Wednesday, November 30, 2011

More about Energy-efficient Supply Chain

As I mentioned in my last blog that an increasing number of companies have gained the awareness of designing and planning a much greener supply chain as concerns about fuel prices, long-term energy availability, and climate changes, etc. Therefore, companies’ attention is finally turning toward one of the most pervasive places where energy can be conserved: the whole industrial supply chain network which encompasses the sourcing, manufacturing, transportation, commercialization, distribution, consumption, and disposal of goods, from the ore mine to the trash can.

I just found some examples to show how companies actually implement their idea to create some more energy-efficient supply chain and how to reduce energy consumption and carbon output in procurement, production, and distribution.

On January 18, 2007, Tesco CEO Terry Leahy announced that the retail chain would reduce the carbon footprint of all stores and distribution centers by 50 percent over the next 15 years. That kind of target cannot be realized by placing unilateral pressure on suppliers. It requires efforts that build trust and transparency along the value chain. When suppliers and customers understand one another’s contributions to carbon emissions, they can identify ecological and economic waste that would otherwise be hard to see.
in 2006, the Carbon Trust, a United Kingdom–based research and advisory group, discovered a “perverse incentive” in the sourcing of raw potatoes for manufacturing snack foods.  Charged with studying the carbon footprint of potato chips, the Trust’s researchers found that because prices are set by weight, farmers typically control humidification to produce moister and therefore heavier potatoes. Even within the strictly limited specifications of moisture content set by the food manufacturers, these few grams of extra water are significant. The extra cooking needed to burn them off accounted for an unexpectedly high percentage of the chips’ energy consumption. 
An obvious solution, wrote the Carbon Trust, would be to change the procurement contract — to provide farmers with an incentive to produce potatoes with less moisture. This would better position the manufacturers to take advantage of carbon trading credits and other regulations for greenhouse gas reduction. And it would set a precedent for further collaboration between food makers and their agricultural suppliers.

Some of the innovations of the next five years will focus on reducing this type of inefficiency. Marks and Spencer, for example, has a specific initiative under way to reduce “food miles,” sourcing its wares from nearby locales and working with local farmers to increase the growing season. Other initiatives will increase transportation efficiencies: A truck that once carried 150 items will now carry 300, or carry the same volume of goods with less fuel. Other projects will reduce and simplify packaging, closely track the joules consumed, or switch to less carbon-intensive materials and energy sources (such as renewable energy and more efficient lighting sources).

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