Solving the Sustainable Sourcing & Green Supply Chain Management Puzzle: A 2010 Rewind

2010 is nearly ‘in the books’, and I vowed that I would not fall prey to the endless lists and recounting of annual accomplishments.  However, never in my 30 years in the sustainability and environmental business has there been so much attention paid to the influence of supply chain management and its role in the greening of business.  2010 has been truly remarkable in a number of key areas of green supply chain management from a number of perspectives, including: policy and governance, operations and optimization, guidance and standardization and metrics.  The green pieces of the supply chain and sustainability puzzle appear to be nicely falling into place.  Key themes that I can glean from this most incredible year are:

Big Industry Movers and Government Green up the Supply Chain- over the past year, observers and practitioners read nearly weekly announcements of yet another major manufacturer or retailer setting the bar for greener supply chain management.  With a much greater focus on monitoring, measurement and verification, Wal-Mart, IBM, Proctor and Gamble, Kaiser Permanente, Puma, Ford, Intel, Pepsi, Kimberly-Clark, Unilever, Johnson & Johnson, Herman Miller among many others made a big splash by announcing serious efforts to engage, collaborate and track supplier/vendor sustainability efforts.  Central to each of these organizations is how vendors impact the large companies carbon footprint, in addition to other major value chain concerns such as material and water resource use, and waste management.  Even government agencies here in the U.S. (General Services Administration) and abroad (DEFRA in Britain) have set green standards and guidelines for federal procurement.  More and more companies are jumping on the green train and the recognition is flowing wide and deep.

Supply Chain Meets Corporate Social Responsibility- Adding to many companies existing concerns over environmental protection, large products manufacturers such as Nestle, Corporate Express, Danisco, Starbucks, Unilever and the apparel industry stepped up in a big way to address human rights, fair labor and sustainable development in areas in which they operate throughout the world. Each of these companies and others like WalMart have embraced the “whole systems” approach that I’ve previously written about in this space and that underscore transparency and collaboration the “value” in the supply chain.  Each company recognizes that to be a truly sustainable organization, it must reach deep beyond its four walls to its suppliers and customers.

Emerging Sustainability Standards Embrace Supply Chain Management- This year, the international Organization for Standardization (ISO) unveiled its ISO 26000 Corporate Social Responsibility guidance document.  In addition, two prominent organizations, UL Environment and Green Seal unveiled and vetted two sustainability focused product (GS-C1) and organization (ULE 880) standards, both of which may markedly affect supply chain behaviors in the future.  Central to all these standards and guidelines is how important supply networks are in supporting the entire product ‘value chain”, not only from an environmental perspective, but from a social and community focused perspective.

Transparency and Collaboration Take on a Green Hue– in April, I had the honor of addressing C-suite supply chain managers and practitioners at the Aberdeen Supply Chain Summit in San Francisco.  A central theme of this conference involved the critical importance of collaboration throughout supply networks to enhance efficiencies and optimize value.   My talk (linked here) focused on how the most successful greening efforts in supply chains (like those used by Unilever, Herman Miller and Hewlett Packard) were based on value creation through the sharing of intelligence and know-how about environmental and emerging regulatory issues and emerging technologies.  Suppliers and customers can collaboratively strengthen each other’s performance and distributing cost of ownership.  Practitioners have found “reciprocal value” through enhanced product differentiation, reputation management and customer loyalty. And the continuing Wikileaks controversy is boldly reminding the business world that accountability and transparency and corporate social responsibility is vital and may even be a game changer in how products and services are made and delivered to the global marketplace.

Logistics Turning to Greener Solutions– numerous studies and surveys conducted by peer organizations this year underscored how sustainability among carriers and shippers was central in the minds of most logistics CEO’s.  Whether it was by land, air or sea, shipping and logistics embraced sustainability as a key element of business planning and strategy in 2010.  I also had the pleasure of visiting briefly with FedEx’s Vice President, Environmental Affairs & Sustainability (@Mitch_Jackson) this fall and learned of the myriad of operational innovations and sustainability focused metrics that the company is tracking throughout its operations and maintenance activities. And UPS even mentioned its efforts to manage its carbon footprint in its catchy new brand campaign “I Love Logistics”.  Finally logistics companies are partnering with manufacturing to support reverse logistics efforts designed to manage end of life or post consumer uses of products or resources.

