Green Supply Chain

Contents
What is Green Supply Chain Management? Green Supply Chain Management Principles Green Supply Chain Management Best

Practices Implementing Best Practices Summary

What is Supply Chain management?

Supply chain management (SCM) is the oversight

of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer.

What Is Green Supply Chain Management

Integrating environment thinking into supply chain management, including product design, material sourcing and selection, manufacturing processes, delivery of the final product to the consumers, and end-of-life management of the product after its useful life".

Green Supply Chain Management

Green SCM integrates environmental and supply chain management.

Green Supply Chain Management

Environmental Management

Supply Chain Management Green Supply Chain Management

Green SCM recognizes the disproportionate environmental impact of supply chain processes in an organization.

 Industrial Ecology: a systematic organizing framework for the

many facets of environmental management..industrial world as a natural system - a part of the local ecosystems and the global biosphere ... offers a fundamental understanding of the value of modeling the industrial system on ecosystems to achieve Industrial Ecosystem Boundary sustainable environmental performance (Lowe, 1993).

Energy and Limited Res ources

Materials Extractor or Grower

Materials Processor or Manufacturer

Limited W as te

Waste P rocessor

Consumer

Management of Materials and Resources from Suppliers to Manufacturer/Service Provider to Customer and Back, with the Natural Environment Explicitly Considered (hopefully in a conscientious manner).

Green Supply Chain => Management

Green SCM leverages the role of the environment in SC value creation. Environmental Value Drivers
Tangible Outcomes
Profitability Asset Utilization Service Level Employee Satisfaction Customer

Green Supply Chain Programs

Supply Chain Value

Stakeholder Interests

Environmental Sustainability Community Quality of Life

Reputation Continuity Alliances Technology

Intangible Value Drivers

Source: Forging New Links, GEMI, 2004

Commercial firms have had early success using Green SCM principles.
Texas Instruments: Saves $8 million each year by reducing its transit packaging budget for its semiconductor business through source reduction, recycling, and use of reusable packaging systems (20% annual savings). Pepsi-Cola: Saved $44 million by switching from corrugated to reusable plastic shipping containers for one liter and 20ounce bottles, conserving 196 million pounds of corrugated material.

Commonwealth Edison: Produced $50 million in financial benefits from managing materials and equipment with a life-cycle management approach.

Dow Corning: Saved $2.3 million by using reconditioned steel drums in 1995. Also conserved 7.8 million pounds of steel.

Green Supply Chain improves operations by employing an environmental solution.

Improves AgilityGreen supply chain

management help mitigate risks and speed innovations. Increases AdaptabilityGreen supply chain analysis often lead to innovative processes and continuous improvements. Promotes AlignmentGreen supply chain management involves negotiating policies with suppliers and customers, which results in better alignment of business processes and principles.
Source: The Triple-A Supply Chain, Lee, Harvard Business Review, October 2004 Environmental Supply Chain Management, Carter and Narasimhan, CAPS Research, 1998

Benefits Of Green SCM

Improvements By Green SCM

Improves operations by employing an environmental solution Improves Agility: Green supply chain management help

mitigate risks and speed innovations

Increases Adaptability: Green supply chain analysis often

leads to innovative processes and continuous improvements

Promotes Alignment: involves negotiating policies with

suppliers and customers, which results in better alignment of business processes and principles.

Why Do it? (Benefits)

USAEP, 2001, USAEP, (2001), Greening the Supply Chain, U.S. Asia Environmental Program,
http://www.usaep.org/ctem/greening.htm.

Economic benefits from increased efficiency. By reducing wastes, companies

decrease handling expenses, fines, and even costly inputs. Supplier's savings may be passed along to buyer companies. Competitive advantage through innovation. Efficient production is enhanced through the use of cleaner technologies, process innovation, and waste reduction. Reduction in wastes equals dollars earned. Improved product quality. Supply chain partnerships help maintain relationships between buyers and suppliers leading to increased control over product quality. Consistent corporate environmental goals. In an era of multi-faceted, nonvertical manufacturing, companies include supplier outreach to address corporate environmental goals. Improved public image. Consumers, investors, and employees respond positively to companies with a reputation for good environmental performance.

Contents
What is Green Supply Chain Management? Green Supply Chain Management Principles Green Supply Chain Management Best

Practices Implementing Best Practices Summary

The product life cycle is the basis of green supply chain management.
Supply Chain in the Environmental Life Cycle
Designing the supply chain concurrently with the product is a supply chain management best practice.

