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9 Key Trends in Green Supply Chain

Until recently, sustainability and “greening” the supply chain largely meant keeping up with regional, national, and global regulations on carbon emissions, hazardous materials, and recycling.

{complink 7426|Gartner Inc.}, though, is now seeing a major shift away from regulator-driven sustainability models to total energy efficiency priorities. During a Webinar this week, Hiranya Fernando, a Gartner senior research analyst, spotlighted nine trends changing the corporate greenery, many of which will involve goal reassessments and followup action from supply chain, operations, and manufacturing professionals. (You can access the Webinar here, but you'll have to register to view it.)

“The sustainability big picture has shifted over the last 18 to 20 months,” Fernando said. “Clearly the focus now is on operational and resource efficiency as opposed to what it used to be, which was this heavy emphasis on carbon and carbon emissions. Those have taken a little bit of a back seat.”

As companies and consumers have become more knowledgeable about green issues and more demanding about what they expect from next-generation products and processes, companies today have to go after something other than the low-hanging fruit that appeased initial legislative requirements. Additionally, while laws forced green conversations to take place corporatewide, other long-term implications have surfaced.

According to Fernando, the top issues influencing green business decisions are:

  1. A focus on cost and overall efficiency throughout the whole supply chain.
  2. This means looking at all water, energy, and waste management practices as opposed to carbon dioxide-only footprint evaluations. Along these lines, capex projects must be more fully explained and justified, and payback and return-on-investment periods better defined.

  3. Energy efficiency is priority.
  4. Within the cost and efficiency focus, energy efficiency gets the most attention. A sharp rise in crude oil, gasoline, natural gas, electricity, and heating oil prices in 2011 and anticipated increases for 2012 are compelling manufacturers to look at usage more strategically.

  5. Continued uncertainty in the regulatory landscape.
  6. There are still many competing loose ends when it comes to figuring out which laws to follow and how to follow them. Regional, national, and global laws are in various states of discussion or implementation, or have been shelved short-term.

  7. Constraints influence.
  8. Other constraints — particularly growing concerns about adequate water supply — are gaining attention. A significant supply-demand gap for water exists and will only get worse in the coming decades, Fernando said. Competition for sufficient water allocations for worldwide operations will heat up, and companies need to consider their water use targets.

  9. IT is taking on a new role in sustainability.
  10. Previously, software and tech tools were aimed at compliance and carbon-reduction goals. Today the tools are being used to monitor and manage energy efficiency, track risks, and lower costs.

  11. Heavier focus on product lifecycle accountability.
  12. Companies are going to greater lengths to determine sustainability gaps from design to end-of-life. Again, this doesn't necessarily stem from wanting to be good environmental citizens; it's another way to reduce total operational costs.

  13. The race for clean technology is clearly still on.
  14. Globally, 2010 venture capital investment in clean tech approached high 2008 levels after a dip in 2009. The US and China are driving much of the growth in this space.

  15. Smart, green buildings and cities are a sweet spot.
  16. Although the recession affected the construction market, green building, especially in the commercial segment, was the only growing segment, she said. Companies are looking at ways to retrofit manufacturing facilities, warehouses, and other buildings to save on total energy expenses.

  17. It's still a risky global environment.
  18. Supply chain, sourcing, and manufacturing operations are all global, with each regional location having its own peculiarities. Disasters like an earthquake in Japan or political unrest in countries mining raw materials cast shadows on continuity in sustainability plans.

On one hand, I'm glad to see the sustainability conversation move away from compliance-level discussions. It's about time; there is a lot more at stake than following the rules. At the same time, it's disappointing that talks seem to be centered on cost cutting. Money-fueled initiatives only go so far in changing behaviors. I guess, though, it's fair to say a certain amount of business evolution will be needed to keep the green revolution fired up.

13 comments on “9 Key Trends in Green Supply Chain

  1. Nemos
    July 15, 2011

    “On one hand, I'm glad to see the sustainability conversation move away from compliance-level discussions”

    I totally agree with you. Sustainability it is a lot more than a dialog about how a company will be compliance with the Green regulations.

    All the above are serious problems we must have in mind for the next decades and in particular the number four (4) ,c oncerns about adequate water supply. 

  2. Eldredge
    July 15, 2011

    Energy efficiency comes up under both items 2 qnd 8, but it really come down to redcuing cost.

