First your facility went lean. Then it went green. You’ve gone energy-efficient and reduced as much waste as you could. But just because your factory is environmentally-friendly doesn’t mean your entire operations are green.
Pollution and waste means you aren’t effectively and efficiently using raw material. In the past, companies looked upstream to their suppliers to green their supply chains. It was all about the environmental practices of the suppliers. Now, the focus has been extended to the whole supply chain.
“A green supply chain is about creating the least possible waste, the smallest carbon footprint you can,” said Kurt Doelling, vice president of supply management, Sun Microsystems. “It helps both the environment and your bottom line.”
The benefits of greening your supply chain include reducing the cost of goods and lowering your supply chain management costs (i.e. less gas for more fuel efficient trucks), as well as the ability to raise your average selling price (think organic foods).
According to Peter Bolstorff, author, “Supply Chain Excellence,” companies can make their supply chains greener across five areas: product design, product lifecycle management, their physical space footprint, energy consumption and waste.
He suggests companies use metrics of impact — evaluating their physical space, energy consumption or waste to find a baseline and measure it — to help determine savings and value behind going green.
Though an alternative like reusable packaging may have a higher initial cost, in the range of $20 to $50, over its lifetime it has a lower cost per use than cardboard. Cardboard may be $10 to $20, but has only two uses.
Pelican Reusable Containers are made of a copolymer, polypropylene base material that generates seven pounds of waste, some of which can be ground and turned into new containers. That is in comparison to corrugated cardboard packaging, which generates approximately 200 pounds of waste.
Reusing packaging creates less waste, less cost over time and it also reduces non-value added labor costs because it is no longer necessary to break down packaging.
“Reusable containers have the additional advantage of helping product presentation,” said Scott Ermeti, vice president, Marketing and International Business, Pelican Products. “There is less damage during transit than with traditional packaging, which means a better reflection on your brand.”
“The customers will determine the level of emphasis on green,” added Bolstorff. “A company can increase costs by selling organic foods. The question is whether or not the consumer will pay for it.”
The best way to be successful in implementing a green supply chain is to align the supply chain goals with business goals. Although green supply chains benefit local communities and environments, the best practices focus on business, not social value. However, with concerns over global warming, the social value is important.
Legislation is becoming globally important and creating a new business model based on something that is both corporate and social responsibility. Without the legislative push in response to global warming, it is unlikely that any one company would have taken it upon itself to go green.
“It has really been over the past year where companies have been motivated to go green,” said Doelling.
Making your supply chain greener can mean a better customer experience.
“When customers would order multiple servers, we would send them multiple manuals. Now, we put them online, which lowers our costs and makes customers happy,” said Doelling. “It has helped save 6,000 trees.”
Sun Microsystems also practices direct shipping. In the past, the company would send parts out to a warehouse and then to the customer. It found that it could reduce costs by doing direct shipping with certain products.
“It’s about ‘how can we drive costs down and make the supply chain a profit center,’” Ermeti said.
“Successful companies make green a part of their mission and vision statements, determine ways to measure progress, and focus resources,” added Bolstorff. “You can’t just decide to be green for green’s sake. You have to have some form of business justification.”
Making a greener supply chain turns compliance and minimizing risk and other forms of cost avoidance into innovation and growth, creating value.
The future of the green supply chain will be like that of auto production quality, according to Bolstorff.
“It will go from being a trend to a way of doing business. It’s just a matter of when the mainstream picks it up,” he said. “They’ll move from leaning it out to greening it out.”