Optimizing the supply chain means moving beyond adding flexibility and creating better strategies for operations, resources, and the bottom line. Today, a truly optimized supply chain also typically means a greener supply chain. In fact, striving for sustainable manufacturing practices is a growing trend and a primary driver for improvement projects. Following are some examples of this overlap.
- Transportation. While it varies from industry to industry and company to company, the largest expense related to supply chain management often is transportation. It's not unusual for transportation to run to 1–4 percent of the cost of goods sold. Transportation management systems have been around for decades and can enable companies to lower expenses in a variety of ways. For ground transportation, this can be done by automating and optimizing load planning, creating fuller trucks, or planning smarter delivery routes. Whether a company is leveraging its own fleet or common carriers, these initiatives mean lower costs as a direct result of fewer miles. And, of course, fewer miles equals fewer emissions.
- Less corrugate. Think about direct-to-consumer, wholesale, retail, or other companies that ship orders in corrugate boxes. The annual cost of the corrugate is no small sum; for some companies, it can be in the millions of dollars. Most warehouse management systems will optimize order cartonization to ensure products are packed into the fewest number of best-fit carton sizes. This enables fulfillment operations to use fewer cartons—and thus spend less on corrugate. Here, less corrugate ultimately means using fewer trees.
- Documents, labels, and paperwork. When consultants analyze the supply chain processes at a given organization looking for inefficiencies, a common technique is identifying paper-based processes. These tend to be manual, be inefficient, and require excess human labor. These tasks are great opportunities to leverage the right technology and automate. Some examples of this are order picking or inventory stocking in a distribution center. If workers are picking using paper pick sheets, productivity can be enhanced with real-time technology, such as handheld terminals with bar code scanners and modern voice-directed picking devices—another excellent way to save money and trees.
- Supplier collaboration. A big part of supply chain optimization in the last decade has been about improving how companies work with their trading partners. Extending your green-friendly supply chain practices to your partners is one way to collaborate even better. For example, if you are optimally packing your product for customer shipments, you can require your vendors to do the same. The same goes for transportation: Are your suppliers shipping product to you by the most efficient means, from both a cost and environmental sustainability standpoint?
- Facilities. If your company is growing, there are many questions to ask: When will we need our next distribution center or manufacturing facility? Where should they be located? How long can we wait before building them? But supply chain efficiency questions must play a huge part, as well: If we increase the capacities of our current network, can we delay opening the next facility? If space is an issue, can we optimize inventory to reduce raw materials or finished goods inventory and slow down space needs enough to delay opening the next facility? If fulfillment and transportation processes are improved, will this help? All of the supply chain tools mentioned in this article can positively contribute to better space efficiency that can then potentially delay or eliminate the need for an added building—and the power, water, staff transportation, and sewage resources required for a new site.
Advanced tools and technologies are likely to continue to increase supply chain optimization in most industries. If these endeavors can help create a greener planet, all the better.
Glenn VanLandingham is senior director of Manhattan Associates. He may be contacted at email@example.com