infrastructure that stretches (ac+ decades or centuries 4for an
e*ample, see en.'i+ipedia.org)'i+i)9ondon7se'erage7system5.
Figure 7. Si!e and Population 2enit( Characteritic o" %ajor 3orld
Citie
Page ) of 29 Print Document
Source: #artner (%a( 2016)
The increase in the num(er, si1e and population density of ur(an centers 'ill significantly
challenge traditional manufacturing, distri(ution and retailing, (ut also provide remar+a(le
gro'th opportunities.
E*plosive levels of ne' demand from the emerging glo(al middle class 'ill re-uire a
'holesale reconfiguration of supply chain net'or+s, including, for e*ample, regional
second,touch postponement, configuration, customi1ation and assem(ly strategies. The
sheer scale of the forecast glo(al gro'th and its velocity predicates the need for strategies
to cope 'ith comple*ity, 'hile remaining agile and resilient. 2ncreasing re-uirements of
ne' infrastructure and the e*cessive pressure on e*isting infrastructure are li+ely to drive
decentrali1ed models of in,mar+et manufacturing 'here possi(le.
2nventory optimi1ation 'ill (ecome critical, 'ith little room for unproductive inventory in
the supply chain or the home, 'ith the latter potentially increasing shopping fre-uency.
!ithout transportation infrastructure +eeping pace 'ith the gro'th and development,
manufacturers and retailers 'ill face significant supply and logistics challenges. E*pect city
logistics to (e lin+ed to usage charges, particularly in central (usiness districts and other
highly congested areas. &ecycling and ta+e,(ac+ programs, as 'ell as pac+aging
do'nsi1ing)reuse, 'ill li+ely need to increase in significance.
The retail sector must adapt to the emerging ur(an landscape. The future Asian and other
middle,class consumers in ne' megaur(an centers 'ill desire a com(ination of !estern
goods, increased levels of personali1ation, greater levels of transparency, and the
integration of regional or national cultural nuances 'ithin products and services. !hile
challenged (y limited infrastructure, the emerging middle class 'ill (e rapid adopters of
technology, and e*pect first,'orld, online commercial e*periences. Gther trends are li+ely
to include the follo'ing"
: Driven (y high rates in e*isting space constraints, large megastores 'ill see+
peripheral locations and (e increasingly connected to advanced pu(lic transportation
systems.
: Smaller,footprint grocery 4such as ;etro5 and other stores similar to the ones
emerging in Europe 'ill serve city,center, residential re-uirements 4see the &etail
Transformation" .onsumeri1ation, Personali1ation, .omple*ity 2ncreases and the
2mpact of the Gnline .hannel section5.
: Ur(ani1ation 'ill drive the adoption of online channels and multichannels that
support 3#3 and (usiness to consumer 43#.5 transactions.
: As personal vehicle usage decreases, consumers 'ill increasingly loo+ to the direct,
from,manufacturer and retail channels to provide to the door delivery and
increased services.
.nerg( Future
Ad'anced .nerg( ,echnologie and %anage+ent
Forces and Drivers
An increasing focus on energy,efficiency due to price volatility and other factors is
resulting in the development of a 'ide range of 2T,ena(led energy and resource
management technologies.
These technologies are principally designed to increase and automate the collection of
energy and other resource,consumption,related data from (uildings, manufacturing sites,
and fi*ed and mo(ile assets.
/or fi*ed and production assets, achieva(le energy savings may e*ceed B$8 of overall
energy e*penditure 4see /igure H5. 2ncreasingly, efficiency and performance improvement
data is (eing analy1ed at the granular asset level. Approaches are no' availa(le that allo'
the detailed assessment of financial and environmental costs and (enefits for a 'hole host
of 'or+ processes and operating environments. An e*ample of a recent analysis (y
9oc+heed ;artin is presented in /igure I.
Figure 8. Contrating Po9er 2e+and 2ata :et9een Con'entional and
.nerg(;.""icient<S+art :uilding& and :et;Cae Scenario Si+ulation
.nerg( Sa'ing and A'oided #reenhoue #a (#0#) .+iion
Note" Estimates represent efficiency gains achieved against the conventional (uilding performance
(aseline. Solid lines are energy savings, and dashed lines are avoided emissions.
T .G# ,e J tons of car(on dio*ide e-uivalent
Figure =. .""icienc( 5+pro'e+ent "or Select 5+pro'e+ent Project
.>preed in ,er+ o" Percentage Financial and .n'iron+ental *-5
Note" &G2 calculated (ased on full asset lifetimes, 'hich range from %$ to #$ years. 3u((le si1e is
proportional to net investment costs.
/or manufacturers, the 2EA identifies specific opportunities for significant savings for
energy,intensive industries, potentially at lo' or negative costs"
: 2n primary steel production, efficiency improvements on the order of #$8 to B$8
are availa(le, (ased on e*isting technology.
: 2mprovements to steam supply systems and motor systems offer efficiency
potentials on the order of %08 to B$8.
: .om(ined heat and po'er generation can (ring %$8 to B$8 fuel savings over
separate heat and po'er generation.
: !aste reduction, recycling and 'aste to energy technologies reduce energy
demand.
: The use of 'aste to energy technologies in the production of paper from pulp can
use close to net,1ero energy. Gutdated, small,scale paper plants in developing
countries, nota(ly .hina and 2ndia, could su(stantially reduce energy needs 'ith
larger plants.
: The cement and chemicals industries are approaching the theoretical minimum
energy use in many countries. Ko'ever, .hina could improve the energy,efficiency
of its cement industry (y almost 0$8. Po11olanic cement, 'hich incorporates
microsilica, is a partial or complete su(stitute for Portland cement, 'hich could
reduce the theoretical minimum significantly.
: Using (iomass feedstoc+s and recycling more plastic 'aste could reduce life cycle
energy consumption and .G# emissions su(stantially.
Machine-to-machine interaction, increasing IT/operational technology (OT) collectivity,
mobility, and sophisticated data management and historian infrastructures are driving
advanced energy management to near-real-time scales. Unprecedented access to high-
resolution, high-fidelity resource consumption data creates the possibility for real-time
optimiation, !hich is capable of significantly reducing the cost of goods sold in many
industry sectors (see "Tool#it$ %nergy, &esource, %nvironmental and 'ustainability Trends
That (ould Impact )our 'upply (hain,""*redicts +,-.$ /reen IT and 'ustainability" and
"%merging Trends That 0ill 'hape the 'ustainable 1usiness Mar#et %cosystem"2 note$ the
last research document in this list been archived2 some of its content may not reflect
current conditions).
3 broad range of options are additionally available for truc# and rail vehicle fleets, as !ell
as mobile assets (see Table -). 4or factory and distribution center usage, light vehicles
and, in particular, for#lifts are increasingly e5ploiting a range of efficient drivetrain
technologies, including electric, compressed natural gas and hydrogen fuel cells. 4or more
on this, see %nvironmental 6eader7s "*8/ 'hifts +,, 4or#lifts to 9ydrogen 4uel (ell
*o!er."
:
Table 1. Fuel Technologies, Vehicle Technologies and System
Optimization Opportunities to Reduce Energy onsumption and !"!
Emissions From Truc# and Rail $ogistics %odes
Strategy Truc# Rail
4uel Technologies ; 6o!-carbon fuel
; (ompressed natural gas ((</), !ith
limited applications
; *lug-in hybrids (future potential)
; Ultra-lo!-sulfur
diesel (!ith
caution)
; %lectrification
; 6o!-carbon fuel
; (</
=ehicle Technologies$
4uel %fficiency
; 3uto-tire-inflation systems
; 0ide- and lo!-rolling resistance
tires
; 3erodynamic improvements
; 6o!-viscosity lubricants
; 6ighter tractors and trailers
; Improved 3( systems and !aste
heat recovery
; Trac# lubricants
; 6o!-friction
bearings
; 6ight!eight cars
; 6ubrication
improvement
; 3erodynamic
improvements
Idle &eduction
; 1un#er heaters and au5iliary po!er
units
; Thermal storage units
; 3utomatic shutdo!n>startup
systems
; %lectrified truc# stops
; Idle reduction policies
; 3u5iliary po!er
units
; ?iesel heat system
; 3utomatic engine
start>stop
; '!itchyard idle
reduction programs
; *lug-in units
&etrofit>&eplacement
; ?iesel o5idation catalysts and
particulate filters
; 'elective catalytic reduction systems
; %ngine upgrade>replacement, such
as direct in@ection, reduced engine
friction and !aste heat recovery
; Truc# replacement !ith ne!er or
hybrid vehicles
; 6ocomotive
replacement !ith
ne!er, cleaner
units
; 6ocomotive
remanufacturing
; 9ybrid rail yard
s!itchers
; '!itchyard idling
reduction measures
'ystem
Optimiation>Operational
%fficiency
; Movement optimiation$
decentraliation of supply chains,
reduced e5cess pac#aging and
shipping freAuency, pic#up and
delivery idling reduction measures,
drive-by !eight stations, electronic
tolling, advanced clearance, port
access improvements, congestion
mitigation measures, arterial signal
synchroniation, real-time traffic
information, reduced empty mileage
and circuitous routes, real-time
par#ing>truc# stop management
; 6onger>heavier combination truc#s
; 'peed restrictions
; /rade crossing separation
; 3dvanced technology and logistics
; Improved local distribution
; Intermodalism and mode shift to
!ater or rail
; %codriving technology and driver
education
; Movement
optimiation$ rail
congestion
mitigation
measures, reduced
empty mileage and
circuitous routes
; 6onger and double-
stac#ed trains
; 6ine-haul speed
restrictions
; 3dvanced
technology and
logistics
; *ort access
improvements
; Train clearance
improvement
; %lectric movement
of containers from
ports to inland
distribution centers
; Intermodalism and
mode shift to !ater
(!ith caution)
'mart>'ustainable
/ro!th
'mart>sustainable gro!th through improved and integrated
transportation planning that accounts better for freight movements.
