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green and sustainable business

Can Supply Chains Reduce Emissions and Costs?

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It’s not necessarily an either/or proposition. Logistics managers trying to optimize supply chains for sustainability and emissions reductions face a tough question: how to implement those goals without breaking the bank.

The conventional thinking is that there’s always tradeoff: A transport company can reduce its CO2 emissions along a supply chain, but at a higher operating cost. Often much higher.

Findings released last month during a webinar sponsored by Finished Vehicle Logistics magazine suggest that in certain cases at least the best of both worlds is possible.

“You can reduce CO2 emissions and costs [along the supply chain] with the right approaches and if processes are executed correctly,” said Nils Lie, Vice President, Business Development, Supply Chain Management for Wallenius Wilhelmsen Logistics, which arranges auto transportation from factory to dealers around the world. “It requires thinking in a new way,” he continued, one that adds carbon emissions to the cost-line of supply chain optimization while factoring in and balancing two vital components of the optimization process: quality and time.

Many companies have not considered examining their outbound supply chains from an emissions perspective because of the assumed high cost of doing so.

Lie revealed the conclusions of a case study that WWL did with India’s TATA Motors using a WWL-designed carbon calculator. The joint study examined ways to reduce supply chain emissions and costs from TATA’s factory in India to dealers in South Africa. Three transportation scenarios were considered for distribution of autos to the dealers by adjusting lead delivery times out of differing distribution hubs and using fuel efficient equipment. The best-outcome scenario entailed a 2.3-day lead time from distribution centers in Durban and Johannesburg to Capetown and resulted in a CO2 reduction of 33 percent coupled with a cost reduction of 22 percent.

The distribution center flow and time component of this approach appears to be a major determining factor in achieving those significant reductions. Taking a bit more time pays dividends in terms of emission and cost reductions. Additional reductions can result by optimizing truck and ocean fleets for greater efficiency and lower fuel consumption.

The TATA study is a relatively short and uncomplicated supply chain sample, so it’s unclear how this model works on long and transportation complex chains.

Lie’s perceptive rejoinder answer to that is, “The more complex the supply chain, the more room there is for improvement.” He adds that the key to success is collaboration by all parties on the supply chain.

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Written by William DiBenedetto

7 June, 2011 at 2:00 am

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