  3. DataCrunch
    July 16, 2011

    Another major way for companies to both optimize their supply chain and become more “green” is by incorporating “Cubing” software technology in their logistics process.  Cubing optimization is a means for reducing space in the shipping process, using less void fill and packaging, shipping less cartons, pallets, trucks, and containers.  By maximizing the shipping loads, also less fuel is used.  All of these factors mean more profits to the bottom line for companies.   I see Cubing as the next frontier in making the supply chain more efficient, profitable, and “green”.      An illustration of a Cubing example below:

     

  4. Houngbo_Hospice
    July 16, 2011

    @Dave Sasson

    Cubing might be helpful in the ship environment , but how can filling all the space with loads reduce energy consumption? Can you elaborate?

  5. DataCrunch
    July 17, 2011

    Hi Hospice, proper cubing can lead to more efficient pallet loads, truck loads, ocean container loads, etc.  All of these lead to less fuel consumption. 

    For example, we actually measured some results in 2007 for the first 5 months after implementing cubing solutions for a leading packaging manufacturer where the software was able to pack more boxes into the same space within their trucks.  For the first 5 months on implementation, compared to same period in 2006, the results were 18,100 fewer trucks on the road.   This added up to 909,000 fewer miles driven with 151,015 fewer gallons of diesel fuel consumed and a reduction of 3.4 million pounds of carbon dioxide.  

    The cost savings were in the millions of dollars and continue to be a major positive impact to the business, not only in profits, but on their carbon footprint.  

  6. Dr. Edward F. Knab
    July 18, 2011

    It is all about minimizing cost and optimizing performance.  Wether its lean or green the bottom line is efficiency over time.

  7. Anand
    July 18, 2011

    “A sharp rise in crude oil, gasoline, natural gas, electricity, and heating oil prices in 2011 and anticipated increases for 2012 are compelling manufacturers to look at usage more strategically”

    Jennifer,

     Thanks for the post. Although rising crude/gasolin prices are hurting many of the customers but at the same time they are forcing manufacturers to optimize the supply chain. I hope eventually green supply chain becomes the norm rather than options.

  8. Jennifer Baljko
    July 18, 2011

    Dave -Thanks for the insight. The cubing concept is intriguing, and the numbers offered below are astounding. So how does it work – the software assesses the size of packages, pallets, and boxes scheduled for shipment on the outbound side, calculates the best-loading scenario, and spits out a logistics plan to the loading bay?

    Is this just for logistics companies or 3PLs managing shipments or can high-tech companies use the software and integrate it with shop floor maunfacturing and delivery coordination? For instance, if the cubing software knows ABC product will be coming off the production line and knows that these pallet usually require  W x L x H dimensions, can it configure the order to comply with expected shipping/delivery dates and alert buyers? Tying all this together seems to an invaluable supply chain tool, and steps up proactive sustainability and accountability.

    Any other links on where  I can get info or which companies may be good examples. Perhaps there's a  possible follow-up post here that the rest of the EBN group would appreciate.

    Thx,

    Jenn

  9. Ariella
    July 18, 2011

    Dave, that's an excellent example of improved efficiency that has a positive impact on the business operations and on the environment.

  10. DataCrunch
    July 19, 2011

    @Jenn – Great questions and the short answer is yes to all.  Cubing algorithms could be used for both in manufacturing and distribution environments.  I will look to possibly writing a full article on this topic as it is an area often overlooked in the supply chain, but offers tremendous reward.

  11. Jennifer Baljko
    July 20, 2011

    Thanks, Dave. I'm looking into it as we speak and will post a longer follow-up post soon. Think the broader community may want to weigh in, too.

     

  12. hwong
    July 21, 2011

    Another example of green energy in real life story. Various companies are revitalizing their  “scrap” supply chain strategy so that they can reuse raw materials such as aluminum for the rolled aluminum products that goes into beverage cans.  The cost of making pure or prime aluminum is very expensive. Alcoa uses alot of energy in order to make that from scratch. But if you remelt the aluminum materials such as our used beverage cans, then the cost of energy and emission of CO2 is much much much less.

  13. Kunmi
    July 22, 2011

    All manufacturing companies are looking into the Green supply chain for many several reasons highlighted in Jennifer's article. The article is a wonderful resource to manufacturers and consumers to look at because it gave alot of deep insight to areas that have been overlooked and areas that need attention. In support of the artic;le, energy efficiency is a strong priority for companies and consumers to focus on. It will be beneficial for us to conserve the usage of gases and fuels as the price skyrockets everyday. Presently, there is no strong hope for the years ahead and we all need to conserve and find alternatives. This brought me to my next point on recycling. Americans are great when it comes to consumption of materials and resources but we fail in the recycling. We make more waste than any country but we should be able to turn things around to make use of plastic containers and melt them for reuse. We need to keep sustaining our supply chain before it goes dry or empty. Finally, we need to look into our carbon emissions, the hazardous materials generated and how to use less of these things.

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