Supply Chain Management for Environmental Improvement

Service-Supply-Chain Strategies

Giving a supplier or contractor responsibility for management of an inventory, material stream, waste stream, or an onsite service engages the supplier or contractor in greening that area of a customer's business. Usually, the supplier knows this part of the business better than the customer and can handle and manage the product(s) or service(s) more efficiently. This allows the customer to redeploy staff to core operations.

A few examples of supplier services include:

Who's Doing It?

Anheuser-Busch Companies, Inc., (see page 18) supplier manages onsite storage and recycling of plastic banding

Commonwealth Edison's suppliers provide just-in-time (JIT) inventory services for chemicals, lubricants, and lab supplies

Eli Lilly and Company(see page 10) outsourced management of compressed gas cylinder management used in lab research, saving money and reducing accidents

Garden.com has nearly all of its inventory managed and stored by suppliers

IBM Inc. (see page 61) provides End-of-Life-Management Services for their products

Intel Corporation implemented just-in-time inventory with many suppliers, aided by web-based commerce tools

Johnson Controls, Inc. (see page 58) offers energy management and other environmental services to customers

Raytheon Company has given EHS requirements to their supplier base, in return for asset protection benefits. They also use supplier-managed central chemical management with online info and ordering, suppler reporting, JIT, simplified invoicing and more

Saturn has much of its inventory under a "jointly-managed" system, where suppliers manage it and share the inventory risks with Saturn and Saturn retailers

Chemical Management Services

Delta Airlines' chemical supplier, Interface LLC, manages Delta's chemical inventory which has improved delivery success rates, inventory practices, environmental reporting and compliance, and reduced chemical use and costs.

Motorola, Inc. collaborates with supplier Ashland Specialty Chemical Company(see page 55) who manages their chemical inventory, and offers less toxic alternatives, optimized containers, efficient logistics, and other services

Nortel Networks teamed with its main chemical supplier to share savings based on chemical services provided rather than on the volume of chemicals purchased, incentivizing both firms to reduce chemical use

More Information

"Servicizing the Chemical Supply Chain" The Journal of Industrial Ecology (Volume 3, Issue 2 & 3, 1999)

Chemical Strategies Partnership (CSP) and CSP Case Studies

Suggestions for the Customer on Implementing Supplier Service Strategies

Go Direct to Suggestions for the Supplier

checkbox Assess areas of your business that may more effectively managed by a supplier

Examples:

  • Chemicals and other lab supplies
  • Office supplies
  • Fleets and fleet maintenance
  • Cleaning and facility maintenance supplies
  • Raw material inventories
  • Scrap, packaging or recyclables associated with a supplier's products
  • Energy management
  • Electronic office equipment and maintenance
  • Office furnishing
  • Document services and related equipment

checkbox Prioritize the opportunity list from the above assessment

Example criteria for prioritizing:

  • Biggest "bang for the buck" (e.g., economic benefit)
  • Well-established supplier/customer relationship(s)
  • Most environmental or efficiency improvement potential
  • Simplest implementation (especially for the first few agreements)

checkbox Flush out an initial objective list and draft plan

Examples:

  • Define proposed responsibilities for each party
  • Define the requirements, e.g., communications, training, safety
  • Estimate and document benefits, e.g., environmental benefits, shared savings from reduced wastes or inefficiencies, competitive advantage, added business for the supplier)

checkboxInvolve the supplier

Examples:

  • Introduce your objectives and initial plan
  • Assess their acceptance and willingness to evolve the program with you
  • Involve the supplier in final planning and negotiating terms, e.g.,
    • Will shared savings be adequate compensation for each party?
    • Will you need to pay for the supplier's additional services or participation?
    • Is the agreement informal or does it need to be official?

checkbox Complete and implement the agreement with the supplier

And:

  • Be flexible - Xerox's leasing program for office equipment was initially developed as a marketing tool, but is now a full-blown Design for the Environment (DfE) program which maximizes recovery and reuse of materials and components from their copiers; including powdered toner
  • Re-evaluate - Evolve the working agreement as you and the supplier develop even more efficient practices

Suggestions for the Supplier on Implementing Supplier Service Strategies

checkbox Assess potential service(s) that can supplement products currently sold to your customers

Examples:

  • Offer cleaning/maintenance services and cleaning supplies maintenance
  • Manage scheduling, delivery, stocking, and tracking of inventories for customers (at their facility or yours)
  • Take back scrap, packaging, recyclables and wastes associated with your products
  • Offer energy management/efficiency services
  • Servicize electronic office equipment, computers, office furniture, or other goods
  • Offer document services instead of just offering copiers, printers, etc.

checkbox Assess the advantages for your organization and the customer

Examples:

  • Interface, LLC began managing Delta Airlines chemical inventory in 1994. Delta has They attained a 30% reduction in overall chemical costs and use. They also dramatically improved delivery success, inventory practices, environmental reporting, and compliance.
  • Environmental and cost savings accrue without much effort on the customer's part
  • Potential gainsharing between supplier and customer can provide incentive for both customer and supplier to further reduce, reuse, recycle
  • Additional business opportunties for the supplier
  • Redeployment of customer staff to core activities
  • Maintenance and/or ultimate disposal becomes the responsibility of the supplier
  • Product(s) are managed and maintained by the supplier, who best knows the product and waste reduction opportunities

checkbox Assess profitability and cost benefits of adding these services

Example:

  • Conduct an economic analysis to see if implementation and operation of the program would be profitable; consider gainsharing in the analysis
  • Calculate potential savings for the customer from improved efficiency and reduced environmental costs, and potentially gainsharing
  • Determine the cost to the customer for the service; will the customer be willing to pay this cost?

checkbox Build the program incrementally

Example: Often, a service model evolves from existing lines of business and historical relationships with customers; a successful program will require careful planning and procedures, significant interaction with customer to ensure you are providing a service they will want and use

checkbox Develop a draft operational plan and terms of agreement

Examples:

  • Define your proposed services and responsibilities for the customer
  • Define the requirements, e.g., communications, training, safety
  • Include benefits, e.g., environmental benefits, shared savings from reduced wastes or inefficiencies, competitive advantage, added business for the supplier
  • Request the customer's participation in developing and evolving the program. Their input will give them more responsibility, interest, and ownership

checkbox If your program is geared toward taking back scrap, recyclables, or end-of-life products, etc., optimize product design and manufacturing activities to facilitate recovery

Example: See DfE/LifeCycle Checklist for more specific opportunities

checkbox Complete and implement the agreement

And:

  • Be flexible - Xerox's leasing program for office equipment was initially developed as a marketing tool, but is now a full-blown Design for the Environment (DfE) program which maximizes recovery and reuse of materials and components from their copiers; including powdered toner
  • Continually evaluate and redesign - Evolve the working agreement as you and the customer develop even more efficient practices

 

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