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Don't Tweak Your Supply Chain - Rethink It End to Tend

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SPOTLIGHT RADICALLY REINVENT YOUR SUPPLY CHAIN

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ARTWORK Michael Johansson, Self Contained, 2010 containers, caravan, tractor, Volvo, pallets, refrigerators, etc. 8.2 x 10.8 x 2.4 m

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Hau L. Lee (haulee@ stanford.edu) is the Thoma Professor of Operations, Information, and Technology at Stanford Graduate School of Business and the director of the Stanford Global Supply Chain Management Forum. He is on the board at Esquel, one of the companies discussed in this article.

Don’t Tweak Your Supply Chain— Rethink It End to End

October 2010 Harvard Business Review 63

by Hau L. Lee

H
SPOTLIGHT RADICALLY REINVENT YOUR SUPPLY CHAIN

Hong Kong–based Esquel, one of the world’s leading producers of premium cotton shirts, faced a quandary in the early 2000s. Apparel and retail customers such as Nike and Marks & Spencer had begun asking the company about its environmental and social performance. Its leaders anticipated scrutiny from other customers as well, since more of them were demanding that a greater portion of the cotton in their shirts be grown organically. But the crop required a lot of water and pesticides, especially in poor and rapidly developing countries, where Esquel’s cotton was grown and processed. Though Esquel’s executives wanted to strengthen the company’s already serious commitment to social and environmental sustainability, they realized they couldn’t simply demand that the farmers who supplied extra-long-staple cotton just reduce their use of water, fertilizer, and pesticides. A mandate like that could be catastrophic for the farmers and their villages. Most of Esquel’s cotton came from Xinjiang, an arid province in northwestern China that depends mainly on underground sources of water. The traditional method of irrigation there was to periodically flood the fields—an inefficient approach that created a perfect

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