Greener Shipping and Logistics- The Backbone of the Sustainable Supply Chain

The backbone of any sustainable supply chain relies on an effective and reliable transport network. And transport networks are clearly the lifeline that drives economic engines. Therefore it’s pretty easy to deduce that the transportation sector needs to be a well oiled, highly efficient and highly productive system. An interesting 2007 University of Massachusetts research study that I recently read studied the importance and criticality of transport systems in supply chains- and just as importantly how “sustainability” plays a vital role in planning and execution. From the study, the authors concluded:

“Without transportation, inputs to production processes do not arrive, nor can finished goods reach their destinations. In today’s globalized economy, inputs to production processes may lie continents away from assembly points and consumption locations, further emphasizing the critical infrastructure of transportation in product supply chains.”

“Indeed, companies are increasingly being held accountable not only for their own performance in terms of environmental accountability, but also for that of their suppliers, subcontractors, joint venture partners, distribution outlets and, ultimately, even for the disposal of their products. Consequently, poor environmental performance at any stage of the supply chain may damage the most important asset that a company has, which is its reputation.

This study underscores the messaging from a great monthly meeting that I attended this week of the Portland Chapter of the Council of Supply Chain Management Professionals (www.cscmp.org). The main topic concerned methods for measuring carbon emissions in the transportation sector. Excluding a full scale life-cycle analysis of the manufacturing of a product, transportation of goods and services represents a key carbon emissions point (second only to the utilities sector).

The presenters were from a unique company, GreenShipping (www.greenshipping.com), located in Hood River, OR, at the opposite end of the beautiful Columbia River Gorge from where I live In Vancouver, WA. The Columbia River has itself served as a vital “lifeline” of commerce since the early 1800s, when the Hudson’s Bay Company established quarters just down the road at Fort Vancouver. But I digress.

The folks from GreenShipping shared with the audience the key drivers (no pun intended) that are motivating freight transportation companies and logistics providers in a direction to measure and manage their “environmental footprint.” In some cases, companies that don’t measure their carbon emissions are finding themselves shut out of contract opportunities. Research has shown that trucking, rail, marine and air modes of transport all have their up and down sides and it’s best to look at point to point options that will result in lower energy/fuel costs, use of modes that use cleaner fuels (LNG, ultra low sulfur diesel), and generate fewer greenhouse gas emissions (use of larger ships that employ more efficient equipment or operational practices). To that end, the transportation and logistics sector has been proactively looking at ways to improve efficiency, while simultaneously reducing environmental footprints associated with moving goods.

This post cannot get into the full range of transport avoidance, operational and technological changes that can be implemented to reduce the environmental footprint associated with moving goods (later posts for sure!). However, as an example, Freightliner Trucks addressed the issue of fuel savings by focusing on more efficient aerodynamics. The aerodynamic features to the company’s Cascadia truck result in 7.8 percent to 22 percent less drag than other aerodynamic tractors, resulting in annual fuel savings of $900 to $2,750 per truck. Translate that into carbon emission reductions and the numbers would be enormous.

Meantime, there are also a number of tools that are available to assess GHG emissions and other environmental attributes associated with supply and transport, to allow you to accurately capture data and measure the true value of your supply chain. And that is where companies like GreenShipping.com can offer ways to measure and quantify what are called Scope 3 (indirect) carbon emissions. The company can help to ship, track, measure carbon emissions and (and here is a unique feature) offset the carbon generated by shipments through a partnership with the Bonneville Environmental Foundation (http://www.b-e-f.org). It’s also important to throw in that In 2004, the United States Environmental Protection Agency (EPA) launched SmartWay^SM— an innovative brand that represents environmentally cleaner, more fuel efficient transportation options http://bit.ly/amztNk.

The transportation sector makes great leaps in addressing its environmental footprint, so if you’ve not already started exploring your own environmental footprint, it’s a great time to start leading the way—or risk being a laggard.