Mar#et-1ased
Mechanisms (4uture)
; %mission controls, such as cap and trade
; %mission pricing, such as carbon ta5
; *ricing emissions !ill offset cost of abatement and achieve
emission reductions
<ote$ This table !as originally published by the (ommission for %nvironmental (ooperation ((%() in its report
"?estination 'ustainability$ &educing /reenhouse /as %missions from 4reight Transportation in <orth 3merica,"
retrievable from !!!.cec.org>'torage>BB>BCD.E(%(-4reightTransport-final!ebEen.pdf .
Source& E '()11*
4ocus areas in aircraft efficiency gains relate primarily to improved engine efficiency and
overall aircraft light-!eighting through the use of carbon composites and other innovative
materials. This has resulted in fuel efficiency gains of up to .,F !hen compared !ith
traditional craft of comparable sie. 4or an e5ample, see %nvironmental 6eader7s "4ed%5
%5press to *urchase -B 1oeing CGCs, Improve 4uel %fficiency .,F."
G
3ll manufacturers and supply chains must benefit from advanced energy monitoring, and
management technologies applied to mobile, production and other fi5ed assets. In addition
to the direct reduction of cost to serve ((T') via reduced fuel and energy charges,
pursuing such strategies also reduces /9/ emissions, and can substantially contribute to
reputational protection or enhancement, as !ell as the avoidance of current or future
charges or ta5es against emissions.
3n organiation7s appetite for investment in advanced energy technologies should be
strongly related to value and ris#, and sub@ected to robust financial and investment
analyses. More energy-intensive industries should pursue such technologies !ith more
aggression. 9o!ever, even less energy-intensive industries should actively e5plore energy-
efficiency improvements to drive do!n costs !herever the financial case can be made.
The paybac# period for energy management investments continues to shorten. ?espite
higher, upfront capital costs, investments in energy-efficiency are usually obvious !hen
the cost of energy if factored into the asset7s total cost of o!nership (T(O). The pursuit of
efficiency programs is already facilitated in part by subsidies, incentives and other support
programs. These early-mover opportunities may become less available over the coming
decade and beyond. (ompanies need to be optimally positioned to ma5imie these
incentives and offset potentially significant &8? costs.
+ncon,entional -atural !as
Forces and Drivers
Over the past half-decade, the discovery and rapid development of unconventional natural
gas reserves, particularly !ithin the U.'., have dramatically enhanced global gas
hydrocarbon resource estimates (see 4igure -,).
C
This has !ide-ranging conseAuences for
future, global energy supplies and prices, and is li#ely to significantly challenge or
other!ise complicate short-term and midterm gro!th in the rene!able energy sector.
Figure 1). $argest./no0n Reco,erable !as Resources, ()11 Estimates
'in Trillion ubic %eters 1T%2*
<ote$ This figure originally appeared in the I%3 report "/olden &ules for a /olden 3ge of /as," !hich
is retrievable from
!!!.!orldenergyoutloo#.org>media>!eo!ebsite>+,-+>goldenrules>!eo+,-+Egoldenrulesreport.pdf .
Source& 3E4 '-o,ember ()1(*
3dvances in drilling techniAues triggered an e5plosion in unconventional natural gas
production. In the U.'., total output has gro!n from -., trillion cubic feet in +,,D to G.D
trillion cubic feet in +,-- (G,F of total production). The commercialiation of
unconventional natural gas has had a disruptive impact on the entire U.'. energy mar#et,
redefining the country7s energy mi5 and driving do!n natural gas prices to their lo!est
level in a decade (see 4igure --). The U.'. government7s %nergy Information
3dministration (%I3) predicts that, by +,.:, HGF of the U.'.7s natural gas supply !ill come
from shale gas. This has and !ill continue to create incidental effects in other geographies.
Figure 11. -atural !as 3mport 5rices '6+S/%illion 7ritish Thermal +nits
1%7tu2*, 189:.()11
This figure originally appeared in the I%3 report "+,-+ Iey 0orld %nergy 'tatistics," !hich is
retrievable from !!!.iea.org>publications>freepublications>publication>#!es.pdf.
Source& 3E4 '()1(*
0hen combining conventional and unconventional reserves, the global natural gas base is
advanced and !idely dispersed. (onventional, recoverable reserves are eAuivalent to more
than -+, years of current global consumption, and the total recoverable resources could
sustain today7s production for over +:, years.
D
The combustion of gas provides significant cost advantages against other hydrocarbons
and a :,F reduction in relative carbon emissions, compared to coal in electricity
generation or cogeneration applications. The same gas-generated electricity provides
opportunities for a "cleaner," light-vehicle transportation scenario, !here electric and
hybrid vehicles are fueled by natural-gas-generated electricity. /as-for-oil substitution
removes residual fears over pea# oil, and provides an additional fuel source for light- and
heavy-vehicle fleets. The sheer scale of conventional and unconventional natural gas
resources being discovered and developed !ithin the U.'. and globally promotes energy
security as !ell as increased (and lo!er) price certainty. 4or these and other reasons,
natural gas is positioned to be the #ey hydrocarbon transitional fuel for rene!able energy
for the coming decades.
This situation is particularly important for U.'. manufacturers. The coming decades !ill see
the <orth 3merican mar#et possessing an energy price advantage in comparison to many
geographies (for e5ample, %urope and Japan). This potential competitive advantage is
redoubled by significant, ne!, onshore and offshore drilling for other hydrocarbons, and a
commitment by the U.'. government to achieve energy independence K and, therefore,
security K by +,+,. More energy-intensive industries should plan for ramped-up activities
!ithin the U.'., and relocate from %urope and else!here. This may be a significant factor
for other industries, in combination !ith the raft of variables considered during location
and optimiation planning.
'upply chain leaders need to !or# !ith procurement, manufacturing and line of business
(6O1) e5ecutives to re-evaluate overall energy strategies in the conte5t of the long-term
supply security and price stability of natural gas. 3vailability, particular the U.'., is
increasing rapidly (for an e5ample, see %nvironmental 6eader7s "/%, (lean %nergy *artner
to %5pand 6</ (orridor"
B
). %valuate energy-related, capital e5penditure programs from a
T(O and short-term &OI perspective. 6ong-term natural gas or gas-related product supply
contracts could "loc# in" !hat are predicted to be relatively lo!, long-term unit prices,
!hich !ill help avoid the li#ely price volatility in other energy sources (see 4igure -+).
Figure 1(. -atural !as 3mport 5rices 'in 6+S ())8 per %7tu* ;
4ssumptions +nder the 34E<s !as Scenario
<ote$ <atural gas prices are !eighted averages, e5pressed in a gross-calorific value basis, that are
e5clusive of ta5. This figure originally appeared in the I%3 report, "3re 0e %ntering a /olden 3ge of
/asL" !hich is retrievable from
!!!.!orldenergyoutloo#.org>media>!eo!ebsite>+,-->0%O+,--E/olden3geof/as&eport.pdf .
Source& 3E4 '()11*
If your company has set aggressive /9/ reduction targets, pursuing a natural-gas-related
policy could significantly reduce your overall carbon footprint !ith reduced costs, compared
to other hydrocarbons.
4leet operators should e5amine the e5tent to !hich compressed natural gas ((</) and
liAuefied natural gas (6</) are used to fuel vehicles of all sies. 'ignificant cost
advantages already e5ist in this area (see 4igure -.). The conversion of e5isting (lass D
vehicles to natural gas technologies currently costs in order of M:,,,,,. Infrastructure
reAuirements are under development. 4or an e5ample, see %nvironmental 6eader7s "4irst
*hase of 6</ Truc#ing (orridor (omplete."
-,
Figure 1=. "istorical and 5ro>ected ?iesel and -atural !as Transportation
Fuel 5rices Through ()=@, +sing the +.S. ?epartment oA Energy<s "ea,y.
?uty Vehicle '"?V* ReAerence ase
Page 1( of 29 Print Document
<ote$ *rices are in U'M +,-, per diesel gallon eAuivalent. This figure originally appeared in the %I3
report "3nnual %nergy Outloo# +,-+," !hich is retrievable from
!!!.eia.gov>forecasts>archive>aeo-+>inde5.cfm.
Source& E34 'Bune ()1(*
!lobal Energy %ar#et ?ynamics
Forces and Drivers
The global energy landscape is changing, !ith potentially far-reaching conseAuences for
energy mar#ets and trade (see "9ype (ycle for %merging %nergy Technologies, +,-+"). It
is being redra!n by the resurgence in oil and gas production in the U.'. and else!here by
a retreat from nuclear po!er, the adoption of vehicle electrification and other alternative
drivetrain technologies, continued gro!th in the use of !ind and solar technologies, and
the global e5pansion of unconventional gas production (see the Unconventional <atural
/as section).
I%3 modeling scenarios see global energy demand gro!ing by more than one-third over
the period to +,.:. (hina, India and the Middle %ast account for G,F of the increase.
%nergy demand is not predicted to rise in Organisation for %conomic (o-operation and
?evelopment (O%(?) countries, although there is a pronounced shift a!ay from oil, coal
and, in some countries, nuclear to!ard natural gas and rene!ables. ?espite the gro!th in
lo!-carbon sources of energy, fossil fuels remain dominant in the global energy mi5 (see
4igure -H). The I%3 predicts that the demands from transportation in emerging economies
!ill lift oil consumption by -:F bet!een +,-, and +,.:. 0orld oil production is predicted
to reach BG million barrels per day (mb>d) in +,.:, !hich is -. mb>d up on +,-, levels,
!ith a gro!ing share coming from natural gas liAuids and other unconventional sources.
The I%3 also predicts that the price of crude oil !ill rise to U'M-+, per barrel (in year-+,-,
dollars) by +,.:.
Figure 1:. 5redicted Future Energy ?emand +nder the 3E4 !as Scenario
<ote$ This figure originally appeared in the I%3 report, "3re 0e %ntering a /olden 3ge of /asL" !hich
is retrievable from
!!!.!orldenergyoutloo#.org>media>!eo!ebsite>+,-->0%O+,--E/olden3geof/as&eport.pdf .