Lean Manufacturing Meets Green Supply Chain– as manufacturing continues its slow rebound from the Great Recession, companies are recommitting themselves to implementing less wasteful production as a way to leverage cost and enhance savings.  Parallel efforts are in play also to incorporate more environmentally sustainable work practices and processes.  Enhancing this effort to lean the product value chain is recognition of upstream suppliers and vendors work practices and possible impacts they may have on manufacturing outputs. Lean efforts have been demonstrated to yield substantial environmental benefits (pollution prevention, waste reduction and reuse opportunities) as well as leverage compliance issues.  More and more, companies are exploring the overlaps and synergies between quality-based lean  and environmentally based ‘green’ initiatives.

Supply Chain and Climate Action– Rounding out the year, the climate summit in Cancun (COP16) produced modest results (given the low expectations all around, what was accomplished looked huge by comparison to Copenhagen).  Activities at COP16, especially by the private sector were geared toward identifying key linkages between supply chain sustainability and climate change.   Perhaps the biggest news to emerge from the two-week conference was an effort by apparel manufacturers to enhance supply chain social responsibility and an internet database that will list the energy efficiency of most ocean-going vessels, in a scheme designed to reduce shipping emissions by nearly 25%.  As I noted, this effort is important not only because it recognizes shipping and transport as a backbone” of commerce (as other industry sponsored programs have recognized already), but because of the value of transparency in enhancing supply chain efficiencies.

Looking Forward to 2011

Yes indeed, it’s been a big year for supply chain management and its intersection with sustainability.  I see little for 2011 that will slow down this upward green trajectory, and naturally I am glad.  I am glad that more businesses “get it” and don’t want to be viewed as laggards in leaning towards a business ethic that values sustainability and socially influenced governance. I am glad that more companies are seeking out green innovation through new technologies and being ‘first movers’ in their respective business spaces.

And I am glad that you (my readers) and I am here to be part of the change.

Seeking Links Between Supply Chain Sustainability, Logistics & the U.N. Climate Conference (COP16)

As the world’s nations converge on Cancun this week for the two week UN Climate Change Conference (COP16) a few statistics are in order to put the supply chain and related logistics industry into perspective.  It’s a pretty sure bet (given poor results at COP15 in Copenhagen and recent Congressional elections here in the U.S.) that it’s unlikely that any major binding agreements will be reached on setting measurable and verifiable targets for greenhouse gas (GHG) emissions cuts for industrialized nations.  What is at least hoped for is that there will be some progress on establishing more robust means to appropriate and distribute micro-finance funds to support development of technologies in developing countries that lack the dollars themselves to manage their own greenhouse gas footprints.

Logistics and Transportation Share a Big Piece of the Carbon Pie

But the fact remains that logistics is a major source of CO2 emissions, accounting for 13.1% of global greenhouse gas emissions, according to the Intergovernmental Panel on Climate Change (IPCC, 2007) – although, this figure also includes passenger transportation.  The “transport sector’ sector as a whole is responsible for 24% of global CO₂ emissions!  So as the logistics industry grows and expands to respond to the ever changing demands by global commerce, so will energy consumption and GHG emissions related to daily logistics.  To that end, in a report issued this fall by Deutsch Post/ DHL, “Delivering Tomorrow: Towards Sustainable Logistics”[1], a study of more than 3600 companies found that “two-thirds, i.e. 63 % of business customers, believe companies will regard transportation as a key lever to reduce their carbon footprint”. And while the report suggests that low-carbon logistics solutions and flexible transport modes are not yet widely available, there are a few market-ready technologies or solutions today that can meet the specific needs of the transport and logistics sector.

