Introduction

Sustainability is, without a doubt, one of today’s most significant

global business opportunities. Besides being good for planet Earth,
sustainability is important to your customers and presents a huge
opportunity for market share growth, as well as providing potential
cost reductions in manufacturing and your supply chain.

Government regulations and public opinion are compelling your

customers to adopt environmentally-friendly policies, like reductions
in packaging, water usage and green-house gasses, and energy
efficiency policies designed to reduce their environmental “footprint”.
They expect you, as their supplier, to support these initiatives.

Sustainability Defined

Sustainability is a characteristic of a process or state that can be

maintained at a certain level indefinitely. The term, in its
environmental usage, refers to the potential longevity of vital human
ecological support systems, such as the Planet's climatic system,
systems of agriculture, industry, forestry, fisheries, and the systems on
which they depend.

The Brundtland Commission, led by the former Norwegian Prime

Minister Gro Harlem Brundtland, defined sustainable development as
“development that meets the needs of the present without
compromising the ability of future generations to meet their own
needs.”

Embraced as a key strategic element and change management tool,

sustainability will help you secure the future of the organization,
brands, and reputation. It will help to minimize business risk, reduce
bottom-line costs, increase top-line profits, and enhance the
experiences of employees, customers, and stakeholders. It’s no
surprise that virtually every manufacturer is claiming they have
sustainable or green products and corporate philosophies. But what
does a sustainable green supply chain actually look like?

The Green Supply Chain

An industry-accepted definition of a green supply chain does not exist

today. So how does one build one? Is it enough to be eco-friendly in
some processes, like transportation or manufacturing, to qualify your
company as being green? What about warehousing, inventory
management, and the efficient maintenance of your capital
equipment? Must every supply chain function be eco-friendly, or can
you focus on some areas of the supply chain and still be considered
green? In reality, all of these questions are open-ended. However,
most experts agree that building a green supply chain is similar to
implementing lean or six sigma strategies; it is a journey, not a
destination.

Building a green supply chain involves making trade-offs between

minimizing your supply chain environmental impact, and other
business objectives like agility, efficiency, profitability, and customer
service.

Manufacturers need to take a holistic approach to supply chain

sustainability, starting with product development, and working their
way through supplier management, manufacturing, transportation,
inventory management, and management of key capital equipment.
Where to Start

Greening an entire supply chain is a daunting endeavour and requires

a long-term commitment. Most companies start with a more
manageable goal, focusing their initial greening efforts on one or two
processes. For example, a company might start their greening journey
by:

 Reducing energy consumption through lean manufacturing

methods and machine preventive maintenance
 Measuring and minimizing its transportation and warehousing
energy usage and carbon footprint
 Working with its suppliers to minimize excess shipping and
end-item packaging

As with other transformative initiatives, there are three major areas

manufacturers must consider when greening the supply chain: people,
process, and technology.

Most manufacturers lack the organizational structures and processes

that enable an end-to-end view of their environmental footprint across
their extended supply chains. Manufacturers that are still functionally-
aligned across manufacturing, sourcing, transportation, maintenance,
and distribution will find it difficult to manage supply chain-wide
green initiatives. Even if strong organizational structures and
processes are in place, companies still require a strong sustainability
vision with associated goals.

Leading manufacturers have identified both strategic and tactical

green supply chain goals as a result of pressures driving their
sustainability issues. These goals include reducing business cost,
enhancing company social responsibility, improving profits, reducing
waste, increasing recycling, reducing emissions, and reducing use of
toxic materials. These goals are being accomplished through projects
and ongoing process and system enhancements including distribution
network redesign, collaboration efforts, demand management
improvements, capital equipment maintenance improvements, product
reformulation, packaging redesign, and enhanced transportation and
warehousing capabilities.

