Sustainability Process Improvement
Designing and deploying a “green” supply chain requires optimization expertise, a strong understanding of all operational processes and involves participation from many key stakeholders in your organization.
Sustainability Process Improvement and Optimization is Profit Point’s next generation of supply chain design.
Here are 7 steps you can take to integrate your sustainability process improvement goals into your supply chain:
1. “Sustainability” is a term that is used very broadly throughout industry, regulatory agencies, communities, and the news media. We need to determine what, precisely, we are trying to accomplish with respect to sustainability. Are we trying to reduce our impact on the watersheds in which we operate? Are we trying to reduce packaging waste? Are we involved in a regional plan to cut certain types of emissions or reduce peak energy consumption? Are we trying to reduce our carbon dioxide (CO2) footprint? And, for any of these questions, is there a certain targeted reduction that we have in mind? Without answers to these questions, it is very difficult to analyze your alternatives and develop a plan to meet your goals.
2. We need to determine the boundaries of the supply chain we are trying to improve. Are we looking at our entire global supply chain, or are focusing on our distribution operations in a single region of the world? Are we bounding our analysis within assets and processes that are totally controlled by our company, or are we including our suppliers and/or customers in the analysis? Are we trying to achieve our sustainability goals within our existing supply chain infrastructure, or do we need to factor in potential expansions or contractions of the supply chain?
3. Once we have unambiguously defined your goal and have clear boundaries around the supply chain we must improve, we need to collect and understand the information that is available to analyze and model our supply chain. This will be information will include things like production capacity, plant operating costs, grams of CO2 produced per kg of finished goods, transportation costs, and product pricing. We may want to include the sources of electricity used by our manufacturing facilities or raw material suppliers to favor those sites using renewable sources of electricity over those that use coal-based electricity. Likewise, we may want to include our transportation suppliers so that we favor carriers with more fuel-efficient fleets. This step is usually the most time-consuming step in the process but is critical to the generation and implementation of the changes you will make to meet your goals.
4. With this collection of information, we need to model the supply chain (this needs to link to our 5 step process on the website) to generate options that both meet our sustainability goals and maximize our profitability. In this step, the “art and science” of green optimization comes to bear. It is here that we may need to make trade-offs between sustainability goals and profitability or cost goals. For example, we may be able to make a very significant reduction in our CO2 footprint with a very slight increase in cost or reduce peak energy consumption by carrying more inventory. Where these trade-offs can be accurately quantified, the “science” is used. However, where the sustainability improvements cannot be quantified, then we use the “art” to bracket the value and the cost of the improvement.
5. Now that we have selected the top options, we need to discuss them with the key stakeholders and decision-makers to get buy-in for a single option so that a successful implementation can follow. This discussion is especially important when future-based assumptions have been made in the analysis. For example, if we’ve assumed a 5% growth in demand and assumed the price of crude at $85/bbl to choose the best solution, will our choice still be the best one if our demand only grows by 2% and the price of crude moves to $100/bbl? If there is a lot of uncertainty in these key parameters, it is important that all stakeholders have a good understanding of the risks associated with each of the options presented. In fact, it may well be time for a more robust type of optimization analysis, but that will be the subject of a future blog article.
6. With all stakeholders on board, it is time to implement our new plan to achieve our sustainability goals. In addition to the communication, selling and training/education facets of our change management plan, we need to include a measurement system ensure we are getting the improvements we anticipated and to check for unintended consequences of our change. This measurement system will also directly feed the last step in this process…
7. … which is to periodically recheck our assumptions and refine our analysis and plan as external events like new customers or unanticipated costs present themselves, or as we find that a key assumption does not hold true for our sustainability gains.