There have been many great disaster movies in recent years, The Day After Tomorrow, 2012 and Deep Impact, but even the Hollywood producers could not have written a script to describe what happened in Europe over the past few days.

The eruption of the volcano in Iceland led to a huge ash cloud covering most of Europe which subsequently grounded all European flights. This is unprecedented in recent history. Most of the disaster movies never focus on what happens to businesses during a ‘natural’ disaster but the effects of the volcanic ash cloud has had some major impacts on supply chains across Europe. The International Air Transport Association has estimated that the ash cloud is costing airlines $200million in losses per day. So by Monday this will amount to nearly a billion dollars. This does not include the cost to global businesses that rely on the aerospace industry for shipping goods around the world. The image below shows all the aircraft movements (shown in yellow) across Europe, this was captured at 10:45pm on Thursday 15th April.  Notice the empty skies over the UK, France, Netherlands and Spain.



The Daily Telegraph newspaper had an interesting article yesterday which highlighted how the volcanic eruption was impacting various businesses across the UK. Retailers for example faced significant disruption to their supply chains due to the ban on the movement of air freight. Store groups face potential shortages of medicine, cut flowers and exotic fruit and vegetables due to the closure of British airspace. Clothing retailers also face a backlog as their stock sits in distribution hubs around the world, waiting to be flown to the UK. Air freight accounts for 25% of the UK’s international goods movements by value. Retailers have increasingly turned to air freight to deliver their goods in recent months to counter the soaring costs of sea freight. Store groups have also become increasingly reliant on air freight as a result of their strategies to hold less stock in their warehouses in the UK. Such measures save them money and prevent them from overstocking low-selling lines, but means that they rely more on a constant flow of goods from abroad. The sudden way in which the volcanic ash cloud spread across Europe meant that many companies were not able to build up their buffer inventory stock levels as quickly as they would have liked.

In addition, there may be many companies needing to air freight expedited goods quickly, perhaps important spare parts, or dare I say it shipping extra flight containers full of new Apple iPads into the UK to support the impending launch of the most important consumer electronic device of the year. What will Apple do if flights are grounded for a few weeks and they do not have enough stock in the country to satisfy the expected high consumer demand? Steve Jobs, CEO of Apple, may be able to control the mobile device market, but he cannot control the effects of a volcano in Iceland. There are also important documents that are shipped by air, CDROMs containing engineering design data, point of sale data and cheque images, if this information is unable to be delivered due to flights being grounded then companies will have no choice but to adopt electronic transfer techniques such as using Managed File Transfer solutions. So why does it take a volcanic eruption to make companies think about how they exchange important business information?, if they are truly interested in greening their supply chains then they should be looking at electronic transfer anyway!

Over the past decade supply chains have been stretched all over the world, taking advantage of low cost manufacturing regions such as China, India, Mexico and Brazil. As a result, complex global multi modal logistics operations have had to be established to be able to transport goods and raw materials to support these remote manufacturing operations around the world. In a previous blog entry I discussed green multi-modal logistics networks and how companies were trying to develop greener logistics networks.



The impact of not being able to ship goods into or out of Europe may lead to some companies revisiting their sourcing strategies and I have seen some reports that manufacturers are starting to reverse the globalisation trend of recent years to try and improve the reliability of deliveries. In an earlier blog post I talked about how the effects of Reverse Globalisation was shortening the supply chains to source components and manufacture goods closer to the markets where the finished good would be sold. The ultimate aim here is to try and reduce logistics costs, get products to market much more quickly and a side benefit is a significant drop in C02 levels. One could even argue that the green movement will be pleased with the effects that the volcanic eruption has had on the World’s air transport infrastructure, after all with no planes flying the airlines and air freight companies will not be emitting any C02!

Another area where companies could improve their green credentials is by automating manual business processes. Only last week I visited a telecoms company, one of the largest mobile communications providers in the world. Despite offering state of the art mobile devices and investing hundreds of millions of dollars in developing support for new faster mobile networks, they told me that only 30% of their B2B transactions have been automated. A leading edge telecoms company having 70% of their business transactions done manually?, surely this cannot be right!  There are simple B2B solutions out on the market, such as GXS Intelligent Web Forms and GXS Trading Grid for Excel that can help automate manual paper based processes and so remove significant amounts of paper from the supply chain.

I also visited a global industrial manufacturing company back in January, they were convinced that they didn’t need an EDI solution and they were keen to implement an OCR scanning based solution for ‘semi-automating’ their business processes. An $18Billion manufacturing company using an OCR based system?, this cannot be right either ! The trouble is that before you even get to the OCR stage there are a lot of manual processes that have potential for errors and more importantly impact a company’s overa
ll carbon footprint. I used the following image to illustrate my point during the meeting.



In an earlier blog I mentioned how GXS Trading Grid infrastructure was helping companies develop greener more sustainable supply chains. Given that GXS has visibility of all transactions flowing across our network we can estimate the green savings that can be made. Here is a snapshot, taken on 18th April 2010, of the green savings that have been made since 1st January 2010. Many of today’s CIOs are starting to ask suppliers or ICT related vendors about how green their solutions or services are. I discussed this in one of my first green related blog entries. In fact we often receive RFPs that ask how green our Trading Grid infrastructure is. Now as we can measure all the transactions that are made across our network we are often asked to produce a Supply Chain Sustainability Assessment, from which the company will receive a certificate to say how much paper has been eliminated from their business processes.

So in closing, with Earth Day 2010 almost upon us, what steps is your company taking to become greener and more sustainable?

• Is your company looking to near shore or reduce the length of your supply chain to reduce logistics costs and hence reduce C02 levels emitted by your 3PL providers?
• Is your company looking at ways to automate, not semi-automate!, manual paper based processes?
• Are you reducing the amount of packaging that is used to ship goods to your customers?
• Have you thought of outsourcing the management of your B2B infrastructure so as to remove the need to host your own B2B infrastructure and hence lower the carbon footprint of your ICT infrastructure?
• Will you be undertaking a review of your suppliers and ICT providers to see whether they are introducing sustainable best practices?, how else will you be able to measure the overall carbon footprint of your entire supply chain?

The volcanic eruption in Iceland highlights how the Earth and its environment has the potential to wreak havoc across global supply chains and economies. I could be cynical here and say that with the 22nd April 2010 representing Earth Day, the Earth could be venting its frustration via the volcanic eruption to remind us to think about the environment and try to do more to look after it by introducing greener supply chains and more sustainable business processes.

For more information on how GXS can help your company introduce more sustainable B2B processes please visit www.greensupplychain.com.

This entry was posted on Sunday, April 18th, 2010 at 3:47 pm and is filed under Apple iPad, B2B, B2B Outsourcing, Crystal Ball Gazing, Driving B2B by Mark Morley, Earth Day, EDI, flights grounded, General Interest, Green Supply Chain, Green supply chains, GXS, High Tech, iceland volcano eruption, Logistics, Mark Morley, steve jobs, Supply Chains, Sustainability. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.