Mtoe N million tons of oil eAuivalent
Source& 3E4 '()11*
The recent rebound in U.'. oil and gas production, driven by upstream technologies that
unloc# light tight oil and shale gas resources, is spurring economic activity !ith less
e5pensive gas and electricity prices, giving industry a competitive edge (see the
Unconventional <atural /as section). 1y about +,+,, the U.'. is pro@ected to become the
largest global oil producer, and the impact of ne! fuel-efficiency measures in
transportation !ill become more noticeable. The result !ill be a continued fall in U.'. oil
imports to the e5tent that <orth 3merica !ill become a net oil e5porter around +,.,.
Increased interchangeability bet!een hydrocarbons, coupled !ith the identification of
substantial, ne!, technically recoverable oil resources, significantly challenges
preconceived notions of a pea# oil limitation on the hydrocarbon economy, and future
supply-constrained mar#ets !ith dramatic increases in cost and price volatility. The U.'.
/eological 'urvey7s most recent modeling of conventional hydrocarbon sources indicate
technically recoverable global (and U.'.) reserves of :G: (.+ in the U.'.) billion barrels of
crude oil, :,G,G (+B- in the U.'.) trillion cubic feet of natural gas and -GG (-, in the U.'.)
billion barrels of natural gas liAuids (see Table +).
Table (. Recent Estimates oA as Cet +ndisco,ered on,entional !lobal
Oil and !as Resources
Source& +.S. ?epartment oA the 3nterior, +.S. !eological Sur,ey '()1(*
0idespread predictions of the end of oil and a postcarbon (and posthydrocarbon) economy
appear to be overstated, at least for the foreseeable future. The substitutability of vast,
unconventional and conventional natural gas resources for oil or coal, particularly !ithin
the U.'., is currently creating a head !ind for the nuclear and rene!able energy agendas
as the game changer for the hydrocarbon energy landscape over the coming decade (see
the Unconventional <atural /as section).
'upply chain leaders must focus on planning longer-term energy strategies in a !orld of
greater Auantities and interchangeability of hydrocarbons than previously thought. 3
hydrocarbon-rich future still presents ris#s associated !ith carbon regulation.
*rocurement, manufacturing operations and supply chain teams should continue to model
evolutions in regional and global energy mar#ets, figuring these into midterm and longer-
term energy policies and opportunities. &e-evaluate combined heat and po!er ((9*) and
other potential electrification>gas or coal on-site generation programs. 0ithin the U.'., in
particular, the case for heavy investment in the use of coal for future on-site activities is
unli#ely to remain an economically optimied strategy.
(ontinue to monitor and leverage national-level programs and incentives that encourage
cogeneration, improved boiler efficiency and other innovations. 6oo# to co-innovate !ith
manufacturers of gas-fueled vehicles and eAuipment to closely trac# and potentially
accelerate the adoption curve.
3 renaissance in hydrocarbon e5ploration and production !ill have conseAuences for
rene!able energy generation and climate change mitigation policies. 3lthough these !ill
play at national and international scales, it !ill be prudent to continually monitor activities.
0here possible, ensure agility in long-term energy strategies. 4or energy- and emission-
intensive industries, anticipate a second !ave of discussion and e5perimentation in carbon
capture and storage (((') &8?. Its deployment as a feasible and scalable technology,
ho!ever, remains a very considerable distance a!ay.
Resources and onsumption
-atural Resource Scarcity, ?emand 3ncreases and 5rice Volatility
Forces and Drivers
*opulation gro!th, demographic transformation and increasing !ealth are placing
increased demand on finite natural resources, in some cases. Mineral and ra! material
commodity demand increases from the 1&I( and other emerging economies are e5pected
to continue over the coming decades. In terms of volume, some G: billion tons of ra!
materials entered the economic system in +,-,, and this figure is e5pected to gro! to
about D+ billion tons in +,+, (see 4igure -:).
--
It is important to note, ho!ever, that the
ma@ority of 4igure -: relates to road, building and ra! material construction, !hich are
abundant and typically not transported over significant distances.
Figure 1@. Recent "istorical and 5redicted !lobal Resource EDtraction
Rates 'in 7illion Tons*
Region Oil
'7illion 7arrels oA
+ndisco,ered
on,entional Oil*
!as
'Trillion ubic Feet oA
+ndisco,ered
on,entional -atural
!as*
-atural !as $iEuids
'7illion 7arrels oA
+ndisco,ered
-atural !as $iEuids*
3rctic Ocean
Oil GG,+-- +.C,HD: D,-B.
/as -,.D:,,HG .-,CDG
Middle %ast and
<orth 3frica
Oil ---,+,- -HH,CDC H,CGH
/as CBG,:-. +:,B-+
3sia>*acific
Oil HC,:HH -.,,HD. .,-+:
/as G,C,DH: -C,B-C
%urope
Oil B,DGD +-,-C- C-,
/as -+,CH: +,+-B
<orth 3merica
Oil D.,.DG -:+,DHC H,-,.
/as H+,,DB, -:,-GH
'outh 3merica
Oil -+:,B,, +B:,HC: B,--B
/as .D.,,G+ --,DD+
'ub-'aharan
3frica
Oil --:,... -++,-DD H,,DB
/as G+-,.H- +.,DCB
'outh 3sia
Oil :,D:: -:,H-B .:G
/as -H.,G+, .,H:,
Total
(onventional
&esources
@F@,(89 @,F)@,F(F 1FF,FF9
?ata sources$ U.'. ?epartment of the Interior7s report "3ssessment of *otential 3dditions to (onventional Oil and
/as &esources of the 0orld (Outside the United 'tates) from &eserve /ro!th, +,-+," !hich is retrievable from
pubs.usgs.gov>fs>+,-+>.,:+>fs+,-+-.,:+.pdf, and "3n %stimate of Undiscovered (onventional Oil and /as
&esources of the 0orld, +,-+," !hich is retrievable from pubs.usgs.gov>fs>+,-+>.,H+>fs+,-+-.,H+.pdf.
Note: This figure originally appeared in the Ellen MacArthur Foundation report "Towards the Circular
Economy, Vol !," which is retrie"a#le from
wwwellenmacarthurfoundationorg$#usiness$reports$ce%&!%
Source: Ellen MacArthur Foundation (2012)
The #ig issue for #iotic resources is the e'tent to which they are #eing undermined #y
o"ercropping, as well as other forms of poor land(use practice) ur#ani*ation) soil erosion)
and loss of producti"ity, salini*ation and land degradation, in general These factors,
com#ined with water stress +see the ,ater: -carcity, .istri#ution, A"aila#ility and /uality
section0 and the li1ely changes to crop production *ones caused #y climate change +see
the Climate Change and Varia#ility section0, will significantly challenge longer(term food
security and re2uire wide(ranging inno"ations in the agricultural sector +see the Food
-ecurity and Food Awareness section0 3ere, we focus on a#iotic resources
4t is widely reported that glo#al metal and mineral resources are finite) in many cases, are
in scarce a#undance) and will potentially cause future price "olatility and limitations to
economic growth -uch general statements simplify a much more complicated reality of
resource a"aila#ility for a "ariety of manufacturing processes +see Figure !50
Figure 16. Key Major Metals and heir !ses
This figure originally appeared in the 6N En"ironment 7rogramme +6NE70 report, "8ecycling 8ates of
Metals: A -tatus 8eport," which is retrie"a#le from
wwwuneporg$resourcepanel$7u#lications$8ecyclingratesofmetals$ta#id$95&:;$.efaultasp'
Source: !"E# (2011)
$lassi%ication o% Metals
< S&ecialty 'etals (These metals are to typically used in small 2uantities in the industrial
and consumer products +C70 industries Their incorporation relates to specific physical and
chemical properties 6ses include light(emitting diodes +=E.s0, magnets, solar panels,
#atteries, electronic de"ices +including flat(panel displays0, nuclear technologies, optics,
alloys and glass manufacture
< #recious 'etals (These ha"e historically #een used as inde'es of wealth, #ut are
increasingly #eing integrated into technology(sophisticated products Applications include
electrochemistry, automoti"e catalysts, electronics and high(tech products
< "on%errous 'etals (These metals contain no iron, and are used in a "ariety of
production processes and products +for e'ample, #attery technologies, paints and coatings,
construction and transportation, industrial catalysts, and energy transmission0
< Ferrous 'etals (These metals are the most commonly used metal group They are
predominantly iron(#ased and possess magnetic properties Common uses include steels,
stainless steel and super alloys
Although some metal and mineral resources may #ecome limited in supply, and could #e
outstripped #y demand e"en at highly inflated prices, many are present in a#undance and
do not pose significant ris1s +see Figure !:0
Figure 1). Esti'ated *ears o% Su&&ly o% +lo,al -ron .re/ A0aila,le
$o&&er/ #otash and $o1ing $oal/ 2ith Su''ary o% otal Esti'ated
A0aila,le Su&&ly
This figure originally appeared in the >37 >illiton report, "Mineral .eposits and Their ?lo#al -trategic
-upply," which is retrie"a#le from
www#hp#illitoncom$home$in"estors$reports$.ocuments$%&!!$!!!%!@AAB%&Mac1en*ieB
%&?eologicalB%&-ocietyB%&ofB%&=ondonB%&7resentationpdf
Source: 34# 3illiton (2011)
There is an increasing re2uirement for procurement teams, e'ecuti"es and strategists to
#e aware of direct and indirect factors affecting long(term resource a"aila#ility and price
Early signals of reducing resource a"aila#ility, and changing supply or demand dynamics
and price, should #e used to reassess procurement strategies and dri"e inno"ation to
achie"e materials su#stitution
,here possi#le, supply chain leaders should see1 multiple, long(term contracts and
challenge supply chain partners to inno"ate reduced resource demands within products
Additionally, current assessment and future modeling of CT- under "arious supply(
constraint and resource(price scenarios will pro"ide companies with an estimation of the
si*e and scale of potential #usiness impacts of resource supply constraint, as well as the
"alue e'posed to resource ris1 -upply chain leaders should also aggressi"ely pursue
product life cycle analysis assessments and fully integrate resource recycling programs,
potentially including the end(of(life ta1e #ac1 of products -ee1 alliance partnerships with
recycling and waste stream specialists 4n addition to measuring recycling efforts, measure
discard streams to identify whatCs actually #eing lost and where opportunity D and money
D are #eing left on the ta#le
3ere are some specific programs and procedures relating to the long(term management of
a#iotic mineral and metal resources that should #e e'plored #y supply chain leaders:
< 5etailed and granular ris1 assess'ent o% 'ineral 0ulnera,ility (The >ritish
?eological -ur"ey has de"eloped a relati"e ris1 inde' that is determined #y a
num#er of factors, including the a#undance of elements in the crust, the location of
current production and reser"es, and the political sta#ility of those locations +see
the >?- Minerals report ">ritish ?eological -ur"ey: 8is1 =ist %&!%"
!%
0 The list
highlights groups of elements that are at ris1 of supply disruption 8estrictions on
the a"aila#ility of rare earth elements ha"e recently recei"ed considera#le attention,
particularly due to the dominance of supply from China 4t is nota#le that China is
now the leading glo#al producer of %E of the 9% elements or element groups
identified on the list Fther economically important metals with high(le"el ris1
supply include platinum group metals, nio#ium and tungsten
< -'&ro0ed e%%iciency o% the e6traction and re%ine'ent &rocess (
4mpro"ements to processes for metallurgical reco"ery could result in the
reassessment of pre"iously uneconomic reser"es and resources, as well as
treatment on residual mine and processing waste Continued 8G. in manned and
unmanned su#marine "ehicles, in particular, could open up significant marine(#ased
metal and mineral reser"es, such as manganese nodules, and other rare earth and
precious metal repositories
< Materials su,stituta,ility (4nno"ate to allow the su#stitution or reduction of
potentially supply(constrained metals and minerals
< -ncreased recycling rates and reuse o% recycled content (8ecycling rates
ha"e increased considera#ly for some elements, with many now e'ceeding a 9&B
reco"ery rate +see Figure !E0 3owe"er, this is not uniformly the case Actual
recycled content in the metals supply chain still remains somewhat lower
< 5esign %or longer &roduct li%eti'es (E'tending product lifetimes could produce
the o"erall material flow rate in many supply chains 3owe"er, this approach, with
managed austerity, generally meets with limited enthusiasm from consumers or
manufacturers, and typically results in reduced producti"ity -er"ice(#ased models
and component$content updates pro"ide scope for additional #usiness opportunities
Page 1' of 29 Print Document
< Stoc1&iling and hedging on ra7 'aterial co''odity &rices ( Ta1ing
positions on commodity purchases does pro"ide a degree of certainty, #ut can
#ac1fire, resulting in increased ris1s and unintended financial outcomes
Figure 18. 9ecent Esti'ates o% End:o%:;i%e (#ostconsu'er) 9ecycling
9ates (!&&er ;e%t riangles) and +lo,ally A0eraged 9ecycled $ontent
(;o7er 9ight riangles) %or 60 Metals
This figure originally appeared in the 6N En"ironment 7rogramme +6NE70 report, "8ecycling 8ates of
Metals: A -tatus 8eport," which is retrie"a#le from
wwwuneporg$resourcepanel$7u#lications$8ecyclingratesofmetals$ta#id$95&:;$.efaultasp'
Source: !"E# (2011)
9etail rans%or'ation: $onsu'eri<ation/ #ersonali<ation/ -ncreased $o'&le6ity
and the -'&act o% the .nline $hannel
Forces and Drivers
Consumeri*ation, personali*ation and online #usiness model transformational trends are
affecting all industries, since more #uyers e'pect retail(li1e, online #uying e'periences and
as new, disrupti"e #usiness models emerge
8etailers in many segments are pursuing e(commerce and multichannel commerce
initiati"es to reduce the o"erall cost of sales and impro"e customer ser"ice le"els
?artnerCs e(commerce forecast for the 6- and 6H retail mar1ets is %@IB of o"erall
sales #y %&!9, up from 9@B in %&&I, falling significantly #ehind the store channel Fnline
and multichannel shopping pro"ides increased choice, information and targeting
>ut consumers are also using the 4nternet to do things differently -ourcing directly from
suppliers or independent pro"iders, and niche mar1ets e'pansion, are already impacting
traditional retail practices, with consumers searching for a stimulating shopping e'perience
+see Venture>eatCs article "4>M =aunches Augmented 8eality App for ?rocery -tores"
!;
0
4n a future dominated #y multichannel commerce and e(commerce, trust and #rand
strength will #ecome increasingly important Heeping a close relationship with consumers,
howe"er, will #ecome more difficult and re2uire an increased use of nontraditional
ad"ertising channels The personali*ation of tele"ision will ma1e it difficult to reach
consumers "ia mass ad"ertising 4nstead, social media channels targeting consumer
groups are li1ely to dominate the retail(customer relationship
Customers want more information a#out products as well as more choice, leading to
increased product di"ersity Consumers also want con"enient shopping to fit in with their
increasingly #usy li"es This has affected, and will continue to affect, the location and si*e
of stores, the opening hours and the types of product on sale These will #e amplified #y
glo#ali*ation, and other social and economic trends +see the -ocietal Transformation,
?lo#ali*ation, Emerging(Mar1et ?ap and 6r#ani*ation as F"erarching, -trongly Connected
Megatrends section0 For e'ample, in the 6H, the num#er of single occupancy households
is e'pected to increase #y almost %&B to %5 million #y %&%5
!@
There will #e a
corresponding growth in demand for "small #as1et" shopping
,e e'pect a continuing shift from supplying products to ser"ices For e'ample, many
home goods could shift to rental models This could pro"ide ine'pensi"e(to(run, "smart(
ena#led," intelligent appliances +see "Competiti"e =andscape: -mart Appliances,
,orldwide"0
A further maJor change will result from the continued rise of customi*ation The range of
products and "ariations in formats is already enormous 4t is now possi#le for consumers
to #uy products designed personally for them or e"en #y them
>eyond customi*ation of current and new product categories for middle( and upper(income
groups, frugal inno"ation will #e applied to create customi*ed, low(cost products to ser"e
lower income groups in emerging mar1ets E'amples already include the K!&& laptop, a
K;9 media ta#let, the K%,9&& Nano from Tata +"the worldCs cheapest car"0, and plans to
create #randed leisure footwear retailing the e2ui"alent of 6-K! in the 4ndian mar1et +see
the 4ndian E'press article "AdidasC K! -hoe to -port 8ee#o1 >rand"
!9
0
Further de"elopments are li1ely to include an increased role for logistics companies in
pro"iding com#ined online ordering and deli"ery ser"ices to manufacturers) manufacturers
of home goods inno"ating to produce products that can interact with grocery shops, and
can store and manage customer information and in"entory) and the pac1aging industry
introducing smart +interacti"e0 pac1aging
>eyond retail, companies in other industries with different selling models are recogni*ing
that their online sites should #e used to sell products and ser"ices directly to interested
Page 1) of 29 Print Document
#uyers of all types +see "7repare Now for the 4mpact of Ama*on-upply on the >%> E(
Commerce Mar1et"0 As more consumers use retail sites to ma1e purchases, they are
ta1ing online shopping ha#its to wor1 with them As a result, they e'pect retail(li1e, online
customer e'periences when they use the 4nternet to ma1e #usiness procurement
decisions
-ucceeding at customi*ation will re2uire highly fle'i#le manufacturing processes and agile
supply chains, with sophisticated 4nternet(#ased ordering systems 4t may re2uire the
incorporation of satellite micromanufacturing, including ;. printing and open fa#rication
+see "Tool1it: Energy, 8esource, En"ironmental and -ustaina#ility Trends That Could
4mpact Lour -upply Chain"0
=arge retail chains will need to increasingly adapt toward the trend of personali*ation and
locali*ation on a multichannel scale, as well as #ecome logistics e'perts at a local le"el
There will also #e a need to increase the adoption of local #rand names and product
categories to ensure #rand continuity within many of the emerging mar1ets
Fnline and multichannel sales channels are here to stay, and will increase in significance
Manufacturers and retailers must in"est consistently in e(commerce site impro"ements,
according to the relati"e aggressi"eness of the company and its sector 4ndustry(specific
issues, such as the mo"ement of sales to the online channel and how fast that change is
occurring, are influencing organi*ationsC interests in e(commerce Frgani*ations in all
industries ha"e we#site re2uirements that will #e impacted #y not only consumeri*ation,
#ut the relati"e upta1e rate +heat0 in their industries Companies must ensure to include
sites outside their industry for customer e'perience #enchmar1s
4n"estments and inno"ations in store locations should #e increased, with a focus on
facilitating the e'ecution of cross(channel shopping 4n"estments in multichannel feed#ac1
management tools are also critical to o#tain customer insight E(commerce applications
need to accommodate the le"els of scala#ility and resilience that will #e re2uired to
support a dou#ling of transactions coming through the channel through %&!5 =eading
retailers are already in"esting in alternati"e store concepts, including cross(channel
fulfillment +such as order online or in a store without store infrastructure and pic1 up in the
store or "ia home deli"ery0) store remodel +design in the store, upload to the ,e# for
production and recei"e home deli"ery0) new formats, such as automated +"ending0 stores
at airports and other pu#lic areas Additionally, pop(up stores that can ser"e as concept
stores to try out new ideas) as showrooms followed #y online purchase) as clearance
stores) and as a focal points for store pic1up, return, e'change and after(sales ser"ice are
growing more common
.epending on your company and sectorCs appetite for ris1 and aggression, trac1 the
e"ol"ing opportunities of 4nternet(#ased selling 6se ?artnerCs e(commerce industry heat
map to le"el set against your company and your industryCs relati"e maturity +see Figure
!I0
Figure 1=. 4eat Ma& o% E:$o''erce -'&act and 9ate o% $hange
Su,di0ided ,y -ndustry
Source: +artner (May 201>)
.%%shore ?ersus "earshore Manu%acturing
Forces and Drivers
The widespread practice of offshoring manufacturing, principally in Asia, which is dri"en,
for the most part, #y low(cost la#or in emerging mar1ets, is under scrutiny 8ising wage
costs) 2uality issues) intellectual property +470 security) increased logistics costs) and
significant, recent supply interruptions ha"e wea1ened the fundamental #asis of the initial
