Just the sheer complexity of today’s long and global supply chains might be enough to daunt any thought of where to start to implement green strategies and technologies. But there is a lot of help available out there to make the journey an easier one.

Companies are carefully evaluating their supply chains—as well as their lean and continuous improvements in manufacturing processes and business management decisions—to make them more sustainable while increasing their bottom lines.

Understand your supply chain before you think green

So what exactly is the meaning of green? According to Adrian Gonzalez, green is a subset of the broader world of sustainability. “Sustainability incorporates endeavors such as fair labor practices, human rights, and community responsibility, while green includes things that impact the environment,” says Gonzalez, director of the Logistics Executive Council at ARC Advisory Group in Dedham, Massachusetts. “Most people equate green to the reduction of emissions of carbon dioxide and greenhouse gases.”

When supply chains were designed decades ago, oil’s cost and environmental impact were never considerations. But today, companies are considering redesigning their long and complex supply chains to reduce transportation costs and the associated carbon footprint generated by moving goods long distances. “Companies should incorporate carbon emissions as part of a supply chain network design exercise, where they can obtain a more holistic understanding of the cost, service level, and carbon tradeoffs associated with different network layouts,” Gonzalez says.

Businesses want to be green, but seek direction. “I start by asking companies a very simple question: ‘why do you want to be green and what is your current carbon footprint?’” says Edgar Blanco, research director of the Carbon Efficient Supply Chains Project at the MIT Center for Transportation and Logistics in Cambridge, Massachusetts. “Defining what green means to your company is a critical first step that will enable you to make informed and intelligent decisions to take meaningful action.”

Businesses can position themselves anywhere along the spectrum of the green chain, from complying with regulations and choosing equipment like bio-diesel engines or low-energy-consuming light bulbs for their facilities. “Or, they can position themselves to move ahead of the curve and be at the forefront in shaping and fixing the environment by redesigning the overall network by pushing for new regulations, developing new products, and beginning to redesign their supply chains to include suppliers and transportation mode selections,” explains Blanco. “Being at one end or the other of the spectrum is not necessarily good or bad—it is just different depending on the dynamics of a particular business.”

Eight steps to green

Here are the top eight suggestions our experts gave us to help companies understand some of the steps they should consider in making their supply chains green, sustainable, and profitable.

Step 1: Begin with a Business Model

The first thing companies should do is to examine the scope of their supply chains to see what they can measure directly and what they can measure indirectly, advises Mitch Greenberg, manager of Washington, D.C.-based SmartWay program developed by the EPA [See Sidebar on the SmartWay program]. “Transportation will always be an indirect measurement if a company does not have its own fleet, and this is where SmartWay can help a company looking to green its supply chain. Carriers who are SmartWay partners can help shippers reduce emissions along their supply chains.”

Green initiatives must make economic sense, notes Shan Hoel, director of communications for Seattle-based TransGroup Worldwide Logistics. He adds that TransGroup is building a clean-carrier preference into its base of SmartWay carrier sources.

Blanco at MIT suggests first examine and understand the scope of your supply chain to avoid risking any misplaced investments. For example, you might discover that the driving force of your supply chain includes third-party logistics providers and warehousing providers located in areas requiring heavy reliance on air-conditioning. “You might then decide, choose providers located in areas requiring less energy to maintain your products and flow them through your supply chain, even though that might mean increasing your miles.”

Although transportation costs in miles as a whole might increase, this decision produces a smaller carbon footprint. “This is a big, multi-year process and you have to be certain this is the direction you wish to go in because you will need to create the right incentives for everyone in your supply chain to follow your direction,” continues Blanco.

Supply chain profiles differ from company to company. “Some may be heavy on the raw materials side, where most of your carbon energy green effects will originate. On the other hand, if you are an auto manufacturer it might be best for you to invest in product design as opposed to investing in transportation because the carbon effects will be much higher during the use stage of your products. Here is where companies need to be bold because the public might perceive that because you are not changing all your facility’s light bulbs you don’t care about the environment. But it makes more sense to invest in product design when considering the long-view.”

Step 2: Transportation

Probably the biggest source of carbon emissions in any supply chain is the transportation component. “I think this is the low-hanging fruit for many companies,” says Gonzalez at ARC.

Schneider National, for example, is committed to a program of year-over-year emissions reductions, evident in the fact that the carrier received SmartWay’s Excellence Award. “We are proud to be one of a few truckload carriers to receive the award two years in a row while we continue to examine how we can improve in our commitment to operate a green fleet,” says Dennis Damman, director of engineering for the Green Bay, Wisconsin-based company.

Schneider continually specs its tractors and other equipment to run as efficiently as possible. “This could include things like specifying energy-efficient tires that run in lower horsepower ranges for better overall efficiency,” explains Damman. About 75 percent of Schneider’s trucks are three years old or newer and feature the latest emissions-control technologies. Software on all equipment continually monitors engine performance.

