How to Grow a Green Supply Chain
Sustainability impacts everything from how companies approach product design all the way through to customer delivery. In today's competitive environment, sustainability must improve profitability and reduce risk.
An industry standard for what constitutes a sustainable supply chain does not exist. Is being eco-friendly in transportation or manufacturing enough to qualify your company as green? As with many areas of supply chain management, what is considered a standard practice depends on the industry and markets you operate in and your customers' expectations.
Most experts agree that building a green supply chain is similar to implementing Lean or Six Sigma strategies; it is a journey, not a destination. It is important to begin the journey by selecting an area with a high probability of achieving a positive impact.
Set Sustainability Goals
Greening an entire supply chain requires a long-term commitment. Envisioning the future state is important, but most companies start with a more manageable goal. They focus their initial greening efforts on one or two processes to start the journey toward that future vision. For example, a company might start its greening journey by:
- Improving its ability to predict customer demand.
- Reducing energy consumption through more efficient manufacturing methods.
- Minimizing inbound and outbound transportation miles.
- Decreasing inventory levels to reduce warehouse energy usage.
Some of the biggest improvements in sustainability and cost reductions can come from enhancing forecast accuracy. The accuracy of your demand plan has a ripple effect throughout the supply chain.
Improving forecast accuracy enables more efficient and green purchasing, manufacturing, inventory deployment, and inbound and outbound transportation—areas that account for a majority of a company's environmental impact.
Advanced transportation management also can have a big impact on sustainability through transportation mode and route optimization. For many companies, transportation accounts for a high percentage of both supply chain cost and environmental impact.
Optimizing where and how much inventory is stored can lead to large warehouse space reductions. Multi-echelon inventory optimization enables a company to minimize total systematic inventory (raw, WIP, finished goods) across multiple channels while ensuring it meets customer service goals.
Often, one of the largest costs and corresponding energy consumption areas of bringing a product to market is manufacturing. Manufacturing planning and scheduling can help you determine where products should be built, and in what sequence, to optimize manufacturing efficiencies, thus minimizing costs and the environmental impact of production.
Steps Toward Optimization
Building a green supply chain involves making trade-offs between minimizing your supply chain environmental impact and other business objectives including agility, efficiency, profitability, and customer service. Building a sustainable supply chain is necessary to optimize your extended supply chain.