supply chain sustainability Archives

The Greenest Mile: Planning’s Role in Supply Chain Sustainability

Sustainability | By Polly Mitchell-Guthrie • 08/05/2021

Supply chain sustainability is a higher priority than ever. In MIT’s State of Supply Chain Sustainability 2021, 80% of executives surveyed said the pandemic either had no impact on their commitment or increased it. PwC reports that almost half of assets under management are held by investment firms committed to decarbonization. Investor concern about material risks from climate change have created new reporting frameworks, such as those by the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Disclosures (TCFD). From many different angles, supply chain sustainability matters, so how do we get there and what is the role of planning?

The greenest mile

Years ago, I thought we’d found the perfect rental house and didn’t blink that it was heated with oil, which was rare. It was a rude surprise when I learned it would cost $100 to fill the tank. On our budget then, this felt like a fortune and fueled my interest in energy policy. I was drawn to Hunter and Amory Lovins, who advocated a strategy pairing energy efficiency with renewables, long before its current popularity. After all, what’s the point of installing solar panels only to waste the greener energy produced?

Similarly, UPS has strong commitments to sustainability and invests in many options, such as alternative fuel vehicles, e-cycles in dense cities, and carbon offsets for purchase with shipping. But they’ve also invested in route optimization, which uses algorithms to save up to 10 million gallons of fuel annually by reducing miles driven in the US. UPS saves time and money at a level worth reporting on earnings calls, but they are also more sustainable. As my friend Jack Levis, who led this project until his recent retirement, likes to say, “the greenest mile is the mile not traveled.”

We must plan, source, make, and deliver differently for supply chain sustainability

Leading supply chains tackle sustainability in a variety of ways. For example, confectioner Mars is building deeper relationships with fewer palm oil suppliers to increase their ability to monitor and impact deforestation. Pharmaceutical manufacturer Amgen built a new biomanufacturing plant in Singapore that uses 70% less carbon than traditional facilities. Schneider Electric has committed to convert its 14,000 fleet vehicles to electric by 2030. These examples address the source, make, and deliver areas of supply chain. But what about the role of planning?

Net zero goals require us to transform our supply chains and do different things. But as we do different things to get to net zero – like Mars, Amgen, and Schneider Electric – we must do these different things differently. If we don’t plan better, efforts in procuring sustainable palm oil, making medicine with less carbon, or delivering to customers with electric vehicles can still be built on top of inefficient processes that waste the savings we made. As UPS puts more electric trucks on the road, they are simultaneously planning for those trucks to travel fewer miles. Similarly, increasing the efficiency of planning and reducing waste will lay a firm foundation for greener sourcing, manufacturing and delivery.

Buffering creates waste

Information trade-offs made to absorb unpredictable volatility force supply chains to buffer. While buffers provide optionality, they also serve only in bad times, not good, and can create waste. Siloed planning, information latency, disconnected processes, and lack of transparency all illustrate problems with poor information. When teams lack the information needed to collaborate, can’t get access to it in a timely manner, and are incentivized based on what’s good for their silo and not the entire supply chain the result is poor planning.

Technicolor, which makes high tech equipment for the connected home, found their sales team drove the business but created havoc by entering new requirements or cancelling them too late for operations to keep up, so inventories grew. Concurrent planning gets rid of silos, connects functions together, gives them a platform upon which to collaborate, and helps them see the impact of any decision upon the whole supply chain. Using this approach, Technicolor was able to forecast more accurately for Q1/22 and bring inventory down by $120 million.

Reducing inventory saves money but also reduces waste, because obsolete inventory becomes another problem. Proper disposal can cause downstream issues. Regulatory standards govern disposal in many industries, because of toxicity in the raw materials, controlled substances in drugs, counterfeiting, etc. This end-of-life disposal is time-consuming and expensive, so reducing waste that must be managed matters.

Moving from linear to circular planning to go beyond incrementalism

Better planning saves money, reduces waste, and is the foundation upon which we must start, but it is not enough. With the foundation built, we can collaborate more effectively end to end with both suppliers and customers to make better, more sustainable decisions. We must measure our progress against commitments like fewer expedites or inventory that must be destroyed so we can do better. And best yet is moving toward the circular economy. The greenest miles in planning are those not driven but also scarce raw materials we didn’t use, expedites we didn’t make, obsolete inventory we didn’t have to dispose, hours we didn’t waste.

