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Supply Chain Spotlight: Sustainable Supply Chains

by Keith Burgess and Simon Glass

December 29, 2009

by Keith Burgess and Simon Glass, IBM SAP NetWeaver Magazine - Volume 5, Issue 4

Turning Green into Gold
Reap the Benefits of Green by Improving Your Supply Chain Processes

Simon Glass
Management Consultant
IBM Global Business Services

Keith Burgess
Management Consultant
IBM Global Business Services

Organizations face increasing pressure to reduce carbon dioxide and greenhouse gas emissions in their supply chains. In addition, in a recent IBM survey of more than 400 supply chain executives, 89% of respondents said that cost reduction was either very important or critically important to their business.1 These environmental and cost reduction goals need not conflict. By executing the right sustainable business strategy, companies can lower their environmental impact and energy use while improving efficiency and reducing costs.

Reducing Emissions and Cost: Where to Begin

We’ve found several common levers that SAP and IBM customers can use to reduce costs and carbon emissions and to achieve sustainablity, for example:

  • Transportation and supply: Consider local sourcing – in addition to using less energy, local sourcing can reduce exposure to such risks as volatile fuel prices. Enhanced vehicle technology and design can also improve fuel efficiency, lower emissions, and reduce costs. To help, IBM offers iLog, which allows you to analyze data in your SAP system, enabling you to optimally design your supply chain to account for trade-offs around price, responsiveness, and sustainability.

  • Product lifecycle management: Look for product redesign opportunities – like reducing the product’s weight or making it easier to disassemble – that reduce energy consumption. For example, laws require that many products be recycled at the end of their life. Planning for this in the original design phase can eliminate or reduce high energy costs later and minimize the carbon emissions of the reverse supply chain.

  • Low-emissions manufacturing: There are many ways to reduce cost and emissions in the manufacturing process. Green Sigma is based on Lean Six Sigma, a strategic approach for analyzing operations to improve efficiency, lower costs, increase quality, and add, change, or eliminate activities and processes. Maximizing asset utilization through predictive maintenance – aided by smart asset monitoring technologies, like IBM Maximo – can also improve efficiency and lower costs. And finally, as legislation is introduced that taxes pollutants, toxic materials, and harmful emissions, effectively addressing these issues reduces potential punitive costs.

  • Shipment: Evaluate potential waste resulting from service level agreements. For example, when agreements force small, expedited deliveries, energy use rises. Furthermore, as the trend toward Internet shopping drives an increase in home deliveries, organizations that take steps to improve first-time delivery success will lower costs and the carbon footprint by reducing repeat delivery trips, while improving the customer experience.

  • Packaging: Reducing the amount of packaging might seem to be the best way to reduce both the cost of a product and its environmental impact – but not if it results in safety, spoilage, damage, and return issues. Proper packaging reduces this waste in the supply chain, which consequently reduces cost and environmental impact.

Turning Green into Gold

The winners in the new economy will be those who develop a sustainable business practice to help them save money now and prepare for the future. IBM is committed to helping SAP customers improve their sustainability. In fact, SAP was a founding member of IBM’s Green Sigma Coalition – a group of companies working with IBM to provide smarter solutions for energy, water, waste, and carbon emissions management.

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