Concept

Design

Raw Retail/ Transport Manufacture Transport Consumer Transport Disposal Material Extraction Use

Typical Supply Chain Scope

The environmental impacts of each LC stage Environmental Life Cycle reduction. are examined for
Water Water Energy

Inputs

Energy

Stage
Concept Design Raw Retail/ Transport Manufacture Transport Consumer Transport Disposal Material Extraction Use

Air

Air Air Water Waste Air

Air Water Waste Air

Air Water Waste

Impacts

Water Waste

Historically, GSC management focused on the upstream supply chain.

Typical Green Supply Chain Analysis

Supplier

Manufacturer

Supplier

Manufacturer

Supplier

encourages suppliers to adopt green practices, environmental management systems, etc. Focus is on the material content and environmental practices of suppliers.

Now, GSC programs are moving from compliance to value creation.

Environmental, Safety, and Health Business Contributions Assure Compliance Minimize Risk Maintain Health Protect the Environment Traditional Cost Avoidance Raise Productivity Enhance Relations Support Innovation Enable Growth Emerging Value Creation

Source: Forging New Links, GEMI, 2004

Companies are starting to view GSC as a strategic analysis tool. Pollution Prevention Hierarchy
Long Term Source Reduction Strategic

Recycle/Reuse

Control Technology Short Term Disposal Tactical

The Pollution Prevention Hierarchy gauges the value of environmental programs.

Source: U.S. Environmental Protection Agency

Contents
What is Green Supply Chain Management? Green Supply Chain Management Principles Green Supply Chain Management Best

Practices Implementing Best Practices Summary

Green supply chain best practices focus on the business results first.
Green Supply Chain Best Practices

Align green supply chain

goals with business goals Evaluate the supply chain as a single life cycle system Use green supply chain analysis as a catalyst for innovation Focus on source reduction to reduce waste

 Before embarking on green supply chain

Aligning GSC improvements with your business goals creates strategic value.
improvements, you need to determine the role of the environment in your business.
Product Differentiation? Managing Competitors? Cost Reduction? Risk Management? Redefining Markets?

When green supply chain programs are properly

aligned to corporate goals, successes become leading indicators of business success.

Environmental indicators on the Balanced Scorecard Greater drive for innovation Stakeholder support
Source: Bringing the Environment Down to Earth, Reinhardt, HBR, July-August 1999 Environmental Supply Chain Management, Carter and Narasimhan, CAPS Research, 1998

Evaluating the supply chain as a system leads to life cycle optimization.

Inputs

System View of Environmental Life Cycle

Raw Material

Energy

Stage
Concept

Design

Raw Retail/ Transport Manufacture Transport Consumer Transport Disposal Material Extraction Use

Outputs

Product

Waste

$ Minimize the bad inputs and outputs.

Maximize the good outputs.

Green supply chain management is a driver for process improvements. In general, pollution and waste represent incomplete, ineffective, or inefficient use of raw material. Green supply chain analysis provides an opportunity to review processes, materials, and operational concepts. As with continuous improvement programs, green supply chain analysis targets:
Wasted material Wasted energy or effort Under-utilized resources Green Process Improvement Approach
Identify the waste streams
Measure or identify the opportunity cost of the waste Create innovation vs. treatment bias toward waste reduction

Source: Green and Competitive, Proter and van der Linfde, HBR, Sept.-Oct. 1995 Environmental Supply Chain Management, Carter and Narasimhan, CAPS Research, 1998

Focusing on source reduction programs drives higher value improvements.

Waste Reduction Opportunities in the Life Cycle

Concept

Design

Raw Retail/ Transport Manufacture Transport Consumer Transport Disposal Material Extraction Use

Reduce
High Potential for life cycle cost savings

Reuse/Recycle

Control Technology

Dispose

Cumulative life cycle costs Low

The Army looked to using hybrid HMMWVs to reduce the fuel SC footprint.
HMMWV Fuel Supply Chain

Army reviewed acquisition, maintenance, and fuel

costs associated with conventional and hybrid HMMWV.

Fuel costs included cost of supply chain. Evaluation based on military operations.

Costs are break even for the two platforms

Hybrid technology lowers fuel cost but has greater

Hybrid HMMWV

maintenance requirements. However, hybrid platforms can also serve as power generators in theater and can offer some operating advantages (e.g., silent operation).