competiti"e ad"antage offered #y offshore and low(cost locations
!5
The low(wage era in
many commonly used offshore locations is rapidly eroding due to dou#le(digit wage
inflation +see Figure %&0
Figure 20. Actual and Forecast -ncreases in the 3ase #ay o% @unior:;e0el
2or1ers at Fo6conn echnology +rou&As Shen<hen Facility and
#redictions o% Future (Short:er') 2age -ncreases
Note: The increase in late %&!% relates to completion of technical e'ams .ata sources are from
TechCrunchCs "Fo'conn 4ncreases ,ages, 8aises 7ay >y !5(%9B For Chinese ,or1ers"
!:
and M4C
?adgetCs "Fo'conn ,or1erCs Monthly ,ages May 4ncrease to 6-K5I; Ne't Lear"
!E
Source: +artner (May 201>)
5e%initions o% .%%shore and "earshore
"Fffshore" is defined as suppliers or manufacturing plants that are located in countries
remo"ed from the country in which the supply +product, part or su#assem#ly0 will #e
consumed "Nearshore" means the supplier or manufacturer is located in a country close to
where the supply will #e consumed Nearshoring or "reshoring" in"ol"es mo"ing from a
source of supply that is located offshore to a source of supply that is within the country
where the product, component or su#assem#ly will #e consumed +see "Multiple Factors
-pur 8eshore and Nearshore Considerations for Manufacturers and 8etailers"0
All these factors are changing the simple offshoring model of "cost first" into one that
re2uires the consideration of cost, location and capa#ilities, as well as other factors Many
6- manufacturers are considering nearshoring strategies Fthers are opting for
decentrali*ed manufacturing and supply chain strategies with multiple manufacturing
localities within mar1et to minimi*e logistics costs, while retaining central control of other
functions
8esearch #y ?artner, howe"er, re"eals that manufacturers are currently not shifting
sourcing from Asia or other locations, nor do they intend to do so in the short term +%&!90
4nstead, a lac1 of demonstra#le cost sa"ings, sun1en costs in offshore in"estments and
relationships, and increasing demand from Asian mar1ets are partially transforming
pre"iously offshore manufacturing into nearshore manufacturing +see Figure %!) see ",hy
Manufacturers and 8etailers ,ill Continue to -ource From Asia" and "Asia 7lays a Hey 8ole
in 6- and European -upply Chains Through %&!9"0
Figure 21. o& hree 9easons %or Sourcing Fro' Asia .0er the #eriod
2012 to 201BC Manu%acturers to "ot Shi%t Sourcing A7ay Fro' Asia
Source: Gartner (May 2013)
In percentage terms, demand supplied by Asian manufacturing sources will remain flat or
increase slightly through 2015. Companies will increasingly shift sources of supply from
Asia to onshore or nearshore locations, but the degree to which this occurs will not reduce
the overall percentage of supply flowing from Asia to the .!. or "urope. !ignificant shifts
in economic environments or policy changes, such as trade agreements or changes in
tariffs, can, of course, impact the pro#ected trend and the changing mar$et to mar$et
dynamics.
As supply chain professionals become more sophisticated in their abilities to %uantify
intangible costs associated with offshore sourcing, the gap between direct costs and other
reasons for sourcing from Asia will li$ely shrin$.
!trategic planners need to shift manufacturing location optimi&ation parameters from ones
that are focused solely on cost to a model that more clearly considers the combination of
cost, location and other capabilities. 'ptimi&ation of this multiparameter model won(t be
time stationary moving forward. !upply chain leaders must increasingly improve the
fidelity of C)! models, and continuously revisit location*based assumptions to validate the
balance of offshore and nearshore production.
+earshoring can irrefutably reduce logistics costs, timing and networ$ comple,ity. -iven
dramatic growth within the Asian mar$ets, increasing nearshore manufacturing capacity is,
in many cases, unli$ely to impact e,isting offshore capabilities. !uch a strategy will result
in a trend of increased decentrali&ation of some supply chain functions.
Companies should mobili&e cross*functional teams to analy&e and ma$e decisions about
offshoring, reshoring or nearshoring. !uch an analysis re%uires e,pertise from sales and
mar$eting, supply chain .including procurement, manufacturing and logistics/, and finance
organi&ations. Corporate legal0contracts, %uality0sustainability and 12 should also be
involved to ensure regulatory compliance, minimi&e ris$ and ma,imi&e opportunities.
Include the possibility of socioeconomic disruption and rapid wage inflation as part of any
associated ris$ assessment.
!egment the supply chain, and calculate the C)! as part of the sourcing strategy and
networ$ design changes. "ven without granular cost data, it is beneficial to understand the
customer, channel and costs that are related to each product group and demand profile.
3onte Carlo and 4isrupter analyses of multiple, potential manufacturing and networ$
locations are preferable to simple one*to*one comparisons. 5hen analy&ing nearshore and
reshore opportunities, in addition to freight cost savings, include the impact of duties or
tariffs, nonrecurring relocation costs, ta, rates and other incentives.
Food Security and Food Awareness
Forces and Drivers
)he coming decades will e,perience parallel challenges of delivering food security for the
global populations, particularly in the least developed countries, while, at the same time,
responding to the increasing re%uirements of diversity, transparency, convenience, and
health from the developed* and emerging*nation, middle*class populations.
)he 5orld 6ood !ummit of 1778 defined food security as e,isting 9when all people at all
times have access to sufficient, safe, nutritious food to maintain a healthy and active life.9
:y 20;0, population growth, water scarcity, climate change and other factors are predicted
by ',fam International to increase global food prices by <0= to 70= or higher .see 6igure
22> see the !ocietal )ransformation, -lobali&ation, "merging*3ar$et -ap and rbani&ation
as 'verarching, !trongly Connected 3egatrends> +atural 2esource !carcity, 4emand
Increases and ?rice @olatility> and Climate Change and @ariability sections/. )his is related,
in part, to the unintended conse%uences of national, biofuel*gasoline blend mandates and
their impact on corn prices, particularly in the .!. Additionally, the growing emerging*
mar$et middle classes are consuming more e,pensive and protein*rich products, such as
meat and dairy .see 6igure 2;/.
Figure 22. Predicted Increases in Word Mar!et Food Prices "eati#e to
2010 (Percentage)
+oteA )his figure originally appeared in the ',fam International report, 9-rowing a :etter 6utureA
6ood Bustice in a 2esource Constrained 5orld,9 which is retrievable from
www.o,fam.org0sites0www.o,fam.org0files0growing*a*better*future*010811*en.pdf .
Source: $%&a' Internationa ((une 2011)
Figure 23. Median )ota Meat *onsu'+tion &or Seected Inco'e
*ategories (,iocaories -,ca. +er *a+ita +er /ay)
+oteA )his figure originally appeared in the 2oyal !ociety report, 9?eople and the ?lanet,9 which is
retrievable from royalsociety.org0uploaded6iles02oyalC!ocietyCContent0policy0pro#ects0people*
planet02012*0D*25*?eople?lanet.pdf . -rouping by income was made using the 5orld :an$(s grouping
based on gross national income .-+I/ per capita. .!ee the 5orld :an$(s 91ow 5e Classify Countries,9
which can be retrieved from data.worldban$.org0about0country*classifications./ 6or the list of
countries in each group, see 9Country and Eending -roups,9 retrievable from
data.worldban$.org0about0country*classifications0country*and*lending*groups .
Source: "oya Society (A+ri 2012)
Consolidation in the agricultural sector continues to increase in parallel with greater levels
of engagement and involvement with chemical and life science industries. )his will be
accompanied by increasing 2F4, particularly in the area of genomics. 6or e,ample, when
activated, the recently discovered phosphorus starvation tolerance .?!)'E1/ rice gene has
the ability to increase production yields by up to 20=, substantially increasing food
security and the total land area available for rice cultivation.
17
6ood awareness essentially relates to the 9democrati&ation9 of food consumption choices
across the growing global middle class. At the intersection of nutritional and physical well*
being, and sustainability, consumers will continue to demand greater transparency in food
sourcing and processing .see the -reen Consumerism and !ustainable Eifestyles section/.
)hey will do this by using social and other new media technologies. Information will be
aggregated and distributed beyond traditional labels, with these new transparencies
directed at the government and private sector.
6ood choices are not #ust about finding the best*tasting foods. Consumers are using food
to improve their physical health, and e,press their personal and social values. )hey are
considering their food(s labor, soil and resource inputs to the authenticity and legitimacy of
retailers as criteria for food selection. In +orth America, "urope, Australasia and some
parts of Asia, greater abundance and availability have given rise to obesity and diabetes.
4iseases of plenty are replacing diseases of hunger.
As an understanding of food and nutrition sciences increases, the lin$ between food and
health will become even more pronounced. Consumers will continue to move toward
functional foods, such as meal replacement bars. !cientific developments will also drive
new choice opportunities. ",pect to see greater convergence between pharmaceuticals and
food .
)o support the growing global population, the agricultural sector will continue to see$
biotechnology innovation from the chemical and agribusiness industries to deliver higher
productivity through improvements in crop varieties, seed coatings, pesticides, and
herbicides and genetic modification. Improvements will also be sought in land and water
management practices, food storage and preservation, and alternative farming models.
Innovation is the $ey to long*term global food security.
!upply chain simplicity, and transparency and traceability, are the $eys to long*term raw
materials and product %uality and safety, alongside food awareness and ris$ avoidance
.see the -uardian(s 93c4onald(s :urgers (6ree of 1orsemeat( 4ue to Close )ies 5ith
6armers, 6irm !ays9
20
/.
