Sustainable Business Strategy with Data Analytics | by Samir Saci

In another article, I introduce the mannequin we’ll use as an example the complexity of this train with two situations:

Situation 1: your finance director desires to decrease the general prices
Situation 2: sustainability groups push to decrease CO2 emissions

Mannequin outputs will embrace monetary and operational indicators as an example situations’ impression on KPIs adopted by every division.

Diagram illustrating cost and environmental impact distribution along the supply chain. Costs of goods sold link to retail, production costs link to manufacturing, and logistics costs link to freight and delivery markets. Environmental impacts include production and logistics footprints, managed by the sustainability department. — A number of KPIs involving a number of departments — (Picture by Samir Saci)

Manufacturing: CO2 emissions, useful resource utilization and price per unit
Logistics: freight prices and emissions
Retail / Merchandising: Value of Items Offered (COGS)

As we’ll see within the totally different situations, every state of affairs could be beneficial for some departments and detrimental for others.

Do you think about a logistic director, pressured to ship on time at a minimal value, accepting the disruption of her distribution chain for a random sustainable initiative?

Information (could) assist us to discover a consensus.

Situation 1: Decrease Prices of Items Offered

I suggest to repair the baseline with a state of affairs that minimizes the Value of Items Offered (COGS).

The mannequin discovered the optimum set of crops to attenuate this metric by opening 4 factories.

Icons representing manufacturing plants of various sizes and capacities, ranging from small factories to large industrial facilities. Each icon highlights capacity differences and potential production output. — Manufacturing community for Situation 1 — (Picture by Samir Saci)

Two factories in India (high and low) will provide 100% of the native demand and use the remaining capability for German, USA and Japanese markets.
A single high-capacity plant in Japan devoted to assembly (partially) the native demand.
A high-capacity manufacturing facility in Brazil for its market and export to the USA.

Sankey diagram showing supply chain flows from production locations to markets. Japan, India, and Brazil production supply units to markets in Japan, the USA, Germany, Brazil, and India, with flows varying in size to represent volume distribution per market. — Answer 1 to attenuate prices — (Picture by Samir Saci)

Native Manufacturing: 10,850 Models/Month
Export Manufacturing: 30,900 Models/Month

With this export-oriented footprint, we now have a complete value of 5.68 M€/month, together with manufacturing and transportation.

Stacked bar chart showing the costs of goods sold (COGS) analysis by production location. The chart includes fixed costs (blue) and variable costs (red). The total cost is broken down into Japan (2.07 M€/month), Brazil (1.42 M€/month), and India (1.52 M€/month), with the highest total at 5.68 M€/month — Whole Prices Breakdown — (Picture by Samir Saci)

The excellent news is that the mannequin allocation is perfect; all factories are used at most capability.

What concerning the Prices of Items Offered (COGS)?

Stacked bar chart showing COGS breakdown by market, highlighting transportation (green), production (red), and fixed costs (blue). Japan has the highest COGS at 4.12 €/unit, followed by Germany and the USA, while Brazil and India have the lowest at 80 and 50 €/unit respectively. — COGS Breakdown for Situation 1 — (Picture by Samir Saci)

Aside from the Brazilian market, the prices of products bought are roughly consistent with the native buying energy.

A step additional could be to extend India’s manufacturing capability or cut back Brazil’s manufacturing facility prices.

From a price viewpoint, it appears good. However is it a very good deal for the sustainability crew?

The sustainability division is elevating the alert as CO2 emissions are exploding.

We have now 5,882 (Tons CO2eq) of emissions for 48,950 Models produced.

Bar chart displaying CO2 emissions by market location and source. The USA market has the highest total emissions (4,980 tons CO2eq), with transportation contributing 3,870 tons and production 1,110 tons. Emissions for Brazil, Germany, India, and Japan are significantly lower, with Brazil at 55 tons CO2eq — Emissions per Market — (Picture by Samir Saci)

Most of those emissions are as a result of transportation from factories to the US market.

The highest administration is pushing to suggest a community transformation to cut back emissions by 30%.

What could be the impression on manufacturing, logistics and retail operations?

Situation 2: Localization of Manufacturing

We swap the mannequin’s goal perform to decrease CO2 emissions.

Icons illustrating a variety of manufacturing site configurations, representing low-capacity and high-capacity factories. The image compares different plant types based on their environmental and operational characteristics. — Manufacturing community for Situation 2 — (Picture by Samir Saci)

As transportation is the key driver of CO2 emissions, the mannequin proposes to open seven factories to maximize native fulfilment.

