Monday, July 16, 2007
By Tom Andel
Green has always been the favorite color of environmentalists and capitalists alike, but for different reasons. These days, however, supply chain initiatives are blending these different shades of green into hues that are both ecologically sound and financially viable. This article offers three examples of how today's supply chains can be profitable while ensuring that those profits aren't made at the expense of corporate citizenship.
The Green in Green
One of largest broadline closeout retailers in the U.S. uses its buying power to find and negotiate the best deals for customers shopping for housewares, toys and seasonal goods. It also employs a team of engineers behind the scenes whose focus is productivity improvement and cost containment.
This company's vice president of distribution support services says that while taking costs out of the chain is his top priority, it can be done while having a positive impact on the environment. His team does that by filtering its waste stream. That means pulling out paperboard, shrink wrap and paper. That's not as challenging as it used to be, now that more companies are starting to demand services that haul away and recycle these materials.
"This is reducing what we send to landfills," the V.P. says. "Plus it's becoming more cost advantageous because people are now saying ‘Why aren't you recycling shrink wrap and cardboard? We can haul it for you.' That didn't happen ten years ago. Today we can take a big chunk of our waste stream out just by doing a better job sorting paperboard out at the source." Half of this retailer's trash stream is reduced by pulling shrink wrap out of it. Last year that translated into 336 loads of trash from one facility alone. Paper and wood represent the other components of that stream. Last year the company's Pennsylvania distribution center generated $14,000 in revenue ($310 a ton) from shrink wrap and saved $44,000 in trash disposal fees. The chain is rolling these initiatives out facility by facility, year by year. At the same time it is implementing other cost-cutting initiatives with green implications.
"Just changing the lighting has green connotations," the V.P. of distribution says. "The disposal of the mercury vapor bulbs in favor of fluorescents has good incentives, including the federal government's 2005 energy policy act. That established a tipping point for us to make the conversions."
The Energy Policy Act of 2005 (www.energy.gov/taxbreaks.htm), signed by President Bush on August 8, 2005, offers consumers and businesses federal tax credits for purchasing fuel-efficient hybrid-electric vehicles and energy-efficient appliances and products. Most of these tax credits will remain in effect through 2007.
To qualify for this Federal tax incentive where lighting is concerned, users must install bi-level lighting, with occupancy sensors. The lighting must also be below a particular wattage per square foot and per fixture."Until recently it cost significantly more to be green," this executive concludes. "Now there are incentives and there is pressure in the industry. It's like when Wal-Mart steps up and says we're going to do RFID, all of a sudden that technology becomes more affordable for everybody."
Sustaining Lives and Environment
Ethicon Endo-Surgery, Inc., a Johnson and Johnson company based in Cincinnati, OH, develops and markets a broad portfolio of advanced surgical instruments for minimally invasive and traditional surgery. Its mission is to help physicians around the world be more innovative in their patient care. But even before these instruments reach physicians' hands, a great deal of innovation goes into the design and packaging of these instruments for their forward and reverse travel through the supply chain. Environmental sustainability is one of the drivers of this innovation, and Andrew Enaiho, environmental manager for Ethicon Endo-Surgery, is responsible for making sure this effort protects both the environment and his company's good name.
ISO 14000 certification helps (www.iso14000-iso14001-environmental-management.com). This is a family of standards primarily concerned with "environmental management." It helps a company identify and mitigate its environmental risks, and in the process, minimize harmful effects on the environment caused by its activities, and to continually improve its environmental performance. Ethicon Endo-Surgery has achieved three certifications since 1999.
"Everything that has to do with our products, packaging and processes involves environmental impact assessment," says Enaiho. "Every packaging product is designed for the environment."
Notable examples are the requirements to use less material, to use post consumer recyclable content, where feasible, and to purchase all packaging materials from certified forests. And because suppliers make most of this company's packaging products, they have to follow Ethicon Endo-Surgery's specifications for purchased items. That means providing information concerning the environmental aspects of their products and their eventual recycling at the end of life. There is no PVC and less paperboard in the company's shipping packaging, and most packaging products are designed for returnability.
Ethicon Endo-Surgery has one design site and three main manufacturing sites. Ninety-eight percent of its products are shipped between these sites and through the supply chain in plastic containers that can be reused approximately a hundred times before needing to be replaced. How does Ethicon Endo-Surgery make sure these containers are returned?
It is part of the company's overall supply chain plan. This strategy is developed by listening to customers and suppliers, as well as to the company's environmental affairs department. These ideas are incorporated into a documented procedure and strictly followed.
