| What is the next great supply chain question to be tackled, i2 Technologies Chairman Sanjiv Sidhu posed to the company’s annual i2 Planet gathering in Phoenix last week.
After a pause, he provided his response: “Carbon dioxide emissions.”
Sidhu may be ahead of the market with his answer, but his reasoning is sound. In the future, companies – and consumers – will want to know the carbon dioxide emissions produced for each product shipped.
Certainly cost will remain a factor in where products are manufactured, particularly with pricing sensitive products like consumer electronics. But with oil prices now touching $120 a barrel, the public is increasingly thinking about the environmental costs of shipping products from far-flung reaches of the globe.
Say a part for a vehicle can be manufactured in China or Mexico at a cost of $40, but the carbon footprint for that part by the time it is shipped to an assembly plant in North America is twice or three times as high for the part shipped from China as the one produced in Mexico. It obviously makes more environmental sense to manufacture the part in Mexico.
Until now, very few companies have considered the carbon footprint of a product as they searched the globe for the lowest cost suppliers. But Sidhu senses consumer sentiment is changing – pushed along in part by rising oil prices.
The average MP3 Player produces about 17 pounds of carbon emissions, he says. If presented with a choice between two relatively equal MP3 Players, but one that is produced with only 10 pounds of carbon emissions, Sidhu thinks a company could have a market advantage.
At the moment, i2's software cannot answer this question. It can help companies determine which supplier can provide a product at the lowest cost including shipping and landing fees, but it cannot provide a corresponding carbon footprint measure. In the future, however, Sidhu believes companies will want this component.
“These are the types of things you will be asking us to help you answer over the next five years,” he says.
The i2 Planet gathering was a milestone for the Dallas-based supply chain software company. It marks the 20th anniversary since Sidhu, and former Texas Instruments colleague Ken Sharma founded the company. Over those 20 years i2 has seen its share of ups and downs. It was an investor darling during the dot com era, a period in which Sidhu’s own personal fortune soared to an estimated $6.5 billion. (He was once considered the richest person of Indian origin in the world.) But when the bubble burst in 2001, i2’s fortunes collapsed with its share price. In 2003 the company’s stock was delisted on Nasdaq and i2 went through a painful restructuring, one from which it is still recovering.
Most companies would have folded under the circumstances, but i2 has one thing going for it that has helped it stay afloat – a blue chip customer base. Its customers are among the world’s biggest and best, including Toyota, General Motors, Nokia, Boeing, Anheuser-Busch, Exxon, and General Electric. In fact, AMR Research, which annually lists its Top 25 Supply Chains, found that 20 of the top 25 companies on its list, had deployed i2 software.
The company’s future is still very much in question – it is currently operating under interim Chief Executive Pallab Chatterjee and has long been rumored as a takeover candidate for one of the big ERP vendors – but if Sidhu and his colleagues at i2 can keep answering the big supply chain questions, like carbon dioxide emissions, it just may be around for its 25th anniversary.
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