07 February 2012

Viewpoint : Guest Columnists

Green myths v real benefits

Published:: 30 January 2009
Article Type:: Viewpoint
Byline:: David Oglethorpe

What constitutes sustainability will always be a contentious issue, but when we think about supply chains, it must be simple - "sustainable" must mean "resilient " while remaining to be about giving the downstream customer what they want.

As we know, customers are increasingly concerned about the environment and signals are passing back up supply chains to ensure that low-carbon production, manufacture and distribution activities are achieved. However, customers also remain just as interested in price and environmental compliance needs to be achieved without additional cost. A truly sustainable supply chain is one which delivers environmental benefits at minimum cost.

So how do we do this? The answer lies in learning from emerging thinking in the food industry, where there is constant consumer pressure to reduce environmental impact.

The food consumer is constantly told (by the media, misdirected academics and celebrity chefs) that downscaling or simplifying products is the way to go as a solution to reducing environmental impact - reducing "food miles", getting rid of packaging, going organic or doing more home-cooking.

But, if we think about it rationally and without the romantic idyll of "The Good Life", all of these supposed solutions actually lead to a greater resource use per unit of output. Diverting product transport from HGVs to cars by increasing the number of local retail outlets (the food miles myth) we carry less product per unit of fuel consumed. This is the same principle that has driven distribution routes to become so efficient.

Removing packaging reduces the shelf-life of products and therefore increases food waste, which is worse in terms of greenhouse gas emissions when land-filled than is plastic, metal or glass packaging material. Organic produce also, in most cases, takes longer to produce and consumes more energy in its life-cycle, with combined lower yields. This again leads to an increase in resource use per unit of output.

Likewise, home-cooking in general uses energy less efficiently than an industrial process would - one just has to think about the oven space we would use to roast a chicken at home and compare that to the number of chickens that would be cooked in the same oven space at a manufacturing plant.

All of these examples expose the fact that rational economic thinking is often left behind when we think about the environment and we tend to automatically search for emotive "wholesome" solutions. True, these options may achieve a price premium (at least in the short run) but the basic economic principle which drives efficient production is comparative advantage, where trade, specialisation and economies of scale lead to efficiency and growth. By electing for these less efficient, supposedly wholesome, supply options, we are abandoning this basic principle, economies of scale will be lost and resource use will be less efficient.

So, the message is, achieving environmental efficiency relies on the same principles as economic efficiency. Environmental impact increases the more resources we use per unit of output, so the more efficiently we use resources the better - this is simple economic efficiency.

To create a sustainable supply chain then, the normal rules apply - focus on lean, agile and cost-efficient production, manufacture and distribution, and resource use per unit of output will improve: Lean is Green.

David Oglethorpe, Professor of Logistics and Supply Chain Management, Newcastle Business School at Northumbria University.

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