A key takeaway from yesterday (attended by many logistics providers and goods manufacturers) was that taking a proactive look at supply chain logistics through a “green” lens is good for a company’s bottom line in terms of efficiencies and cost savings. But the residual reputational and environmental upsides are enormous in a challenging and competitive economy.

Your thoughts and ideas? What is your company doing to tackle this challenge?
This post was originally published on my New Green Supply Chain Blog, which can be found at https://community.kinaxis.com/people/DRMeyer/blog

Strategic Sourcing & Procurement: Great Starting Points to a Green Supply Chain

Reports surfaced this week about a Deloitte survey of a relatively small group of 50 executives taken from late 2009 to early 2010. However, the survey covered five industry sectors: automotive, consumer products, process and industrial, technology, and telecommunications.

While there was disagreement in some industry’s over what constituted a ‘green job’, there was widespread agreement in a number of areas.  Almost all surveyed indicated that sustainability priorities were at least partially aligned with their companies’ priorities. A total of 65 percent discussed priorities related to improving the environmental sustainability of their companies’ products.

Also, according to the survey, there were several areas of ‘greatest opportunity’ for becoming more sustainable while enhancing business profitability:

– 46 percent cited opportunities related to manufacturing process and operations

– 31 percent brand enhancements and perception

– 21 percent supply chain

The survey indicated a clear recognition (and a growing one) that ‘sustainability’ as a business enhancement plays an importance role in the future of business.  In its summary, Deloitte cited four key success factors that can aid a company’s ability to leverage sustainability, increase business value and emphasize supply chain management:

– Aligning sustainability strategy with business  strategy.

– Integrating sustainability into operations and processes across the value chain.

– Structuring non-traditional collaborations and extending existing collaborations.

– Setting up a governance structure that is supported by the right infrastructure.

On the supply chain point, the survey recommended as I have several times in this space the importance of driving sustainability upstream (vendors) and downstream (customers) in the product/service value chain through collaboration.  Efforts taken throughout the value chain broadens the reach of sustainability initiatives and makes it less isolated.

Implications to Supply Chain Management

So if you’re a supply chain pro (as I assume that if you’re here, that’s the case), you may be asking “Where do I get started down this green path’?”  The aspects of supply chain management that can benefit from a sustainability focus, are well, all of them:  product design, planning/ forecasting, manufacturing, order management, transportation, distribution, service management and reverse logistics. However, if you wish to start somewhere and get some huge bang for your buck, start with sourcing and procurement.

When you think of sustainable sourcing, consider it as a process of purchasing goods and services that takes into account the triple bottom line  or TBL (People, Planet, Profit) aspects of a product and its use. Sustainable sourcing considers how products are made, where and from whom they (and their components) come from, how they are transported, and how they are ultimately disposed of. Companies excelling at sustainable sourcing strive to ensure that their products and components meet or exceed environmental and social expectations.

To meet this need, many organizations are revamping their spend analysis tools to layer in a sustainability component (looking at the Total Cost of Ownership (TCO), or full range of costs- from an environmental and social perspective as well as financial). Simply put, TCO is:

Total Acquisition Cost- Total Lifecycle Cost = Total Cost of Ownership

In future postings, I will delve more deeply into TCO related methods to supplement spend analysis in the procurement process.  In the meantime, rest assured that more companies that are seeking to manage the life cycle environmental impact of their products.  They’re finding sustainable procurement to be a valuable tool to quantify and compare a product or component’s lifetime environmental and social impact while positioning the company for smart growth in a rebounding economy.

This post was originally published on my New Green Supply Chain Blog, which can be found at https://community.kinaxis.com/people/DRMeyer/blog

A Green Supply Chain Takes Innovation, Systems Thinking, Collaborative Approach–And Patience

As I have been involved with organizations through the years on environmental issues, I have discovered many things about supply chain management:

• Contractors and suppliers often create environmental impacts, sometimes related to the nature of their product or work, sometimes by accident
• Most organizations for some reason feel “powerless” to control their suppliers products
• Many companies are constrained by cost factors (purchase from the lowest cost vendor or bidder)

So when considering how to effectively manage and influence contractors and suppliers, raise expectations and take control of your supply chain, it may be valuable to take a “systems thinking” approach. Those that do realize that doing so may unlock significant revenue and cost savings potential.

