Water – supply chains using more but less available

Roger OakdenGlobal Logistics, Logistics Management, Procurement, Supply Chains & Supply NetworksLeave a Comment

Know your supply markets

Water in supply chains

Water is not a resource in which Logisticians typically concern themselves; but should they? Changes in climate and weather activity are likely to affect supply chains – less water available for much of the time; then too much water, in the form of floods.

Water has not received the publicity of climate change, yet is a critical supply chain risk. The water shortages in Capetown, Chennai and San Paulo have raised the visibility of associated risks; but short-term mitigation responses do not address long-term risks. The report Treading Water: Global Water Report 2018 highlights the ‘real world’ situation. Of the 783 companies that agreed to provide information for analysis, only 31 qualified for the ‘A list’, with a genuine, strategic response to water risk.

Within the main group of respondents, 75 percent reported exposure to water risk, which may affect their future business, revenue or operations. Yet, over the previous four years, there had been a 50 percent increase in reported purchases of water by companies and only 29 percent of companies had set water reduction targets or goals. These figures indicate a serious situation, of which most product companies are unaware.

The report identified that about 70 percent of water usage is through agricultural supply chains, which includes the food and beverage industries and 19 percent by the ‘high impact’ industrial sectors of mineral extraction and metals, oil & gas, electric utilities and chemicals.

As water moves from being an operational issue to a CEO challenge, companies will need to evaluate how water quantity and quality may affect their business (and supply chain) strategy. An approach is to focus on the three Rs of water:

  1. Reduce water use
  2. Replace public water with alternative sources and
  3. Reclaim and reuse wastewater (currently only between 4 and 8 percent of industrial use water is reclaimed and reused)

But before these objectives can be addressed,the CEO (and then the board of directors) must receive a proposal about the company’s strategic position concerning water sustainability. This is a role for the Supply Chain group, as the providers of water are suppliers and divisions and departments the customers.

Agriculture and water scarcity

As agriculture supply chains are the largest industrial user of water, there are many opportunities for improvement in water usage. A recent report by the Australian CSIRO research organisation studied water scarcity impacts in producing foods. The water scarcity impact measure consists of two elements:

  1. The litres of water used to produce a finished product, ready to consume; multiplied by
  2. A weighting depending on whether water scarcity at the source is higher or lower than the global average

To provide a focus for action, water scarcity was identified for on-farm use and through food and beverage production. On farm use of water covers:

  • Pre-harvest water is used for crop irrigation, frost protection, as a carrier for fertilisers and pesticides, washing tools and harvest containers
  • Post-harvest water is used for washing and cooling produce, internal transport and applying waxes and coatings
  • People use e.g. washing and drinking

The researchers noted that water scarcity measures have an extensive range. For example:

  • breakfast cereal made from puffed rice at 1,464 litres of water/kg
  • wholemeal bread at 11.3 litres of water/kg

The researchers also identified a wide variation in the water scarcity footprint between producers for the same farm commodity, reflecting differences in farming methods:

  • Tomatoes grown for the same market reported a water scarcity footprint from 5.0 to 52.8 litres of water per kg of tomatoes
  • Milk produced within one State had a variation in the water scarcity footprint from 0.7 to 262 litres of water per litre of milk

To assess water use improvement in production, the researchers divided the 5,000 food items studied into groups, from high to low water scarcity:

  • Group 1: Discretionary foods and beverages. An example is a small bar of milk chocolate that uses 21 litres of water
  • Group 2: Fruit and juice items
  • Group 3: Dairy products and alternatives (including non-dairy beverages made from soy, rice and nuts)
  • Group 4: Bread and cereals
  • Group 5: Meat and meat products

To achieve reductions in the water scarcity footprint in both on-farm and production requires the operational measures of product reformulation and changes in technologies. Of equal importance are the Procurement strategies of businesses in the agriculture and food industries, to emphasise water management in supplier selection decisions.

From data to decisions about water

Once a corporate direction has been established, operations personnel can collect and analyse data about water processes – withdrawals, consumption and discharge. To assist internal and comparison analysis and decisions, it is important that reporting is in a standard format across the organisation (and preferably across the industry).

Based on the data collected, a risk assessment can be done. This would include risks related to water availability, quality, consumption, conservation and discharge, but also of floods from rivers and sea.

Ecolab provides a free online tool called the Water Risk Monetizer. This financial modelling tool incorporate water risks into planning decisions through four steps:

  1. assess water scarcity risks
  2. understand the full value of water to businesses,
  3. calculate the potential revenue at risk, and
  4. quantify the water risks in financial terms

Facilitate the adoption of Water Management

With data collected and risks analysed, a requirements, budget and implementation plan can be developed and sold to the executive team. Once accepted, an objective message (the Aim) for all staff can be promoted; for example ‘New water used 3.5 times before discharge’.

To support the Aim, some low cost initiatives can be implemented:

  • installing ‘low flow’ taps throughout the facilities
  • collect and recycle rainwater
  • water use performance measures
  • incentives to reduce the organisation’s water footprint
  • higher investments will provide equipment that isolates different grades of water, with segregation piping and collection tanks

Achieving a ‘close to zero’ water footprint is not easy. At multinational food business Nestle, 35 percent of its 400 factories are located in water-stressed regions. However, it has taken the past twenty years of thinking, development and investment in factories and supplier farms to reduce the water use per tonne of product by 80 percent.

To make a significant reduction in the water impact, organisations need the co-operation and involvement of their supply chains, to work towards water stewardship. While water management is internal to a business, water stewardship sees water use as being ‘owned’ by the supply network. To achieve this requires an agreed framework and a verification system that is monitored by an outside organisation – another liaison role for the supply chain group.

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About the Author

Roger Oakden

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With my background as a practitioner, consultant and educator, I am uniquely qualified to provide practical learning in supply chains and logistics. I have co-authored a book on these subjects, published by McGraw-Hill. As the program Manager at RMIT University in Melbourne, Australia, I developed and presented the largest supply chain post-graduate program in the Asia Pacific region, with centres in Melbourne, Singapore and Hong Kong. Read More...

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