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Supply Chains in the Clean Energy Sector Not So Green -
The Challenge and Opportunity

The Clean Energy Sector's supply chain is green - as in greenhorns - with young entrepreneurial startups that are focused on significant product innovation and market entry issues. Numerous Presidents and Prime Ministers - from Japan, to the US, Canada, Germany, China and others - have created stimulus packages for the Clean Energy sector. The intention was to develop technologies that could boost GDP and gain global leadership in this growing sector.

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Yet ever since the greening movement began, companies of all sizes have focused on product, product, product. Their second concern has been market, market, market.   And now politicians have also gotten into the act with jobs, jobs, jobs - the political-speak is 'green jobs.' 

But where are those jobs going to come from? They are going to come from manufacturing, installation and service. And that is Supply Chain! Achieving global domination with extensive product availability while bringing down the costs - a major goal of the industry - well, that's Supply Chain, too. So, we need a new mantra for the CE sector - supply chain, supply chain, supply chain.

Take a look at Massachusetts, my home state, as a good example of tackling the issues and opportunities in the Clean Energy Supply Chain. The Massachusetts Clean Energy Center (CEC) has developed a well-run government partnership program ( This program brings together investors, state stimulus packages, as well as funding opportunities from the federal government for budding companies in the CE sector. The goal is to get firms to locate in the state by helping them with start-up costs and with jobs and training opportunities offered by the state. This aggressive program has been quite successful at getting our fair share of this capital. Massachusetts is home to some of the best Clean Energy companies.

The Challenge

Job, Jobs, Jobs should emerge from such a strategy. And that is the first concern. But first, let's review some first principles in global supply chain:

·         Innovation can happen anywhere in the world.

·         Markets for your product can exist almost anywhere (given that there is the wind, land, or water required by a potential site for these clean energy technologies).

·         Manufacturing can exist almost anywhere in today's world.

·         Manufacturing plants become the first sunk cost/fixed cost once you start up (unless you outsource).

·         You need people with deep expertise in material and product creation, manufacturing sciences and plant floor techniques.

·         And once installed, you need a robust system to monitor and maintain equipment performance.

The Issues

Emphasis on Innovation - the growing Clean Energy industry is currently focusing on product innovation like crazy. These companies are dominated - as tech start-ups generally are - by innovative engineers. And what do innovative engineers do? They innovate, resulting in each new customer getting a new revision of the product line - or sometimes a whole new product line. 

This has huge implications for the Supply Chain:

1.       The constant shift in design and materials requirements can make procurement unpredictable.

2.       When there is no solid product knowledge in the field, installation can be problematic.

3.       If there is no way to understand failure rates, no way to manage inventory for parts that fail in the field, and no experienced people in the field to maintain the product, service supply chain and product maintenance can be a challenge.

Location - now here is where the political rhetoric is at odds with our current reality. We want the green jobs, but we have so many excuses when it comes to creating them. I polled many of these CEOs to find out where they are going to locate their next factories. Overwhelmingly they responded, "Not here!" 

The reasons were as follows:

1.       There has been such erosion in manufacturing in the last ten years that local talent for manufacturing does not exist.

2.       I am not sure that I have a market nearby - i.e. DEMAND - so I need to think about a location where demand for my product is highest.

3.       Colleges are not producing manufacturing and operations graduates who can develop the innovations required for our exacting processes.

4.       Taxes are too high, and I cannot afford employee benefits.

The Opportunity

There are tremendous challenges that this sector must confront, in order to reap the rewards of going green in supply chain. As long-term supply chain professionals might say, "I have seen this all before," as they roll their eyes. But this is your opportunity, if you act now! 

Software solutions providers - especially those with strong Supply Chain solutions such as Supply Management, Collaboration, Service Supply Chain, and APS vendors. This is a growing market, and we hardly see you in there.

Operations professionals - manufacturing personnel can be gregarious personalities, but marketing themselves was never their strong suit. High-tech experience in a resume is a particularly strong pedigree if you have dealt with constant product changes and upgrades, and developed strong understandable business processes. 

Supply Chain Industry Groups - from an association perspective, the supply chain industry groups are not proactively seeking out companies that could use their help. Many of these groups have become conference and publishing organizations rather than groups that deal with the real problems of supply chain professionals in various industries. These groups need to step forward and be part of the solution.

IEEE comes to mind as a great paradigm of an association by engineers - for engineers - who work across the problem set - from education, to career development, to industry action, to government influence. Supply Chain groups need to respond in the same way.

Seeing the growth is this sector is inspiring. But we also need the presence of this industry here. We can all be part of that growth. Contact me if you want to talk more - and act - on this issue.


To view other articles from this issue of the brief, click here.

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