Consider Starbucks. In mid 2009, Starbucks announced a legitimate attempt to address some very vocal stakeholder issues to clean up its supply chain by staring efforts to ensure that single-use cups are recyclable by 2012. So they convened a “cup summit” with representatives from every part of the paper and plastic cup supply chain, including raw material suppliers, cup manufacturers, retail and beverage partners, local municipal governments, Starbucks employees, and environmental NGOs. They brought in systems thinking guru Peter Senge. This effort is no small task given the internal (vendors and suppliers) and external (end use customer) variables necessary to make this program a success. They modified their goal to 2015. Starbucks reconvened this past spring and they are continuing down this open, transparent path to a sustainable supply chain. They are taking on this approach one city, one franchisee at a time. They are working with customers and cities to develop more proactive, use friendly recycling solutions.

To date, in its approximately 2,200 company-owned stores in North America that control their own waste collection, recycled items are made from one or more materials. While the company has continued to encourage recycling in cities where it’s “marketable,” a great deal remains to be down on the customer side (see Triple Pundit 8/20/10 article http://bit.ly/9SOJig). The company is also reaching deep and is offering farmers incentives to prevent deforestation, with pilot programs currently underway in Sumatra, Indonesia, and Chiapas, Mexico. This represents both an upstream and a downstream approach to green supply chain management. Sustainability is built into the company’s business vision, all performance metrics and product development decisions.  Starbucks has a long way to go to meet its goals but heretical goals like theirs may be takes time, coordination, patience, and above all, will.

Like Starbucks, Hewlett-Packard, the obvious Walmart makeover and others, forward-thinking companies are making efforts to consider how parts or components of a system are interconnected and examines the linkages between them. In the manufacturing and delivery of a product, a systems approach recognizes the interconnectedness between product components and delivery systems. So changing the way one component is manufactured, delivered, used and reused can effectively change behaviors and operations along the “value chain.” And along with this product systems thinking approach, sustainability data and metrics will flow with it, demonstrating the benefits to all those in the value chain.

So by standing back and viewing the supply chain in a systematic or holistic manner, organizations can apply that “big-picture thinking” needed to be truly innovative. Doing so can create leverage points that companies never realized they had before with their suppliers. So how does a company like Starbucks, or HP, or Walmart tackle such a beast, with literally tens of thousands of suppliers in their supply chain? Well nothing comes easy and overnight. Get yourselves into that mindset first before you proceed. But there are some relatively simple ways you can proceed and make the progress you have set out to achieve:

Develop macro and micro-scale process maps of the critical stages of the supply chain, with an emphasis on key sustainability inputs (energy, materials use, waste generation, carbon footprint), to fully understand where supplier processes and products connect. Identify those processes that you do not even have direct control over–this is vital because you may gain a better appreciation of you supply chain partners’ priorities as well

Identify the critical supply chain partners that have the greatest product impact and begin evaluating the strengths and weaknesses of the current relationship. If need be, can you effectively influence or control what they do and how it’s done?

Create a sustainable sourcing plan (with a two- to five-year window) where you develop a relationship with partners at those critical phases in your supply chain, from Tier to Tier. Develop a long-term engagement plan (as shown on the figure below), that incorporates your supply chain one tier at a time. Also make sure that the approach is collaborative and transparent (as I recently noted) in order to manage your suppliers expectations–and your own.

The upsides of collaborative, systems-based thinking is that suppliers feel ownership of the process, feel more invested in its outcomes and better positioned for a value-added business relationship. This is the essence of a green supply or “value chain.” All parts really are pulling together–this is the new wave of business in the 21st Century.