Domestic Fuel Storage

Transportation Into Theater

Transportation Within Theater

Theater Fuel Storage

Theater Fuel Distribution

Source: Economics of Hybrid Electric Technology: Military Vehicles, 2002, LMI Resource Costs of Supplying Power to a Battlefield, 2004, LMI Research Institute

USPS worked with direct mail vendors to reduce supply chain cost and waste. Direct Mailers realize higher response rates and lower operating costs
Direct Mail Supply Chain Ensure Ensure changes proper do not affect addressing sorting capability
Direct Mailer Post Office Sorting Facility Post Office

Target mailings to generate less waste

Customer

Waste

Target recycled content and recyclable materials Estimated

Recycle undeliverable mail

Undeliverable Items

Problem: Excessive direct mail waste and cost

savings (USPS) = $500 Million (1997)

Source: Greening the Mail, 1999, LMI

The Dutch flower industry greened its production to increase throughput.

Netherlands produces 65% of the worlds cut flowers, yet has

limited land.
Mass cultivation in a confined area resulted in

fertilizer, herbicide, and pesticide contamination.

To correct the problem, growing was shifted to

rock wool and water vs. soil.

Fertilizer in the water is recycled through the

system to reduce waste. Water based growth also reduces the risk of infestation by weeds and pests, reducing the need for chemical treatments. The new system also greatly reduced variations in growth conditions, greatly improving the predictability of output.
Producers were able to increase output per space and further

innovate to reduce costs (e.g., new harvesting methods).

Source: Green and Competitive, Porter and van der Linde, HBR, Sept.-Oct. 1995

Xerox implemented a take-back program redefined customers expectations.

Xerox Copier Take-back Program

70-90% (by weight) of machines reused 144 million pounds diverted from landfills (2003)

In early 1990s Xerox launched a new initiative to take

back used copiers as a source of material for new machines. Customers like the program because they no longer worry about machine disposal. Source: Bringing the Environment Down to Earth, Reinhardt, HBR, July-August 1999 Xerox estimates several hundred million dollar savings Environment, Health, and Safety Progress Report: 2004, Xerox Corporation annually.

Contents
What is Green Supply Chain Management? Green Supply Chain Management Principles Green Supply Chain Management Best

Practices Implementing Best Practices Summary

Green supply chain efforts need to rise above the cost center view.
Green supply chain projects need to be clearly defined in

terms of the business value to the organization.

Clear value will gain senior management support. Clear value will help secure buy-in from other organizations

Environmental programs are viewed as business cost

centers.
Environmental, safety, and health (ESH) resources are often

scarce in an organization. ESH offices are targeted early during cost cutting programs.
ESH offices have difficulty articulating their business value.
The inability to articulate the value of green supply chain effort

in business terms lowers their profile. Many executives have misconceptions of how green supply chain efforts will impact their operations. Without a clear business value proposition, it is difficult to get executive support for projects.
Source: Forging New Links, GEMI, 2004

Consider the existing business model when planning GSC projects.

Many businesses have internal hurdles that must be

overcome for any improvement effort.

Inconsistency in supply chain operations (by unit, region,

product, etc.) Business viewed through existing operationsresistance to change Focus on short term goals and short term results Limited partnership experienceespecially in the environmental office.
To be successful, the project manager needs to

understand the organization and plan for the applicable hurdles.

Develop communication/evangelization plan. Build a project team with broad functional representation. Clearly articulate project business value. Use outsideNew Links, GEMI,where in-house expertise doesnt exist. Source: Forging experts 2004

Use tools such as Green SCOR to help define and analyze GSC problems.
GreenSCOR Concept

Environmental Management

Supply Chain Management

Managing the environmental impacts of operations, including compliance, emissions, and remediation

GreenSCOR Model

Managing the flow of material from supplier to end customer, including procurement, transportation, inventory management, and production

GreenSCOR is a modification of the SCOR model that includes environmental elements.

GreenSCOR Content

Environmental Management

SCOR Model

GreenSCOR modifies the existing SCOR structure to include environmental processes, metrics, and best practices. GreenSCOR Model

GreenSCOR maintains the integrity of the current SCOR model by adding to the existing elements.

Areas to Green the Supply Chain

Designing Of Products

Production
Material Purchase Packaging

Warehousing
Logistics & Reverse Logistics

Designing Of Products
An eco friendly design approach leads

1] Less material usage

2] Minimum Operations
3] Proper use of Computational fluid dynamics tools can used to reduce the exhaust emissions at designing level

Purchase
Implementing Green purchasing policies Technical support to vendors to reduce the

emissions
Guidelines for usage of less hazardous materials

Production
Achieving Economies of scale in production

Lean manufacturing approach

Fuel efficient tools and machines Selecting less carbon intensive energy sources

Packaging
Mercury free

Non toxic (minimize toxicity)

PVC or DEHP free Recyclability

Hazardous waste considerations

Durability/Reusability Energy efficient

Summary

Logistics
Optimized Truck loads Direct shipment to the customer(Dell model) Routing of distribution Reverse Logistics

Greenness in Logistics
Supply chain management practices and strategies that

reduce the environmental and energy footprint of freight distribution. It focuses on material handling, waste management, packaging and transport.

