19 Steps to Creating a Lean and Green Supply Chain
Nurturing a green, sustainable supply chain benefits the environment and your bottom line. Here are some tactics—from analyzing your transportation network and warehouse design to looking for recycling opportunities—to help you go green and get lean.
For specialty coffee company Keurig Green Mountain, ensuring a sustainable supply chain goes to the heart of its mission, which includes using the power of business to create a better world. To that end, Keurig works to responsibly source its coffee and engage 1 million people within its supply chain to improve their livelihoods by 2020.
Through Blue Harvest, an initiative coordinated via Catholic Relief Services to restore and manage water resources in coffee-producing areas, Keurig works with farmers to implement best farming practices, strengthen water governance, and protect watersheds. The program is "taking a landscape view of water challenges," says Colleen Popkin, senior manager of sustainability with Keurig. Over the past several years, the program has helped to improve 47 water systems that serve 36,000 people, saving about 50 million liters of water.
Keurig’s work is not only good for the environment, but it’s also smart business. If farmers can’t make a living growing coffee, they’ll switch to other crops. "We’re seeing positive results coming from the program," Popkin says. One example: In 2016, coffee production in the El Jilguero region of Honduras averaged 616.5 kilograms of green coffee per hectare, up from 345 kilograms per hectare in 2015, when the region was devastated by coffee rust, and struggled with poor farm management and a lack of investment.
Like Keurig, many companies can benefit by developing greener, more sustainable supply chains. Doing so reduces the legal, financial, and reputational risks to which most supply chains are exposed, says Luiz Amaral, global manager for the World Resources Institute’s Global Forest Watch. For instance, in some countries, purchasing supplies whose production leads to deforestation is illegal. Deforestation also can weaken the ability of a region to support agriculture, as forests help protect against ground erosion and water run-off. "Deforestation might put your own activity at risk in the long term," Amaral says.
Moreover, sustainable supply chains often save money. After all, consuming less water and energy typically lowers expenses.
A green supply chain also is one component of a solid corporate reputation. "These days, global companies are expected to own their supply chains," says Terry Yosie, president and chief executive officer with the World Environment Center, an environmental protection organization based in Washington, D.C. Consumers expect companies to know the players and activities, and to ensure they’re doing all they can to responsibly source and produce their goods.
Ready to boost your supply chain sustainability? Here are 19 tactics to take.
1. Engage leadership
As with any worthwhile undertaking, a commitment from the top is critical. Leadership needs to understand the strategic value or business case for sustainable procurement to the organization. With that understanding, they can dedicate resources and help determine goals and priorities that align with organizational targets, says Beth Eckl, director of the environmental purchasing program with Practice Greenhealth, a nonprofit focused on positive environmental stewardship by organizations in the health care community.
2. Assemble a diverse group
Bringing together employees from different departments allows for a range of expertise. "A multi-disciplinary team is key," says Julie Moyle, an outreach and engagement specialist with Practice Greenhealth. Working with individuals from different departments also creates champions of sustainability initiatives across the organization.
3. Identify the drivers of waste
Does a product’s packaging fail to keep it from breaking or spoiling? Do some systems have high mis-pick rates? That can increase returns, which consume energy and resources—and money. "Identify the weaknesses," says Brian Neuwirth, vice president, sales and marketing with Unex Manufacturing, a Lakewood, N.J.-based order picking solutions provider.
Correcting problems that generate waste offers several benefits, says Brian Lipinsky, a lead researcher with the World Resources Institute, an independent, non-governmental global research organization. It enables organizations to reduce purchases, make better use of the products they do purchase or produce, and can cut disposal fees.
The adage, "you can’t manage what you don’t measure," applies in building a more sustainable supply chain. Once companies identify the drivers of waste, they need to measure how much is occurring. What percentage and what types of products are going to landfills or compost? Knowing that a particular product is being discarded at a higher rate than similar items can help identify actions to reduce waste and cut costs.