This post was originally published on my New Green Supply Chain Blog, which can be found at https://community.kinaxis.com/people/DRMeyer/blog

Exploring the “The Portland Bottom Line”- A Collaborative Effort in Sustainability Best Practices

Co-edited by Peter Korchnak and Megan Strand, “The Portland Bottom Line: Practices for Your Small Business from America’s Hotbed of Sustainability” is a collaborative exploration of sustainable practices for small businesses. Fifty small-business people from Portland, including myself,  share their experiences with sustainability in their companies. Each short essay highlights one actionable idea, valuable practice, practical tip, or actionable advice with demonstrated triple bottom line impact that any small business can implement tomorrow.

Contributors will collectively choose a local community organization which supports the launch and growth of small businesses or social ventures to receive 100% of net profit from the sales of “The Portland Bottom Line”.

I am excited to be part of this project and partnered with a great group of sustainability visionaries, practitioners and experts.

Look for “The Portland Bottom Line” in November 2010 .

www.portlandbottomline.com

What Motivates Suppliers to Meet Sustainable Sourcing Requirements- The Carrot vs. The Stick?

Are you old enough to remember the opening lines of the Buffalo Springfield song  For What it’s Worth? “There’s something happening here/What it is ain’t exactly clear/There’s a man with a gun over there/Telling me I got to beware”. I am thinking there is a green supply chain revolution in play, just as there was political unrest and turbulence of the mid to late 1960’s from which this song originated. Methinks Walmart may be “the Man”, but are they really holding a gun to suppliers?  I’m not so sure.

Walmarts efforts internally to establish its sustainability index continue to slowly progress along (I still predict a 2-3 year process before anything tangible emerges).  But, the company is as I predicted last year, changing the rules in how sustainability is felt up and down the supply chain- mostly for good.  Many companies in the retail and electronics sectors, such as Proctor and Gamble and IBM have most notably stepped up to the plate, but many others are learning from Wal-Mart’s green supply as well (see “The surprising success of the green supply chain” http://bit.ly/digXmH).  So how is this “cat herding” happening at such a rapid pace and what are the key issues being driven through the ‘value chain’.  Is this just a matter of keeping up with the next guy?

First- the ‘drivers”.  There are a number of factors and issues, both internal and external that can be attributed to this hot phenomenon in the supply chain space. In a 2009 study by GTM Research, sustainability was clearly a driving topic in supply chain management, ranking behind only three factors:  improving customer service, reducing supply chain risk and managing and optimizing an extended supply chain network  (Greening The Supply Chain: Benchmarking Sustainability Practices And Trends- GTM Research 2009 http://bit.ly/cl1QlU ).   The same study found that several factors were driving the greening of the supply chain across a number of vertical markets, notably:

• Lost sales (projected to be in the billions of dollars) because products in the supply chain were not “green” enoug
• Increased energy and transportation costs (accounting to over 50% of the cost increases)
• Damage to reputation and
• Supply disruptions

In response, Walmart and other major retail and industry giants are driving upstream and downstream performance based changes, designed to reduce suppliers environmental footprints and focused on several key areas:  energy management, fuel cost containment, carbon emissions, water use and waste generation.  New issues also factoring into the mix include green chemistry and management of restricted materials, depending on the geographic reach of global markets served.

To that end suppliers, from Tier One on down through the chain are responding to varying degrees and the early results appear favorable. As I reported last week, companies like Herman Miller, Walmart, P&G and Johnson and Johnson (http://bit.ly/cFBzjD) are showing marked reductions in most of the key metrics that they have been focused on, with much of the credit due to those suppliers who have found business sense in sustainability.

Now to that you may say that suppliers are goaded, cajoled, forced, strongly encouraged, or perhaps threatened to comply, or else risk losing millions in contracts.  Actually, what I am seeing with the likes of Miller, IBM, Hewlett Packard and others continues to be more of the carrot and less of the stick- more collaboration and performance based incentives coupled with onsite verification- that’s all good because it encourages accountability.  But that’s a topic for a future post.

