Green logistics

Posted on 13 Aug 2008 by The Manufacturer

Efforts to reduce the carbon footprint of the supply chain are not just cosmetic. Debbie Giggle finds that rethinking packaging, consolidating logistics and reviewing the logic behind long distance shipping are delivering significant cost benefits

The last six months have seen the birth of the carbon neutral product. We may be tempted to dismiss such claims and innovations as marketing ploys, but organisations like the Carbon Trust are working proactively with companies in this area, and an international methodology for measuring environmental impact is under discussion.

“The move is largely customer-driven,” said Nigel Issa, associate partner/supply chain team leader with Atos Consulting. “Retailers such as Marks and Spencer are publicising their intention to become carbon neutral. It is inevitable that suppliers will feel a pressure to deliver carbon reductions.”

However, for manufacturing in the wider sense, re-examining the overall cost of the global supply chain is yielding some startling results.

“Cost and carbon impact are no longer mutually exclusive,” said Issa. “With a booming Chinese economy causing capacity problems, and the rise in the cost of oil, the logic behind shipping product from a distance is falling apart. A 30 per cent reduction in production cost, offset against a 35 per cent increase in shipping costs, is resulting in a net increase.

“The two factors – cost and environmental impact – are therefore often aligning on the same side providing an extremely compelling case for reducing distances travelled and improving supply chain efficiency. Many cost reduction exercises will have carbon impact metrics, even if CSR (corporate social responsibility) was not the original driver.”

Tackling the environmental impact of a product is far from simple, however. It touches every element of the product from cradle to grave and, as most manufacturing businesses are structured along functional/departmental lines, this can cause problems. As the most visible ‘carbon creator’, the supply chain frequently becomes the key focus for environmental improvement. Improvements here can often be tackled more quickly than, for example, completely rethinking production processes, and yet such opportunities are frequently overlooked.

Issa commented: “Even in environmentally aware companies the discussions around greenlogistics are still at very early stages. The challenges are around reduction of packaging, the consolidation of loads for more efficient transportation, identifying low carbon routes, and tackling energy efficiency of warehousing.”

For some major brands, the improvements in supply chain have become the centre of promotional activity. Persil and Surf Small & Mighty, for example, lead their TV advertising with the environmental benefits of their ‘two times concentrated’ liquid detergent. Since the launch last March, Unilever advises that 7,859 trees and 892 football fields of space were saved by the 9.2 million bottles sold.

There may be some that would pick holes in these environmental claims, but a green gauntlet has definitely been thrown down. On the 22 April Adnams launched the UK’s first carbon neutral beer – East Green. Carbon reductions have been made throughout the product lifecycle with help from the Carbon Trust, the University of East Anglia’s carbon reduction team (CRed) and WRAP (Waste Resources Action Programme).

East Green is made from high-yielding barley, grown locally to minimise CO2 emissions, and Boadicea hops which are naturally aphid-resistant, reducing the need for pesticides. During production, an energy recovery system recycles 100 per cent of the steam created during brewing and uses it to heat 90 per cent of the following brew.

Some time ago, Adnams moved its range into award-winning lightweight bottles. The impact has been significant. Adnams’ glass usage has reduced by 624 tonnes per annum. The lighter bottle (299g instead of 445g) reduces carbon footprint by 415 tonnes of CO2 per year across the range. Comprehensive data compiled by leading organisations in the environmental field quantifies the improvements.

Energy efficiency improvements from innovative warehousing design contribute still further to the company’s carbon reduction strategy. When all measures are taken into consideration, the remaining carbon creation related to East Green is offset through a company called Climate Care, but as this equates to less than 1p per bottle, we can see that it is the carbon reduction measures rather than carbon offsetting that make the difference.