Green Logistics The Flow

Important Factors
Cost

Reliability
Time Warehousing

IT Systems

The Blue Print

Top Down Approach Greenness is imposed by

regulations
Charging for external costs in Europe & Road Pricing in USA Movement of Hazardous Goods & Mandatory Collection & Re-

Cycling Unpredictable Outcomes

Bottom Up Approach Improvements by Industry

Practices
Business interests of Industry match with Govt. Initiatives IT control over scheduling & routing makes further gains

possible

Compromise Approach Normally by Certification

Schemes
Recycling & Environmental Compliance gives market edge

Application of Green Logistics

Product Design and Production Planning Light materials & Processes which allow high transport density Physical Distribution Usage of LEED certified facilities Shipping strategies & sufficient load factor must be taken into account Materials Management Better Packaging to reduce material consumption & waste Recycled resources as Industrial Inputs Reverse Distribution Manufacturers and domestic waste producers achieve environmental credit.

Other Initiatives
Eco labeling: Labeling that identifies products that

meet certain environmental criteria LEED (Leadership in Energy and Environmental Design): Design and Construction practices that significantly reduces or eliminate negative impact of building on environment Green sourcing: Sustainable procurement

Contents
What is Green Supply Chain Management? Green Supply Chain Management Principles Green Supply Chain Management Best

Practices Implementing Best Practices Summary

Implementing Green supply chain properly will drive real business value.
Green supply chain concepts manage environmental

impacts where they occurideally before they occur. Best practices focus on the business, not social, value that green supply chain management creates.

Align green supply chain goals with business goals Evaluate the supply chain as a single life cycle system Use environmental analysis as a catalyst for innovation Focus on source reduction to reduce waste

Successful implementation requires raising the profile

and perceived value of environmental projects.

Articulate project value in terms of business value Create the project to work within the organizational

culture Use effective tools (e.g., GreenSCOR) to enable project execution

Carbon Emissions a Global Challenge With global warming being recognised as one of the largest challenges of this century, carbon emissions are increasingly becoming the centre of attention

Global warming is the result

of increasing CO2 concentration in the atmosphere

Global warming is and will be

one of the largest challenges of this century

Transportation activities are

one of the main contributors to global warming

Some examples of the carbon footprints when transporting goods

Transport of tuna from Spain to Japan Transport of 1 pair of shoes 450 kg CO2 372 g CO2

China Spain Japan

North Europe

20 KM

0 KM

7500 kg CO2

3700 g CO2

Transportation - An important source of CO2 Due to globalization and increased outsourced trends, transportation is the only sector that has increased CO2 emissions in the last two decades

EU Change in CO 2 emission in UE (1990-2004)

Transport Energy industries Residential Average Other (non-energy) Services Industrial processes Agriculture Industry (energy) Waste Fugitive emissions
-33% -36%
-40% -30% -20% -10% 0% 10% 20% 30%

26% -3% -4% -5% -10% -11% -12% -13% -15%

Source: European Logistics Users Providers and Enablers Group ( ELUPEG)

mounting pressure from stakeholders

ambitious CO2 reduction targets

untapped potentials in global supply chains

The scope can cover supply chain activities from the pick-up at the vendors factory until delivery to the point of sale

Factory

Truck/ Rail/ Barge

CFS facilities

Load port

Ocean/ Air

Discharge port

Truck/ Rail/ Barge

DC

Truck

Point of sale

SupplyChain CarbonCheck - a standardised approach 4-step methodology based on internationally recognized emission standards

Implement solutions

Simulate carbon footprint & costs of alternative scenarios 2

3 Evaluate CO2 emission & cost reduction potential

1 Estimate current supply chain carbon footprint & costs

Step 1: Estimate Current Carbon Footprint As a first step, we map your current carbon emissions and provide you with a snap-shot of the carbon footprint of your supply chain