To get to these greenest miles and achieve the changes necessary to combat climate change we must transform our supply chains to a circular model. Planning for circularity makes good business sense, because it mitigates risk from the scarcity of raw materials, volatile prices of those materials, and regulatory restrictions on disposal, among others. But it also turns the tables from managing risk to building stronger, longer relationships with customers, such as by building an item once but selling it many times, as circular economy expert Sandy Rodger explains.

The circular economy involves flows familiar to supply chain planners but done in new ways, which calls for new ways of working together. Some ways are internal, because too many companies have their sustainability efforts siloed from their supply chain. As we use fewer and/or renewable materials at the beginning of the process all the way to planning more effectively for returns at the end we will need cross-functional cooperation. But for circularity to scale we will also need new markets, which means commitments between customers and suppliers and potentially even coopetition. Accenture argues that the circular economy represents at least a $4.5 trillion economic opportunity, so there is money on the table for those willing to do differently.

The work needed to do different things and to do them differently is not for the faint-hearted. But climate change is not for the faint-hearted either. And those of us in supply chain planning, accustomed to putting out fires and getting yelled at, are the opposite of faint-hearted. The last year has shown the kind of courage, drive, and commitment we have within us. Supply chain leaders have signaled this kind of commitment to supply chain sustainability, and planning has a key role in making that happen, in driving us toward the greenest miles.

Polly Mitchell-Guthrie is the VP of Industry Outreach and Thought Leadership at Kinaxis, the leader in empowering people to make confident supply chain decisions. Previously she served in roles as director of Analytical Consulting Services at the University of North Carolina Health Care System, senior manager of the Advanced Analytics Customer Liaison Group in SAS’ Research and Development Division, and Director of the SAS Global Academic Program.

Mitchell-Guthrie has an MBA from the Kenan-Flagler Business School of the University of North Carolina at Chapel Hill, where she also received her BA in political science as a Morehead Scholar. She has been active in many roles within INFORMS (the Institute for Operations Research and Management Sciences), including serving as the chair and vice chair of the Analytics Certification Board and secretary of the Analytics Society.

Supply Chain Sustainability Gathers Steam

Sustainability | By Glenn Jones • 05/25/2021

The global supply chain is routinely beset by challenges, both large and small, but the past couple of years have delivered a string of significant logistics disruptions that have threatened to upend the tightly choreographed dance of global freight transportation. The coronavirus pandemic is the most obvious of these hurdles, but everything from the threat of tariffs to the temporary blockage of the Suez Canal (and even the ongoing closure of the I-40 bridge in Memphis) could have had lasting ramifications for global commerce.

These disruptions, which will only get more frequent in the coming years as major weather events wreak havoc on freight transportation, have supply chain stakeholders scrambling from crisis to crisis. There’s been little room for long-term planning, and supply chain sustainability has mostly been an afterthought, a “nice-to-have” initiative that is not of critical importance. That’s starting to change. More and more large U.S. companies, both inside and outside of freight transportation, are pledging to become carbon-neutral operations. The airline lobbying group Airlines for America announced in March that its member carriers will all go green by 2050.

Customers are asking companies to make supply chain sustainability a priority, and younger logistics employees are making the push from the inside. Potential employees want to make sure they work at an environmentally conscious supply chain technology provider. Regulations may be more of a driver in the future.

In fact, in its 2020 report on supply chain sustainability, the MIT Center for Transportation & Logistics and the Council of Supply Chain Management Professionals found that sustainability is becoming a mandate at the corporate level, with more than 80 percent of the 1,100 industry stakeholders surveyed saying sustainability is now an important issue. More than 45 percent of respondents said they were under pressure to adopt supply chain sustainability practices. Though corporations are starting to pay attention to supply chain sustainability, less than half of those surveyed in the CSCMP report know how to make their processes more sustainable.

How can companies hit the ground running on creating a sustainable supply chain? Including CO2 emissions as a key criterion for carrier selection and using logistics technology to reduce or eliminate empty miles are the biggest opportunities to make an immediate difference.