Union Pacific Railroad’s herd of about 200 Green Goats and Gen-Set switchers saves the company about 16 percent in fuel savings and over 40 percent in emissions reductions annually. “These smaller engines, producing ultra-low emissions, were originally designed for stationary gen-set power,” explains Robert Grimaila, vice president of safety, environment, and security for Omaha-based UP.

Management is key to minimize fleet inefficiencies, states John Daniel, vice president of marketing and business development for Chattanooga-based Covenant Transport, Inc. “Investing in ultra-low-sulfur diesel engines or APUs to eliminate idling are some ways to manage your fleet. We also benefit from running primarily team-driven tractors over solo-driven ones.”

Since a major percentage of Covenant’s fleet is team driven and transcontinental, it means fewer deadhead miles for the company. “These are the kinds of things that go into the EPA algorithm model SmartWay uses, as some of the things EPA measures include non-productive or non-revenue-generating miles,” explains Daniel. “When you are running teams, you can generate a lot more revenue miles.”

Network balance is another area resulting in emissions savings and revenue increases. “We constantly work to assure there is not an imbalance in either more inbound than outbound or vice versa, which causes inefficiencies and deadhead miles—and it’s also the root cause of other inefficiencies,” Daniel says.

Transportation Management Systems help Covenant route and analyze transportation patterns. “Technology at both the front and back ends of our operations help us identify what is a profitable or unprofitable use of our assets,” Daniel says. “It benefits our customers as well, because if we are able to become more efficient that means our customers have more capacity available through our fleet.”

Step 3: LEED-Certified Buildings and Energy-Reducing Initiatives

The number of LEED-certified buildings has grown exponentially over the last few years, Gonzalez reports. Tax credits and other incentives are available to companies using these buildings. The U.S. Green Building Council developed the Leadership in Energy and Environmental Design (LEED) Green Building Rating System.

In a similar program, Union Pacific Center in Omaha recently won the Energy Innovators Award presented by the U.S. Department of Energy. The award recognizes companies who have successfully developed or deployed energy efficiency and/or renewable energy technologies, services, or policies. The UP Center is also an EPA-recognized ENERGY STAR® building.

The Center is the new headquarters for UP, which opened in 2004 and won the award based on innovative and cost-effective approaches to implement energy-saving changes.

At the same time, geography has its role in energy savings and emissions reductions, notes Shan Hoel. “Since the Pacific Northwest is powered largely by hydroelectric, our emissions factor is a lot lower than those for a similar company located in an area that burns coal or oil,” explains Hoel at TransGroup.

Step 4: Packaging Reduction

A driver of this initiative is Wal-Mart’s packaging scorecard, begun this year to encourage its 60,000 global suppliers to reduce packaging and conserve natural resources. According to a corporate press release, the initiative will save 667,000 metric tons of carbon dioxide from entering the atmosphere, which is equivalent to removing 213,000 trucks from the nation’s highways annually, saving 323,800 tons of coal and 66.7 million gallons of diesel fuel. About $10.98 billion is expected in savings from a 5 percent reduction in 10 percent of the global packaging industry. “This initiative—contrasted with Wal-Mart’s RFID program they were pushing a few years ago—is more welcomed because there the ROI is more evident and the payback is faster,” Gonzalez notes.

Schneider National reports more of its customer base is reducing product packaging. “This means the transportation component becomes more efficient because we can haul a lot more product,” says Damman.

Union Pacific requires from its suppliers packaging that is safe and recyclable, especially for replacement parts the railroad receives to repair its cars and locomotives.

Step 5: Education and Training

Beyond the technological advancements, companies can invest in their people. For example, Schneider offers an intensive driver training program that pays incentives to drivers who perform efficiently in achieving fuel economy through reducing idling time and keeping their speeds within a certain range. Using ECMs (engine control modules), the company sets maximum speed limits on its tractors. Damman reports that Schneider’s overall rate for tractor idling is well below half that of the industry average.

Meanwhile, UP’s Fuel Masters Program rewards locomotive engineers for handling trains safely and efficiently, thereby reducing fuel consumption.

Step 6: Carbon Credits

A lot of discussion and implementation is taking place—in transportation and other industries—in buying and selling carbon credits. One prominent player is the Chicago Carbon Exchange (CCX). “It provides emission reduction incentives for its members, and some of the dollars used to purchase carbon credits actually offset the cost of developing systems that reduce carbon emissions,” notes TransGroup’s Hoel. “It offers some low-hanging fruit, but it is only as valuable as the measurements they are offsetting against.”

Hoel adds he avoids the global-warming argument that bodes radical climate change and is more in favor of discussing how green discussions are best focused on overall business climate changes. “This is really what we are all talking about. It’s a sea change in the way businesses perceive their supply chains that is driving these initiatives.”

