Tag Archives: transportation

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

17 Aug

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

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New Green Supply Chain Blog on Kinaxis Supply Chain Community

6 Aug

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

Green Transportation- All It Takes is Innovation and Drive

16 Mar

Framing the Issue

  • “Only 22 Fortune 500 companies have begun blunting their supply chain’s impact on the environment”
  • The amount of cargo shipped is “expected to triple in the next 20 years”
  • Measuring ghg emissions is the “fundamental starting point” of “any serious entity”
  • When reducing transportation emissions, “it is best to begin with the ‘low-hanging fruit’”
  • Rail transport is four times more efficient per ton than motor and 600 times more efficient than air transport

‘Greening” Transportation in the Supply Chain

“Logistics” is the integrated management of all the activities required to move products through the supply chain. Generally, “green logistics” focuses on seeking ways to manage the environmental footprint of the supply chain associated with your product, from point of manufacture through to the end user.  This translates often to taking a life cycle approach to manufacturing and distributing your product (as well as reverse logistics in some cases).

Transportation is a very key element of the logistics process and the supply chain which runs from vendors through to you to your customers. It involves the movement of product, service/speed and cost which are three of the five key issues of effective logistics. It also impacts with the other two logistics– movement of information and integration within and among suppliers, customers and carriers.

The 2009 14th Annual 3PL Study found that newer concepts and technologies are emerging to help both 3PLs and shippers cope with a “new, slower growth world”. The report advocated creating “horizontal, cross-company supply chains refereed by neutral third parties. This innovation is based on the concept that by clustering specific logistics activities and consolidating supply chains, significant economies of scale can be achieved in terms of efficiency (logistics cost), effectiveness (customer service) and environmental sustainability (carbon footprint)”, and as noted below.

Solutions:

From a logistics standpoint, 3PL providers might consider development of strategies to eliminate unnecessary materials handling or avoidable transport, and look for efficiencies that could move more product at a time.  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).

Any number of “green” strategies to enhance the competitive position of freight-forwarding services are being implemented worldwide , including at key ports of entry here in the U.S.  Most freight related environmental issues generally involve solutions to reduce energy consumption and limit greenhouse gas emissions.  Naturally some carbon or energy intensive issues can be managed only if they are directly controlled by freight forwarding companies, while other activities not under direct control can only be influenced in practice (for instance contract carriers).

Business Case Examples

  • Freightliner Trucks. 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.
  • Nortel: Nortel shifted from air to sea transportation to deliver significant cost reduction and took major adjustments in production planning and order scheduling to make it work For Nortel, the increased use of sea freight has saved more than $1,000,000 versus the more expensive air freight cost, as well as the opportunity to negotiate improved pricing that has realized approximately $500,000 of cost reduction.
  • The 2009 14th Annual 3PL Study: This study found that shippers want to create more sustainable, environmentally conscious supply chains. That means striking a balance between labor and transportation costs and the market value of carbon-reducing processes, compressed production cycles and less carbon intensive transportation modes that beat the competition.

Summary

Eyefortransport’s Green Transportation & Logistics European Report  (2008-09)  indicated the “The results from this year’s survey show that the supply chain industry has increased its focus on green initiatives from last year, and anticipates this trend to continue for some time yet. This has been shown in most of the topics of the survey, from increased adoption of initiatives, greater awareness of options available, growing incentives for greening whilst barriers are diminishing, to greater anticipated ROI and effectiveness of supply chains. …While those companies who have adopted strategies are gaining, those who have been left behind are finding it harder to implement changes. “

A 3PL green logistics strategy, regardless of whether you are involved with domestic or international, to be effective in gaining a competitive foothold, must recognize the criticality of:

  • Customer requirements
  • Mode selection
  • Carrier relationships.
  • Measuring/benchmarking
  • Regulatory impact.
  • Carrier mergers and alliances and closings
  • Flexibility

Looking at these basic challenges through a sustainability lens offers greater opportunities to find innovative opportunities to optimize resources, leverage risk and maintain cost volatility through enhanced supply chain relationships

It goes to say that a sustainability-focused 3PL strategy one innovative way to respond to the dynamics of your business, its customers, suppliers and operation through cost-effective, value added supply chain solutions.