Green Supply Chain: the How-to Guide

How to create a supply chain program that saves the environment? In this article, we will show you the list of best practices to implement a green supply chain.

Establish Green Supply Chain Metrics

The Green supply chain program aims to measure, analyze and improve performance among various members of the international companies. To ensure that these companies' operations are in an environmentally friendly manner.

Many supply chain management projects or six sigma projects start with performance measurement. A leading consulting firm like LMI Government Consulting utilized the cross-industry platform, SCOR Model, to deliver a quick measurement of performance as below,

metrics

As you can see, these performance measurements are centered around cost, policy compliance, quality management, and the number of wastes generated from the system.

- Compliance costs, Noncompliance costs, and Energy costs can be found in a standard financial statement.

- Policy compliance, such as % of correct packaging, % of the supplier with the EMS system, and % of carriers with environmental criteria is one type of supplier evaluation criteria.

- Amount of waste such as % of the product returned, % of product disposed against product re-manufactured, liquid waste, solid waste, and recycling waste can be found in the production records.

One special type of metric is the amount of Carbon Emission. This measurement needs lots of work and will be discussed in the next topic.

Conduct Carbon Footprint Analysis

Carbon Footprint is the amount of greenhouse gas generated by various activities, usually expressed in kilograms or tonnes. Since there are many types of greenhouse gas such as Carbon dioxide (CO2), Methane (CH4), Nitrous oxide (N2O), Hydrofluorocarbons (HFCs), Perfluorocarbons (PFCs), and Sulfur hexafluoride (SF6), they are called collectively as CO2e. In order to capture the amount of CO2e emission, simplified supply chain map with analytical procedures, from procurement, inventory control, and transportation as explained below,

flowchart

Quantify Emission from Raw Material Sourcing

Energy consumption is a big source of CO2e. In order to determine the amount of CO2e released during production, you need to know how many units your suppliers produce a year (Total Output), Electricity Consumption a year, and how many units you purchase from them.

sourcing

Another piece of information you require is called the emission factor. This is the amount of CO2e released for 1 kWh of electricity consumption. Then, the basic idea to calculate CO2e emission is the energy consumption*emission factor.

Quantify Emission from Inbound Logistics

Each mode of transportation emits a different level of CO2e then an emission factor is different. To compute the emission from inbound logistics activities, total weight and distance should be identified. Then, the total CO2e emission is the result of weight in tonnes x distance in km x emission factor / 1,000,000.

inbound logistics

Quantify Emission from Manufacturing

The same logic (energy consumption*emission factor) also applies to in-house manufacturing. Anyway, the amount of available data will be more extensive. You may want to incorporate the different sources of energy in computation which are summarized below,

Manufacturing

Quantify Emission from Outbound Logistics

The same logic (weight in tonnes x distance in km x emission factor / 1,000,000) also applies to outbound logistics. Anyway, you may find that you have hundreds or even thousands of delivery destinations. Then, how you can determine the distance?

The first piece of information you need is geographic coordination. The easiest way to get it is to use a geographic coordinate published by U.S. Census Bureau.

Geocoding

If you know the zip code, you can get the Latitude and Longitude easily. Then, you use lat and long to compute the distance between you and your customers as below,

Distant Calculation

The benefit of this approach is that you can calculate the distance from you to every customer rapidly in an excel file. Anyway, please note the distance is a straight line from one point to another. Then, the distance seems to be a bit shorter when compared with the actual road contour.

Reference
- Protocol, Greenhouse Gas. "Greenhouse gas protocol." Sector Toolsets for Iron and Steel-Guidance Document (2011).


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Last review and update: July 5, 2022
About the Author and Editor:
Ben Benjabutr is the author and editor of Supply Chain Opz. He holds an M.Sc. in Logistics Management with 10+ years of experience. You can contact him via e-mail or Twitter.