Issa said: “There are big gains to be had by reviewing packaging use. Packaging typically occurs under four separate headings, ranging from pack design to more day-to-day transit packaging and protection for palletising, but often responsibility isn’t coordinated at a single point. Typically, a brand manager will work with external designers on pack presentation whilst a completely different team specifies packaging for storage and transit. The gains come from reviewing packaging as a whole.

“It’s important to ensure your assumptions about packaging are correct. For example, a number of retailers now want products delivered in cages instead of on pallets. But many manufacturers are still packaging with all the shrink-wrapping that you’d associate with palletisation. There’s one immediate saving.”

Brenthaven – a manufacturer of notebook carrying cases – has recently carried out such a review. It manufactures overseas and ships worldwide. Being carbon neutral, by internal improvements and carbon offsetting, is a key part of the USP for its zero impact product line.

Scott Armstrong, CEO of Brenthaven, explained: “Achieving our packaging reductions started with a deep look at our current strategy.
Prior to this year we were putting every notebook case in an individual box then putting several of the individual boxes into a larger box. The rationale for this initially was that it would protect the product during transport from Asia to the US and Europe. One of our largest customers also requested the packaging.

“When we reviewed packaging use, we met with our customer, explained our objectives and proposed other options. They were particularly pleased with the idea of moving to wrapping the products in biodegradable polythene bags. We did some research and learned that what we really needed was just to protect our bags from water damage while on the water. Therefore, boxes were not necessary. By using biodegradable bags we weren’t polluting the earth with more plastic that would fill landfills. We pay a bit more to use these but hopefully we will cover the costs by selling more bags to environmentally conscious customers. Once we had the right solution and sign off from our key customer, the rest was just execution.” The move has enabled the company to reduce packaging by over 100,000 boxes a year.

Another aspect of the company’s logistics is proving rather more difficult to tackle. “We are working with the Huxley School of Environmental Studies on a project in which we hope to learn greener ways of shipping/transporting our products,” explained Armstrong. “This is clearly where the majority of the environmental impact is felt with our products, so we are very interested in finding alternatives.”

Issa commented: “Identifying low carbon routes is particularly challenging. Changing this aspect of your supply chain is a major structural issue. You can’t just tweak it. Many businesses selling into Europe have relocated to places such as India or China. But if your supply base is in Europe and your customers are in Europe, can you really justify, by cost or by carbon impact, the amount of shipping backwards and forwards to Asia?”

In another area however, manufacturers are making more headway. Consolidation of loads and vehicle sharing are key to controlling costs and carbon impact. The main approaches tend to be for the manufacturer to involve a third party logistics (3PL) company to do this on its behalf, or to become a kind of 3PL in their own right and manage logistics for other businesses alongside their own.

“There are challenges around identifying suitable partners,” advised Issa. “Issues with regard to frequency, capacity, bottlenecks and shortfalls are inevitable. Governance is therefore a major factor. How will deliveries be prioritised between the vehicle sharers in the event of capacity problems?

“3PLs have a role to play, particularly in outbound logistics. For inbound logistics the task is a little more complex. A mechanism has to be created, such as a consolidation hub for example at a port, to enable consignments to be moved more effectively.”

Once again, carbon reduction requires the kind of ‘umbrella view’ across multiple functions that few businesses are structured to provide. So how are businesses approaching the ‘greening up’ of their activities?

Armstrong commented: “Like any change, it does require leadership from the top. When we first announced this direction, there were those in the company who questioned whether we were serious or just using this as a new marketing ploy. Our actions in the last few months have shown we are walking the talk and the nay-sayers have now jumped on board. I’m hopeful that themore we do, the more momentum we will build and the more our employees will embrace this new direction.”

For some businesses, innovation may have the answer. Adnams, for example, has been greatly helped by new bottle technology as well as by expert external help.

“A first step is when manufacturers take their CSR objectives and make them more specific. This will drive the development of a practical set of levers and targets around the carbon reduction discussions. In time, these actions and measures can integrate with other continuous improvement activities,” concluded Issa.