Introduction to the Green Supply Chain

Starting to create a green supply chain can add to the bottom line

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Listening to Environmentally Aware Consumers

As the public becomes more aware of environmental issues and global warming, consumers will be asking more questions about the products they are purchasing. Companies will have to expect questions about how green their manufacturing processes and supply chain are, their carbon footprint and how they recycle.

Profiting from Being Green

However some companies have seen that this not a bad thing and indeed have been able to convert the public’s interest in all things green into increased profits.

A number of companies have shown that there is a proof of the link between improved environmental performance and financial gains. Companies have looked to their supply chain and seen areas where improvements in the way they operate can produce profits.

General Motors reduced disposal costs by $12 million by establishing a reusable container program with their suppliers. Perhaps General Motors may have been less interested in green issues if they were making record profits, but in an attempt to reduce costs in their supply chain, GM found that the cost reductions they identified complemented the company’s commitment to the environment.

Unaware of Potential Benefits

Companies can find cost savings by reducing the environmental impact of their business processes. By re-evaluating the company's supply chain, from purchasing, planning, and managing the use of materials to shipping and distributing final products, savings are often identified as a benefit of implementing green policies.

Despite the public’s focus on the environment, benefits attributed to reducing a company’s environmental impact are not in the forefront of supply chain executive’s minds. It appears that many executives are still unaware that improved environmental performance means lower waste-disposal and training costs, fewer environmental-permitting fees, and, often, reduced materials costs.

Hopefully the interest in green issues and environmental concern by the public will not wane as economic issues become more important due to the faltering economy.

Optimized Supply Chain

Optimizing your supply chain means getting your customers what they want, when they want it.  And spending as little money as possible while accomplishing that.  Many in the supply chain world see this definition as counterintuitive to what it means (and costs) to deploy a green supply chain.  However, when a supply chain is analyzed for cost reductions - that often goes hand-in-hand with green initiatives.  Reduction in shipping typically means less and less fossil fuels are burned.  By consolidating and optimizing material and packaging usage, less corrugated products are consumed - not to mention bubble wrap, foam peanuts, shrink wrap and other dunnage.  

And the more robustly green your supply chain becomes, the more it can become a public relations and marketing boon.  Imagine letting your customers know that you're saving the planet x-number of tons of packaging material and y-number barrels of oil every year through your green supply chain initiatives.

 That's a metric that easily resonates with the public.  And the cost reductions that you pass on to the bottom line easily resonate with your chief financial officer, board of directors and shareholders.  

Designing and implementing a greener supply chain is truly a win-win-win scenario for your company, your shareholders and your planet.  When a supply chain becomes greener - waste is driven from it.  When waste is driven from your supply chain (or any process) - the cost of that process is reduced.  When costs are reduced - everybody's happy.  Except the planet.  The planet is happy when it's not choking and not covered in our garbage.  But that can actually be a tangential benefit of greening your supply chain.

If you want your company to strive for a greener supply chain, sell the green supply chain initiative as a cost savings initiative.   

This article has been updated by Gary Marion, Logistics and Supply Chain Expert.

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