"mbedding value in products will continue to significantly increase alongside mar$et
e,pectations from an increasing number of mar$et segments. Connecting food inputs to
foods on the shelf continues to increase even in mature and highly regulated mar$ets .see
the -uardian(s 96ro&en :eefburger !ales 4own D;= !ince !tart of 1orsemeat !candal9
21
/.
'ver the long run, consumers will be loo$ing for more novel strategies that involve
pac$aging and disposal to meet their goals. It will become critical for food manufacturers
to develop products that are designed not #ust 9farm to for$,9 but from farm all the way to
disposal in ways that enable consumers to proactively act on their values. Ei$ewise, there
are significant business opportunities related to the efficient shipping of food over long
distances and preserving0e,tending product shelf life.
Companies should ma$e product information engaging. )o better understand how their
choices relate to their social and environmental values, consumers will be loo$ing for food
information that is easy to find and trac$. Clearly, such approaches are more critical for
early*adopting consumer segments, but food producers can also gain benefits by
encouraging greater levels of food education in the mar$etplace.
6or food manufacturers, ma$ing information easy to access and integrate into a variety of
electronic locations will be critical. 6or food retailers, viewing trac$ing and gaming as ways
of engaging with shoppers will help build loyalty and enable customers to find products
they connect with emotionally.
0on'ateria "esource Focus
Forces and Drivers
)he resources re%uired for supply chain e,ecution in the coming decades will differ from
the ones that have previously dominated. Anticipate resource scarcity to e,tend to a wide
cross*section of nonmaterial and organi&ational resources, such as talent and $nowledge
management .see 6igure 2D/. 4eveloping an organi&ational understanding of $ey,
nonmaterial resources provides situational awareness, which leads to ris$ reduction, as
well as $nowledge0information enhancement and retention.
Figure 21. Gartner2s 3ierarc4y o& Su++y *4ain "esources
Source: Gartner (May 2013)
3ar$et*leading performance will increasingly be lin$ed to the management of human,
$nowledge and institutional capital. In an increasingly connected world, the means and
framewor$s of information e,change, as well as the connection agents and the nature of
their connections, will continue to increase in importance, forcing enterprises to build
coherent and long*term, nonmaterial resource management strategies .see 9?redicts
201;A -lobal Corporations 2ethin$ !upply Chain 2esource 3anagement9/.
!upply chain leaders need to ensure that there is sufficient consideration or nonmaterial
resources, in addition to raw material, energy and commodity resources.
As global recovery accelerates into the middle of this decade, large enterprises must fully
embrace the technology*immersed environment that will drive business at a %uic$er pace.
Eeading manufacturers and retailers are already ta$ing advantage of these new classes of
nonmaterial human* and information*rich dynamic resources to create innovative products
and services.
)he $ey areas of focus in relation to nonmaterial resource management include the
following .see 9?redicts 201;A -lobal Corporations 2ethin$ !upply Chain 2esource
3anagement9/A
G )he nonmaterial sales channel
G Hnowledge capital and the power of the future, information*enabled, commercial
relationship
G 1uman capital and talent management as a resource priority, particularly in
emerging mar$ets
G Hnowledge management and security
Water: Scarcity5 /istri6ution5 A#aia6iity and 7uaity
Forces and Drivers
Page 2( of 29 Print Document
)he availability and %uality of water for domestic, industrial and agricultural uses is, in
many regions, insufficient to support demand from renewable sources, such as rain and
recharge. )his trend is rapidly increasing, much li$e the tensions between residential,
commercial, agricultural and industrial usage. 5ater consumption in less developed
countries is dominated by agriculture, while industrial activities dominate consumption in
developed economies .see 6igure 25/.
Figure 28. (a) 9irtua Water :aance "eated to )rade in Agricutura and
Industria Products; (6) <sti'ates o& $#era Go6a Water Foot+rint o&
Production5 1==> to 2008; and (c) *ontri6utions o& Product *ategories to
<sti'ated Go6a 9irtua Water Fows
+oteA In .a/, net e,porters are shown in green, with net importers in red. Arrows are portional and
show the largest gross, international, virtual water flows .less than 15 giga cubic meters I-m;J per
year/. )his figure originally appeared in the +"!C'*I1" Institute for 5ater "ducation report
9+ational 5ater 6ootprint AccountsA )he -reen, :lue and -rey 5ater 6ootprint of ?roduction and
Consumption,9 retrievable from www.waterfootprint.org02eports02eport50*+ational5ater6ootprints*
@ol1.pdf .
Source ?0<S*$@I3< Institute &or Water <ducation (May 2011)
)he financial and other impacts of floods, droughts, and water %uantity and %uality are
increasingly impacting the world, as industries cope with the impacts of supply chain
disruptions relating to water*related events. )hese include, for e,ample, the recent floods
in )hailand, the most severe .!. drought in 50 years and rising demand for water in
developing economies. !wiss 2e estimates that flooding impacts 500 million people every
year and now rivals annual earth%ua$e losses at K15 billion.
22
)he costs of the flooding
associated with the 2012 .!. eastern seaboard(s 1urricane !andy are still being tallied at
the time of writing, but are widely predicted to be about K50 billion.
Hey ris$ factors associated with direct operations and supply chain activities include water
stress or scarcity, flooding and associated supply chain interruptions, rising discharge
compliance costs, regulatory uncertainty, declining water %uality, tightening withdrawal
limits, high water prices, reputational damage, and restricted or otherwise limited
operational water permits.
2;
It is increasingly common to discuss the water re%uirements of production and
consumption in terms of so*called 9virtual water footprints.9 )he global annual average
water footprint in the period from 1778 to 2005 was 7,0L< -m
;
per year .<D= rainwater
IgreenJ, 11= surface and groundwater IblueJ, 15= polluted water IgrayJ/. Agricultural
production consumes 72=. About one*fifth of the global water footprint relates to
production for e,port. )he total volume of international virtual water flows related to trade
in agricultural and industrial products was 2,;20 -m
;
per year .8L= rainwater, 1;=
surface and groundwater, 17= polluted/. )he water footprint of the global average
consumer was 1,;L5 cubic meters per year.
2;
Hey factors that are affecting freshwater usage globally include population growth and
increasing affluence, as well as the e,pansion of business activities, climate change and
rapid rates of urbani&ation .see the !ocietal )ransformation, -lobali&ation, "merging*
3ar$et -ap and rbani&ation as 'verarching, !trongly Connected 3egatrends> Climate
Change and @ariability> and )he 'ngoing rbani&ation and "mergence of 3egacities
sections/. )he concept of water stress applies to situations where there is not enough
water for all uses, whether agricultural, industrial or domestic. 5hen annual per capita
renewable freshwater availability is less than 1,<00 cubic meters, countries begin to
e,perience periodic or regular water stress. :elow 1,000 cubic meters, water scarcity
begins to hamper economic development, and human health and well*being.
2D
Compliance re%uirements on water e,traction, use and waste0treatment disclosures will
continue to increase alongside other environmental parameters. ?ilot water*footprinting
e,ercises within your product portfolio and operational sites. nderstand the water usage
re%uirements of your $ey suppliers and raw materials. 6actor in water availability as part
of your long*term supply chain networ$ strategy, and anticipate the potential future
impacts of water*related regulations and charges.
Innovate to reduce water usage in $ey manufacturing stages, and consider cost*effective
strategies to improve rates of water consumption and waste generation. Integrate gray
and brown water usage strategies, and evaluate the potential for water treatment and
recycling in water*stressed areas and0or for water*intensive processes.
Areas where opportunities might be available to improve operational and supply chain,
water*related performance include process re*engineering> desalini&ation and process
water purification> product and pac$aging redesign .in particular, the light*weighting and
downsi&ing of pac$aging and containers/> collaboration with suppliers to reali&e cost and
volume savings> proprietary information sharing to improve the greater good and enhance
shared value> customer engagement to promote more conservative consumption
behaviors> and increasing brand value reali&ation through collective action.
)he ma#ority of the challenges and opportunities lies in the agricultural sector. )he
spectrum of opportunities ranges from the biotechnology, genetic and agrichemical
innovations mentioned above> to reducing food wastage through improved refrigeration
and smart irrigation> to offering advanced, integrated and increasingly mobile information*
enabled solutions to farmers.
Sustaina6iity and t4e <n#iron'ent
*i'ate *4ange and 9aria6iity
Forces and Drivers
"vidence for changes in global climate conditions and climatic variability is now
overwhelming. )he fingerprint of its impacts may already be superimposed on
contemporary e,treme weather events. Ei$ewise, its impact on global supply chains and
business continuity are already manifesting wide*ranging conse%uences. )he challenge
now is to better understand at what rate and to what e,tent climate changes will occur,
and how they will directly and indirectly affect populations, well*being, economic conditions
and supply chain networ$s.
)he changes most li$ely to affect global supply chains are those of e,treme events, rather
than average conditions, although changes in seasonal or annual rainfall and temperature
are already resulting in changes to crop production &ones .see 6igure 28/. )he previously
predicted and globally averaged 2 degrees Celsius temperature increase, resulting from
forecast -1- emissions, has recently been updated to D degrees Celsius or more .see
9?repare +ow to ?rotect Mour !upply Chain 6rom the "ffects of Carbon and Climate
Change9/.
Figure 2>. Increasing Incidence o& Fooding 6y MaAor "egion5 1=80 to
2000
)he data for this figure was culled from a series of presentations published by 3illennium "cosystem
Assessment, which are retrievable from www.unep.org0maweb0en0!lide?resentations.asp,.
Source: Mienniu' <cosyste' Assess'ent (2008)
-lobally averaged sea level is increasing at a rate of ; millimeters .mm/ per year. 'n
multidecade timescales, this will have direct impacts to logistics .in particular, container
ports and the pro,imity of large swathes of global population to low*lying coastal areas/.
!easonal deicing of the Arctic has already opened up new transportation opportunities via
a 21st*century +orthwest passage, cutting D,000 nautical miles off the distance from
coastal !outheast Asia to +orthwestern "urope.
