Be Proactive or Eat Dust: The Case for Sustainability in the Supply Chain

---

Changes in technology, processes and business practices are changing so rapidly that it can be perceived as a lot of people throwing sh** against a wall to see what sticks.  Knowing this, a safe “corporate” response might be, “Let’s sit here, have a picnic and see what sticks, then we’ll jump on that bandwagon.”  I often hear things like, “We’ve always done it this way”, “This is how it worked at my last firm” and my favorite, “If it ain’t broke, don’t fix it.”  Again, all rational responses in their own light, but reactive lines of thinking nonetheless.

This is no time for a picnic.  The world needs problem solvers for many issues, but today we’ll focus on the case for proactive sustainability practices along the supply chain.

Companies standing out from the crowd are taking the extra steps, spending more, speaking out, and partnering with companies that have a focus on sustainability practices going forward.  Manufacturers and consumers alike are demanding higher quality products/service and lower carbon footprints.

According to a USGBC press release from June 14, 2016 regarding the LEED In Motion Project, “The manufacturing sector alone makes up 30% of the nation’s energy consumption and 4% of daily water use.” There are profits to be rewarded to companies willing to take small steps toward sustainability across the supply chain.

In fact, we’ve already seen how Murphy Logistics is creating a positive long term net impact on select communities, utilities, partnerships and their organization in general from a previous post – 3PL Spotlight: “Location, Location, Logistics”.

That’s great, so where do I start?

Company Buy-In:  It all begins with putting sustainable practices top of mind across an organization.  Everyone needs to understand why Green Supply Chain Management (GSCM) is good for customers, employees and the company in general.  Focus on identifying where your biggest “wins” will come from using the Pareto principle a.k.a. the (80/20) rule.  Once the areas where you can have the greatest success are identified,  use a managed approach like Six Sigma’s (DMAIC) methodology: define, measure, analyze, improve, control to manage the process.  As your company focuses on efficiency with sustainability in mind, operational costs will decline as a result of reduction in waste, efficient management of resources, and reduced production costs.

Consider tackling these items first:

• Lighting systems
• Temperature control (HVAC, insulation, HVLS fans, dock seals, etc.)
• Stormwater management
• Landscaping maintenance
• Co-op with utility companies

Yes, I’ll have an organic 3PL…

Sustainable practices will create opportunities for product differentiation and competitive advantages, but in order to manage costs you’ll need to have a measurable process for each initiative.  Manufacturers are already pushing for vendors and suppliers to incorporate sustainable practices that align with company wide sustainability/efficiency objectives.  Here’s a list of some major groups that are participating in LEED across their large industrial portfolios:

I expect you will see Fortune 1000 companies begin using carbon footprint as a success metric/branding strategy.  It will also create an easy way to weed through third party logistics (3PL) providers bidding for contracts.  3PLs have already begun branding strategies that highlight their sustainable innovations and practices.

Here’s a link to the top food logistics companies from 2017 consisting of transportation providers, 3PLs, cold storage providers, technology companies, pallet manufacturers and many others who have stepped to the front to become the leaders in supporting a more sustainable global food supply chain.  Lots of good examples of innovative practices and processes that create savings for the logistics firms and their customers.

Green Building Design

Most of the discussion around LEED certified buildings up to this point have centered focus on office, mixed use and multi-family buildings. However, with the rise of online retail and B2C distribution, industrial warehouse space is sharing the spotlight.

USGBC‘s multi-tier rating models provide ample opportunity for GSCM practices to be facilitated at the industrial level.  Spec industrial and build to suit sites can achieve LEED certifications through features and methods of building design in addition to building systems, user behavior and construction methods.

Below I’ve listed some examples of sustainable features that are fairly easy to implement and use whether or not you are pursuing LEED certification.  Here is a link to see a full list of LEED Credits.

• Lighting systems and fixtures – Lighting makes up roughly 30% of energy usage in a DC.
• “Bioswales” – native prairie grass plants, etc.
• French drains
• Clerestory glass
• Daylighting (sensors)
• Recycled carpet
• Non-VOC paint & finishes
• Energy efficient MEP systems
• Solar power arrays
• Battery power storage
• Healthier work environment

Ideally, we would get to a point where buildings achieve a “net-zero” rating where the design, construction, systems, appliances/equipment, operations, maintenance and user behavior are as efficient as possible.  Any remaining energy requirements are addressed with on-site renewable energy solutions.

Location will play a role in sustainability

Location of DCs can be a major cost reducer since a great deal of energy use comes from transporting products to and from the DC.  Subsequently proximity to inbound ports and customer is also becoming more important to decision makers looking to reposition distribution portfolios.

Economics are key

As you might imagine, all these things cost money, and if you are focusing on public warehousing with month-to-month contracts, it probably doesn’t make sense to put up a $1 million solar array on your roof.  Sustainable capital expenditures by owners and tenants will be funded by contracts that cover the “payback period” or the time that is needed for savings to offset the cost of the investment.  Logistics firms with close knit partnerships will be in a much better position to communicate the long term value of sustainable investments.

 

Thanks for reading.

---

Resources:

1. http://www.supplychain247.com/article/7_trends_in_sustainable_warehouse_design/green
2. https://www.prologis.com/industrial-development-capabilities/capital-deployment/sustainable-development
3. http://cerasis.com/2016/07/12/warehouse-cost-savings/
4. https://kapost-files-prod.s3.amazonaws.com/published/56438d353dab34e8a1000061/green-building-economic-impact-study.pdf?kui=ntZxSELuij0YNSwkwEO_Kw
5. https://www.usgbc.org/articles/experts-weigh-leed-and-industrial-facilities
6. https://www.usgbc.org/articles/new-green-building-report-shows-industrial-sector-prioritizes-sustainability-design-and-ope
7. https://readymag.com/usgbc/industrial/
8. https://www.ccim.com/cire-magazine/articles/industrial-goes-green/?gmSsoPc=1
9. https://www.foodlogistics.com/sustainability/article/12336794/food-logistics-2017-top-green-providers
10. https://www.thebalance.com/introduction-to-the-green-supply-chain-2221084
11. https://globalscgroup.com/benefits-of-green-supply-chain/