The Green Supply Chain
Nine trillion dollars are spent annually on worldwide logistics costs. When most people look at this figure their heads spins thinking about the number of zeros in that number and the scope of activities that it represents. Corporate leaders have also started to look at this number as a huge opportunity to streamline processes and reduce expenses. Everything from agriculture to manufacturing is being analyzed in a whole new light and directors have been pleasantly surprised by the possibilities.
Global shipping giant DHL recently released a study about the transformational trends currently taking place in the global logistics industry. In the report, they predict that logistics will no longer be viewed as a commodity and that 63% of corporations believe it will be used as a key effort to reduce global carbon usage. Consumers from around the globe seem to be supportive with 84% of Asian consumers and 50% of western consumers saying that they would accept a higher price for green products. DHL has personally responded by being the first logistics company to set a 30% improvement goal for their carbon usage by 2020. They have also increased their carbon neutral shipments four-fold to 704 million shipments from 2008 to 2009.
Wal-Mart has also been a big proponent of increasing efficiencies and promoting environmentally-friendly policies in multiple levels of their supply chain. Wal-Mart plans to sell $1 billion worth of food grown by small farmers in China and India after training them to use water, pesticides and fertilizer more efficiently. Another major area of focus is sourcing products that do not destroy the rainforest. In Brazil, Wal-Mart only sells beef from ranches that do not ruin the rainforest and they are starting a program in Indonesia to only buy palm oil that does not cause rainforest destruction.
In manufacturing, IBM has led the way for electronic and IT companies in “greening” their supply chain. IBM now requires 4 things from their suppliers:
1. Define an environmental management system (EMS).
2. Measure existing environmental impacts and establish goals to improve performance.
3. Publicly disclose their metrics and results.
4. “Cascade” these requirements to any suppliers that are material to IBM’s products.
Increased transparency is intended to continuously improve their standards and should help all members of the supply chain. IBM also notes that these requirements are designed to make suppliers as green as IBM while increasing their profitability.
Caterpillar is working closely with their catalytic-converter supplier Tenneco to not only reduce emissions in their tractors, but also make their manufacturing more efficient in order to save money. The new parts have reduced product costs by 20% on that product and the new partnership has helped Caterpillar better respond to sudden demand increases.
Companies all over the world are realizing the benefits of creating efficiencies in their supply chains that not only help the environment, but also save companies money and contribute directly to the bottom line.
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