4isruptions will be wide*rangingA
G An increased probability of business disruption
G Challenges to, and geographical shifts in, materials sourcing, particularly in
agriculturally based supply chains
G Increased impacts from e,treme climatic events, particularly in coastal and river
floodplain environments, as well as in areas of rapid urbani&ation
Eong and centrali&ed supply chains will face a greater ris$ of business discontinuity, and
distribution and supply interruptions. )he li$elihood of at least some of those interruptions
and disruptions is predictable down to geographical areas and climatic &ones. Ei$ewise,
climate change will impact the buying behaviors, patterns and locations of consumers
globally, and, in particular, those from developing nations.
3anufacturers and supply chain leaders need to ta$e a long*term view to understand
potential abrupt and gradual impacts, as well as multiple, potential, future climate
scenarios, to ensure that strategic planning cycles incorporate the consideration of what
will undoubtedly be an increasingly critical business issue.
Supply chain leaders must develop integrated strategies to manage potential impacts of
climate change on investments, supply chain networks (including logistics) and the
associated business risks. There is a need to integrate climate change within a basket of
new economic factors, which offers challenges and opportunities to manufacturers (see
"Why anufacturers !eed to "dapt to #limate #hange in the $%st #entury").
&ere are four connected, strategic themes relevant to supply chain leaders that are
adapting to future climate change (see 'igure $())
* Carbon and change management strategies These include carbon tracking
and reporting, and, increasingly, energy management and resource efficiency.
+eading organi,ations will continue to strengthen their focus on water and raw
materials yield-waste conversion rates. These can be indirectly related to climate
change and energy consumption, as well as energy resource and climate change
impact throughout, particularly upstream in the supply chain (see the Supplier
.eporting, .esponsibility, Sustainable and /thical 0rocurement section).
* Climate change risk management strategies #ompanies need to undertake
disrupter analysis to evaluate the potential supply chain and business continuity
conse1uences of future climate scenarios. There is also a need to develop more
sophisticated approaches to energy and resource hedging. 'or e2ample, highly
centrali,ed supply chains and related infrastructure are significantly more vulnerable
to one3off, climatic or other events than decentrali,ed ones (see "arket Trends)
&ow 4apanese /lectronics anufacturers "re "ddressing the /merging 0ost1uake
5ssues" and "Why Sourcing anagers !eed to #onduct #ountry "nalysis").
* Strategic climate change and efficiency investments Significant business
opportunities e2ist within the climate change landscape. The low3carbon energy
market, for e2ample, was recently estimated by 6eutsche 7ank to likely reach a
value of at least 8$.$ trillion by $9$9. any potential investments and strategies
relating to climate change are essentially "no regrets strategies," which make good
business sense, even in the unlikely absence of a limited3, low3 or no3climate3
change global outcome.
* Change governance and alignment with financial and business objectives
The convergence of the three other climate3change3related business strategies
above aligns climate change and overall business strategies, financial outcomes and
business adaptations. /2ploiting modeled scenarios from climate models can allow
manufacturers to contemplate opportunities and challenges. There are increasingly
high3precision forecasts of water availability, variability and 1uality that should be
integrated into long3term supply chain planning.
Figure 27. A Four!hase Framework for "rgani#ational and Su$$ly Chain
Climate Change Strategies
Source% &artner '(ay 2)*+,
"lso, the potential e2tent of climate change and its impact on manufacturing can provide a
platform for focused innovation, which could deliver intermediate innovations to e2isting or
future products. 5t can also provide an early3mover advantage where leaders can
accumulate 50 and patent rights. This will become intrinsically valuable, and, potentially,
have applications and value to other business areas or sectors.
&reen Consumerism and Sustainable -ifestyles
Forces and Drivers
#onsumer awareness relating to sustainability continues to increase. #arbon and water
footprinting, labor inputs, food origins, and other metrics are increasingly being connected
to consumer value. &owever, they still remain difficult for many consumers to interpret
meaningfully and are sometimes contradictory. 5n advanced economies, consumers prefer
food and other product choices in which the information is complete, transparent, easy to
understand and easy to connect to their value.
The growing connection between physical well3being and nutrition provides additional
stimulus to this trend. 5t has the potential to increasingly shift the dialogue among
consumers toward gamification and social media to disclose and encourage consumption
patterns that are the most sustainable and ethical, and-or are healthier positions.
There is not yet clear evidence of a tipping point being reached for any but the most
leading3edge (lifestyles of health and sustainability :+;&"S<-ethical) market segments,
where consumers are willing to pay significant price premiums. &owever, green product
credentials are an increasingly important differentiator in many industries. #urrent leading
sectors include high3tech, retail, footwear and apparel, and consumer goods. 5n the =.S.,
the green marketplace is predicted to increase from 8>$9 billion in $9%9 to 8?>@ billion in
$9%@.
$@
The retail sector is widely predicted to continue to consolidate. 5t is possible that, at the
same time, an e2tension of the "locovore" movement will result in the development of
hyperlocal products and local3product3dominated sales channels. 7alancing this dichotomy
will force large retailers to simultaneously carry globally recogni,able goods, as well as
local nuances, brands and products. ;nline and mobile app filtering systems may emerge
that allow the setting of geographical limits to purchasing. These applications may also
allow tracking local food and other products. 5n addition to locali,ation factors,
manufacturers and retailers will continue to build out branded portfolios of green products
from widely varying segments (see /nvironmental +eaderAs "Walgreens +aunches Breen
0roducts 7rand"
$C
).
'ood and beverage, and personal and household goods sectors, in particular, must
continue to invest and innovate within green product portfolios, and, at the same time,
reduce alternative, nongreen products. This trend is broadening to other sectors, due to a
growing number of government and state mandates. 5ndependent of market perceptions,
case e2ample data continues to demonstrate cost3efficiency gains and risk reduction
associated with the pursuit of green-sustainable product development.
7eyond simple green declarations, manufacturers and food producers will need to develop
novel strategies to embed additional value in their products. 'or e2ample, this could
include sourcing, packaging and disposal strategies. 5n addition to adding value,
manufacturers must increasingly add information to empower informed consumer choice.
With the e2pansion of organic food e2pectations and credentialsD and negative publicity
relating to upstream supplier activities, and food, pharmaceutical, vehicle, toy, and
numerous other product recalls, consumers will increasingly look for product "authenticity"
and safety assurance (see ""ppleAs Supplier .eport &ighlights Trend and /2panding !eed
for Supply #hain Transparency"). 5t is already a mainstream retail issue, with
supermarkets competing to meet these desires, while remaining focused on the more
traditional markers of price, brand and 1uality at the same time.
ore sustainable retail will depend on a number of actions at the industry scale)
* -ogistics coordination and sharing haulage #ompanies should seek out co3
innovation and collaboration in noncompetitive activities, such as increased
efficiency through backhaulage, which would decrease the number of free,er depots
and other opportunities to focus competition on the shelf and not elsewhere.
* Consumer communication /nsure that industry groups agree on single and
unified approaches to product information and labeling.
* (onitoring and re$orting "gree to metrics with common standards that are
publicly reported.
* Su$$ly chain im$act analysis =ndertake life cycle analysis to identify the key
issues (see the Supplier .eporting, .esponsibility, Sustainable and /thical
0rocurement section), and build cooperation on managing shared challenges, such
as climate change impacts in the food supply chain.
* Simultaneous globali#ation and locali#ation "s retail market consolidation
continues, look for ways to engage local supply chains. This will increase comple2ity,
but also satisfaction.
* .aste and $ackaging "gree to universal packaging standards and unified
messages to consumers. #reate economies of scale in dealing with store3level food,
packaging or other waste.
* /Choice editing/ the industry =se segmentation strategies to agree on
products that all retailers should stop selling.
Su$$lier 0e$orting1 0es$onsibility1 Sustainable and 2thical !rocurement
Forces and Drivers
anufacturers are re1uesting greater levels of information from suppliers in response to
stronger stakeholder e2pectationsD efforts to improve transparency, as well as increase
ecoefficiency and product data 1ualityD and social, economic and environmental
sustainable outcomes. These e2pectations are not restricted merely to end3customer
pro2imal industries. Within 7$# and 7$7 transactions, sustainable procurement can be a
type of proactive procurement practiced through the "positive buying" of sustainability3
related or ethically favorable products, or a "moral boycott," or negative sourcing and
procurement, of unfavorable goods, products, or materials.
Substantial (that is, up to a factor of @9), upstream, environmental and other sustainable,
multiplier effects are found in many industries, compared to the sustainable performance
of ;/s (see 'igure $?D "#ounting the #osts and 7enefits of Supply #hain Sustainability
and "ssociated /nvironmental 5mpacts").
$(
Figure 23. Financial (odeling of 2nvironmental 4m$acts in the 5$stream
and 4nstream Su$$ly Chain of -ockheed (artin
Source% &artner '(ay 2)*+,
=ndertaking supply chain product sustainability analyses is a big data and analytics3rich
challenge. To streamline data collection and enhance information 1uality at the product,
Page 2' of 29 Print Document
product portfolio or supply chain scale, a number of approaches have been adopted,
including product life cycle and environmental-economic, input3output analyses, as well as
Web3based supplier information e2changes (see "/nablonAs Wi,ness "dds ore 0roof That
Sustainability 5s Boing Social"). "lthough they are currently on the legislative backburner,
future, international, climate change agreements may additionally result in the imposition
of tariffs and ta2es relating to the embodied carbon in products and services (see "#arbon
/missions 'rom Blobal Supply #hains) #arbon Trading Eersus #arbon and Trade").
The increasing e2pectation of consumers, investors and other stakeholders to disclose the
environmental and sustainable credentials of corporations and their products or services
makes high3fidelity, upstream and downstream product characteristic analysis a priority
and necessary competency for the future supply chain.
0repare for increased e2pectations relating to the disclosure of sustainable and
environmental attributes of products, as well as the materials from which they are
manufactured. This will re1uire greater levels of interaction, information e2change,
education and collaboration with suppliers. +eaders are already gaining a competitive
advantage and generating tangible value by proactively engaging with suppliers. &owever,
the development of sustainable and ethical procurement codes of conduct will soon
become a re1uirement and not a choice.
