The Business Benefits of “Going Green” with Your Supply Chain

In the not too distant past, when confronted with a decision between investing in sustainability efforts versus corporate survivability, the choice was clear for most organizations. However, as the economic recovery has gained strength and consumers have expressed a desire for corporations to focus on these efforts, green supply chain practices are emerging again. Organizations not only view themselves as being able to “afford” investing resources in “greening” their operations but also see that these changes can truly benefit both the environment and their bottom line.

Sustainability efforts can span many areas of the supply chain. Here are a few areas of consideration for your green supply chain consideration.

Green Supply and Procurement

• While you can’t always influence the practices of your suppliers, you can determine the suppliers with whom you work. When purchasing raw materials or components of your finished product, there are several considerations to reduce the environmental impact.
• To minimize shipping distances, work with local suppliers whenever possible.
• When evaluating suppliers, think beyond costs and consider their environment performance. Do they have programs in place to reduce waste and energy usage? Do they recycle materials and products?
• Focus on suppliers who are open to co-shipping to reduce transportation cost.
• Work with your suppliers to support them in their efforts by having them work with you in a sustainable way, from utilizing a fuel-efficient fleet to leveraging bulk shipments.
• If you are single sourcing particular raw materials, analyze the supplier’s renewals and reusables
• Continuously evaluate future optimization scenarios with a network design optimization tool.
• Help suppliers manage the sustainability impact – monitor and make sure they adhere.

Product Design

• Modifying existing design to better accommodate sustainability can add to product costs. However, that difference can often be accommodated for with a higher price, increasing that margin.
• Utilize recycled materials whenever possible and with fewer materials.
• Design products with the intent for them to be refurbished or repaired, not disposable.
• Collaborate with your suppliers or other partners to join together and reduce the environmental impact of the product itself or how it is manufactured.

Manufacturing and Assembly

Are your manufacturing facilities physically located in good coordination with suppliers, sources of renewable energy, as well as the markets in which you are addressing? The location of facilities and plant design can all play a role in the environmental impact of your efforts.

Packaging Design

One very visible opportunity to minimize environmental impact comes in the form of package design. Here are a few considerations:

• Minimize the usage of packaging, especially plastics
• Maximize the stackability and packability of products to fit more on a pallet and in each shipment
• Develop re-usable packaging for shipping.
• Re-use outbound shipping containers for return
• Consolidate shipments when possible

Shipping and Transport

The least expensive shipping modes often also have the lowest environment 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.

• Identify opportunities to develop collaborative shipping programs with other shippers to share warehouse and/or truck assets.
• Analyze trucking practices carefully. Consolidated shipments don’t always equate to reduced impact. 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.
• Conduct a backhaul analysis. Avoid having trucks return empty, looking first for internal product moves or reverse logistics. If there are no good internal options, work with a broker to find a backhaul partner.
• Revisit route optimization frequently. Changes in market conditions, fuel costs, traffic patterns, and road construction can impact delivery times, costs, and emissions. Regular analysis is necessary to refine and validate.

Supply Chain Network Design

To implement the changes that will have the most impact on sustainability and/or bottom line, a big picture view is needed. Utilizing modeling software to evaluate alternative supply chain network design scenarios is a great option.

• Optimize your warehouse design to minimize space used, the number of times each item is handled, and the travel distance within the facility.
• Periodically revisit your network design especially if your company is growing through mergers and acquisitions. These activities can lead to redundancies.
• Use modeling software to evaluate network design optimization scenarios.
• Apply risk and environmental factors to network design to understand the impact of developing a robust and resilient supply chain for sustainable initiatives.
• Use sustainable metrics to measure water waste and non-hazardous and scrap material utilization.

Reverse Logistics

One often overlooked, but essential, place to look for opportunity is in the return, recycling and refurbishment process. Retail brick and mortar stores return 4 billion pounds of waste and 11 billion pounds of CO2. The return rate for e-commerce is 10-20 percent of all sales.

• Analyze product return processes. If consumer product returns are routed to multiple warehouses, determine if a centralized returns location is more efficient.
• What can you accomplish in the field without having to physically send products back to a central facility first? Can you recover raw materials? Refurbish products?
• Develop a closed-loop supply chain

With the dozens of available options to reduce emissions, the best approach will vary organization by organization. But one thing is for sure – not only can going green benefit the environment and your customers – it can also benefit the bottom line.

Bobby Miller is Senior Director for Design Solutions at LLamasoft. He is responsible for the overall Design product strategy, product management and thought leadership. Prior to his role at LLamasoft, Bobby was an executive at ORTEC International responsible for sales and marketing and was the company thought leader. Bobby pioneered the innovative ‘Perfect Shipment’ which utilizes demand forecasting to generate optimal shipments, enabling organizations to plan and reduce freight cost in advance of execution. He has over 30 years of expertise working in the consumer goods industry and designing supply chain software solutions that has help companies globally such as P&G, General Mills, Coca-Cola and Walmart. Prior to ORTEC, Bobby was Sr. Manager of Supply Chain Excellence for Georgia-Pacific, where he pioneered the concept of sales order load optimization. He has also held various positions with Kraft, Coopers Lighting, Information Resources, IRI Logistics and JDA. Bobby received a B.S. degree in Information Systems from Chicago State University. He is the founder and past chairman of the Technology Association of Georgia Supply Chain Society.