“We want to take a significant step forward to improving carbon efficiency and do our part to facilitate a low-carbon economy,” says Chief Executive Officer of Deutsche Post DHL Frank Appel. Deutsche Post DHL was the first logistics company worldwide to commit to a carbon efficiency target – 30 percent improvement by the year 2020 compared with 2007.  Other companies such as UPS and FedEx are implementing similar programs designed to optimize operations in a sustainable manner.

The report also cited that “70 % of respondents believe that legislation is needed in order to bring about a substantial shift towards a sustainable logistics industry.” The study shows that carbon pricing mechanisms can likely accelerate a market-based dynamic toward more sustainable solutions. Once there is a real price tag attributed to carbon emissions, the environment will be an integral part of investment decisions.    Customers in Asia in particular appear quick to accept that sustainable solutions may cause higher prices, according to the study. For example, 84 percent of consumers in China, India, Malaysia and Singapore say they would accept a higher price for green products – compared to only 50 percent in Western countries.  This type of hesitancy on the part of Western countries falls in direct line with the ‘foot dragging’ that has occurred at past climate conferences.

The report concluded by suggesting seven key developments that are likely to take place that can largely be influenced by the ways that logistics can affect global commerce:

1. Logistics counts – it is not a commodity. Logistics is not only a chief catalyst of global trade and a defining component behind value creation – it is also a business of strategic importance in the move towards a low-carbon economy.

2. Technological change will be achieved through a concerted planning and implementation effort between private companies, governments and financial institutions.

3. Collaboration will increasingly be seen as an enabler to attain sustainability even between perennial competitors. This will especially be the case as greenhouse gas emissions reduction becomes a priority for suppliers, business customers and logistics companies.

4. Business models of logistics companies will change as sustainable innovations and technological advances create new opportunities.

5. Carbon labeling will become standardized. Carbon ‘tags’ offer ways for customers to compare environmental impacts of products. This increased product ‘transparency’ can raise confidence among logistics customers and end consumers when making climate-friendly choices.

6. Carbon emissions will eventually have a price tag, whether it’s mandated by law or not. Already, carbon accounting has become part of companies accounting, decision making and corporate reporting practices in many market sectors. Increasing movement in this direction, with possible government or free market intervention will only increase the demand for a price to be attached to CO2 emissions.

7. Carbon pricing will lead to more stringent regulatory measures.  However companies will only accept a price tag on carbon emissions if governments ensure a level playing field across industries (and more challenging will be across economies).

Companies are not Waiting Around

Already, big product manufacturers and retailers like Unilever and Walmart are reaching deep into their supply chain to stock shelves with less harmful products.  Gavin Neath, senior vice president for sustainability for Unilever says that this approach not only helps the company cut costs, but create new products that are less impacting to the environment and expand in developing-world markets that are likely to be hit hard by global warming, he said. With efforts to secure a global climate treaty barely inching forward “big companies like ours, which have very extensive supply chains, reaching across all continents and 60, 70 countries, can make a difference,” Mr. Neath explained.

That brings us back to COP16.

UPS Carbon Neutral Shipping Program (courtesy Logistics Management Magazine)

It’s been suggested by some practitioners and policy makers that at COP16, a binding agreement is more likely to occur when countries take ownership of their entire life-cycle emissions and when such agreements are based on data that attributes emissions fairly.   It’s also been proposed that national inventories be generated by adopting measurement tools that follow the principles established by existing carbon accounting methodologies already used by corporations and at a product level.   Supply chain wide carbon accounting (at the product design, manufacturing and distribution levels) is a vital ingredient to achieve this result.

I’ll be watching COP16 developments closely in Cancun these next two weeks and will offer additional insights about what potential policy driven outcomes these negotiations may have on supply chain logistics.

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[1] The study on sustainable logistics was developed with experts from MIT, Potsdam Institute for Climate Impact Research, National University of Singapore and the Technische Universität Berlin, Deutsche Post DHL, and manufacturers/retailers like Fujitsu, Henkel, HP, Unilever, and Walmart.

