mdia p3-05-supply-chain-150420

MULTI DIMENSION IMPACT ACCOUNTING

File: MDIA-p3-06-SUPPLY-CHAIN-150420.odp Peter Burgess (c) All rights reserved

MDIA

SUPPLY CHAIN

SUPPLY CHAINThe supply chain is a key part of themodern economy;

Supply chain has enabled much of thelow cost high profit performance ofbusiness that is now the norm;

Supply chain optimizes for profit;

With prevailing laws, regulation andmetrics, optimizing for profit results in a race to the bottom for social andenvironmental impact



PRODUCT the SUPPLY CHAIN

Zero to startCosts this stageProfit this stagePrice this stageZero to startCosts this stageProfit this stagePrice Stage 1FINANCIAL ACCOUNTS EACH STEP OF THE SUPPLY CHAINCost = Price stage 1Costs Stage 2Profit Stage 2

Cum Costs Cum ProfitPrice Stage 2Cost = Price stage 2Costs Stage 3Profit Stage 3




Cum Costs Cum ProfitPrice Stage 5ETC...

SUPPLY CHAINThe supply chain works when eachstage of the chain is profitable;

The system works by every stage aiming for maximum profit;

Entities with the most negotiating powermake the most profit;

However, the financial profit goalexcludes important impact issues thatare increasingly important.



MBSSNaturalCapitalHumanCapitalPRODUCT the SUPPLY CHAIN

ADJUSTMENTS TO REFLECT IMPACT (EXTERNALITIES)Zero to startCosts this stageProfit this stagePrice this stageZero to startCosts this stageProfit this stagePrice Stage 1FINANCIAL ACCOUNTS EACH STEP OF THE SUPPLY CHAINCost = Price stage 1Costs Stage 2Profit Stage 2

ImpactStage 1ImpactStage 1ImpactStage 1

Cum Costs Cum ProfitPrice Stage 2ImpactStage 2ImpactStage 2ImpactStage 2Cum ImpactCum ImpactCum ImpactCost = Price stage 2Costs Stage 3Profit Stage 3

Cum Costs Cum ProfitPrice Stage 3ImpactStage 3ImpactStage 3ImpactStage 3Cum ImpactCum ImpactCum ImpactFinancialDimension


SunBOPEOPSunFinancialCapitalHumanCapital Man BuiltStructures& SystemsNaturalCapitalSunSunSunFinancialCapitalHumanCapital Man BuiltStructures& SystemsNaturalCapitalSun

Financial Accounts describe Economic Activity

Financial CostsFinancial ProfitFinancial RevenuesFinancialBalance Sheet

BOPFinancialBalance Sheet

EOP


SunBOPEOPSunFinancialCapitalHumanCapital Man BuiltStructures& SystemsNaturalCapitalSunSunSunFinancialCapitalHumanCapital Man BuiltStructures& SystemsNaturalCapitalSunFINANCIAL ACCOUNTSDESCRIBE ECONOMICACTIVITY IN FINANCIAL OR MONEY TERMSWHILE COMPLETELYIGNORING IMPACT ON EVERYTHING ELSE


SunFinancial Accounts describe Economic Activity

BOPEOPSunFinancialCapitalHumanCapital Man BuiltStructures& SystemsNaturalCapitalSunSunSunFinancialCapitalHumanCapital Man BuiltStructures& SystemsNaturalCapitalSunFINANCIAL P&L ACCOUNTREVENUESProducts Sold X PriceProducts Bought X PriceEnergy Bought X PriceEmployee BenefitsEmployee PayrollOther expendituresAsset use costsDepreciationFinancial expensesPro-good expendituresTaxationPROFITCOSTS


SunACCOUNTING FOR EVERYTHING

BOPEOPREVENUESProducts Sold X PriceVALUE to buyerEqualsHUMAN CAPITAL ADDWages and benefitsWhat value to employee?Pro-good expendituresWhat value to society?TaxationWhat value to society?POSITIVE IMPACT NOTACCOUNTEDFORFinancialCapitalHumanCapital Man BuiltStructures& SystemsNaturalCapitalSunSunFinancialCapitalHumanCapital Man BuiltStructures& SystemsNaturalCapitalSunFINANCIAL P&L ACCOUNTREVENUESProducts Sold X PriceProducts Bought X PriceEnergy Bought X PriceEmployee BenefitsEmployee PayrollOther expendituresAsset use costsDepreciationFinancial expensesPro-good expendituresTaxationPROFITCOSTS



BOPEOPFor products andenergy bought and this processFree use of thecommons andpublic services& infrastructureDegradationof landWater scarcityand degradationAir pollution:Impact on peopleAir pollution:Impact on climateAir pollution:Impact on peopleSolid wasteResourcedepletionEnvironmental DegradationNegativeimpactFinancialCapitalHumanCapital Man BuiltStructures& SystemsNaturalCapitalSunSunFinancialCapitalHumanCapital Man BuiltStructures& SystemsNaturalCapitalSunFINANCIAL P&L ACCOUNTREVENUESProducts Sold X PriceProducts Bought X PriceEnergy Bought X PriceEmployee BenefitsEmployee PayrollOther expendituresAsset use costsDepreciationFinancial expensesPro-good expendituresTaxationPROFITCOSTS



