June 2009 | Commentary | Green Landscape

Sustainable Network Design: The Right Tools Make All the Difference

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Until recently, supply chains were designed to deliver goods on time and at the lowest possible cost. This is still the focus for many companies, but as consumer pain increases due to rising energy costs, and environmental concerns such as global warming achieve greater awareness, forward-thinking businesses realize green issues are here to stay. These organizations are redesigning their supply chains to answer growing customer demand for reasonably priced, environmentally friendly solutions.

Companies can do more than just tap into green demand with supply chain design; they can also reduce costs. Businesses with best-in-class green supply chain designs have lowered supply costs, as well as overall logistics and transport costs, by two percent while answering the green challenge, according to an Aberdeen Group report.

Most companies, however, "are overwhelmingly unprepared to reap the environmental, social, and economic benefits earned by those who craft well-planned and well-executed sustainability initiatives," the report states. These businesses underutilize network design tools that provide visibility and control of supply chain operations and their ecological impacts.

EXAMINING THE OPTIONS

Using network design tools can result in improved efficiencies—including alternate sourcing, risk management, improved service levels, and modal shifts—throughout the supply chain. These tools allow companies to create inbound and outbound transportation and distribution networks that minimize carbon emissions by trading off sourcing decisions, transportation mode, and inventory policy.

By employing mathematical optimization and sophisticated cost and carbon dioxide emissions models to assess the various tradeoffs, the tools can help companies design an efficient, low-carbon supply chain.

Companies can realize almost immediate improvements by modeling carbon emissions with strategic network design. These applications track costs and emissions that can be influenced in the short to medium term so companies can quickly determine the most effective number of facility locations, sizes, and capacities to meet customer service goals while reducing their carbon footprint.

Businesses that use network design tools also benefit from dynamically planning where and when to make, buy, store, and move product given changing fuel costs. Through these models, companies quantify the cost, service, and carbon implications of each scenario and prepare themselves for the impact of change.

By analyzing the travel impact of goods on the environment, companies can capture big savings from more efficient transport which, in turn, means lower fuel expenditures and logistics operating costs.

INVENTORY COUNTS

With strategic network design, companies can gain from more environmentally friendly distribution plans. Inventory analysis and stocking calculations help create the optimal balance between service levels, inventory investment, and the carbon associated with different transportation modes and replenishment frequency.

Transitioning to a physical supply chain designed to reduce emissions takes more than a tool. It requires a strategic, long-term commitment and the flexibility to adapt as the market evolves.

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