2010 Green Supply Chain Awards Recognize Companies for Innovation, Efficiency, Environmental Performance.

Last week, the Supply & Demand Chain Executive magazine announced the recipients of its 2010 Green Supply Chain Awards.  These awards recognize companies that are making sustainability a core part of their supply chain strategies.

This is quite an impressive list and perhaps it shows that “green supply chain” as an integral function in business operations may be cementing itself as a new “business as usual”.  Why?  I have spoken repeatedly about how small to midsized companies are being pressured by primary customers, or original equipment manufacturers are seeing trade barrier blockage due to emerging rules and regulations, and how advancements in accounting for corporate social responsibility effort are on the rise, to name a few.

 “The purpose [of the Green Supply Chain Awards], according to Andrew K. Reese, editor, Supply & Demand Chain Executive is to “highlight a range of strategies and solutions that companies are employing to incorporate sustainability into the supply chain,” Reese said. “Our readers can use this information as a baseline to assess their own efforts in this regard.”  Through an online nominations process, submissions were reviewed based on the clarity and content of the sustainability and related supply chain management goals and strategies, implementation measures taken and performance results to date.

From among the nominated companies Supply & Demand Chain Executive selected those firms that “stood out for their projects to incorporate sustainability objectives into their own supply chains or to enable sustainability in their customers’ supply chains”.  Recipients ran the gamut from logistics and transportation companies (Maersk, DHL, YRC, CaseStack, Penske, Unisourse, Evergreen), , airlines and railways (Norfolk Southern, Cathay Pacific), clothing and footwear apparel (Timberland, Puma), healthcare (Kaiser Permanente), pharmaceuticals (Novartis), retail office supplies (OfficeMax), software and enterprise systems applications (Syspro, Cisco), among others.

Past recipients like Schneider Electric implemented a number of measures through its supply chain designed to manage the Registration, Evaluation, Authorization and Restriction of Chemical Substances (REACH) law entered into force in the European Union in June 2007. Taking proactive action with its suppliers avoided costly disruptions in its operations.

At D.W. Morgan Co. last year, the company introduced iPhone-based mobile communications system, and with it managed to eliminate roughly 50,000 paper way bills annually.

Finally, 2009 winner Conexant Systems consolidated its hubs to two major locations in Singapore and Taiwan.  This consolidation allowed the company to allowing it to mix-and-match its chip sets at those locations, leading to significant reduction and reuse of packing materials, and reduced customer shipment frequency (by up to 75 percent).  Now that is efficient!

These examples  demonstrate how viewing at sustainability as a vital business risk management tool can be effective at all points in the product value chain- from Sourcing/Procurement, to Product Fulfillment/Logistics, Operations, Product Lifecycle Management Design , and other areas of the product value chain.

On top of the SDCE Green Awards list, Inbound Logistics named its Top 50 Green Partners list earlier this year (some of the third party logistics and freight companies are also listed on the more recent SDEC list I might add).  Visionaries every one of them for being innovative and sustainable without negatively impacting their bottom line.  I encourage you to look over the list and the great accomplishments each of these manufacturers and supply chain partners have achieved.

There are a myriad of “boots on the ground” examples where companies have tackled operational efficiency and optimization and managed to reduce their environmental footprint and pare costs of production and product distribution.  All it takes is innovation, a solid cross functional team, leadership support and the will to finish the job. Perhaps next year, your company will make the list.

Redwood Forests Provide a Clue to Business Sustainability and a Greener Supply Chain

Thoreau did it.  So did Carter and Brezhnev, and Reagan and Gorbachev too.  They all took a walk in the woods, like I did on a recent weekend…to explore and resolve internal and external issues.  My hike took place in the coastal redwood forests of the Santa Cruz Mountains on the central California Coast.  A hike through these beautiful groves of ancient redwoods is truly an awe-inspiring, reflective experience. Redwood forests are complex ecosystems. From the tallest trees in the world to the tiniest animal, the whole forest is a working system in a very delicate balance. Everything has a role to play in this forest.

