Four key focus areas for supply chain sustainability: Part 1 – carbon emissions
With COP 27 drawing to a close this week, the climate crisis and the challenges that must be overcome in the next 5-10 years will no doubt linger in business leaders’ brains far beyond the conference doors closing.
From manufacturing to logistics, office space to warehouse operations, the potential impacts on people and planet (and therefore the opportunity to reduce them) spans the whole gamut of our supply chains.
It can feel overwhelming, but sustainability is simply a new type of supply chain improvement, one that will ensure a more resilient and innovative business emerges on the other side.
To this purpose, we’ve identified four key environmentally negative impacts, common in supply chains, that businesses looking to improve their sustainable credentials should focus their efforts on.
- carbon emissions
- the amount of green space utilised
- the use of chemicals
- and landfill waste.
Across a series of articles, we’ll take a closer look at each area in more depth, to see what challenges, changes, and opportunities face business both now and in the immediate future.
Tackling carbon emissions in your supply chain logistics.
Last mile delivery
Transportation of goods into, around, and out of your supply chain network is typically the largest contributing factor to carbon emissions.
Last mile delivery (delivering into urban centres) commonly accounts for more than half of all delivery emissions, in spite of the relatively short distance left for products to travel.
Maintaining customer service is always crucial when making any business change. However, it’s worth noting that studies have shown 86% of consumers want to be offered and incentivised to use delayed, more environmentally friendly, shipping options. This means (when incentivised correctly) reduced carbon delivery can present a win-win scenario for your business and your customers.
A slower delivery promise can allow for a greater number of orders to be consolidated into fewer vehicles at a greater truck fill, saving fuel and therefore reducing the carbon intensity of each order. This can also provide the additional benefit to the business of flattening daily peaks of outbound orders, allowing operations to produce more consistent plans and realise further cost savings.
Therefore, it’s vitally important to collaborate with your commercial teams – this joint approach can be critical in coming up with incentivised ways to improve efficiency of delivering to customers.
‘Greening’ your fleet
Upgrading your fleet can be a daunting prospect, with the shift to greener biofuel engine vehicles, or the switch to fully electric, both requiring large cash investment.
Yet, for the sake of sustainable transport, using vehicles with greener fuels can have a significant impact on reducing carbon emissions.
Electric vehicles present an even greater reduction (when paired with renewable electricity generation), but these come with the additional challenge of how to plan delivery routes with EV charging points in mind.
This can be overcome with the right transport planning and the right software.
Knowing where to position your fleet of vehicles to minimise the mileage expelled on an average day also requires a trade-off on how centralised/de-centralised your supply chain network should be.
One solution might be setting up micro-hubs to reduce the distance items have to travel to the consumer. The trade-off is more internal logistics and more inventory held in a greater amount of space. A carbon and cost balancing act.
Pick up and drop off (PUDO)
The number of stops and starts of a delivery vehicle is a big contributor to carbon emissions.
One option is to offer customers delivery to Pick up and drop off (PUDO) locations, which are often positioned in populated areas where consumers can collect or drop off a parcel while on a journey they would have taken anyway.
If you’ve not already, it may be more economical altogether to outsource your customer deliveries. Third party delivery providers will be able to maximise truck fill across routes and are also on the forefront of developing new initiatives such as e-cargo vehicles (electric bike/van hybrids), electric drones, and droid (vehicles on pavements) deliveries.
Although some of this technology is still a ways from being common-place.
To re-cap, the key questions to ask when thinking about your last mile delivery are:
- what delivery options will be offered to your customers,
- what vehicles you will use to transport goods to the customer,
- which locations goods will be held and dispatched from, and
- where deliveries will be left for the customer
- should customer deliveries be outsourced?
Further transport carbon-reduction projects may include finding ways to replace long haul air logistics with sea or train routes which can have a huge impact on reducing a business’ carbon footprint. This is likely to require better inventory forecasting given the increased lead-time of supply.
A drastic measure can involve procuring goods currently purchased from abroad instead from national suppliers, referred to as “re-shoring”. This can be a costly and time-consuming activity but not only can it minimise carbon output but also reduce risks to supply, for example, the Suez Canal incident in 2021, or the recent global pandemic.
Other areas to look at to reduce carbon emissions might include:
- Production processes: clothing and shoe production is responsible for 10% of global carbon emissions with 70% of those emissions coming from the production process.
- Reduction in the volume of returns: Walmart invested in a diverse range of models to provide online fashion shoppers with a better representation of themselves in their clothes, ultimately reducing the volume of returns and therefore the associated carbon emissions.
- The energy used to run warehouses – switching bulbs to LED can be a super quick and effective win, but also offsetting emissions by generating your own renewable energy through clean energy solutions such as solar panels or wind turbines. Not only can clean energy generators offset building energy consumption but by supplying excess energy back to the grid can be part of a process towards certifications a net zero company.
- You may also look at ways to help employees travel to work in more environmentally-friendly ways such as cycling or car-sharing schemes.
Final thoughts: the supply chain balancing act
Taking one element of your business and breaking down its credentials can be an effective way to push forward meaningful sustainability improvements without overwhelming the constant ‘balancing act’ that is supply chain management.
But keep in mind, while sustainability might be considered a ‘new’ component in the mix, it is most certainly going to be a pivotal one. Ultimately, many companies will need to not just change, but transform the way that they do things – so get started now before it becomes too late.
About the author
Ashleigh’s work focuses on the performance of data analysis and production of statistical models to derive insights.
Ash has worked with start-ups, defence contractors, retailers and the NHS to derive value from data and solve big problems.