=se product life cycle and economic input3output (/5;) data to develop richer interactions
with supply chain partners to e2plore opportunities for co3innovation, efficiency gains and
improved sustainable-ethical product outcomes, shared savings, and continuous
improvement. odel material flow, and environmental and sustainability impacts,
throughout your supply chain, since "sustainability impact multipliers" will be resident in
the upstream and downstream supply chain. Such an approach delivers full, supply chain
transparency, and allows the identification of critical areas for improvement.
Sustainable certifications and labeling provide some opportunities, but their proliferation
and lack of international or national standardi,ation are currently limiting their
utility.
$?
/2pect and track transformation in this area.
6evelop a data-information management infrastructure with the appropriate technology
tools and social media-crowdsourcing opportunities to allow you to focus on analysis and
insight, rather than data gathering. Some of these platforms will be developed at the
industry3sector scale.
0ecommended 0eading
Some documents may not be available as part of your current Gartner subscription.
"&ype #ycle for /merging /nergy Technologies, $9%$"
"#ompetitive +andscape) Smart "ppliances, Worldwide"
"0redicts $9%F) Blobal #orporations .ethink Supply #hain .esource anagement"
"Technology Trends That atter"
"Societal and /conomic Trends That atter"
"7usiness and anagement Trends That atter"
"ultiple 'actors Spur .eshore and !earshore #onsiderations for anufacturers and
.etailers"
"Why anufacturers !eed to "dapt to #limate #hange in the $%st #entury"
"0repare !ow to 0rotect Gour Supply #hain 'rom the /ffects of #arbon and #limate
#hange"
"#ounting the #osts and 7enefits of Supply #hain Sustainability /nvironmental 5mpacts"
"Why Sourcing anagers !eed to #onduct #ountry "nalysis"
"ultichannel .etailing) The Store .emains the &ub of .etailing"
"0repare !ow for the 5mpact of "ma,onSupply on the 7$7 /3#ommerce arket"
"The !e2us of 'orces) Social, obile, #loud and 5nformation"
"7usiness Bets Social"
2vidence
%
Standard #hartered. "The Super3#ycle .eport." .etrieved from
research.standardchartered.com-researchdocuments-0ages-.esearch"rticle.asp2H
I.J(F?K@ .
$
cLinsey. "Winning the 8F9 Trillion 6ecathlon." .etrieved from
www.mckinsey.com-features-F9MtrillionMdecathlon.
F
World Trade ;rgani,ation. (!ovember $99C). "5nternational Trade Statistics $99C."
.etrieved from www.wto.org-english-resMe-statisMe-its$99CMe-its9CMtocMe.htm.
>
cLinsey. (arch $9%%). "=rban World) apping the /conomic 0ower of #ities." .etrieved
from www.mckinsey.com-insights-urbani,ation-urbanMworld.
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/nvironmental +eader. ($@ ay $9%$). "0IB Shifts $99 'orklifts to &ydrogen 'uel #ell
0ower." .etrieved from www.environmentalleader.com-$9%$-9@-$@-pg3shifts3$993forklifts3
to3hydrogen3fuel3cell3power .
C
/nvironmental +eader. (@ 4uly $9%$). "'ed/2 /2press to 0urchase %K 7oeing (C(s,
5mprove 'uel /fficiency F9N." .etrieved from
www.environmentalleader.com-$9%$-9(-9@-fede23e2press3to3purchase3%K3boeing3(C(s3
improve3fuel3efficiency3F9 .
(
"ccording to the =.S. Beological Survey, unconventional hydrocarbon resource
assessments include heavy oil, tar sands, shale gas, shale oil, tight gas and coalbed gas.
Shale gas and tight gas are the principle sources of =.S. unconventional natural gases.
?
5nternational /nergy "gency. (!ovember $9%$). "Bolden .ules for a Bolden "ge of Bas."
.etrieved from
www.worldenergyoutlook.org-media-weowebsite-$9%$-goldenrules-weo$9%$Mgoldenrulesreport.pdf .
Page 2) of 29 Print Document
K
/nvironmental +eader. (%> !ovember $9%$). "B/, #lean /nergy 0artner to /2pand +!B
#orridor." .etrieved from www.environmentalleader.com-$9%$-%%-%>-ge3clean3energy3
partner3to3e2pand3lng3corridor .
%9
/nvironmental +eader. (( 6ecember $9%$). "'irst 0hase of +!B Trucking #orridor
#omplete." .etrieved from www.environmentalleader.com-$9%$-%$-9(-first3phase3of3lng3
trucking3corridor3complete .
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5t is important to distinguish between types of natural resources (see 'igure $C). 7iotic
resources are crucial for some energy, such as biomass, and all food production (soil, water
and biodiversity, for instance). "biotic resources are metal, mineral and rock raw materials.
"ccording to the =nited !ations 6evelopment 0rogramAs illennium /cosystem "ssessment
(see www.unep.org-maweb-en-"bout.asp2OK), using "biocapacity" measures, it has been
argued that the earthAs biotic resource capacity was e2ceeded in the %K?9s and that human
activities were using about %.@ times the area of a "sustainable" earth by $9%9. 6irect
e2traction of biomass in the form of fibers, timbers and other products constitute around
$9N of overall resource e2traction.
%$
7BS inerals and !atural /nvironment .esearch #ouncil. ($9%$). "7ritish Beological
Survey) .isk +ist $9%$." .etrieved from www.bgs.ac.uk-mineralsuk-statistics-risk+ist.html.
%F
Takahashi, 6. (% 4uly $9%$). "57 +aunches "ugmented .eality "pp for Brocery Stores."
Eenture7eat. .etrieved from venturebeat.com-$9%$-9(-9%-ibm3launches3augmented3reality
3shopping3app .
%>
'orum for the 'uture. (September $99(). ".etail 'utures) Scenarios for the 'uture of =L
.etail and Sustainable 6evelopment." .etrieved from
www.forumforthefuture.org-sites-default-files-proPect-downloads-retailfutures$9$$3
report.pdf .
%@
5ndian /2press. ($F !ovember $9%%). ""didasA 8% Shoe to Sport .eebok 7rand."
.etrieved from www.indiane2press.com-news-adidasQ%3shoe3to3sport3reebok3
brand-?(K@CC-9 .
%C
;ther factors include changes to direct, tangible, supply chain costs, including logistics
(particularly for heavy items such as appliances and industrial goods)D inventory carrying
and supportD inventory being tied up for multiple weeks in transit via ocean transportationD
recognition and accounting for hidden or intangible costs relating to product 1uality and
increased postsales service costsD risks from natural, geopolitical or labor disruptionsD and
currency fluctuations Q in particular, the increasing value of the yuan relative to the =.S.
dollar.
%(
7urns, . (%( 'ebruary $9%$). "'o2conn 5ncreases Wages, .aises 0ay 7y %C3$@N for
#hinese Workers." Tech#runch. .etrieved from techcrunch.com-$9%$-9$-%(-fo2conn3
increases3wages3raises3pay3by3%C3$@3for3chinese3workers .
%?
#hang, S. ($@ ay $9%$). "'o2conn WorkerAs onthly Wages ay 5ncrease to =S8CKF
!e2t Gear." .5.#. Badget. .etrieved from www.micgadget.com-$CF>@-fo2conn3workers3
monthly3wages3may3increase3to3usCKF3ne2t3year .
%K
"g'a2. ($> "ugust $9%$). "5ncreased 0hosphorus =ptake in .ice #an 5mprove Gield."
.etrieved from agfa2.com-$9%$-9?-$>-underground3solution3found3to3starving3rice3plants .
$9
7utler, S. ($? 'ebruary $9%F). "c6onaldAs 7urgers A'ree of &orsemeatA 6ue to #lose Ties
With 'armers, 'irm Says." The Buardian. .etrievable from
www.guardian.co.uk-uk-$9%F-feb-$?-mcdonalds3free3horsemeat3link3farmers .
$%
!eville, S. ($C 'ebruary $9%F). "'ro,en 7eefburger Sales 6own >FN Since Start of
&orsemeat Scandal." The Buardian. .etrieved from
www.guardian.co.uk-uk-$9%F-feb-$C-fro,en3beefburger3sales3down3>F3horsemeat .
$$
Swiss .e Broup. (4uly $9%$). "'lood) "n =nderestimated .isk." .etrieved from
www.swissre.com-clients-newsletters-'loodManMunderestimatedMrisk.html.
$F
&oekstra, ". I ekonnen, . ($? 'ebruary $9%$). "The Water 'ootprint of &umanity."
0roceedings of the !ational "cademy of Sciences of the =nited States of "merica. Eol. K, !o.
K. .etrieved from www.pnas.org-cgi-doi-%9.%9(F-pnas.%%9KKFC%9K.
$>
'ry, ". (arch $99C). "'acts and Trends) Water." World 7usiness #ouncil for Sustainable
6evelopment. .etrieved from www.unwater.org-downloads-WaterMfactsMandMtrends.pdf.
$@
The #onsumer Boods 'orum. ($9%%). "$9$9 'uture Ealue #hain) 7uilding Strategies for
the !ew 6ecade." .etrieved from www.futurevaluechain.com.
$C
/nvironmental +eader. (K !ovember $9%$). "Walgreens +aunches Breen 0roducts 7rand."
.etrieved from www.environmentalleader.com-$9%$-%%-9K-3walgreens3launches3green3
products3brand .
$(
Section %@9$ of the recent 6odd3'rank Wall Street .eform and #onsumer 0rotection "ct
relating to the tracing of conflict minerals, various ethical cocoa, sustainably forested
products and other sourcing programs are e2amples of this trend gaining momentum
1uickly. "dditional pressure is increasing by way of the White &ouse /2ecutive ;rder %F@%>,
which relates to sustainable procurement e2pectations in the =.S. public sector.
$?
Sustain"bility. ".ate the .aters." .etrieved from www.sustainability.com-proPects-rate3
the3raters.
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