"This is a true partnership," Enaiho says. He adds that there are financial rewards for environmental stewardship, on both the supplier and customer sides. "The first year this was implemented we had cost savings of over a million dollars," he adds. "For our customers it's an indirect cost savings. They don't have to dispose of packaging."
A large portion of Ethicon Endo-Surgery's budget is dedicated to finding ways to reduce packaging even further and developing greener products. However, the goal for greener packaging material can't compromise patient safety. Product integrity must take precedence over environmental considerations. The company's minimally invasive endoscopic medical devices help surgeons do things that their hands cannot. While these products are robust, that doesn't mean they can't be green, as well.
"To make these products greener, they are designed so that the plastic and metal components can be readily removed, recovered or destroyed at the end of their life so they don't end up in a landfill," Enaiho says. "Where environmentally sustainable we recover usable materials by extracting them from our capital equipment. We salvage the usable components as spare parts or send them to an approved recycler."
Ethicon Endo-Surgery just opened an equipment service and repair center in Cincinnati. Product comes to this center from hospitals as far away as Canada, South America and North Korea. There are many reasons for returns. One of the most common is Ethicon Endo-Surgery's development of a newer, more robust version of an instrument. It will then offer to do a trade-in with customers.
Enaiho is convinced that any manufacturer can be green if they design their products with a green mindset. That will solve 90% of the problems traditionally associated with their disposal, he believes. Recycling is just a small piece of the green puzzle.
"Once you start managing your risk and defining your environmental system to a new standard, that's when you get bigger results [from environmental stewardship] because you are looking at a much bigger picture than recycling," he says. "Design for recyclability, remanufacturability and for disassembly are also part of the process. One size doesn't fit all. Look for the environmental considerations that apply to your industry."
And don't wait for regulators to force you into action, he suggests. The days of command and control by environmental regulators are over. Today's green requirements are driven by opportunity.
Cradle to Cradle
Ben Graham is a student of opportunity. As vice president of finance, sales and supply chain for Bell, Inc., a Sioux Falls, SD, folding carton converter, Graham looks after the needs of major high-dollar accounts. One of Bell's biggest clients is the U.S. Postal Service (USPS). For this and other major customers, environmental sustainability is a huge initiative. That not only makes it a huge opportunity for Bell, but for Bell's suppliers as well. In its most recent project for the USPS, a green supply chain forged itself around a simple courier envelope.
Bell reverse engineered the envelope it manufactures for the USPS in accordance with MBDC guidelines (www.mbdc.com). These guidelines fall under a program known as "Cradle to Cradle Certification,' which gives a company ways to measure achievement in environmentally-intelligent design and helps customers purchase and specify products that meet a broader, greener, definition of quality.
In making this envelope for USPS according to MBDC specs, Bell uses environmentally safe materials, designs for material reutilization (recycling or composting), uses energy efficient processes, and develops strategies for social responsibility.
Products made according to these guidelines can be certified Silver, Gold or Platinum and branded as Cradle to Cradle. Bell was the first USPS supplier to develop and create a certified sustainable envelope for them.
"We went back to our supply chain and leveraged those folks to help us look at the inks, adhesives, string, tape, paperboard, chemicals, processes -- everything that goes into the production of the USPS product," says Graham. "We're asking our suppliers to roll back the shades on their recipes. We need to see if there are ingredients that will have downstream effects when this product goes into the waste stream or when it's in use, or even when we're manufacturing it. We consider all the health and human factors that go into making this package." Graham sees this certification as a badge of honor for everyone in the supply chain associated with it. Being accredited as a sustainable supplier and being a customer to such suppliers is a win/win. Observes Graham:
"The Krafts of the world can say ‘Not only do we do business in a sustainable factory but we have a product that's certified sustainable.'"
There are also costs associated with this opportunity, however, and potential partners need to be aware of the man-hours involved as well as the higher cost of more environmentally sustainable components. Nevertheless, Graham is confident of the value.
"If you can differentiate yourself by coming to the table as a certified sustainable supplier and have gone through these initiatives with customers and can help other customers by shortening the lead times on those types of things, you create value," he concludes.
About the Author
Tom Andel was recently named chief editor of Modern Materials Handling magazine. He has been writing about packaging, material handling and logistics for 27 years, most recently for Paperboard Packaging and Material Handling Management magazines. He has won numerous editorial excellence awards throughout his career and is an active member of the Warehousing Education and Research Council (WERC). He can be reached at tandel4315@aol.com
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