Supply Chain Frontiers issue #19. Read all articles in this issue.
Building energy efficiency into supply chains is not a fringe green issue; rising fuel costs and consumer pressure for environmentally responsible products are forcing companies to rethink supply chain design and management. A one-day conference on the MIT campus on April 30, 2007, will explore the challenges. As two companies scheduled to present at the conference, Fujitsu Computer Systems Corporation and Staples Inc., show, there are many approaches to supply chain energy efficiency, but a common goal is to bring burdensome costs under control.
Fujitsu Computer Systems Corporation began switching to a direct-ship distribution model about six years ago. The company saw significant efficiency and customer service gains by marrying each product with a customer at the point of manufacture in Asia, and delivering direct to customers in America without stopping at distribution centers. Fujitsu continues to refine the model and has added a new goal to its original objectives: energy efficiency.
“As fuel surcharges have impacted our business over the last year or so, we have come to appreciate our direct-ship model even more,” said Kevin Wrenn, Senior Vice President, Operations and Quality, based in Sunnyvale, CA. For example, the company is transferring more shipments from air to ocean, a move driven largely by soaring fuel costs. In addition to switching to a less expensive mode of transportation, the direct-ship model has enabled Fujitsu to cut its energy bill by reducing the number of shipments it makes.
Indeed, supply chain energy efficiency is becoming part of a corporate culture that is already centered on sound environmental policies. “Given the increasing volatility of fuel prices, and growing concern over environmental issues, making the supply chain less energy intensive has become crucially important at Fujitsu,” Wrenn said.
This is more than just a mission statement. The company has established a multi-disciplinary task force that meets every week to review environmental compliance issues, and supply chain is a key part of that group. “Supply chain is at the core of our operations – and so is energy efficiency,” Wrenn said.
At Staples, “we try to take an integrated approach to energy management, to support our business goals and drive our environmental objectives,” said Mark Buckley, Vice President of Environmental Affairs. “As a company, Staples is strongly committed to reducing our carbon emissions by seven percent from where we were in 2001 over the next three years. To help achieve this goal, we’re focused on energy reduction across our entire business, especially our supply chain.” Prior to his current position Buckley was Vice President, Facilities Management and Purchasing.
Staples’ integrated approach encompasses various programs. The company is actively developing distribution centers that use less energy than more traditional designs. As Buckley explained, these buildings incorporate a number of innovative features such as lighting systems that maximize the use of natural light. “We are looking at variable-speed drive motors that use less power,” he said.
Staples is also strongly committed to renewable energy. This January the company unveiled the largest solar power installation in New England at its 300,000-square-foot distribution center in Killingly, Conn. The roof-mounted installation, built at no capital cost to Staples, is expected to generate clean power to run 14 percent of the distribution center, while also saving on energy costs for the retailer. The solar power system is expected to have a measurable environmental impact and reduce annual carbon emissions equivalent to the amount produced by the average car driving 420,000 miles. Staples currently has solar power systems on two additional distribution centers in California, with a third installation currently under construction.
In its distribution network Staples is looking at the use of alternative fuels for delivery trucks and improving vehicle utilization. For example, rather than running trucks empty after product has been delivered, many vehicles carry used materials on the backhaul for recycling. Also, the company is working with large corporate customers of its contract division to increase their average order size, which can help reduce carbon emissions and fuel by making deliveries more efficient.
Buckley works with supply chain to develop solutions like these, but as he emphasized, each program has to be viable. “I have to make the business case for every initiative with clear benefits and an ROI,” he said.
The “Achieving the Energy-Efficient Supply Chain” conference is organized jointly by the MIT Center for Transportation & Logistics and the Council of Supply Chain Management Professionals. It will take place on April 30, 2007, on the MIT Campus, Cambridge, Massachusetts.