Reducing Supply Chain Emissions and Costs at the Same Time

Logistics managers attempting to optimize supply chains for sustainability and emissions reductions face a tough question: how to implement those goals without breaking the bank.

The conventional thinking is that there’s always tradeoff: A transport company can reduce its CO2 emissions along a supply chain, but at a higher investment and operating cost.

Findings released last week during a webinar sponsored by Finished Vehicle Logistics magazine suggest that in certain cases the best of both worlds is possible.

“You can reduce CO2 emissions and costs [along the supply chain] with the right approaches and if processes are executed correctly,” says Nils Lie, Vice President, Business Development, Supply Chain Management for Wallenius Wilhelmsen Logistics, which handles auto logistics from factories to dealers around the world. “It requires thinking in a new way,” he continues, one that adds carbon emissions to the "holy trinity" of cost, time and service quality.

Many companies have not considered examining their outbound supply chains from an emissions perspective because of the assumed high cost of doing so.

During the webinar Lie revealed the conclusions of a case study that WWL did with India’s Tata Motors using a WWL-designed carbon calculator. The joint study examined ways to reduce supply chain emissions and costs from Tata’s factory in India to dealers in South Africa. Out of many possible scenarios, three transportation scenarios considered for the distribution of autos to dealers resulted in cost and emission reductions by adjusting lead delivery times out of differing distribution hubs. The best-outcome scenario entailed a 2-3 day lead time from distribution centers in Durban and Johannesburg to Capetown and resulted in a CO2 reduction of 33 percent coupled with a transport cost reduction of 22 percent.

The distribution center flow and time component of this approach appears to be a major factor in achieving those significant reductions. In short, taking a bit more time pays dividends in terms of emission and cost reductions. Additional reductions can result by optimizing truck and ocean fleets for greater efficiency and lower fuel consumption.

The Tata study is a relatively short and uncomplicated supply chain sample, so it’s unclear how this model works on long and complex chains. Lie’s answer to that is, “The more complex the supply chain, the more room there is for improvement.” He adds that the key to success is collaboration by all parties on the supply chain.

There’s always room for greater collaboration and changes that challenge conventional thinking about cost assumptions.