How to use technology to build a sustainable supply chain

Manufacturers are looking to sustainable supply chains to reduce both costs and carbon footprints. Having the right technology in place will help drive supply chain sustainability.

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Regulatory requirements and customer expectations are driving manufacturers to adopt sustainable supply chain practices

-- and technology is playing a key role.

Besides helping product development, procurement, and supply chain teams meet corporate social responsibility (CSR) requirements, implementation of so-called green supply chain programs, in many cases, is also lowering costs.

Supply chain sustainability technology takes many forms, including:

  • Tools to track, measure, and report on supplier compliance to global and regional environmental requirements such as the European Union's Restriction of Hazardous Substances (RoHS) directive.

  • Solutions that enable companies to measure the carbon footprint of their supply chain

  • Sourcing and engineering-based solutions that enable companies to entertain and analyze alternative design specifications and cost structures for products and packaging

  • Tools that optimize inbound and outbound logistics to minimize both costs and carbon footprint.

Companies today often implement sustainable supply chain technologies as part of broader initiatives. For example, it is not uncommon for organizations to implement supplier on-boarding, development, and information management solutions that help reduce supplier management costs, lower supply risk and also capture and report on sustainability-related supplier metrics.

An increasing number of companies are also capturing green supply chain metrics as part of the strategic sourcing process, basing their supplier-selection decisions on a variety of factors that look at sustainability factors along with cost.

Industrial, food, consumer packaged goods, high technology, and other organizations are also investing in supply chain sustainability solutions that involve R&D and engineering. These efforts help companies to base design decisions and tradeoffs on both total cost and related sustainability metrics.

For example, an organization may work with suppliers to identify and implement alternative materials that help reduce weight and packaging costs. In other cases, initiatives focus on changing packaging specifications to reduce total logistics costs.

One of the best-known examples of this is how Costco and other warehouse-format companies worked with suppliers to redesign the traditional one-gallon milk container to fit on a standard pallet (versus requiring special handling tools and equipment). This also reduced the total amount of plastic resin in the packaging, reducing costs further.

About the author: Obsessed with how companies manage, spend and save money, Jason Busch writes about procurement, trade and supply chain issues on his blog Spend Matters. He is also Managing Director of Azul Partners, an advisory firm.

This was first published in February 2010

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