The Surprise Inside: Making Your Supply Chain More Sustainable
Have you ever wondered how much …
- Energy it took to make the computer on which you are reading this article?
- Fertilizer it took to make the french fries you had at lunch?
- Fuel it took to get your box of cereal to your local grocery store?
- CO2 or other greenhouse gases (GHGs) it took to make that fuel-efficient, low-emissions hybrid car?
- Paper or plastic was used in the packaging for your kid’s new video game console?
- Water it took to make the latte at your local coffee shop?
I wish I had the answers to all of these questions, but I don’t. Except for the last one. Watch this video to see how much water is needed to get that latte to you. The answer is kind of shocking. Like it says in the video – the more you learn the answers to these kinds of questions, the more likely you will be to change the way you think about everything.
Understanding Your End-to-End Supply Chain
Companies in many industries are trying to answer these types of questions, related to the full lifecycle of products and services across their entire supply chain. Their efforts often lead to surprising findings.
For example, in the book Strategies for a Green Economy: Opportunities and Challenges in the New World of Business by Joel Makower and Cara Pike, the authors discuss an effort that The Coca-Cola Company undertook to look at the lifecycle of their soft drink products to determine which parts produced the most GHG emissions. Was it the water purification process? Was it the blending and bottling process? Was it the manufacture of the bottles and cans? Was it the distribution of the drinks to stores and restaurants? The surprising answer: it was related to the vending machines and fountains where the products are sold. The combination of the energy required to power the refrigeration in these devices and the refrigerants used in the devices were the largest contributors to their overall GHG emissions. This realization led Coca-Cola to begin working toward creating new, more efficient vending machines that use different refrigerants with a much lower climate change impact and that are less harmful to the ozone layer.
In order to understand the full lifecycle (“cradle to grave”) environmental impact and cost related to your supply chain, you will need to gather and report on a tremendous amount of information – some of it about processes that happen within your company, and some of it related to the processes of your suppliers and their suppliers. Additionally, many companies are looking at the “cradle-to-cradle” environmental impact and cost of their products – essentially extending the lifecycle perspective to account for environmental impact of the usage of the product and eventual recycling/reuse in new products.
When looking at sustainability in your end-to-end supply chain, there are three main areas on which to focus:
1. Sustainable manufacturing and assembly. In order to improve the sustainability of your manufacturing and assembly processes, you need to make sure you track detailed information about things such as water used, energy used, chemicals used, fuel used, waste produced and resulting GHG emissions within your factories or assembly plants. Companies would need to track this at various stages of the manufacturing process. The idea is to capture the data at a granular-enough level so that you can determine where inefficiencies lie. Information about these processes could also be captured and monitored in near real-time with equipment sensors and controls allowing for rapid response if something goes awry on the line, such as machine misalignment that produces defective products.
The information gathered in the manufacturing and assembly process could also help your product design process because it may highlight areas where the product and packaging design could be adjusted to allow for less costly or less impactful manufacturing.
2. Sustainable transportation and logistics. When focusing on transportation and logistics, the primary goal from a sustainability perspective is to reduce fuel usage and resulting GHG emissions.
To do this, you can model your distribution and supply network to determine what scenarios achieve the optimal results. You would include not only sustainability factors in this optimization, but also the other factors, such as constraints and targets that are important in a distribution operation. These would include overall cost, on-time delivery and other service-level targets, spoilage and shelf life, facility locations, customer locations, inventory levels, transportation modes (e.g., parcel, rail and ocean). Network modeling helps you make the macro decisions needed to define an optimal distribution network.
You could also implement transportation management solutions that help you to make daily decisions about what transportation modes, carriers and routes make the most sense (balancing costs and other service requirements) at that specific time, given the options available. Transportation management systems will help you make the ongoing micro decisions to have an optimal distribution network.
Reverse logistics tracking systems could also be implemented to help your company manage the return and reuse of products and parts through recycling or “product stewardship” programs.
3. Sustainable sourcing. Sustainable sourcing focuses on gathering information from your suppliers related to their processes, their inputs to their products and related output of GHGs. When doing this, you should request that your suppliers share information about sustainability related attributes, which you might track with regard to your own operations such as usage of water, fuel, energy, waste, chemicals and GHG emissions. You could then track this over time and use it as another set of criteria in order to compare your different suppliers – in addition to vendor criteria you may already use, such as cost, quality and scale. This is similar to the situation I described in a previous article about how Wal-Mart and the U.S. government are beginning to request this type of information from their suppliers.
If you are part of a company that manufactures or assembles products, I suspect the areas mentioned in this article are of increasing concern to executives focused on operations, manufacturing and distribution. Making improvements in these areas will reduce your operating costs, minimize your exposure to resource volatility (such as energy and fuel prices), decrease your susceptibility to potential costs associated with GHG emissions, and improve your competitiveness.