Posted by Patrick Connaughton on April 5, 2007
On February 1st, 2007, Wal-Mart CEO, Lee Scott unveiled “Sustainability 360” – a series of projects lined up to promote environmental stewardship across their suppliers, customers and associates — http://www.walmartfacts.com/articles/4784.aspx
Last month, riding the momentum of that announcement, Wal-Mart released its plans to migrate from its current Peterbilt 386 big rigs to hybrid versions of the same model by 2009. The goal: to begin reducing the emissions of their fleet (notably, the second largest in the US) and increase fuel efficiency by as much as 25% — http://www.peterbilt.com/index_new_mor.asp?file=2093&archivedate
My take: This is a leading indicator that sustainable or “green” supply chain management is finally gaining some traction. While the maintenance of hybrid power systems is still more expensive than traditional ones, the estimated fuel savings could eventually outweigh those costs. It’s initiatives like these that will really move the green supply chain forward and it’s not just Wal-Mart contributing. Other industry leaders like GM, Honda, S.C. Johnson, Dell, and UPS all have stories that are just as compelling. I expect other companies to follow suit as the benefits become more tangible.
Hybrid vehicles and alternative fuels sources aren’t the only ways companies can go green with their supply chains. A company like PepsiCo, for example, with thousands of shipping containers in transit at any given time can save millions of dollars over time finding creative ways to reuse these materials. Packaging, shipping pallets, and racks make up a significant cost of doing business and effectively reusing these assets is money in the bank.
How do you get started? Start by creating a comprehensive environmental profile of your company, spanning across the entire product life cycle from sourcing raw materials to the disposal or recycling process. With a view from the top, it’s often easier to justify green supply chain projects. The sum of many small benefits at each business unit level can be much greater than one or two big wins over time. By rolling the cost-benefit analysis up a level, cost savings can be justified when the economies of scale are considered.
This is not just for future projects either. Ongoing innovative efforts to streamline supply chains should also have an environmental impact assessment done. While moving forward in some areas, it is easy to take a step back when a process change or a cost cutting initiative is effective at improving the supply chain but the environmental impact is not considered.
**** More to come on the Green Supply Chain! *****
Patrick Connaughton | Senior Analyst - Supply Chain