3
1
Estimate

Carbon Footprint Calculator

4

2
Simulate Evaluate

Implement

Global supply chain scope

Carbon mapping of current supply chain with Maersk Carbon Footprint Calculator

Internationally recognised emission standards & calculation methodology

AS IS
Result: Snap-shot of the supply chains current carbon footprint the AS IS scenario
A B C D

Step 2: Simulate Alternative Scenarios We then estimate carbon emissions for alternative configurations of the supply chain and compare

the results with the current footprint

TO BE 1
3 1
Estimate

2
Simulate Evaluate

4
Implement
A B C D

AS IS Simulation of alternative supply chain set-ups TO BE scenarios Calculation of carbon emissions and total supply chain costs for each scenario Comparison of TO BE scenario with AS IS scenarios Identification of CO2 reduction potentials TO BE 3
A B C D

TO BE 2

Step 3: Evaluate CO2 Reduction Potentials Reduction potentials are evaluated under various aspects

3 1
Estimate

2
Simulate Evaluate

4
Implement

Evaluate carbon reduction potentials based on:

Strategic fit Impact on carbon footprint Impact on total supply chain costs

Ease of implementation

Concrete recommendations for implementation

Step 4: Implement Solutions Maersk Logistics assists in implementing the agreed solutions, thus helping you tap the full potential of carbon footprint reduction in your supply chain

3 1
Estimate

CO2 Reduction 4
Implement

2
Simulate Evaluate

Preparation of roadmap for implementation Maersk Logistics assists in putting agreed solutions into practice Estimation of actual achievements in reducing carbon emissions after implementation phase

Solution C

Solution B

Solution A

Time

What have we done so far? Case Studies

What have we done so far? case study 1 In this study, we have analyzed the environmental impact of alternative transportation modes

The Project > An electronics company exporting goods from Barcelona to Denmark > Environmental impact analysis of two scenarios: Truck vs. Multimodal Results > The analysis reveals that trucking alternative represents more than 3 times more CO2 emissions compared to multimodal transportation

Total CO2 (KGs) Truck Multimodal Savings 197.120 65.224 131.896

Alternative 1 Truck Total CO2 emissions: 197.120 KGs

Factory (Barcelona)

Warehouse (Denmark)

Alternative 2 Multimodal Total CO2 emissions: 65.244 KGs

Factory (Barcelona)

Truck

DC (Spain)

Rail

DC Truck (Copenhagen)

Warehouse (Denmark)

What have we done so far? case study 2 The aim of the study was to identify main drivers of carbon emissions in the supply chain and provide alternatives to reduce carbon footprint and costs

The project > A leading health and beauty group Alliance Boots > Exports from Asia to United Kingdom

The Scope

Factory

Truck/ Rail/ Barge

CFS facilities

Load port

Ocean/ Air

Discharge port

Truck/ Rail

DC

Truck

Point of sale

What have we done?

Estimated current carbon footprint & costs Simulated carbon footprint & costs for alternative scenarios Evaluated CO emission & cost reduction potentials with Boots Helped Boots to implement solutions
2

Results 29% reduction in CO2 emissions 21% reduction in supply chain costs

Results 29% CO2 reduction The supply chain improvement initiatives led to 29% reduction in CO2 metre)
80 70 Reduction 60 50 40 30 20 10 0 2004 2007

(per cubic

terminal handling reduction increased equipment utilisation improved weight efficiency (air) air shipment reduction carbon emissions (kg/cbm)

Results 21% cost reduction Lower carbon emissions come along with lower logistics costs a win-win situation for you and the environment!

Reduction

terminal handling reduction increase in container utilization air shipment reduction USD / cubic meter

without initiatives

2007

What have we done so far? case study 3 In this study we have estimated the carbon footprint from supply chain related activities

The project > An American retailing brand > Global supply chain with imports to USA

The Scope

Factory

Truck

CFS facilities

Load port

Ocean/ Air

Discharge port

Truck/ Rail

DC

Truck

Point of sale

Results 57,59 million CO2 for shipments in 2007 On average, each cubic meter shipped had a carbon footprint of 101 kg

Rail

Ocean

Truck

What does this mean?* 57,59 million KGs of CO2 is equivalent to; > 10,548 passenger cars driven for one year > 133,939 barrels of oil

not

Air

* : http://www.epa.gov/cleanenergy/energy-resources/calculator.html

Transport Carrier Selection

Network Distribution Optimization

A Greener Supply Chain

Transport Mode Optimization

Equipment Utilization Improvement

Typically, lower carbon emissions come along with lower overall logistics costs and maintained or improved service levels a win-win situation for our clients and the environment!

THANK YOU FOR YOUR TIME