newswor thy
sense and sustainability
REDUCING A SUPPLY CHAIN’S CARBON
output is like cleaning roof gutters in the
springtime: You know it should be done and
you’ll benefit from doing it, yet you just haven’t
gotten around to it. If that pretty much
describes your operation’s carbon-reduction
efforts to date, you’ve got plenty of company, if
the results of a recent survey by the consulting
firm Accenture are any indication.
The survey of 245 supply chain executives in Europe, Asia, and the Americas
conducted from May to July 2008 found that 86 percent of respondents had
undertaken at least one green initiative in their warehouses, and 38 percent said
they had implemented at least one such program for their truck fleets. Yet only
10 percent were measuring their overall carbon footprints. This lack of hard data
made it almost impossible to gauge the effect of their carbon-reduction programs, and more than one-third— 37 percent—said they had no idea of the
emissions levels across their supply chains.
Jonathan Wright, managing director in Accenture’s supply chain management
practice, says the results indicate progress in launching carbon-reduction programs within specific operational silos. But they also show that companies have
had less success in creating programs to measure emissions across complex supply chains involving multiple partners and often stretching thousands of miles,
he says. “The industry is still on the learning curve,” Wright says.
In Wright’s view, companies are hamstrung by inadequate scientific expertise, a
lack of data on environmental best practices, and the inability to allocate the needed human and financial resources to tackle such a broad initiative. In addition,
many lack the support of a corporate champion. The companies that have made the
most strides typically have someone either in the executive suite or on the board of
directors actively supporting their carbon-reduction efforts, according to Wright.
Double win
Since the survey’s completion, progress has been slowed by a dramatically weakening world economy and a sharp drop in energy prices. Though supply chain
executives remain aware of the importance of reducing emissions, Wright says,
they feel less of a sense of urgency about their carbon-reduction initiatives.
Maybe they should reconsider: Companies that simultaneously work to cut
their carbon footprint and streamline their supply chains can reduce their carbon output by 5 to 10 percent while achieving supply chain cost savings of
between 10 and 15 percent, Wright says.
For some companies, the results can be even more dramatic. In 2008, Chinese
steamship and logistics giant COSCO asked IBM Corp. to suggest measurable
ways the carrier could cut carbon emissions in its domestic Chinese supply
chain. IBM analyzed COSCO’s carbon footprint and its supply chain operation
using a mathematical tool known as the “Supply Chain Network Optimization
Workbench,” or SNOW. The resulting analysis allowed COSCO to cut the number of distribution centers in China from 100 to 40, slash logistics costs by 23
percent, and reduce CO emissions by 100,000 tons a year, or 15 percent, accord-
2
ing to IBM. p. 10
cut, cut, cut won’t
work
The exhibit floor at the 2009
ProMat conference and exposition was filled with equipment
and technology that promised
to automate processes and cut
labor costs all in the name of
efficiency. Yet at the same time
those purveyors were strutting
their collective stuff, several
management gurus were cautioning attendees to be judicious in reducing head count,
warning that indiscriminate job
reductions will cause more
problems than they solve.
One of them, Jim Tompkins,
head of Raleigh, N.C.-based
consultancy Tompkins Associates, said that while it’s often
essential for companies to
reduce capital and operating
expenses, they should be
careful not to lay off experienced workers needed to
maintain cost-effective operations. Too many companies
blindly cut costs without
weighing the impact of their
actions on long-term strategic
directions, Tompkins said.
“Lots of companies cut, cut,
cut. That’s an action, not a
strategy,” he said. “You have
to have a strategy first.”
The consultant also took a
hard line on labor force reductions aimed at meeting return
on investment (ROI) metrics.
ROI assumptions are nothing
more than flawed predictions
that are especially vulnerable
to error in a weak, uncertain
economy, Tompkins said.