TransNeutral is a new program allowing TransGroup’s customers to participate in a carbon dioxide offset through the emissions reduction program of the Chicago Climate Exchange. “We use a weight-based calculation to determine the amount of carbon a shipment emits and we can offset that through the purchase of a CCX carbon credit through our relationship with LiveNeutral, a non-profit affiliate of the San Francisco-based Presidio School of Management, which is a CCX member,” explains Hoel.

Step 7: Waste Reduction

Waste is inevitable and unavoidable, notes MIT’s Blanco. “Although waste should be reduced as much as possible, why should we expect companies to have ‘zero’ waste?”

He adds that businesses try to buy their way out of the waste bin so they can identify their companies as carbon neutral. “This is really more of a marketing campaign than an initiative,” Blanco continues. “When companies buy these carbon offsets, the waste is not visible so it’s all about moving waste around. In some instances there may be a case made to invest in carbon offsets, but companies should always focus first on investing in their supply chain to make it more carbon efficient.” He differentiates between ‘carbon neutral’ programs and carbon credits purchased through organizations like the Chicago Carbon Exchange.

Step 8: Recycling

UP’s e-waste program is designed to dispose or recycle items like computers, monitors, keyboards, and fluorescent bulbs, which amount to over 300,000 pounds annually. “UP’s environmental group identifies acceptable recyclers or disposers,” explains Grimaila. But the biggest recyclable the railroad handles are batteries used for signal systems and grade crossing gates, of which UP recycles an average of over 1.1 million pounds annually.

Standards still evolving

While many companies are still trying to calculate exactly what their carbon footprint is, the challenge is there are no standards that are well defined or universally adopted yet. “It’s still a work in progress,” admits ARC’s Gonzalez.

Hoel at TransGroup perceives the challenge as an exciting opportunity. “We are getting involved early on and we can be part of the solution and the process in getting best practices and standards established. Once everyone is on the same page, then the measurements will be more meaningful than they currently are.”

In the journey to find industry standards, TransGroup and others continually work with groups like SmartWay and MIT’s Center for Transportation and Logistics. TransGroup, for example, is in the developmental stages of an action plan with SmartWay. “I can’t say too much at this point, but what is important is it is not just a feel-good thing,” Hoel reports. “We are developing solutions from a nuts-and-bolts perspective of improving the environmental impact of freight operations in ways that reduce emissions and save fuel and energy in our own operations and in the areas of our customers’ supply chains where we have direct involvement.”

The common, day-to-day initiatives companies are implementing as part of their normal operations are important, but MIT’s Blanco urges considering the long view. “I am talking more about the radical changes companies can make and where they will be in the future in terms of operating a truly green supply chain and not just green-washing and trying to make everything you do look green.”

“We might discover we were all wrong about global warming 50 years from now,” says TransGroup’s Hoel. “And if that is the case and we implemented all of these initiatives to reduce our dependence on oil, what is wrong with having a cleaner world? So companies need to be careful in their evaluations of the green supply chain and they need to identify what is their real objective: is it altruistic, politically driven, or is there real substance to their plan?” wt

Sidebar: Shipping the SmartWay

SmartWay is a voluntary partnership among truck carriers, freight shippers, rail carriers, shipper-carriers, logistics companies, and the EPA that establishes incentives for 1) improvements in fuel efficiencies, and 2) reductions in greenhouse gas emissions. By 2012, the initiative aims to save up to 150 million barrels of oil annually. Primary program components are: creating partnerships; reducing all unnecessary engine idling; and increasing the efficiency and use of rail and intermodal operations.

SmartWay provides the quantitative tools so a company can evaluate the emissions associated with SmartWay’s transportation and logistics partners, giving companies the opportunity to hire the best partner for their transportation and environmental models.

“The goal of SmartWay is to create consistent protocols so companies have standard and consistent measurements to work with,” explains Mitch Greenberg, manager of the Washington, D.C.-based SmartWay program developed by the EPA. “We can help companies conduct the measurements they need to do. We can also show them how to inventory their trucking partners to actually see the kinds of fuel economies their hired trucking companies are achieving. SmartWay provides consistency to the industry, allowing companies to save significantly in not having to build these kinds of programs on their own.”

SmartWay members must commit to the program by promising to calculate their environmental footprint by measuring the emissions generated from their trucking operations (or those of their hired partners). They must promise to improve their emissions reductions continually. “So what we end up with is an index showing the environmental performances of member trucking companies so shippers can choose the companies that best fit their environmental needs,” Greenberg explains.

The program eventually will expand to include ocean and air modes. “We will be able to tie together all the transportation modes into an integrated measurement tool,” explains Greenberg. “This will allow shippers to view their overall supply chain and choose the appropriate transportation mode, each having its inherent environmental, time, and cost benefits. Through SmartWay we are trying to get environmental performance placed directly into the discussion of how goods movement companies are hired.”