"There’s a lot of waste baked into the operations of many businesses," Lipinsky says. "Once you take the first step to measure and examine what’s happening, you’ll notice opportunities for change."
5. Set goals
Goals can spark action. A number of large food companies, including Nestlé and Campbell Soup Company, have committed to cutting food loss and waste in half by 2030. "Bold, ambitious targets can start to encourage creativity," Lipinsky notes.
An organization doesn’t need to know exactly how it will reach the goal when it sets it. "Setting a goal shows you have initiative and the drive to reach for the top," Lipinsky adds. Often, achieving the goals requires a combination of both larger, more sweeping actions, and small, incremental steps.
6. Define green
A decade or two ago, "green" focused almost entirely on a supply chain’s environmental impact. Today, a green or sustainable supply chain encompasses "economic prosperity, environmental quality, and social justice," says Kim McQuilken, president of sales and marketing with Atlanta-based Spend Management Experts.
At the same time, each organization needs to determine how to apply "green" concepts to its operations. When purchasing supplies, for instance, "you have to define what a ‘green’ widget is," Eckl says. Should the definition include the method of production? The distance the widget is transported? Whether it’s free from chemicals of concern?
To be sure, not every organization has the resources to examine each product in such depth. Selecting products that have been certified by credible third-party standards and certifications, such as EPA’s Energy Star, can streamline the process.
7. Analyze the transport network
Companies often can reduce the amount of energy used to transport materials and products. Transportation Insight, a provider of supply chain services based in Hickory, N.C., worked with a snack food manufacturer that frequently shipped products between plants, before assembling them into truckloads that would travel to the final customer. An analysis showed the company could lower energy use by moving products directly to the end customer in less-than-truckload (LTL) shipments. "It was better to eliminate the transportation moves," says John Richardson, vice president of supply chain analytics.
Conversely, a company that has multiple LTL shipments traveling between, say, Texas and California, may cut energy use by combining them on one truck that goes to an LTL center in California, where the shipments are broken apart. Or, the company may be able to hold some customers’ orders for several days to accumulate bigger shipments that more efficiently use the space within a truck.
"Look at your network and how you can consolidate shipments to maximize efficiency and minimize the number of trucks," Richardson advises.
Also check for "double shipping," McQuilken says. For instance, a company might ship products from a distribution center in Indianapolis to Sacramento, only to have part of the shipment backtrack to Wyoming. A network analysis can bring this to light.
8. Conduct a backhaul analysis
"One thing that chews up costs, as well as the environment, is empty trucks returning to the point of origin," McQuilken says. Loading products onto those trucks means fewer trips and less wasted fuel.
The first step is to look internally for products that can fill the trucks. "Make sure that inside the company, the left hand is talking to the right," McQuilken says. If no options are available internally, many brokers can identify potential backhaul partners.
9. Reduce idling
Some organizations implement "no idling" policies for trucks, ambulances, and shuttles traveling to and between their campuses, in order to reduce air pollution, Moyle says. She adds that new technologies and power hook-ups can allow vehicles with refrigeration systems and vital equipment to continue to operate.
10. Analyze warehouse design efficiency
A layout that reduces the number of times an item is handled and cuts the distance traveled between actions can reduce both labor and energy costs. An efficient layout allows many companies to work within a smaller facility, or avoid expanding. "One of the easiest ways to be green is to reduce your footprint, or to not expand," Neuwirth says.
11. Go beyond compliance
Focusing strictly on compliance, often through supplier audits, can keep organizations from maximizing the benefits of greener supply chains. "You get death by thousands of audits," Yosie notes. "It’s looking at compliance through a legalistic prism, versus something that will generate value." Companies and their suppliers often end up simply going through the motions.
"Just complying with a set of standards is not enough for us to secure the coffee we need to grow as a business," says Keurig’s Popkin. Instead, Keurig needs to "get in the trenches" with its suppliers, and work to address the complex issues of water and farm management.