In the meantime, to paraphrase another line in that Buffalo Springfield tune:  “Stop [vendors] what’s that sound /everybody look what’s going round”.  Until next time.

This post was originally published on my New Green Supply Chain Blog, which can be found at https://community.kinaxis.com/people/DRMeyer/blog

Sustainable Sourcing – Transparency & Collaboration to Create ‘Reciprocal Value’

This post was originally published on my New Green Supply Chain Blog, which can be found at https://community.kinaxis.com/people/DRMeyer/blog

In the new ‘green’ economy, disclosure and transparency is king. In fact, consumer demand, especially in the retail sector is driving a new “business as usual”, where green indexes that display the environmental footprint of a product are rapidly becoming commonplace. Sourcing sustainable materials can mean, therefore, putting added pressure on suppliers to share sensitive information and help create green products—or risk being cut out of the supply chain altogether. So was the conclusion in a recent article on how many consumer products manufacturers are literally “going the distance” to source sustainable ingredients (http://bit.ly/a1a1Bw). From specialty products like Dr. Bronner’s Magical Soap to larger products manufacturers like Unilever and Method, manufacturers are revisting the design process to source less resource intensive, more environmentally benign ways to manufacture their products. Not only is this good for the environment, but clearly better for companies bottom lines.

A classic case of disclosure in the supply chain came recently with Herman Miller, the popular furniture manufacturer. Years ago the company embarked on the sustainability path, because they clearly saw a business advantage but felt it was the “right thing to do.” The company launched its ‘Perfect Vision’ campaign in 2003, which included green goals such as no landfill waste, no hazardous waste, no air or water emissions from manufacturing, and the use of 100% green energy, all by the year 2020. Simply put, the company couldn’t reach those goals without engaging over 200 materials and components suppliers in managing their own environmental footprints global supply chain.

The company chose to take a holistic approach to design, raw materials, production methods, packaging, shipping, recycling, and even marketing–across the entire value chain. They reached down four full tiers in their supply chain, crafting hundreds of non-disclosure agreements to understand the true environmental footprints of each and every component of their products.  They knew that to be a truly sustainable company, they had to green its entire supply chain. This obviously has not happened overnight, but Herman Miller has stayed the course.  They embraced transparency and openness but did so with their value chain in a collaborative, win-win manner.  To date nearly half of the 200 plus suppliers are in alignment to meet Millers waste reduction goals with 10 more years to cross the finish line.  It’s clear to me that most companies are not lagging behind to meet these goals and are stepping up to stay ahead and to stay competitive.

Successful supply chains are based on mutually beneficial relationships between suppliers and customers, so it is important to extend the scope of sustainability value creation by sharing intelligence and know-how about environmental and emerging regulatory issues and emerging technologies, so that suppliers and customers can collaboratively strengthen each other’s performance. Doing so aids in distributing cost of ownership, enhancing product differentiation, and ensuring customer loyalty.

Collaboration and transparency then creates a sort of “reciprocal value creation” in the supply chain, where both suppliers and customers are better equipped and enabled to recognize and quantify each others value contributions to a successful, green supply chain.

New Green Supply Chain Blog on Kinaxis Supply Chain Community

Friends- I want to let you all know that I have recently been invited to be the lead expert blogger on green supply chain issues for the Kinaxis Supply Chain Community. 3500 members and growing strong! As mentioned, The Supply Chain Expert Community is “Your social place for learning, laughter, sharing and connecting.”

LEARN—Read insights from our bloggers and members. Ask questions, discuss trends, research topics.

LAUGH—Visit the “Just for Laughs” section, and enjoy some supply chain humor.

SHARE—Impart the lessons you’ve learned and the obstacles you still face. Invite your friends and colleagues to join the discussion.

CONNECT—Meet peers who face similar challenges and opportunities. Give and receive support.

You can view my Green Supply Chain Blog here:

https://community.kinaxis.com/people/DRMeyer/blog