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Salesforce Commerce Solution Guide

The Greening of the Supply Chain

By Erika Morphy
Nov 27, 2007 4:00 AM PT

The trend toward environmentally friendly, or green, business practices is permeating just about every industry and, at a more granular level, specific operations within particular segments -- from high-tech server options to green building.

The Greening of the Supply Chain

The supply chain is no exception, according to a new survey conducted by Eyefortransport in June and July.

Two-hundred seventy one transportation and logistics executives participated in the survey. Forty-four percent of the respondents were in the transport and logistics sector, and 8 percent were in high-tech and electronics. The food, retail and consumer packaged goods industries each accounted for 6 percent.

The automotive, chemical and healthcare/pharmaceutical sectors were fairly evenly represented, while the defense/aerospace industries were in the minority, "which may or may not be an indication that supply chain greening does not feature high on the list of priorities for these sectors," according to the report.

85 Percent and Growing

The survey revealed there's a huge awareness of the benefits that green technology can bring to the supply chain, and by extension, to a company's bottom line.

Only 6 percent of respondents said green issues were likely to remain at the same level of importance as now, according to the report. In contrast, the vast majority of respondents, 85 percent, believed that green issues would become more important to their transport and logistics processes over the next three years, with 13 percent of that group identifying green issues as their number one priority.

Less than 1 percent expected green issues would lessen in importance.

The growing concern is apparent even without evidence from a survey, said Katharine O'Reilly, director of environmental research at Eyefortransport.

"I believe the greening of supply chains is going to gain more and more industry and public attention over the next year," she told CRM Buyer. "The reality is that up to 75 percent of a company's carbon footprint comes from their transportation and logistics, and that without taking positive environmental steps in this area, they are missing a key component of their sustainability agenda."

It Takes a Village

One best practice that is emerging in this admittedly nascent discipline, according to O'Reilly, is the collaboration among logistics users, providers, suppliers -- and even competitors.

An average of 25 percent of respondents reported that they had already partnered -- or planned to partner -- with a logistics providers to help them green their processes. An additional 27 percent were actively exploring the possibility of adding a logistics partner for that purpose.

This push toward green is driven by a number of factors, including financial return on investment (45 percent), public relations payback (34 percent), and improved supply chain efficiency (34 percent), according to the report.

Current Practices

Respondents were also asked about current practices. Sixty-three percent said they already were improving energy efficiency or were planning steps to do so; 45 percent were redesigning warehousing and distribution center networks; 42 percent were rerouting vehicles to reduce miles; and 40 percent were reducing -- or at least measuring -- emissions.

Of the companies currently implementing environmentally friendly supply chain strategies, 61 percent said that such initiatives were not affecting their efficiency, while 34 percent reported that their green initiatives were making their supply chains more efficient. Only 5 percent of respondents reported a decrease in supply chain efficiency due to green initiatives.

Fixed Costs Count

More firms are likely to embrace green technologies in their transport and supply chains going forward, Walter G. Copan, executive vice president and chief technology officer at Clean Diesel Technologies, told CRM Buyer.

For starters, fuel costs are among the highest fixed costs for firms that have significant transport operations associated with their businesses. There are other savings and efficiencies that can be realized through a green transport and logistics supply chain, he added, which is sure to drive deeper adoption.

Indeed, these benefits are already beginning to be realized in some parts of the world, especially Europe. "We are seeing an increased movement to minimizing the carbon footprint of fleet operations and other transport related activities," Copan said.


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