Coastal Redwoods (Sequoia sempervirens) are also known for their resistance to fire.  They are protected by a very thick bark that lacks the highly flammable resin of other tree species. These resilient trees in some cases, can live for more than 2,000 years, making them one of the oldest tree species in the world. Also, unlike most trees, redwoods lack a taproot. Instead, they have a shallow root system that can extend up to 100 hundred feet outward, forming a network of connected root systems with other trees. But despite the connected roots, high winds and/or flooding can bring these massive trees to the ground.

Now substitute the word “forest” with “supply chain”, “tallest tree” with “largest company” and tiniest animal with “smallest supplier”, and you hopefully get where I am going with this post.

I mentioned in prior posts that to make progress on environmental issues in organizations and in supply chain management, organizations must understand that they’re part of a larger system. Fifth Discipline and The Necessary Revolution author Peter Senge makes valid claims that organizations are in a better competitive position if they understand the larger system that they operate within and to work with people you haven’t worked with before.  Like a forest, where all parts depend on the other, if the balance is upset, there can be chaos and poor ecosystem health.  A supply chain is in effect a business ecosystem.  And a supply chain functions the same way as a redwood, in that it has interconnected roots rather than one strong taproot, but can be blown down by external forces that it may not be able to control.

The Concept of Business Ecosystems

Author James Moore developed and popularized the strategic concept of business ecosystems in his 1996 book The Death of Competition: Leadership and Strategy in the Age of Business Ecosystems. According to Moore, a generic business ecosystem is defined as the economic and social environment that consists of organizations, individuals, regulatory structures and controls, government organizations, customers, competitors, suppliers, and the many entities with which a business interacts. The principal purpose of the business ecosystem is to align its members towards a shared vision that is greater than the sum of its parts.  Business ecosystem value is created by the combination of participants and their contributions – and their role within the ecosystem to enable the achievement of a combined vision or goal.

Many organizations have sought ways to deliver greater product and customer value through innovative supply chain solutions. The common link is that customers’ receive value from a whole solution, which takes into account all value chain contributions.  Think HP, Microsoft, Cisco, IBM.  Traditional high tech companies.  But this thinking extends to consumer product and apparel manufacturers (Herman Miller, Procter and Gamble, Unilever, Nike, Keen, Patagonia) and major retailers like Walmart, Starbucks, Kohls.  The list grows weekly.  Each of these organizations have created business ecosystems through redefining the nature of the value for the client.  They have further created new competitive environments, with new rules and practices that account for sustainability and that challenge their industry norms through green supply chain innovation.

While my recent post called out many large companies for being procrastinators and laggards, I continue to applaud the industry leaders who’ve seen how each tree (supplier) contributes to a stronger and healthier forest (supply chain).

So go take a walk in the woods.  Breathe the air, take in the silence…and think of ways that you can help your company refocus its sustainability efforts and supply chain health for future generations to enjoy.

Green Supply Chain Management Requires Less Procrastination & More Innovation, Leading by Example

Admit it- we’ve all done it.  Procrastinated. Waited until the brink of a bad outcome.  Not taken the time to thoughtfully, proactively, pragmatically complete an assignment, implement a new ‘leading edge’ technology or launch a disruptively innovative initiative.  Instead we react, overlook great ideas for something less, produce a less articulate response to an inquiry, or implement a semi thought out idea.

Even in the business world, whether in supply chain management or in adoption of the ‘triple bottom line’ in business strategy, there are leaders and there are laggards.  Innovators and adopters.  I was reminded of this when I ran across a research paper that was published in “Sustainability” Journal this past spring.  The article, “Supply Chain Management and Sustainability: Procrastinating Integration in Mainstream Research” presents the results of a study conducted by several university researchers in The Netherlands. The researchers noted that “procrastination can be viewed as the result of several processes, determined not only by individual personality, but also by the following factors:

• availability of information;
• availability of opportunities and resources;
• skills and abilities; and
• dependence on cooperation with others.”