Working with a strong supply chain technology provider with a holistic digital operating platform is key. These companies are fueled by creating innovative solutions that allow stakeholders to weigh the carbon emissions of transportation modes against service and cost. This thinking can also shift how companies view freight transportation in general. In many organizations, freight shipping has become static: companies use air cargo because that’s what they’ve always done. With advanced planning, these same organizations can start dynamically selecting freight transportation routes and modes based on their current needs, bleeding carbon emissions from their supply chains in the process.

Supply chain digitization can also offer more direct solutions to creating sustainable freight transportation processes. In the U.S., empty miles are a significant driver of increased supply chain costs and carbon emissions. Reducing empty miles from the supply chain will help drive down the $1 trillion in waste throughout the global supply chain and help make the industry more green. This can be done through street turn matching, which reduces empty miles that generate significant carbon emissions. For rail users, domestic reload solutions enable steamship lines to reduce or eliminate the cost of returning containers via rail from inland ports by allowing shippers to use the container for a domestic move. This eliminates repositioning empty boxes – quite literally, shipping air.

For retailers, supply chain sustainability is part of the conversation about inventory. Just-in-time inventory levels have helped retailers and other shippers grow without holding vast amounts of inventory in their warehouses, but I-need-it-now shipping practices prioritize speed at all costs. If shippers work to better balance customer demand and inventory levels, they can choose more sustainable, slower freight transportation options. Selecting service levels and modes with an eye toward supply chain sustainability, and not solely based on price, will help turn supply chain sustainability from a concept to an engrained practice.

Supply chain sustainability isn’t a passing fad, and there is a more mainstream acknowledgment of the costs of doing nothing than ever before. Every freight transportation user should be asking: Am I accounting for my carbon footprint when balancing logistics costs with inventory costs? This is part of the social and environmental responsibility of supply chain stakeholders.

Glenn Jones is global vice president of product strategy and marketing for carbon-neutral supply chain technology provider Blume Global. He has a proven track record of growing businesses by building and leading R&D and product marketing organizations to define, develop, position and sell highly innovative and high value enterprise solutions delivered in the cloud. He was formerly the COO of Sweetbridge, the CTO of Steelwedge Software and also held leadership positions at other supply chain software companies including Elementum, E2Open and i2 Technologies.

Mars, AB InBev, and the Art of Supply Chain Sustainability

Sustainability | By Chris Cunnane • 05/05/2021

Supply chain sustainability and the concept of “going green” continues to drive a lot of operational initiatives and innovations as companies and countries look at their overall carbon footprint and look for ways to be more environmentally friendly. There is of course a system of checks and balances for global corporations when looking at supply chain sustainability, 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.

At last month’s Blue Yonder Icon virtual summit, Lisa Manley, Vice President of Sustainability at Mars, and Ezgi Barcenas, Global Head of Sustainability for Anheuser-Busch InBev, detailed how their respective companies are focusing their efforts and strategies to support supply chain sustainability. Sustainability initiatives cannot exist in a vacuum. Both speakers touched on how the Sustainable Development Goals (SDGs) established by the United Nations are a driving force behind individual initiatives.

UN Sustainable Development Goals

The SDGs developed by the UN are a collection of 17 interlinked global goals designed to be a “blueprint to achieve a better and more sustainable future for all”. The SDGs were set up in 2015 by the United Nations General Assembly and are intended to be achieved by the year 2030 and are included in a UN Resolution called the 2030 Agenda.

The 17 SDGs are: (1) No Poverty, (2) Zero Hunger, (3) Good Health and Well-being, (4) Quality Education, (5) Gender Equality, (6) Clean Water and Sanitation, (7) Affordable and Clean Energy, (8) Decent Work and Economic Growth, (9) Industry, Innovation and Infrastructure, (10) Reducing Inequality, (11) Sustainable Cities and Communities, (12) Responsible Consumption and Production, (13) Climate Action, (14) Life Below Water, (15) Life On Land, (16) Peace, Justice, and Strong Institutions, (17) Partnerships for the Goals.

