These days there are a lot of reasons companies are getting interested in improved sustainability, increased corporate social responsibility programs and supply-chain management solutions. Among the most salient are increasing business globalization, environmental compliance requirements and supply-chain cost pressures.
From environmentally friendly packaging to carbon-footprintreducing network design and logistics, going green has moved beyond buzzword status to a business imperative that can lower costs and provide competitive advantage.
How are senior managers responding to these challenges and opportunities? The Aberdeen Group offers some insights. In its March 2008 report, “Building a Green Supply Chain: Social Responsibility for Fun and Profit,” the firm noted that green, sustainability and corporate social responsibility mandates are at the top of executive agendas worldwide. For example, reduction of waste and improved disposal methods are key goals and top actions for 38% of the survey’s respondents.
The Green Trend
Companies of all types and sizes have identified key areas for their initial green strategies, including transportation, logistics, sourcing, procurement, emissions, carbon-footprint reduction, waste disposal, recycling, packaging design and product design.
Best-in-class companies have adopted holistic, life-cycle approaches to green supply-chain programs and their key elements, such as materials and equipment. They engage in carbon-footprint tracking and modeling and are twice as likely as other companies to have visibility into their energy usage, thereby being able to lower their total energy consumption in facilities.
Best-in-class companies also recognize that going green touches many areas within the enterprise and logistics processes. These include, but are not limited to, package usage, route optimization, the use of alternative fuels, finding alternatives to air freight, controlling landed costs and monitoring total environmental impact.
Moving Green Forward
While the Aberdeen Group report signals a trend toward greater interest in green initiatives among senior executives, not all executives are on board, which can present an additional challenge for others in the organization who want to move forward with green initiatives.
While material handling managers and executives, who are often at the heart of supply-chain operations, have a unique opportunity to help their companies adopt and/or improve green initiatives, one challenge they often face is trying to demonstrate the value of such initiatives to senior management.
There can be several reasons for senior management reticence. Two of the most common are not understanding the benefits and not knowing where to start.
In many cases, the business case for green initiatives often hinges on the ability to “turn green into gold,” by emphasizing to senior executives the impact on top and bottom lines. Whether a company goes green to comply with government mandates, to be perceived as a thought leader or good corporate citizen, to impact its bottom line, or some combination of these, the practices of going green are rapidly starting to move beyond simple lip service. One reason is that businesses are starting to realize the many benefits of going green.
Despite the fact that a rapidly increasing number of companies is routinely interested in pursuing green agendas and allocating budgets to support them, many companies are still underprepared to reap the environmental, social and economic benefits. For example, the Aberdeen Group report noted the challenges that companies face in moving ahead with green initiatives. The top challenges were not knowing where to start and needing to learn more about available strategies and solutions to enable successful efforts.
Creating a Roadmap
Here are four concrete steps to get senior management involved in moving your company ahead with green initiatives.
• Ensure executive-level responsibility. Executive sponsorship is essential. Senior managers must be educated about sustainability issues before they will buy into the concepts. Again, as noted above, this relates to demonstrating the benefits and providing places to start.
One excellent place to begin to locate relevant information on the various benefits of green initiatives, as well as specific recommendations on how to get started, is the U.S. EPA Web site. In recent years, the EPA has been aggressively working with businesses to launch cooperative green ventures. Three of the most relevant resources include: www.epa.gov/greenpower; www.epa.gov/partners; www.epa.gov/epahome/business.htm.
Once buy-in is secured, a senior executive must be appointed to have oversight. This will ensure cross-functional vision and coordination, and it will also catalyze focus on both strategic and tactical objectives.
• Establish clear metrics, and track green performance. You can’t improve what you don’t measure. Performance management is a key area on which to focus. Green performance tracking must include the ability to gather the appropriate data from across the enterprise, present a single view of all green metrics and provide line managers with visibility and analytical tools to manage green drivers in their functional areas of responsibility. It is also important to communicate about green initiatives and expectations across the enterprise.
• Move aggressively to embrace technology enablers. Whether green initiatives are focused on greening functional areas, such as supply-chain network design, warehouse management, transportation and logistics, asset management and/or energy/natural resource consumption, explore various technology options that can provide the tools and visibility necessary to identify and manage green processes. Information on many of the most useful technologies is also available at the EPA resources listed in this article.
• Adopt a life-cycle approach to key process areas. Carbon-footprint modeling and tracking is an example of an area that can align well with overall enterprise objectives of lowering carbon emissions, while preparing for new carbon-reporting regulations already in place in some markets. Understanding the end-to-end impact of green supply-chain strategies and decisions will provide additional opportunities for using green criteria to lower costs and improve competitive advantage.
A Green Case Study
One area ripe with opportunity for tremendous green dividends is optimized packaging.
One manufacturing plant maintains an impressive operation of painstakingly refurbishing motor-vehicle headlights and tail lights to prepare them for sale to automotive repair and body shops, distributors and online sellers. The company handles a wide variety of lights, fitting almost every make and model of vehicle, from current models to classic cars.
One of the most significant challenges the company faced was high freight costs from the manufacturing plant. This was due to the classification that was assigned for shipping the plant’s existing box configuration.
Transportation and warehouse-management specialists went to work with data they gathered through an analysis, identifying areas where the greatest impacts could be made. They identified four areas of opportunity: packaging, palletization, pallet design and cushioning.
To address packaging, the team introduced four new box sizes to supplement the current range, thus reducing the amount of headspace in each box.
In terms of palletization, the specialists optimized pallet height to increase freight density. They did this by ensuring full use of the trailer height (110 inches) to reduce freight costs.
For pallet design, the team recommended a standard Grocery Manufacturers Association-style, fourway- entry pallet design. This helped optimize use of space and resulted in a larger number of unit loads per truck.
For cushioning, the team recommended the use of foam-injected sheets as void fill for the headlights and tail lights, which also helped to achieve a cost reduction.
Before moving ahead on these initiatives, the specialists brought in senior management early to get involved in the strategies and tactics. In addition, the company established metrics so the results could be reported across the enterprise.
As a result of making these improvements, the company’s third-party logistics provider worked with carriers to reduce the freight class from 250 to 150. Therefore, the initiatives not only helped to reduce the costs directly associated with packing but also with overall freight costs. As a result, transportation costs dropped by a total of 40%, reflecting lower charges from carriers, reduced fuel costs and reduced material usage.
This is just one example of how greening the supply chain can be a win-win for companies of all sizes that work together to deploy, track and optimize such promising initiatives.
Scott A. Johnson is vice president of sales and marketing at Harte-Hanks Logistics, a thirdparty logistics provider based in Deerfield Beach, Fla. He can be reached at 800-234-4487, ext. 389, or scott_ [email protected].