BOPEOPREVENUESProducts Sold X PriceVALUE to buyerEqualsHUMAN CAPITAL ADDWages and benefitsWhat value to employee?Pro-good expendituresWhat value to society?TaxationWhat value to society?For products andenergy bought and this processFree use of thecommons andpublic services& infrastructureDegradationof landWater scarcityand degradationAir pollution:Impact on peopleAir pollution:Impact on climateAir pollution:Impact on peopleSolid wasteResourcedepletionEnvironmental DegradationPOSITIVE IMPACT NOTACCOUNTEDFORNegativeimpactFinancialCapitalHumanCapital Man BuiltStructures& SystemsNaturalCapitalSunSunFinancialCapitalHumanCapital Man BuiltStructures& SystemsNaturalCapitalSunFINANCIAL P&L ACCOUNTREVENUESProducts Sold X PriceProducts Bought X PriceEnergy Bought X PriceEmployee BenefitsEmployee PayrollOther expendituresAsset use costsDepreciationFinancial expensesPro-good expendituresTaxationPROFITCOSTS

SUPPLY CHAIN ANALYSISBy including IMPACT in supply chainmanagement analysis we improvebalance between profit, people andplanet;

Corporate decision makers will knowmore about the true performance of their supply chains.


PRODUCTNothing much will happen until SUPPLY CHAIN IMPACT ANALYSISis incorporated into the easily availabledata about PRODUCTS;

PEOPLE make BUY or NOT TO BUYdecisions about PRODUCTS;

COMPANIES make PROFIT by makingPRODUCTS that PEOPLE choose toBUY


PRODUCT AND SUPPLY CHAINThe MONEY dimension of the supplychain is routine; however

The IMPACT dimensions of the supplychain are rarely implemented in a rigorous manner.

This is big next step!



MBCNaturalCapitalHumanCapitalPRODUCT the SUPPLY CHAIN

ADJUSTMENTS TO REFLECT IMPACT (EXTERNALITIES)Zero to startCosts this stageProfit this stagePrice this stageZero to startCosts this stageProfit this stagePrice Stage 1FINANCIAL ACCOUNTS EACH STEP OF THE SUPPLY CHAINCost = Price stage 1Costs Stage 2Profit Stage 2

ImpactStage 1ImpactStage 1ImpactStage 1

Cum Costs Cum ProfitPrice Stage 2ImpactStage 2ImpactStage 2ImpactStage 2Cum ImpactCum ImpactCum ImpactCost = Price stage 2Costs Stage 3Profit Stage 3

Cum Costs Cum ProfitPrice Stage 3ImpactStage 3ImpactStage 3ImpactStage 3Cum ImpactCum ImpactCum ImpactFinancialDimension


SunSmall decisions by people make all the difference

BOPEOPSunFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunSunFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSun


SunBOPEOPSunFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunSunFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSun

Financial Accounts describe Economic Activity



EOP



Financial Accounts describe Financial Impact



EOPImpact Accounts reflect Externalities

Balance SheetChangesImpact on InstitutionsImpact on PeopleImpact on SocietyImpact on PhysicalImpact on KnowledgeImpact on ResourcesImpact on EnvironmentImpact on EcoSystemBalance SheetChangesBalance SheetChangesBalance SheetChanges


SunEvery single PROCESS has IMPACT on EVERYTHING



SunPLACE the aggregate of everything in the place


PLACE


SunPRODUCT made by one PROCESS




PRODUCT

PRODUCT the result of a SUPPLY CHAIN withseries of PROCESSES


SunOne of the PROCESSES in a PLACE



SunOne of the PROCESSES in a PLACE and alsoa PROCESS in an ORGANIZATION




ORGANIZATION

A big ORGANIZATION is the aggregation of many operations or PROCESSES in many PLACES




PEOPLE


SunEverybody has a role in making this world of ours a better place


PEOPLE




ProductPlaceSupply ChainProcessOrganizationEnablingenvironmentSociety







SO TO SUMMARIZE:

PROCESS is everywhere

SUPPLY CHAIN is a chain ofPROCESSES


PROCESS uses inputs (labor, materials,knowhow, natural resources, etc.);

PROCESS produces PRODUCTS (goods and services that enable livingstandards and quality of life);

PROCESS determines efficiency andimpact both on PEOPLE and PLANET


PROCESS is key to good performance of the SUPPLY CHAIN, both for the PROFIT dimension and also for IMPACT on PEOPLE and PLANET


mdia p3-05-supply-chain-150420

Data & Analytics