Designing a Greener Supply Chain

To create a green supply chain companies can optimize the physical supply chain, lower energy usage in the manufacturing conversion process and improving product design and packaging to minimize waste.

U.S. manufacturing is at a crossroads. Globalization has changed the game. U.S. manufacturers have had to either adapt to market forces or fold up shop. In many respects the deck has been stacked against them, as emerging market competitors backed by favorable trade policies and low-wage labor siphoned off their market share. To survive, U.S. manufacturers have focused on specialization, quality, lean manufacturing, and other strategies, detailed regularly here in IndustryWeek. Honing these practices has helped many thrive despite the macro-economic forces at work against them.

Now there is another "global" trend impacting the manufacturing industry: climate change. It sounds pretty ominous but in the dark clouds there's a silver lining. U.S. manufacturers are well positioned to lead the rest of the world in the battle to lower carbon emissions and, at the same time, show why it will be a very profitable endeavor. Using technology and innovation, U.S. manufacturers can reduce their energy consumption, optimize their supply chain, reduce their costs, differentiate their brand, and establish the worldwide standards for environmental stewardship and sustainability.

The "carbon footprint" means different things to different people and there are several contributing factors to a manufacturer's footprint. Here are just two of several. First, there is the carbon impact of global supply chain networks. Carbon footprinting can become onerously complex when you consider the upstream and downstream contributions of partners and suppliers. Second, there is the carbon emissions generated from facilities, which includes all on-premises production assets and utilities. In this article we will focus on the supply chain how to design your network to factor carbon footprint.

There are multiple ways to foster green supply chains. These include optimizing the physical supply chain and the storage and transportation of product across it, lowering energy usage in the manufacturing conversion process, and improving product design and packaging to minimize waste and increase the recycle content of each.

Manufacturers can substantially reduce transportation, inventory, and production costs by using supply chain management (SCM) principles to plan the most efficient logistics network possible -- and be greener for the effort. Indeed, most companies have ample opportunities to reduce costs and improve customer service through SCM.

Many manufacturers rely on just-in-time practices in their supply chain that focus on costs and delivery. Supply chain modeling can take this to the next level by helping factor in the cost and benefits of variables like alternative transportation modes, fuel costs and the carbon impact of these decisions. These decisions do not have to sacrifice customer service or delivery times. In fact, a focus on supply chain design and modeling can actually improve these performance indicators while reducing costs and environmental impact. Supply chain design is a rapidly growing area and there are consultants and technology solutions that can help manufacturers create more efficient supply chain models that can react to dynamic requirements and market conditions.

The practice to green the supply chain has met its fair share of critics who cite it is not possible to design a supply chain that reduces a company's carbon footprint without increasing its costs and stifling growth. Recent studies by industry analysts show companies that implement best practices to green their supply chain do, in fact, reduce overall supply chain costs.

Evolving your supply chain to meet 21st century challenges does not mean replacing your fleet with the next generation of vehicles. It is about creating efficiencies to remove waste from the system. By modeling carbon emissions within strategic network design, manufacturers can realize almost immediate benefits. This technology allows companies to track and model costs and emissions that can influence the supply chain so companies can easily determine the most effective number of locations, sizes and capacities of facilities to meet consumer demand while also adhering to a green standard.

By moving away from spreadsheet based planning or system that relies on two variables (cost and speed), manufacturers can dynamically plan where and when to make, buy, store, and move goods based on changing fuel costs and transportation modes. The models allow manufactures to immediately see the impact of network changes to the supply chain and the bottom line.

Green is not a fad. These issues will not go away. The question is whether U.S. manufacturers will lead this new global trend or whether they will wait and react to it. The early returns are encouraging to me, as I see more and more manufacturers here make environmental sustainability a part of their identity. It's a smart, long-term business decision with a surprisingly quick return on investment.

Andrew Kinder is director of product marketing for Supply Chain Management at Infor, an Alpharetta, Ga.-based enterprise software provider. Kinder, based in the UK, has been involved in the enterprise software business since the 1980's, seeing it from a number of different customer-facing angles including implementation and support, business consulting, marketing and sales. For more information on how Infor is helping manufacturers green the supply chain, please visit http://www.infor.com/solutions/scm/strategicnetworkdesign


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