In addition, in a review of more than 100 additional studies on procrastination, the following additional items were found to likely to influence procrastination:

• the nature of the task, and
• the context of the issue.

It is these last two issues that the authors raised as primary reasons for procrastination, especially regarding embedding sustainability research and practices in supply chain operations and management. The authors found that “the nature of the task”, because it’s often complex and requires many internal and external stakeholders, and therefore tends to “generate conflicts”.  Also, the roots of supply chain management and related research are generally grounded in operations management and operations/logistics.  Therefore, the researchers noted that environmental and social aspects of supply chain management are foreign,  “out of context” and not wholly integrated into supply chain management and research.  I would also argue that dependence on others is a key issue as well given the widespread, outward facing challenges associated with supply chain coordination.

So what this means is that if a concept is foreign or unfamiliar or “out of context” it’s either set aside as being non-value added.  Also because of some of the complexities often inherent in grasping and applying sustainability concepts, some just throw up their hands and say “I’ve no time for this”.  This in turn can lead to procrastination in the real-world application of sustainability in supply chain management.

In a study conducted during the height of the recession (late 2009), GTM Research found that despite its growing prominence, “sustainability is not a core part of most companies’ strategies today or …a prime driver of their supply chain agendas.”  The study found that sustainability lies in the middle of the pack of supply chain priorities today, behind cost cutting.  The graphic presents a “leaders vs. laggards” scenario.  The 23% difference between leaders and laggards related to sustainability initiative implementation is large and underscores the work that remains to advance the “value proposition” for sustainability in supply chain management.

Prior posts have described positive aspects of adopting whole systems-based, collaborative and transparent approaches to sustainable sourcing and manufacturing,  and green logistics.  Sustainable thinking in supply chain management also value chain practices supports environmental and social responsibility – so why aren’t more companies adopting these methods?

I know who many of the leaders are in implementing greener and more sustainable supply chain practices in their respective markets and I’ve written about them here – Walmart, HP, Dell, Patagonia, Nike, Intel, Cisco Systems, IBM, Herman Miller, Proctor & Gamble, Unilever, Campbell Soup, Timberland, Danisco, UPS, FedEx, Staples immediately come to mind.  Laggards? Well you know who you are, but I am not pointing fingers.

While the future looks bright for a “greener” perspective in supply chain management, there still remains a stigma that a sustainable value chain is a costly one. In reality, there may be some up-front costs associated with some initiatives- very true.  But companies must take a longer view and pencil out the ROI of supply chain sustainability best practices. And its possible by taking a leap and reaping the benefits.  I’m confident that those organizations who wish to lead (and stop procrastinating!) will find a great many benefits including:

1. less resource intensive product designs,
2. better supply chain planning and network optimization,
3. better coordinated warehousing and distribution and
4. more advanced and innovative reverse logistics options.

Those who choose to lead will realize significant cost savings, improved efficiencies and a more secure and profitable future.

Give it a whirl- what have you got to lose- or should I say, gain?!  C’mon, tell this community what you think.  We’re listening.

In Supply Chain Logistics Management, There’s a Reverse Gear–and It’s Green–Part 2

In Part 1 on this series, I presented some definitions of reverse logistics from a traditional versus sustainability focused mindset, and extended product responsibility.

Reverse logistics includes processing returned merchandise due to damage, seasonal inventory, restock, salvage, recalls, and excess inventory.  It also includes recycling programs, hazardous material programs, obsolete equipment disposition, and asset recovery.  While product “take-back programs” have been a part of many companies operational playbook for some time, more sophisticated approaches are emerging which involve greater degrees of coordination and planning among multiple suppliers.

For a logistics practitioner, the best value choice for disposition is still often determined by the most profitable alternative:

1. Reconditioning – when a product is cleaned and repaired to return it to a “like new” state
2. Refurbishing – similar to reconditioning, except with perhaps more work involved in repairing the product.
3. Remanufacturing – similar to refurbishing, but requiring more extensive work; often requires completely disassembling the product
4. Resell – when a returned product may be sold again as new
5. Recycle – when a product is reduced to its basic elements, which are reused – also referred to as asset recovery.