The most successful supply chain greening efforts align a company’s

technology to their organization and process capabilities. Diving into
a technology investment without understanding how it aligns with an
overall company strategy is counterproductive. When a manufacturer
is ready for green supply chain technology investment they need to
ensure they have a holistic vision that considers integration across
multiple supply chain areas versus point solutions specializing in only
one area like transportation or manufacturing. Having established a
holistic vision, implementation can be accomplished through focused
initiatives around key supply chain elements. The benefits of such a
phased approach is reduced complexity and improved time to value.

The Value of Green Supply Chains

Beyond being good for planet Earth and your company’s image, green
supply chain initiatives also tend to have a large return on investment
by impacting both top and bottom line results. In the white paper
“Building a Green Supply Chain: Social Responsibility for Fun and
Profit”, Aberdeen used four key cost-related criteria to distinguish
Best-in-Class companies from industry average and laggard
organizations.
The Value of Greening the Supply Chain

Evidence suggests that the net effect of evolving to a sustainability

culture is positive to the bottom line – not just from a cost impact and
risk avoidance, but also revenue from your enhanced image with the
customers. Going green can lead to benefits beyond measure –
especially when you take a long term view.

Top Five Green Supply Chain Strategic Actions

Although manufacturers take on green initiatives for a multitude of

reasons, according to Aberdeen Research the most common areas that
companies are implementing supply chain process and technology
improvement strategies include:

 Redesign aspects of logistics and transportation system

 Redesign procurement/sourcing strategy around green
 Focus on emission/carbon footprint reduction strategies
 Improve waste disposal management (recycling, reuse, reverse
logistics)
 Redesign aspects of packaging and/or product design

Historically manufacturers have started sustainability or green

programs to improve public relations or influence stakeholders. More
recent trends have found that the major areas of emphasis for green
programs have expanded to include the extended supply chain where
being green also has large impacts on profitability.

Key Green Supply Chain Processes

While there are a number of functional areas that can contribute to
greening the supply chain, most of the benefit can be gained by
improvements to key supply chain processes discussed in the
following sections.

Supplier Collaboration

Supplier relationships have always been a critical component of

business success. But in an increasingly competitive and fast-paced
world, the role of the supplier is becoming even more important. The
principle of supplier collaboration is based on gaining visibility and
control not within a single company, but across an enterprise and its
key suppliers. Because trading partners share visibility, control and
accountability for their cooperative activities, trust and dependability
are increased and surprises are all but eliminated. Companies that
have implemented supplier collaboration initiatives consistently refer
to three high-impact benefits for their organizations: increased
visibility and responsiveness; optimal inventory levels; and improved
customer service. Supplier collaboration also has tremendous
productivity and efficiency benefits, streamlining and even
automating the traditionally paper and time intensive activities
associated with procurement and delivery. And, in an increasingly
globalized business world, web-based supplier collaboration has other
obvious productivity benefits. Not only do shared technology systems
and data help to overcome cultural differences and disparate business
processes, but they also ensure that the supply chain is productive
around the clock. No matter what country or time zone key vendors
are in, real-time information sharing ensures that there are no delays
in response.
Supplier collaboration helps to green the supply chain by:

 Reducing material shortages, production downtime and

obsolescence
 Reducing the amount of inventory kept in stock at the customer
and supplier locations
 Reducing expediting activities, administrative tasks and indirect
personnel costs
 Reducing extra freight required due to the need to expedite •
Optimizing floor space and capacity utilization

Demand Management

Demand management is the matching of supply and demand over

time. Demand Management consists of forecasting based on history
and known future, creation of alerts to notify of exceptional
circumstances, forecast calculations based on standard and proprietary
algorithms, inventory policies based on forecast variability, and
collaborative planning between various business functions and
between suppliers and customers. By optimizing demand
management, manufacturers enable green supply chain efforts in a
number of ways including:

 Reducing over production leading to spoilage, obsolescence,

and excess inventory storage requirements
 Improving forecasting for new product introductions including
new products that are environmentally friendly
 Optimizing the roll-out of enhanced packaging that minimizes
waste and includes recycled materials
  Reducing inventories by quickly sensing changes in consumer
demand and synchronizing market demand with production
output
 Improving manufacturing efficiencies by removing surprises
and smoothing the flow of products through the production
cycle

