To stay with this week’s theme of establishing an environmentally-friendly supply chain, here are a few more tips from Logistics Management on going green while at the same time cutting costs: Green logistics: Industry expert cites ways of going green and cutting costs at the same time. In the article, supply chain expert Jack Ampuja discusses strategies such as redesigning packaging and logistics systems, and the effect that oil price fluctuations can have on supply chains:
Right now, Ampuja said, the smart companies are working on “what if” plans for oil prices at $100, $120, or even $150/barrel, ready to implement when and if prices go that high. With each plan, companies have to think about how many distribution centers they have, how efficient the routes are between them, how they manage inventory to feed those routes, and other issues.
“The (plan based on) $150 oil is going to give you a different network than $80, I guarantee,” he said.
Another area that companies need to revisit is packaging optimization. Ampuja said packaging can cost companies much more money than it needs to, and use too many raw materials. Companies that cut packaging down to size can cut as much as 40 percent of their shipping costs.
While there has been a buzz across the industry about the environmental sustainability issue for quite some time now, I have noticed that press coverage on the topic has picked up significantly in the past few weeks. Many of these articles, including the one above, cite presentations that various supply chain experts have given at industry events (a lot of big industry events and conferences are held around this time of year). To me, the fact that this has become such a recurring theme among industry experts is an indication that in upcoming months, “going green” will start to become the norm, and not just a competitive advantage that companies can have, as their customers will start to expect it.
A recent survey conducted by GTM Research on 74 supply chain executives had some surprising results. Interestingly, sustainability is not at the top of the list of priorities – it falls in the middle of the pack. Companies are still investing in this area though, and the quest for energy efficiency is more popular than any other sustainable supply chain activity this year. Three fourths of respondants feel that their company’s environmental stance will have a direct effect on customer relationships within three years. Approximately one third feel it is a issue with customers today.
The below chart from GTM Research shows what their respondants believe will be the most influential supply chain activities in the next 12 months, for industry leaders and laggards:
Source: GTM Research
To read more on the study findings, please read the press release from GTM Research. SupplyChainBrain also has a nice summary of the findings on their website.
In last week’s post about greening the supply chain, I referenced an article that suggested starting with overseas suppliers (specifically those in China) to increase the supply chain’s energy efficiency. The article also discusses how Walmart has established a supplier energy efficient program in China, where the company has set a target of improving the energy efficiency of 200 factories by 20 percent over the next three years.
Today I found a bit more info on setting up a sustainability program such as Walmart’s. This article from Logistics Management explains that the benefits go beyond being good environmental citizens:
“Shoppers are looking for a good deal, but they also expect transparency,” she said. “They want to know that retailers are sensitive to global warming and other threats to future generations.”
Regina Edwards, director, supply chain compliance, for MeadWestvaco, concurred, stating that shippers were asking for “green” metrics placed on suppliers.
“Given the fact that we are so diversified and global, our leadership realized that we had to develop a principal code of conduct for suppliers that included more than just basic compliance,” she said.
It would not surprise me if, before long, going green becomes standard operating procedure, rather than something companies implement when they can.
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