Greening the Supply Chain

Expert pinned on noticeboard

Expert pinned on noticeboard

As global stakeholders continue to push for cleaner production from the manufacturing supply chain, companies of all sizes are now considering environmental issues as part of their corporate strategies. Most large manufacturers are adopting sustainability strategies in advance of impending regulations.

The pressure continues to mount on suppliers from global manufacturing leaders. Last fall, several of the world’s leading multinationals announced they were banding together to form the Supply Chain Leadership Coalition, to promote better environmental standards among their supply chains. The group includes Procter & Gamble, Unilever, Tesco, Nestlé, Imperial Tobacco Group and Cadbury Schweppes. The launch of the new group is part of a wider trend that has seen numerous multinationals increase pressure on suppliers to cut emissions and disclose environmental impact information.

The reality is that most large manufacturers do not have the time and money to help all of their smaller suppliers remain lean and green. Many smaller firms are still struggling with where they should begin in greening their operations and do not have the resources to devote to environmental and operational improvements. The Green Suppliers Network, an innovative, voluntary program sponsored by industry, the U.S. Environmental Protect­ion Agency and the Manufacturing Extension Partnership program of the U.S. Department of Commerce, works with these companies get the on-site technical assistance needed to remain profitable, environmentally sound and competitive.

The Green Suppliers Network works with large manufacturers to engage their small and medium-sized suppliers in reviews. “When GM helped launch this initiative a few years ago, we wanted to reach deeper into the supply chain to continue improving the environmental performance of the industry as a whole. And, we have been very pleased with the progress that has been made on all levels,” says Beth Lowry, vice president of environment, energy and safety policy at General Motors (GM).

As a global firm with suppliers all over the world, GM is also developing green supply chain programs overseas. The firm realizes that its future growth will be coming from overseas markets and that China will be a big part of that growth as it becomes the world’s largest auto market in next decade.

“We worked with GM to implement a pilot green supply chain program initiative with its suppliers in Shanghai,” said Gwen Davidow, director of global corporate programs with the World Environment Center (WEC).

The “China Greening Supply Chain Pilot Project” was implemented by GM, Shanghai GM and the World Environ­ment Center. GM invited eight top-level suppliers to participate. After a short training course, the suppliers evaluated opportunities to improve quality, reduce environmental impacts and lower costs. Through the evaluation, suppliers were able to identify actions and investments that ultimately resulted in a combination of net financial savings as well as improved environmental performance.

According to the Green Car Congress, the original eight participating suppliers have reduced their displacement of CO2 by more than 2,500 tons and saved about 28 million gallons (about 106 million liters) of water annually. They also have lowered their operating costs by a collective $254,500. Now SGM is reported to be working on another green supply chain initiative and they are targeting the number of participating suppliers to reach 40 by the end of 2008, and could further grow to 150 by 2010.

“The momentum overseas is definitely building on the greening of the supply chain initiative,” Davidow said. In addition to its success in working with GM in China, WEC has also recently worked with Alcoa on a greening the supply chain project project in Mexico and a follow-up project with Alcoa in Romania. “Getting repeat business is a great indicator of success,” Davidow said. WEC hopes that once manu­facturers go through this greening of the supply chain process, they will engage their tier two and tier three suppliers and enact it with them.

Starting Small

As this initiative gains traction globally, obviously the smaller manufacturing suppliers will have to make the necessary investments to adopt cleaner practices. In the United States, many smaller firms are already squeezed on price and global competition, but they need to adapt to the winds of change.

The reality is that the train has gone out of the station and companies that embrace sustainable manufacturing will be well positioned to be responsive to client supply chain demands and impending regulations while also positioning themselves for future global competition.

The Green Suppliers Network is a tremendous resource that should be tapped by small-to-medium sized firms. Once suppliers commit to a review, it usually takes two to three days to conduct an on-site visit. During this time, the Green Suppliers review team trains facility employees to create a value stream map and process map of current and future process flows.

At the end, suppliers are given a cost benefit analysis that identifies lean and environmental opportunities in their facility and evaluates which opportunities have the greatest return on investment. These reviews are assisting suppliers from across the United States to save thousands and often hundreds of thousands of dollars. The program’s first 19 reviews have helped suppliers identify $9 million in annual cost savings and more than $3 million in cost savings from one-time lean opportunities.

“The lean and green principles have become our way of doing business for everything we do at H&L Advantage, and it’s now in our DNA,” said Steve Beurkens, sales marketing manager of H&L Advantage. H&L Advantage is a small injection molding manufacturer located in Grandville, Mich.. With 60 employees and 40 years in the business, H&L Advantage knows what it takes to compete. When it was nominated to participate in Green Suppliers by its largest customer, it viewed participation as an opportunity to rise above the rest.

Getting Involved

Manufacturers are encouraged to contact Kristin Pierre for more information about the Green Suppliers Network. These experts in lean and clean manufacturing techniques helped H&L Advantage identify over a dozen improvement opportunities in August 2004.

Global companies understand that both global and local stakeholders will not differentiate between a multinational company and its suppliers if they do not demonstrate sustainable leadership as part of their preeminent business success. In an age where reputation is everything, manufacturers with a global footprint need to ensure their vendors and suppliers are in line with the core principles of their sustainability strategy. Accordingly, small-to-medium manufacturers need to pay attention to this green supply chain movement and adapt to the trends accordingly to ensure their future survival.