Council Post: How To Use Attribute-Based Planning For A Green Supply Chain

Just recently, BlackRock — the world’s biggest investment firm, which manages $7 trillion — decided to avoid investing in industries that are not environmentally friendly. They didn’t do this because they are environmentalists or because of their views on climate change, but because it makes good business sense. It is not a surprise that, in the past decade or so, most companies have been gradually paying more attention to this issue and making decisions based on reducing their carbon footprint.

However, most of these decisions focus on enabling change over a longer time period: for example, changing the energy source from conventional fuel to renewables, building environmentally friendly plants, producing cars with zero emissions or making appliances that are highly efficient. These decisions are all good, but they do not address the short-term usage of carbon. At the tactical level, there is not as much visibility as to how much of an impact the company is making in its day-to-day activity and production of goods or use of suppliers. Depending on where a product is made and what material or supplier it uses, the carbon footprint of the product can vary.

Measuring is the first step to improvement. You can monitor the “carbon footprint index” of production in the supply chain — not just weekly or monthly, but every time you plan production. It determines all the possible ways of producing a mix of products at all different locations and with the use of different materials. It projects sales and inventory, allowing you to estimate future costs, revenue and profitability. As the combination of production factors changes, so does the carbon footprint.

How To Measure Your Company’s Carbon Footprint Daily

The key to this system is the use of attributes and the ability of the planning system to tag the carbon footprint of every method, supplier, component, location and so on. Attributes are attached to every object in the supply chain, including trucking or air transportation, distance traveled and how it is made and sourced. Once you establish these attributes, an attribute-based planning engine is capable of projecting the overall carbon index of production every time it plans.

In order to be able to do this, the planning system must be equipped to represent attributes for every object in the supply chain. The system employs machine learning techniques using pattern recognition algorithms to detect trends and find major causes of carbon emission in the supply chain. Finally, the approach can be used to simulate NPI launches by examining different ways of producing the product in order to minimize its carbon footprint, thus integrating PLM and supply chain planning to produce a greener company.

It is critical when you implement planning systems to ensure the availability of attributes for every object in the supply chain. Such attributes enable monitoring of the carbon footprint, but there are many other types of attributes that can monitor other intricacies of the supply chain that may not be so obvious to an expert observer. For example, as equipment gets older, its efficiency drops and its carbon footprint potentially increases, or the cost of production and maintenance goes up. So, having attributes is important, but one should make sure these attributes act as dynamic constraints and their value is taken into account every time the system searches for a solution. Make sure that there is a “language” by which rules can be defined using these attributes. For example, an expert system-like rule such as IF … THEN … ELSE. These form Boolean expressions that define your business processes and can be changed easily over time as your business changes. Then the system becomes adaptable and malleable to your environment.

Steps To Reduce The Carbon Footprint Of Your Products

The above-mentioned trends can be used in many ways to bring visibility to the problem and find causes for improvement and correction. For example, the results of the plans and the resulting trends can be shared with suppliers to improve their operations. It can also be shared and negotiated with the customers to adjust their demands for high emission products. The trends of carbon usage can also be part of the pricing strategy to minimize the use of high-carbon-footprint products. We are already seeing that consumers are very conscious of products that are not environmentally friendly. Changing their volume in the mix can be a huge immediate step toward the reduction of carbon usage.

The visibility provided by this approach can be extremely helpful to educate not just the employees of the company but also suppliers, customers, equipment manufacturers and end-users on products’ carbon footprint and the impact that their decision can have on the environment — thus, finding joint incentives to create a much greener supply chain.