Mars and Supply Chain Sustainability

Ms. Manley Vice President of Sustainability at Mars, indicated that global businesses play a large role in helping to advance the SDGs. While there are 17 dedicated SDGs, Mars has been purposeful on where to focus their efforts. To that end, the company is prioritizing specific SDGs. First is SDG 1: no poverty. According to Ms. Manley, poverty plays a huge role in agricultural supply chains. The UN highlights the five “outcome targets” for SDG 1: eradication of extreme poverty; reduction of all poverty by half; implementation of social protection systems; ensuring equal rights to ownership, basic services, technology and economic resources; and the building of resilience to environmental, economic and social disasters.

The second SDG to highlight is SDG 17: partnerships for the goals. Mars has a deep belief that the only way they are going to make a meaningful difference from a sustainability perspective is by working collaboratively with others.

The third SDG that Ms. Manley highlighted, and went deeper into is SDG 13: climate action. Climate action is incredibly important for Mars and its supply chain partners. To that end, Mars started with a commitment to 100 percent renewable energy a number of years ago and is making steady progress. The company has established long-term power purchase agreements at the country level. As a result, Mars has been able to procure renewable electricity to cover the entire business in those specific countries. The next part is to drive progress toward a science-based target that goes across value chain. Mars is working with top suppliers to take action similar to what they have done with renewable energy and launched a “Pledge for the Planet” a few years ago, asking suppliers to join them in a pledge for sustainability.

Mars is also focused on advocacy. It is one of 300 companies that came together in a request to the Biden administration to dig deep in its ambitions for climate action. It is asking for country level goals to reduce emissions by 50 percent of more by the end of 2030.

Ms. Manley highlighted another area of sustainability that is part of its strategy: eliminating single use plastics. For Mars, becoming more sustainable with its packaging is a huge priority. The company looks at the initiative in four ways:

Identify the packaging they simply don’t need and stop using it. The company looks at different models of packaging use, and how it can be re-used or recycled. Ms. Manley gave the example of re-usable containers for pet food, which can be refilled at the store.
Once you know what you do need, redesign the packaging to make it fit into a circular model.
Namely, what is on the horizon for packaging technology? Mars has a dedicated team exploring the future of biodegradable papers and bio-based plastics.
Mars can make all the changes it wants with packaging designs, but if the systems for collecting and recycling used packaging aren’t established around the world, the program cannot scale.

AB InBev and Supply Chain Sustainability

In an audience poll during the session, next generation technology like artificial intelligence (AI) and machine learning (ML) for forecasting demand and pricing was driving the most interest in sustainability. According to Ms. Barcenas, Global Head of Sustainability for Anheuser-Busch InBev, these findings are consistent with what influences sustainability in most supply chains. AB InBev definitely sees an opportunity to use more data to understand the impact of climate change on the value chain. In agricultural supply chains, there is a disproportionate level of impact in vulnerable communities, so the more they can bring in modeling and predictive analytics, the stronger sustainability initiatives can be.

Ms. Barcenas highlighted two distinct areas that AB InBev is looking at for supply chain sustainability. The first is the company’s approach to water management. There is a saying in the brewing industry: “no water, no beer.” But Ms. Barcenas pointed out that water is a critical resource beyond just being a main ingredient in beer. As the world’s leading brewer, AB InBev is committed to being part of the solution in areas where they are seeing growing water stress. The company’s focus on water management goes across 3 approaches:

AB InBev is internally looking at water efficiency. The company is the most water efficient brewer in the world. Over the last decade, it has reduced its water usage over 40 percent. The company is working to continue that trend as part of its 2025 sustainability goals.
Promoting a reduction in water usage or improving the health of a water shed is great. However, companies need to have a measurable improvement piece for the results to stand up. To that end, AB InBev has a rigorous reporting process on how these improvements are being measured, and partner with the Nature Conservancy and World Wildlife Fund (WWF) in its initiatives.
AB InBev is working with farmers to be more climate resilient. This means ensuring farmers have the best practices in place, helping to provide the right crop management protocols. AB InBev uses AI and ML to help build a climate model and see how barley sourcing impacts the climate.