Product take-back programs

Product take-back programs are particularly popular in the retail sector, as manufacturers reap the benefits for material recovery while customers find convenient ways to jettison used products for recycling (printer cartridges, used computers, aluminum cans, tires, batteries, etc).  As my first post mentioned, restricted materials directives in Europe such as WEEE and RoHS have for years been dictating how manufacturers manage “end of life” equipment issues.  In his book aptly named “The Truth about Green Business”, Gil Friend describes a series of steps that retailer Patagonia and manufacturer Hewlett Packard (HP) have taken to close the loop on product manufacturing to mutual benefit.  In particular, to meet the growing demand to manage end of life issues for computers and other electronics, HP and mining company Noranda crafted a take back system in the early 2000’s that is unique. The system covers pickup, transportation, evaluation for reuse or donation, and recycling for products ranging from printers to scanners.  Noranda provides HP and other OEMs with disassembly, product testing and metal recovery services.  Part of this process involved installing efficient warehousing systems that electronically tracked materials through the recycling process. About 3.5 million pounds of materials are processed annually.  Dell Computer Corporation also has a similar take-back program, aimed at its leasing customers and other large companies that may have Dell units. Dell Financial Services handles the asset recovery for customers and the viability of the units determines how they are recycled/

Turning Trash to Into New Products

In a post this week  by author Marc Gunther, Walmart announced that as part of its efforts to reduce its waste streams from its retail and distribution centers, they are working with one if its suppliers (Worldwise) to begin what it calls the Full Circle program.  This program creates a closed-loop system that takes old plastic bottles, clothes hangers, plastic bags and corrugated cardboard and makes new products from materials that would otherwise be waste- and turns them into eco friendly pet products that are in turn resold in Walmart stores. And there you have it-trash to treasure through “upcycling”.

Quoting Gunthers post, “We’re committed to creating zero waste,” explains John Kunkel, senior buyer, pets for Walmart. One way to get there is to take things that Walmart throws away and instead of sending them to a landfill, make them into something useful.”  The effort reportedly took more than a year and was coordinated with “seven or eight different divisions of the company.” according to Mr. Kunkel.  After Walmart’s waste is baled, it is separated into its components at materials recycling facilities.  Then the baled waste is trucked to supplier Worldwise’s North American manufacturing plants. The products that result are then shipped to distribution centers and to all of Walmart’s U.S. stores. “We’ve had to create a playbook,” Kunkel said. “Now other manufacturers can implement a closed loop in their business.”

Getting Started

Reverse logistics deals with five basic questions:

1. What alternatives are available to recover products, product parts, and materials?
2. Who should perform the various recovery activities?
3. How should the various activities be performed?
4. Is it possible to integrate the activities that are typical for reverse logistics with classical production and distribution systems?
5. What are the costs and benefits of reverse logistics, both from an economical as an environmental point of view?

To first address these questions, ask yourselves which products are suitable for reverse logistics?  Base your decisions on “recoverable” characteristics that a product might have such as:

1. The product size
2. Volume of sale of products
3. Hazardous components
4. Design cycle and product life cycle
5. Product traceability
6. Product modularity

As an example, the  graphic below presents a conceptual supply chain “total carbon  footprint” and the various touchpoints from a manufacturing and reverse  logistics perspective (graphic via  Reverse Logistics – Turning Green to Gold, Reverse Logistics Magazine, Aug/Sept 2008).

Once you can get a handle around which products pose the greatest asset value in terms of recoverability, the next phase is in looking for potential ways to reprocess or reuse waste byproducts or other manufacturers that may be turn your waste into their product feedstock.  Either way it’s a win-win-win- for your company, your customers and the environment.

Further posts will focus on proactive steps that companies can take to design sustainability in product manufacturing, and ways to coordinate reverse logistics campaigns with suppliers and customers.

Meantime, it would be valuable to this readership if you’d consider sharing what your company is doing to “lighten the environmental load” on the planet and in your manufacturing process.

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