Five Initiatives for Supply Chain Sustainability

supply chain sustainabilitySustainability and the concept of “going green” has been a hot topic lately, especially as companies and countries look at their overall carbon footprint and look for ways to be more environmentally friendly. Of course, there is a system of checks and balances for global corporations, as even though they may have the best intentions, profitability is still the main business driver. Over the last few years, supply chain sustainability has become increasingly important, as manufacturers and retailers have taken the lead on green initiatives across the full spectrum of the supply chain, including in the warehouse, store, and through transportation. Here are five ways these companies are improving supply chain sustainability.

Product Packaging

One area of concern for the long-term health of the world is the use of packaging in both the manufacturing and shipping of products. Many companies have seen both the inefficiencies of their packaging, as well as the wastefulness, and taken this as a direct challenge for major improvements. In an article I wrote a few years ago, I noted most retailers use an excessive amount of packaging when they ship items. The extra boxes, bubble wrap, tissue paper, and additional packaging materials can have a negative impact on the environment. It is materials that can be used for other shipments, reducing the amount of materials retailers need to keep on hand. If the end consumer does not recycle the excess material, it is clogging landfills and contributing to a growing problem. To further complicate things, as trucks are packed less efficiently, it takes more routes to deliver all the packages. The combination of money spent on additional fuel for more routes and the emissions from these vehicles contributes to overall pollution issues.

However, it is not just the packaging of shipped orders that is a problem. Often times, product packaging is not recyclable or biodegradable, which compounds the problem. Recently, Nestlé announced that it would create the Institute of Packaging Sciences to focus on developing “functional, safe, and environmentally friendly” packaging. The new packaging tests will look at recyclable, biodegradable, and compostable technologies, each of which will be tested across a number of product lines in the lab. This will be a major step in helping to reduce packaging waste in the global supply chain.

Energy Efficiency

Warehouse sustainability is a major concern in the global supply chain. However, there are many steps that warehouses can take to become more sustainable, especially when it comes to energy consumption. In a report my colleague Steve Banker recently wrote, survey-based research showed the important role safety plays in a thriving warehouse. A key part of this is proper lighting within the warehouse. Energy-efficient LED lights can serve two roles here. First, they can provide better lighting within the warehouse. Second, they can reduce energy significantly, with many companies cutting their annual lighting costs by 50 to 60 percent as a result. Less energy consumption is a win for sustainability.

Another area of energy efficiency is the use of alternative power sources. More and more companies are turning to solar and wind power to reduce their reliance on traditional energy sources and generate their own energy. For many warehouses, the cost for the installation of solar panels can be recouped within the first six months. For those warehouses that are not suitable for solar panels, wind energy is an alternative, as well as skylights which can let in natural light and reduce the amount of electric lighting that is needed.

Alternative Fuels

Alternative fuels are creating a lot of attention in the transportation sector. Seeing major truck manufacturers running pilot programs of electric semis is a big deal for the industry. Companies like Daimler, BYD, Volkswagen, Nikola, Tesla, and Uber are providing the business case for the eletric trucks. And while a lot of attention has been given to the semi-truck industry and how reducing carbon emissions on cross-country trips are great for the environment, parcel delivery companies have been seizing the momentum. Companies like UPS, HDL, FedEx, and others have piloted multiple programs using electric delivery vans and electric bikes or scooters within congested cities for last mile deliveries. These pilots have shown that electric bikes, vans, and scooters are fully capable of handling the demands of last mile deliveries while pulling larger vehicles from already congested roads. Additionally, autonomous robots and drones have garnered a lot of attention for their ability to make last deliveries while reducing carbon emissions and congestion. Alternative fuels are clearly an area that will continue to gain traction.

Optimized Routes

A TMS can save shippers money in a lot of ways, including simulation and network design, load consolidation and lower cost mode selections, and multi-stop route optimization. From a sustainability standpoint, route optimization is the big winner. Obviously load consolidation means less trucks on the road to deliver the same freight, which is important as far as carbon emissions. But with route optimization, companies can use algorithms to determine the most efficient route for every truck on the road, from, cross-country deliveries to the final mile. By determining the absolute ideal route for each truck, shippers are able to reduce their fuel costs and their miles significantly; with backhaul optimization, deadhead miles can also be reduced so trucks are not just carrying air to their next destination. Reducing miles and fuel consumption is a key part of supply chain sustainability.

Returns and Recycling

A final way to improve supply chain sustainability is by optimizing returns at the store and warehouse level. According to research I did around omni-channel returns management, it became clear that sustainability practices are also an important aspect of returns management.  Companies need to decide what they will do with the returned item, which will vary based on the type of product.  Per our survey, 64.2 percent of respondents indicated they re-use the returned item, and sell it “as is.” This is common for apparel and other non-electronic items.  For consumer electronics, things are a little trickier.  Here, 53.5 percent refurbish the item and then sell it, while 26.7 percent remanufacture the item, which means the item is held to higher standards than refurbishing.  When an item cannot be salvaged, 60.7 percent of respondents recycle it. The decision to re-use, refurbish, re-manufacture, or recycle goes a long ways to improving sustainable operations.

Final Word

Supply chain sustainability is increasingly important for the future of business and the world as a whole. Companies are investing more money into sustainability initiatives, seeking to reduce waste and carbon emissions. These initiatives include eco-friendly packaging to eliminate waste, using energy more efficiently, using alternative fuels and electric vehicles, improving delivery routes for less carbon emissions, and ensuring that returns are re-sold, refurbished, or recycled. These five steps are certainly in the right direction for a more sustainable supply chain.