Why “Going Green” With Your Supply Chain is the Smart Decision
A decade ago, sustainability efforts were often de-prioritized in favor of corporate survivability considerations. Today, as the economic recovery has gained strength, enterprises are again evaluating sustainability and environmental improvement initiatives, with the presumption they can now “afford” to make their operations greener. What those organizations are discovering, however, is that changes designed to benefit the environment are also good for the bottom line.
Green thinking can be applied across the supply chain from end to end. Let’s take a look at some of these areas.
Green Supply and Procurement
To fully realize the benefits of a green supply chain, it’s essential to consider the parts of it you can influence as well as those you directly control. When purchasing raw materials or components, there are a number of steps you can take to reduce the environmental impact, including:
- Use local suppliers whenever possible, to minimize shipping distances.
- In addition to cost, consider environmental performance when evaluating suppliers. Ask if they have programs in place to reduce waste and energy use, and if they recycle products and materials. (1)
- Work with suppliers to transport their products to you in an environmentally friendly manner—for example, by using fuel-efficient vehicles or utilizing bulk shipments. (2)
Designing products for sustainability can in some cases add to product cost. But the difference is often more than compensated for in terms of commanding a higher price and margin. A few ideas for reducing environmental impact through product design include:
- Design products to be refurbished / repaired, giving them a longer life, and ultimately recycled rather than added to the waste stream.
- Design products using recycled materials where feasible.
- Where possible, design products using fewer or less materials.
- Collaborate with suppliers or contract manufacturers to jointly drive design changes that reduce the environmental impact of the product itself or the manufacturing process. (3)
Manufacturing and Assembly
The location of manufacturing facilities (relative to suppliers/markets as well as sources of renewable energy), plant design (equipment, HVAC systems, power co-generation), and manufacturing processes all provide opportunities for minimizing the environmental impacts of production.
A few ideas for improving sustainability in the area of product packaging and containerization include:
- Minimize materials usage (particularly plastics).
- Maximize stackability and packability to fit more products on a palette and in each shipment (e.g., square or rectangular packaging rather than round or oval shaped).
- Develop re-usable packaging for shipping.
- Re-use outbound shipping containers for product returns.
- Consolidate (ship multiple products packed together) when possible.
Shipping and Transport
The least expensive shipping modes also have the lowest environmental impact. However, it’s important to balance the economic and ecologic advantages of bulk shipping with the impacts of larger order sizes and carrying more inventory.
- Analyze trucking practices carefully. Consolidating shipments often makes economic and ecologic sense, but in some cases, using less-than-truckload (LTL) shipments may make more sense, if it eliminates multiple trips between warehouses. (1)
- Conduct a backhaul analysis. Take a big-picture view to avoid trucks returning empty, looking first for internal product moves or reverse logistics. If there are no good internal options, work with a broker to find potential backhaul partners. (1)
- Revisit route optimization frequently. Changes in market conditions, fuel costs, traffic patterns, and road construction can impact delivery times, costs, and emissions.
Supply Chain Network Design
Choosing the most impactful changes for benefiting both the environment and the bottom line requires both taking a big picture view and utilizing modeling software to evaluate alternative supply chain network design scenarios.
- Optimize your warehouse design to minimize space used, the number of times each item is handled, and the travel distance within the facility. (1)
- Revisit network design periodically, particularly if your company is growing through mergers and acquisitions. These activities can lead to redundant facilities or opportunities to rebalance inventory storage.
- Use modeling software, like LLamasoft Supply Chain Guru, to evaluate future network design optimization scenarios.
Among ideas for improving sustainability through returns, recycling, and refurbishment processes:
- Analyze product return processes. If consumer product returns are routed to multiple warehouses, determine if a centralized returns location is more efficient. (1)
- Develop programs and methods to recover raw materials from products already in the field. (3)
- Develop and offer options for refurbishing or remanufacturing products in the field. (3)
- Develop a closed-loop supply chain (return / refurbish / recycle everything). (3)
There are dozens of steps any company can take to reduce GHG emissions, many of which benefit the bottom line as well as the environment. But while some of these tactics may seem obvious, determining the best alternatives often isn’t easy.
Per Gartner (3), “Commercially available network design software, such as LLamasoft’s Supply Chain Guru, can make such calculations (balancing economic and environmental impacts) easier by including standardized variables for different types of carbon inputs… in a network model, as well as by including access to greenhouse gas emissions benchmark data within the tool for major transportation modes, per-unit weight and distance shipped.”
- “19 Steps to Creating a Lean and Green Supply Chain,” Karen M. Kroll, Inbound Logistics http://www.inboundlogistics.com/cms/article/19-steps-for-creating-a-lean-and-sustainable-supply-chain/
- “3 Steps to Building a Green Supply Chain,” Hazardous Waste Experts http://www.hazardouswasteexperts.com/3-steps-to-building-a-green-supply-chain/
- “Designing an Environmentally Sustainable Supply Chain Network,” Kamala Raman and Pam Fitzpatrick, Gartner https://www.gartner.com/doc/3621326/designing-environmentally-sustainable-supply-chain