Over the past year there has been a noticeable trend in the way that Original Equipment Manufacturers (OEMs), especially in the automotive industry, have approached their waste, energy, and air emissions management: supply chain management designed to reduce embedded emissions before they enter into the picture. It’s the next big sustainability tactic that’s getting applied to businesses everywhere, and we predict that in 2013 almost every business, from large to small in every industry, will be affected by emerging supply chain management strategies.
Previously, manufacturers relied on maximizing efficiency and installing powerful control devices to capture or eliminate reportable emissions and greenhouse gases. And although those environmental management strategies are still essential, EH&S specialists have realized that tackling emissions at the source is more environmentally effective, simpler, and more cost-efficient. It’s all about tapping into the ripple effect that happens when the numerous links in your supply chain make small and achievable steps to reduce emissions in order to yield big results.
You don’t need to be a big automotive OEM to reap the rewards of better supply chain management however. Almost every business has their own supply chain and purchases materials or parts from another business, which means there’s an opportunity to assess your supply chain for potential improvements. A common example of this is any business that purchases paints or similar coatings from a chemical/coatings vendor: do they offer a low-VOC paint? Do they have shipping options that would generate a smaller carbon footprint? Is there a more effective method they could use to communicate chemical component data to you that would save you time and hassle? Even finding selecting a vendor that uses less packaging will save you costs associated with shipping out waste.
Supply Chain Management Techniques
There are two main techniques that we’re starting to see getting implemented in the environmental management industry: environmental assessments that weed out the weak links, and imposing top-down sustainability policies through the supply chain. Both work well for reducing your overall environmental impact, and both can be used simultaneously. However, how effectively you can carry these tactics out will depend on your own position within the overall supply chain.
Rethinking the Competition with Environment-Focused Assessments
The most common approach used by manufacturers to improve their supply chain management is to use environmental metrics as the primary mode of assessing who they will choose to do business with. It is becoming increasingly important to be the vendor with the lowest embedded environmental footprint rather than the one who can offer the lowest prices. That’s because corporate sustainability strategists are now taking into account the built-in costs that are associated with all the embedded VOCs, HAPs, GHGs, and toxic waste. Cleaner & greener products, despite often having a slightly higher initial cost, are ultimately more cost effective through the entire product life cycle.
Good supply chain management focuses on weeding out the weak links in the chain and building an environmentally sustainable supply chain. It’s better for emissions management, waste management, and makes both consumers and executives happier. As we all move toward a more global marketplace for consumer products, it’s beginning to matter more and more what goes into your product – for example, a weak link in your supply chain could actually be holding you back from exporting your product to Asia or certain European countries. It’s time to start considering the total environmental footprint of a product, and that means assessing your supply chain, link by link.
The key to using this supply chain management strategy is to rethink the way you select those you are doing business with and create a new set of selection criteria. This will likely require some team work between your purchasing manager and your environmental team. Oftentimes, you’ll have to do some emissions forecasting for all the products you decide to use - in fact, you might discover that the easiest way to reduce emissions is to switch materials entirely, which could dramatically change your supply change and break away from old links.
Let your supply chain know you are reassessing the materials you use and be transparent about your new environmentally-centered criteria. Give them the opportunity to rise to your expectations or explain how their products contribute to your sustainability. We suggest you take a look at your current emissions and then set goals for the reductions you’d like to see, and then talk to your current and potential suppliers and ask them how they can help you achieve those goals - a good supplier won’t have the attitude that your sustainability is none of their business. Sometimes just mentioning you are reassessing your supply chain will be enough motivation to spur your current vendors to make the changes you want to see.
Top-Down Supply Chain Management: Throwing Your Weight Around
This second technique is well-suited for any business that is in the enviable spot of being the top dog in their supply chain. If your vendors fight to be the ones you choose to do business with and depend on you to be the leader, you may be able to ask your supply chain to make certain changes rather than do the hard work of finding new suppliers. This could also be extremely useful there just doesn’t seem to be a supplier out there that does exactly what you are looking for but you’re already working with a reliable vendor who comes close.
For example, of you make it a priority in 2013 to start GADSL reporting (a voluntary automotive protocol that lists all the banned substances in vehicles around the world), you can ask your current vendors to completely remove GADSL chemicals from their parts & materials. Another common strategy is to improve the flow of EH&S management data by asking your supply chain to provide comprehensive information about chemical formulas, energy use associated per part, GHGs related to shipping, etc. so that you can account for these embedded aspects throughout the supply chain.
Just be sure that your business is large enough to attempt this strategy, otherwise it could compromise your relationship with vendors and make it more difficult to manage your supply chain in other ways. If you’re not sure you have enough influence over your suppliers yet, we recommend using the first strategy so that you can more clearly gauge how readily suppliers are willing to help you meet your goals.
January 10, 2013