Leveraging Free Trade Agreements: Revealing the Hidden Cost Savings
Learn how Benjamin Moore saved millions by automating the NAFTA qualification process.
Sponsored by Amber Road
Most Read Articles
How Ford is collaborating with suppliers to green its supply chain
Ford Motor Co.'s commitment to making manufacturing more environmentally friendly does not stop at its own factories' gates. Instead, the automotive giant wants its suppliers to "keep pace" with its own efforts to reduce carbon emissions, conserve water and energy, and cut down on waste.
Through its Partnership for A Cleaner Environment (PACE) initiative, Ford is sharing with its strategic suppliers more than 350 best practices and tools that it originally developed to improve the environmental sustainability its own manufacturing sites. In return, the suppliers report on their progress and share best practices with their own suppliers. In this way, Ford hopes the initiative will reduce the collective environmental footprint of its entire automotive supply chain, Mary Wroten, supply chain sustainability manager for Ford, explained in an interview.
PACE began as a pilot in 2014 with just a handful of key suppliers and has now grown to include more than 40 suppliers, which represent 1,100 manufacturing sites in 40 countries across the globe.
As a result of the program, Ford reports, its suppliers are on track to reduce carbon emissions by 500,000 metric tons and save an estimated 550 million gallons of water (or the equivalent of 837 Olympic-sized pools) over the next five years.
"We are starting to get that scaling effect that we are looking for," Wroten said.
Ford shares its best practices through an interactive software tool that it developed internally. The software asks the supplier to input its size and current environmental footprint as well as its environmental goals for the future (for example, reduce energy consumption by 5 percent over five years). The supplier then selects potential actions from Ford's list of its best practices. The best practices range from easy to implement to more complex. Some examples include:
- replacing incandescent light bulbs with more energy-efficient LED light bulbs
- conducting "energy treasure hunts," where experts walk through a facility and look for ways to lower energy consumption
- reducing compressed air usage, which can reduce energy usage
- eliminating single-pass cooling systems, which can consume a lot of water,
- installing solar panels and using wind power
After the suppliers make their selections, the tool will then tell them whether the actions will help them achieve their goals. Ford purposefully designed the software to be as flexible as possible and suggest practices that would be most aligned with the supplier's own goals.
"What we learned in the pilot is that the more flexibility we give to the suppliers in the tool, the more likely they will use it," Wroten said.
Ford also designed the program, which is run through its purchasing department, to be completely voluntary. The company does not use incentives or penalties to drive participation. Instead, Ford encourages its suppliers to participate by letting them know the environmental and economic benefits such actions have had for Ford, said Wroten. For example, in 2014 the automaker upgraded to LED lighting in all of its U.S. manufacturing facilities. That investment has helped Ford reduce energy consumption by 56 million kilowatt hours annually, which saves the company $7 million in energy costs annually, Wroten said.
Ford also carefully considered which of its suppliers to invite to participate in the program. Currently it is focusing only on strategic partners that have the greatest potential to impact sustainability. For example, when it came to water, the program focused on the most strategic component suppliers that were located in water-stressed regions, Wroten said. "For energy, we focused our program on those suppliers that use the highest amount of energy and could benefit the most from the program," she added.
The program has been well received by the supplier community, according to Wroten. The automotive components supplier Denso, for example, has been participating in PACE since 2014. So far, the Japanese company has cut back on its electricity and water usage by using more efficient manufacturing equipment, installing a closed-circuit cooling system, and replacing its metal halide lights with T-8 LED lighting.
For companies interested in creating similar programs, Wroten recommended making sure that they have their own house in order first. "The sustainability journey is a long one," she said. "A company should always start at their own facilities first. Once they figure out how to reduce the environmental footprint at their own facilities, then they can scale it up and pass it on to their subtiers."
In recognition of Ford's commitment to corporate responsibility, Ethisphere, a third-party organization that defines and advances standard business ethical practices, named the automaker to its list of the World's Most Ethical Companies for the eighth year in a row. Ford was recognized not only for PACE but also its programs for monitoring human rights and safe working conditions and sourcing conflict-free minerals.
Join the Discussion
After you comment, click Post. If you're not already logged in, you will be asked to log in or register.
We Want to Hear From You! We invite you to share your thoughts and opinions about this article by sending an e-mail to ?Subject=Letter to the Editor: Quarter : How Ford is collaborating with suppliers to green its supply chain"> . We will publish selected readers' comments in future issues of CSCMP's Supply Chain Quarterly. Correspondence may be edited for clarity or for length.