Greening Your Supply Chain

info@finishingtalk.com (Finishing Talk) — Mon, 24 Mar 2008 21:59:29 +0000

Originally published in the March 2008 issue of the Finishing Talk Newsletter

Across the U.S. and around the globe, large companies are taking it upon themselves to shrink their environmental footprint - a dramatic and important step towards a cleaner, and more environmentally sound future. Realizing that it's not just regulations that are forcing the change, but an equally worrisome rise in energy costs and quality issues, manufacturers are taking matters into their own hands. And they are starting with their suppliers. According to a recent survey of supply chain professionals carried out for eyefortransport's "Green Transportation and Logistics Report", green issues are rated by 94% of executives as a business priority. This is occurring in response to the high demand by large manufacturers - corporate giants such as Wal-Mart who are leading the way by revaluating and reorganizing their current supply chain (which is responsible for 92% of the retailer's environmental impact) - to be more environmentally friendly.

Ship Smart
The number one energy culprit in industry is transportation and logistics, making up a whopping 75% of a company's carbon impact. By making efficient shipping decisions, such as planning a shipping route that will transport the most products with the least wasted energy and money, companies can reduce their carbon footprint and save money.

Look at the Big Picture
The concept of Green Supply Chain Management (taking into account the entire life cycle of a product and the culmination of its environmental impact) is something that is taking hold in industry right now. Due to demands from consumers, government, and advocacy groups, many companies are now evaluating the environmental impact of a product, from 'birth' to 'death'. This cycle encompasses the product's design, the sourcing and selection of material, the way in which it is manufactured, purchase by the consumer, maintenance of the product, and finally its disposal, is taken into account.

Get to Know Your Suppliers
According to the EPA's "Lean and Green Supply Chain Guide" (Jan. 2000), direct interaction with supply chain partners can enable a company to "reduce total inventory levels, decrease product obsolescence, lower transaction costs, react more quickly to changes in the market, and respond more promptly to customer requests". Many companies have begun to reduce their supplier base down to only a few key suppliers, and "implementing lean manufacturing methods".

Get Started
The Lean and Green Supply Chain guide suggests a four step program to making your supply chain more efficient:

1. Identify Costs: Review materials management practices to identify areas and activities that incur significant environmental costs. For example, the electroplating industry tends to spend resources on large storage and waste treatment areas within a facility. Therefore, storage costs would be an ideal place to start. Two common approaches to identifying sources of environmental costs are materials tracking and EH&S performance reviews.

2. Determine Opportunities: Which identified areas provide the greatest opportunity for improvement? This can be accomplished by implementing Pareto diagrams and other bar charts to display environmental costs by supply chain activity and to rank opportunity areas by value. It can also be accomplished by identifying the root causes of wastes by constructing cause-and-effect diagrams or by continually asking why certain problems or procedures exist.

3. Calculate Benefits: Next is the calculation of costs and benefits of various options. You can conduct quantitative evaluations, which rely on empirical Data (for example, the Internal Rate of Return (IRR) and Economic Order Quantity calculations are two methods). Another approach is through qualitative evaluation, based on observation and judgment.

4. Decide, Implement, and Monitor: After completing the first three steps, the last step to take into consideration involves making a decision, implementing the changes, and monitoring progress. Without these things, your management plan will either fall through or never even begin. It will be, essentially, "unsustainable" - which is exactly what you are trying to move away from. It will take time and patience to get your supply chain where you want it to be. There are steps that can be taken to make the transformation to a greener management system, and as long as you are willing to do the research, communicate your goals, and keep track of your progress, you will be on your way to sustainability. It won't hurt that you will probably increase product quality, boost consumer confidence and respect for your company, maybe even get some government or private organization recognition for your effort, and of course, save money. Not to mention the planet will thank you.

Resources and additional information:

- Green Transportation and Logistics Report: 3rd Supply Chain Directions Green Transportation & Logistics Summit

- The Lean Green Supply Chain: A Practical Guide for Materials Managers and Supply Chain Managers to Reduce Costs and Improve
Environmental Performance (EPA)

- Creating a Green Supply Chain

- Ten Steps to a Green Supply Chain

- Best Practices in Implementing Green Supply Chains (LMI Powerpoint)

-Green Power to the Supply Chain (Extended Abstract � S. Khiewnavawongsa & E.K. Schmidt, Purdue University)

Written by: Anna Levitsky, editor of Finishing Talk

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Greening Your Supply Chain