Ms. Barcenas also highlighted some of AB InBev’s procurement strategies for a sustainable supply chain. AB InBev has embedded sustainability in its procurement functions. The company has identified that over 80 percent of carbon emissions come from the value chain. The biggest opportunities are to enhance collaboration and innovation with their suppliers to address shared sustainability challenges. Ab InBev has over $30 billion in supply chain spend and tens of thousands of partners upstream. It needs to bring scale to new levels to innovate with them.

Part of this innovation was the launching of its Eclipse Initiative. The initiative was launched in 2019 and is a global sustainability platform. As of now, there are 50 suppliers that are part of the collaboration with a shared vision. The initiative looks to bring the suppliers together to co-innovate and co-design packaging and raw materials sourcing in the future. The end goal is improved supply chain sustainability.

Growing Up to Become a Sustainable Supply Chain

Guest Commentary | By Polly Mitchell-Guthrie • 03/03/2020

Is your supply chain immature? Does it resemble a 14-year-old boy, as a planner I met at an Institute of Business Forecasting and Planning event described his company’s supply chain? Grown up beyond diapers but not yet making good decisions consistently. In an immature, disconnected supply chain, planners operate inefficiently and in reactive mode. Not only does this mode make the daily life of a planner difficult, but it does not position the company toward a sustainable supply chain capable of making decisions that are better for profits, people, and the earth. But the opportunity to make an impact for everyone working in supply chain – including Jeff Bezos – is enormous, and it starts with maturing the supply chain’s capability.

Because in spite of advancements in supply chain as a profession, the majority of companies feel their supply chains are immature. In a McKinsey report, Digital transformation: Raising supply-chain performance to new levels, the consulting firm found that the level of digitization among supply chains was only 43%, the lowest of the sectors analyzed. An immature supply chain incurs waste, from excess inventory to lost time due to latency of decision-making. This waste makes living in the land of immaturity stressful for a supply chain planner. When things go well planners get no credit, but when things go wrong, as they do more often with inefficient processes, planners receive angry phone calls or emails.

An immature supply chain is not a sustainable supply chain

An immature supply chain is inefficient but also rarely good for the earth or its people. The supply chain components of plan, source, make, deliver and return can be fraught with environmental consequences. Poor planning can lead to excess scrap or inventory that gets burned or sent to landfills. Sourcing can deplete scarce natural resources. Making goods can cause harm ranging from factory emissions to excess packaging. Delivery is difficult without a carbon impact. And returns logistics provider Optoro estimated that only 10% of returns from the holiday season ended back on the shelves, with much of the remaining 90% destined for landfills.

For an environmentally-conscious supply chain planner, already beleaguered working in an immature supply chain, these realities render a tough job even harder. And environmental concerns belong not just to planners: they’re increasingly top-of-mind for consumers. For example, environmental non-profit and investment research provider CDP, in research on fast-moving consumer goods, reports leading firms like Coca-Cola, Nestlé, and Danone are all racing to compete in the face of rising consumer demand for sustainable products.

Avoiding paralysis

My point is not finger-wagging or blame: according to CDP, 90% of the greenhouse gases in this sector are in their supply chain, which means supply chains have a tremendous opportunity to make a difference. But to make any kind of impact on sustainability initiatives, supply chains must be transformed. Sounds great in theory, but if you are in leadership at a company with an immature supply chain, how do you even get started?

In spite of what some vendors will say, there’s no magic pill. You can’t take two from the list of digital transformation, blockchain, the internet of things, artificial intelligence and machine learning and wake up in the morning feeling better. If your company joins the growing list making commitments toward zero-carbon emissions, that’s a great start. But those commitments must still be translated to actions on the ground and an infrastructure in place to measure results.

It is easy to feel paralyzed by the scope of the problems. And yet, as Christiana Figueres, one of the authors of the Paris climate change accords wrote in a new book, The Future We Choose, “We think that optimism is a decision. It’s a choice that we make….It’s basically an open attitude that is not a guarantee of success, but that actually opens the possibility towards success. We also understand that the opposite, fatalism, is a guarantee of failure.” Rather than feel depressed by the scale of the problem, you can start somewhere, and a great place to begin is to improve the maturity of your supply chain.