A Sankey diagram depicting production and market flows for different locations. The USA, Germany, Japan, Brazil, and India are shown as production points linked to their respective or export markets with varying unit volumes represented by flow widths. — Provide Chain Flows for Situation 2 — (Picture by Samir Saci)

Two low-capacity factories in India and Brazil fulfil their respective native markets solely.
A single high-capacity manufacturing facility in Germany is used for the native market and exports to the USA.
We have now two pairs of low and high-capacity crops in Japan and the USA devoted to native markets.

From the manufacturing division’s viewpoint, this setup is way from optimum.

We have now 4 low-capacity crops in India and Brazil which can be used method under their capability.

A bar chart comparing variable and fixed costs by production location (USA, Germany, Japan, Brazil, and India). The total cost is prominently displayed, highlighting how fixed and variable costs contribute to overall production costs. — Prices Evaluation — (Picture by Samir Saci)

Due to this fact, fastened prices have greater than doubled, leading to a complete funds of 8.7 M€/month (versus 5.68 M€/month for Situation 1).

Have we reached our goal of Emissions Reductions?

Emissions have dropped from 5,882 (Tons CO2eq) to 2,136 (Tons CO2eq), reaching the goal fastened by the sustainability crew.

A bar chart showing CO2 emissions in tons by market (Brazil, Germany, India, Japan, and the USA) with sources split into production and transportation emissions. The USA has the highest combined emissions, with transportation dominating. — Emissions per Market (Situation 2) — (Picture by Samir Saci)

Nevertheless, your CFO and the merchandising crew are frightened concerning the elevated value of bought items.

A stacked bar chart showing the breakdown of the cost of goods sold by market (USA, Germany, Japan, Brazil, and India) into production, transportation, and fixed costs. India and Brazil have the highest COGS due to high fixed and production costs. — New COGS for Situation 2 — (Picture by Samir Saci)

As a result of output volumes don’t soak up the fastened prices of their factories, Brazil and India now have the very best COGS, going as much as 290.47 €/unit.

Nevertheless, they continue to be the markets with the bottom buying energy.

Merchandising Crew: “As we can not improve costs there, we won’t be worthwhile in Brazil and India.”

We aren’t but achieved. We didn’t contemplate the opposite environmental indicators.

The sustainability crew would love additionally to scale back water utilization.

Situation 3: Decrease Water Utilization

With the earlier setup, we reached a median consumption of 2,683 kL of Water per unit produced.

To fulfill the regulation in 2030, there’s a push to scale back it under 2650 kL/Unit.

Two charts: on the left, a donut chart displaying water usage distribution by country, with Japan leading at 38.8% and the USA at 33.5%. On the right, a bar chart showing water usage per production location, with India using the highest at 3,500 liters per unit. — Water Utilization for Situation 2 vs. Unit Consumption — (Picture by Samir Saci)

This may be achieved by shifting manufacturing to the USA, Germany and Japan whereas closing factories in Brazil and India.

Allow us to see what the mannequin proposed.

Icons of three types of factories: a small factory, a medium-sized factory, and a large factory with chimneys, representing various production capacities. — Manufacturing community for Situation 3 — (Picture by Samir Saci)

It appears to be like just like the mirrored model of Situation 1, with a majority of 35,950 models exported and solely 13,000 models regionally produced.

A Sankey diagram showing production flows from countries (e.g., Germany, USA, Japan, Brazil, and India) to respective markets, with unit quantities labeled for each flow, highlighting production-to-market supply chains. — Stream chart for the Situation 3 — (Picture by Samir Saci)

However now, manufacturing is pushed by 5 factories in “costly” nations

Two factories within the USA ship regionally and in Japan.
We have now two extra crops in Germany solely to provide the USA market.
A single high-capacity plant in Japan shall be opened to satisfy the remaining native demand and ship to small markets (India, Brazil, and Germany).

Finance Division: “It’s the least financially optimum setup you proposed.”

A stacked bar chart showing the costs of goods sold (COGS) analysis by production location. Includes variable costs in red and fixed costs in blue, with total costs highest in the USA at 2.4M€/month. — Prices Evaluation for Situation 3 — (Picture by Samir Saci)

From a price perspective, that is the worst-case state of affairs, as manufacturing and transportation prices are exploding.

This ends in a funds of 8.89 M€/month (versus 5.68 M€/month for Situation 1).

Merchandising Crew: “Models bought in Brazil and India have now extra cheap COGS.”

A grouped bar chart illustrating COGS per unit across markets, broken into transportation, production, and fixed costs. Brazil and India show the highest COGS due to higher transportation and production expenses. — New COGS for Situation 2 — (Picture by Samir Saci)

From a retail viewpoint, issues are higher than in Situation 2 because the Brazil and India markets now have COGS consistent with the native buying energy.

Nevertheless, the logistics crew is challenged as we now have nearly all of volumes for export markets.