Chain of Thought

For ROI, it's Easier Being Green

In MH&L's September feature on Automation's ROI, I reported that many material handling professionals are taking a more “holistic approach to cost justification.” That's a fancy way of saying “think outside your box.” I realize both of those phrases are annoying—the first for sounding pretentious and the second for being clichéd. But in an economy where there are still number crunchers who demand hard figures to justify a technology investment, it's good to see that environmental factors are getting easier to get harder.

This week we reported that Pharmaceutical Distributor McKesson expects to use IBM's Supply Chain Sustainability Management (SCSM) system to determine the value of keeping cold-chain pharmaceuticals such as insulin and vaccines in one central refrigeration facility rather than distributed among several sites. This system factors in the inventory cost and the potential reduction in carbon emissions against the option of keeping such products in all its warehouses. McKesson hopes it will be able to use such comparisons to help it increase efficiency without spewing more emissions into the environment. But if Don Walker is right, this tool will also help justify future investments in material handling technology—as well as the location of the facility in which that equipment will be used.

Walker is McKesson's senior vice president of distribution operations. He told me that as his company's relationship with IBM evolves, McKesson will eventually be able to factor environmental impact—a traditionally soft cost—into ROI calculation.

“If you think about building a building today, supply chain people try to find the lowest cost to deliver what they'd like to have,” he said. “It's a game we have to play in terms of capital funding. But if we had additional information it would provide carbon impacts and energy impacts over the life of that building. The real value is being able to monetize the value of some of the sustainability efforts because you can now measure and understand the impact financially of the carbon footprint.”

The SCSM system may also help McKesson select facilities for LEED certification. Attaining “Leadership in Energy and Environmental Design” status provides independent, third-party verification that a building project is environmentally responsible, profitable and a healthy place to work. McKesson's most recent building in Chicago is LEED certified, and Walker is hoping this tool will not only help his company target other facilities for LEED certification, but that it will also help them select future sites and the equipment to be used at those sites.

Now that big end users like McKesson are getting smarter about hardening carbon footprint numbers, material handling technology vendors are going to have to get better about sizing themselves up to see if their shoes fit their customers' footprints.

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