Reducing waste and inefficiency are a critical foundation upon which to build a mature and sustainable supply chain. Maturing your supply chain will pay off financially. The same McKinsey research cited above showed that companies that aggressively digitized their supply chains increased earnings (before interest and taxes) by 3.2%, the largest percentage of any business function, and their overall revenue by 2.3%.

Stepping toward a more mature and sustainable supply chain

One of the hallmarks of an immature supply chain is keeping data in Excel sheets across a string of disconnected silos, which inevitably causes latency. When decisions must be cascaded across silos, responding quickly is nearly impossible. A fundamental goal of any supply chain is to balance supply and demand, but when functions are siloed, functional excellence in one area may be negated by another. Capacity planning is blind to its impact on inventory.

This blindness and the latency involved in seeing means leadership lacks the visibility to make the best decision across the entire supply chain. The visibility and agility in our unique concurrent planning approach at Kinaxis makes these impacts more transparent. As you mature, you can improve your forecasts by better matching demand and supply through a single view across the entire supply chain. When these impacts are tied to inventory, businesses can reduce waste.

Moving toward the sustainable supply chain

As noted above, another challenge companies face is linking the visionary promise of laudable commitments to day-to-day objectives. For any initiative to stick it must be integrated into the fabric of the company’s bottom line. A core capability to help weigh complex decisions is the ability to generate scenarios quickly that show the impact of any decision in a link of the network to the entire supply chain itself, with the most relevant KPIs as a scorecard. With this kind of functionality smarter decisions can be made to assess the impacts on margin, revenue AND sustainability. This level of visibility is critical for any mature supply chain, let alone a sustainable one.

Concurrent planning means a supply chain has the visibility necessary to operate primarily in proactive mode but the agility to react quickly when necessary. Because even the best demand forecasts are made at a point in time, and things on the ground change rapidly. Consider extreme weather events like hurricanes and heat waves, which in an age of climate change research suggests are growing more intense and/or frequent.

As ARC Advisory analyst Steve Banker shares in this Forbes blog post, Procter & Gamble’s supply chain is so resilient that as Hurricane Irma approached in 2017 they reviewed capacity-at-risk in the path of the storm and repositioned their inventory to have the most-needed consumer goods ready for residents of Puerto Rico as soon the storm passed. This kind of agility meant that unlike competitors, they did not have to warn Wall Street of revenue hits from the storm. A more mature supply chain, connected, and agile, is also a more sustainable one.

It takes a village

A more mature supply chain performs better financially but also environmentally, because reducing inventory can mean sending nothing to the landfill. When Unilever adopted a zero-waste supply chain model, they racked up $227 million in cost benefits. Given the scale of the environmental challenges we face, we need large commitments made at scale to reduce carbon emissions and slow down climate change. But if the tragedy of the commons has yielded the current state of the environment, its opposite will also be required to turn this state around. Steps to move up the curve of supply chain maturity build this foundation.

If it takes a village to raise a child, it will take a global village of companies, nations, cities, and individuals to raise a more sustainable world. As Jean-Pascal Tricoire, Chairman & CEO at Schneider Electric wrote, “No single company can achieve the 17 United Nations (UN) Sustainable Development Goals (SDGs) alone. Each company plays a key role, and the SDGs create a coordinated framework for progress. The latest report by the UN Global Compact and Accenture of 1,000 global CEOs underscores how much the private sector still has to do. Aligning on the SDGs is critical to progress together, with suppliers and customers. At Schneider Electric, we believe in teamwork and are fully committed to this effort.”

And supply chains have a key role to play in this effort. Just this month, Jeff Bezos, founder of Amazon, made one of these large commitments in announcing that he would contribute $10 billion toward philanthropic efforts to fight climate change. This kind of funding dwarfs existing funding in this area and has an opportunity to make a significant impact. But as Aseem Prakash, a professor at the University of Washington and founding director of the school’s Center for Environmental Politics, points out, “Bezos has to think beyond this $10 billion … the leverage he has is not just $10 billion, the leverage he has is Amazon. Amazon can utilize its global supply chain network [and make it] an aggressively green supply chain.…Be clear that we will not do business with fossil fuels. I think if Amazon does that, others will follow.”

Five Initiatives for Supply Chain Sustainability

Sustainability | By Chris Cunnane • 01/30/2019

Sustainability 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.

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