The program is growing quickly. When it began in 2004, there were 14 member companies. Today, there are 672 companies in the program, the majority of which are trucking companies. “It just makes good business sense to be sustainable because you are saving fuel,” Greenberg says.

Mitch Greenberg, manager of the Washington, D.C.-based SmartWay.

Sidebar: Wales Takes the Forefront in Renewables: New technologies have a direct impact on transportation, logistics, and distribution. By Lara L. Sowinski

New technologies have a direct impact on transportation, logistics, and distribution.

While the introduction and implementation of green technologies continues to take root in the U.S. and abroad, some of the most exciting developments in the sector are fully underway in Wales.

The Walsh Assembly Government has whole-heartedly embraced the renewables sector, in part out of economic necessity and also to stem the effects of on-going ‘brain drain’ and job losses. And, it is working aggressively to position Wales as a leader in sector.

One such effort is Technium, a partnership between the Welsh Assembly Government, the University of Wales, and the private sector. It is comprised of a network of innovation centers (ten of them are located around the country) designed to nurture young technology businesses and provide the knowledge, support, and physical facilities to help them succeed.

At the Technium OpTIC (Opto-electronics Technology & Incubation Centre, www.optictechnium.com) located in St. Asaph Business Park, one of the world’s largest photovoltaic (PV) panels runs the length of the building’s outside wall. The panels work in both sunny and overcast conditions to collect solar energy and produce DC energy, which is converted to AC and then fed back into the mains. In addition, the curved wall also harvests rainwater, which collects into a reflection pool where it is used to help flush toilets and irrigate the landscaping. This type of system is one that can be used in other office buildings and warehouses.

Although Sharp Corporation is well-known for its consumer electronics, the company also maintains a long history in solar technology and photovoltaics (PV). Of the company’s solar module manufacturing plants, and one of the most technically advanced, is situated in Wrexham, Wales (www.sharp.co.uk/solar), where it assembles monocrystalline and polycrystalline solar modules for use in both residential and commercial installations.

Meanwhile, work on the next generation of solar cells is being spearheaded by Cardiff, Wales-based G24 Innovations (www.g24i.com), which has pioneered breakthroughs in the manufacture of extremely thin, flexible, and versatile photovoltaic material that converts light energy to electrical energy, even under low-light indoor conditions.

G24i’s advanced solar cells can be embedded into ‘intelligent’ fabrics that can be made into jackets, tents, and awnings, for instance, which can then be used to power mobile electronic devices. The company has just shipped a new type of solar charger based on this technology that can be used to recharge mobile phones to a company in Kenya, which marks the first commercial application for G24i’s product.

The company’s chairman, Robert Hertzberg, sees incredible potential in developing countries like Kenya, where it’s not only quite expensive to charge mobile phones via conventional methods, but it also means a trip to the nearest village.

Wales is at the center of other advancements in renewables and alternative energy sources too, all of which can help lower the overall energy costs for office buildings, warehouses, and homes. Wind energy, for example, is the most readily available commercial renewable technology and Wales’ weather and geography make for a natural fit to capitalize on this technology.

In 2005, London-based Falck Renewables (www.falckrenewables.com) constructed the UK’s largest onshore wind farm, Cefn Croes, located near Devil’s Bridge, Wales. The wind farm has a capacity of 58.5 MW and will save the equivalent of 160,000 tons of CO2 annually and generate enough electricity to supply approximately 42,000 homes.

The North Hoyle Offshore Wind Farm, built and operated by npower renewables (www.npower-renewables.com), is the UK’s first major offshore wind farm. It’s located 7 kilometers off the North Wales coast and generates enough electricity to supply about 40,000 households each year.

One of the more unique yet low-tech projects is Wave Dragon (www.wavedragon.co.uk), which is essentially a floating barge that uses ocean waves to drive turbines. The Wave Dragon uses two giant arms (145 meters each) to ‘catch’ waves, which are temporarily stored before falling into turbine chambers and converted into electrical energy. The electricity is transferred to shore by a cable.

 According to Iain Russell, UK Manager for Wave Dragon Wales Ltd., the real advancement comes with being able to accurately monitor wave activity and then calibrate the Wave Dragon to optimize the incoming waves. A pilot program is set to begin this year with the installation of a Wave Dragon located four to five miles off the southwest Wales coast. It will be the UK’s first and largest offshore wave energy installation and will produce enough electricity each year to meet the demand of between 2,500 and 3,000 homes and will offset the release of about 1,000 tons of CO2 annually.

The Technium OpTIC building in Wales boasts one of the world's largest photovoltaic (PV) installations, which contains 2,400 PV panels and supplies between 3% and 20% of the building's energy requirements.