Lean Manufacturing

One proactive way for manufacturing companies looking to enable

green practices across their supply chain is to implement lean
manufacturing. While lean manufacturing environments differ
according to the nature and needs of the manufacturer, they all share a
number of critical elements:

 Production is done according to customer demand

 Value is assessed from a customer perspective
 Processes are designed for maximum flow
 Continuous improvement procedures are integral to operations
 Personnel are empowered to control the manufacturing
processes for which they are responsible, and they have the
authority to shift operations based on real-time demand

The underlying principles of lean manufacturing are to build

effectiveness and efficiency across the entire supply chain by delaying
differentiation through postponement, minimizing buffers and steps,
and eliminating waste. The net effect of lean completely supports
sustainability.

Transportation Management
Managing the transportation carbon footprint is probably one of the
more discussed greening efforts in supply chain management. One
reason for this is the push to make product carbon foot-printing
information available to consumers. Another reason is its alignment
with transportation efficiency and rising transportation costs.
Minimizing empty miles, shifting to intermodal capacity, and
improving capacity utilization through consolidation will reduce
energy consumption and transportation costs while also reducing
carbon emissions.

Warehouse Management and Distribution Requirements

Planning

Supply chain processes like warehousing management and

distribution requirements planning are often more challenging to
green. Minimizing the environmental footprint of inventory can be in
direct conflict with the more accepted goal of reducing working
capital. To add to the challenge, in greening inventory management, a
company must consider the ramifications of decisions on efficiency,
customer service, flexibility, and greening goals not only for
inventory, but also transportation, customer fulfillment, and
production. This is certainly a tall order from an organizational
alignment, process definition, and technology standpoint.

However, the effort to reduce warehouse space through advanced

inventory management capabilities and to operate required warehouse
space as efficiently as possible leads to greening of the supply chain
through less power consumption and less total emissions.

Enterprise Asset Management

Manufacturing companies are searching for ways to increase
production output and improve product quality while reducing cost.
One of a manufacturing company’s most important assets is its
manufacturing equipment, and the costs associated with managing
and maintaining this equipment can be significant. Higher performing
equipment uses less power, produces less waste and less carbon
emissions leading to greener supply chain operations.

Product Design and Product Lifecycle Management

Green product design and environmental regulatory compliance are

increasingly important for manufacturers across all industries. EU
RoHS, China RoHS, Korea RoHS, California RoHS, ELV, REACH–
the list of environmental regulations for reducing hazardous
substances in products keeps growing. What, exactly, are the costs if a
company’s products fail to comply? Missed customer requirements,
blocked shipments, costly redesigns and scrapped parts are just the tip
of the iceberg. No doubt, the stakes are high–with potentially millions
of dollars in lost revenue and related costs. To avoid these costs,
manufacturers must identify, track and control a constantly evolving
list of high-risk substances, both in their products and in their supply
chain. Spreadsheets, home-grown databases, and manual processes
simply can’t meet this enormous data management challenge.

Conclusion

Aberdeen’s white paper entitled “Building a Green Supply Chain:

Social Responsibility for Fun and Profit” identified five key
categories that differentiate companies with Best-in-Class green
supply chain capabilities from those companies with ‘Average’ and/or
‘Laggard’ capabilities.

These categories include process, organization, data, technology, and

performance measurement. ‘Best-in-Class’ companies have the
following characteristics.

 A holistic, life-cycle approach to their green supply chain

initiatives, and a senior executive in charge of establishing the
vision and driving associated initiatives
 A well-developed green training program, and active
recruitment of talent with expertise in green initiatives
 Are 30% more likely to use advanced transportation and
logistics systems to enable their green transformation
 Are 70% more likely to use Enterprise Asset Management
solutions to effectively manage asset life-cycles
 A commitment to track and measure key supply chain cost
metrics, especially in the areas of transportation, warehousing,
distribution, and manufacturing