"Seek partnerships that help you make a more sustainable enterprise," recommends Joanne Spigonardo, senior associate director of business development with the Initiative for Global Environmental Leadership at The Wharton School. One example: some large companies share pallets used to ship some of their products; previously, each company used its own pallets. Sharing saves money and cuts waste.
13. Involve procurement
The procurement department can work with suppliers to implement environmentally preferable purchasing (EPP) programs, says Mary Larsen, director of sustainability and supplier diversity with Advocate Health Care, based in Downers Grove, Ill. In addition to considering price and quality, these programs consider a product’s environmental performance. For instance, they can ask suppliers whether their products can be recycled at the end of their lives, and whether the supplier is trying to reduce waste and energy use.
Over time, such questions should lead to a greater selection of sustainable products at reasonable prices. "There’s a huge opportunity to bend the cost curve, the more we demand these products," Larsen says.
14. Leverage technology
Technology, such as the World Resource Institute’s Global Forest Watch, can help organizations streamline their sustainability efforts. Global Forest Watch uses satellite technology, big data, and cloud computing to cost-effectively provide real-time information on deforestation.
Before this system was available, companies either had to have individuals on the ground in all areas of their supply chains in which deforestation was a risk, or purchase satellite imagery, which can be costly, Amaral says. Now, they just need to know the location of the supplier. The technology can provide value across a range of supply chains, include those of agricultural companies, food processors, and retailers.
Technology also can help companies train employees and vendors on their supply chain sustainability initiatives. "You can’t send people all over to deliver support," Yosie says. But most companies can develop websites that provide information and answer questions.
15. Optimize packaging
Companies often can reduce both costs and resource consumption by modifying their packaging. "It starts with the materials," McQuilken says. Many packaging companies offer sustainable packaging options.
Package size also, not surprisingly, impacts resource use. Most consumers who’ve placed online orders have received shipments in which small products, such as a jar of skin cream, traveled in large containers. "There’s a lot of shipping air," McQuilken says. Experiment to identify products that can be safely shipped in smaller boxes or even envelopes.
16. Reuse products when possible
After the rise of AIDS and HIV, and the washing up of medical waste on New England beaches in the 1980s, suppliers began producing and healthcare organizations began purchasing single-use, disposable items. "It became standard practice to use something once and throw it away," Moyle says.
The use of disposable supplies and equipment today can alleviate infection control concerns, and the convenience factor makes it a hard habit to break, but the practice comes at a high financial and environmental cost.
While safety in the healthcare supply chain remains paramount, organizations are finding safe ways to reuse some products. For the past decade, Advocate has worked with a reprocessing firm that accepts items labeled as single use and reprocesses them according to FDA-approved instructions.
Often, products can be reprocessed multiple times. That reduces resource consumption and saves money, because the products can be repurchased at about half their original prices. "We’re saving not only the cost of the device, but also the cost of disposal," Larsen says.
17. Analyze returns processes
As e-commerce grows, so do returns. Often, companies struggle to process them efficiently, especially if they’re shipped to retail locations or distribution centers, McQuilken says. Many companies can process returns more efficiently, and with less resource use, within a central returns location.
18. Focus on total lifecycle cost
Conventional wisdom has sometimes held that purchasing green products and applying environmentally friendly processes costs more than other products and processes. That’s not always the case, however. "You have to look not just at the purchase price, but also at the total cost of ownership," Eckl says. Any analysis should consider the energy, water, and labor required to maintain, operate, clean, and dispose of an item, as well as the initial investment. Once all these factors are included in the calculations, green products often become competitive.
19. Maintain continuous focus on building a greener supply chain
It doesn’t make sense to put off taking steps to green your supply chain. Nor does it make sense to work at it only sporadically. Many companies analyze and streamline their transportation network every three to five years. While that’s a start, their energy use often inches back up in the interim. As Richardson recommends, "Get engaged and keep a continual focus on your supply chain."