CSCMP's Supply Chain Quarterly
December 12, 2017
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Efficiency gains through optimization are inherently, quantifiably "green"

The "Perspective" article titled "'Green' supply chains are still too costly" (Quarter 1/2014) summarized a report that indicates companies are not heavily investing in making their supply chains "greener." On the surface this appears to be true, but there is a fundamental flaw in the framework of how that conclusion was reached.

The Accenture/CDP-funded report discovered that investment in emission-reduction programs has declined and companies are only willing to make such investments when a return on investment (ROI) is relatively immediate. This is correct, but what about waste- and emission-reducing actions that are not explicitly labeled as such? Many companies are making great strides in achieving greener supply chains as a natural by-product of the classic pursuit of efficiency. They just don't label those spends as waste- or emission-reduction investments.

Green and efficient supply chains are not mutually exclusive; in fact, they are mutually dependent.

Consider traditional physical distribution modeling, which is typically viewed as a cost-saving measure. Its goal is improving efficiency, which is achieved by reducing transportation distances, improving fuel mileage, and optimizing freight movements. While this may not immediately result in flagship green initiatives like building carbon-neutral factories or converting fleets to liquefied natural gas (LNG) vehicles, it does lead to a reduction in fuel-intensive and carbon-intrusive operations. Wouldn't it be fair to call that "green"?

Saving on freight costs by "shipping less air" is commonly achieved by reducing packaging. A recent project completed by my company, Chainalytics, removed �?? inch from the packaging of a prepared food item. That resulted in over $600,000 in cost savings, and the project was a financial success. But it also was an environmental success: That small change eliminated 100 tons of CO2 emissions and 146 tons of paper and corrugate, and saved 2,920 trees. And that's each year.

This packaging optimization had sizable green effects, yet it was not accounted for as an emission- or waste-reduction program. If our client had been surveyed for the Accenture/CDP report, it might have indicated that it had made little or no investment in reducing emissions. However, emission reduction was achieved, as a direct result of purposeful supply chain optimization. Significant reductions in emissions and natural resource usage almost always accompany this type of initiative.

Many green activities are taking place as a result of supply chain trends that do not necessarily evoke specific environmental ideals. Nearshoring, reshoring, packaging and shipping optimization, routing, warehouse and manufacturing location—these are all supply chain elements that companies are actively engaged in improving. Though [the impetus for such initiatives] may be cost-saving directives, it would be shortsighted to say that they do not also make the affected supply chains greener.

Companies everywhere are greening their supply chains and reducing carbon footprints. They are doing so as a regular, complementary effect of cost-reduction endeavors achieved through supply chain efficiency gains.

Gene Long
Vice President, Industry Supply Chains
Chainalytics
Atlanta, Georgia, USA

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