Tuesday, July 18, 2006

Cost Savings through Greener Supply Chains

Sorry for the lack of images tonight -- that part of Blogger is "down for maintenance..."

Joel Makower's most recent "Toiling Point" column is up at Grist today, and this time he's focused on supply chains. In the case of Illinois-based Baxter Health Corporation, Joel's central example, searching out greener and more efficient products for their hospitals, clinics and offices meant big savings on the things they needed to keep business running smoothly. When Jenni Cawein, manager of corporate environmental health and safety engineering, first came on the job six years ago, she taught her new employer a big lesson about a relatively small item: light bulbs:
Armed with details about the department's goals, Cawein set up a time to address the purchasing staff. At that meeting, she offered an illustrative example involving three fluorescent light bulbs: one cost $1 and was expected to last 2 years; another cost $5 and lasted 8 years; the third cost $2 and lasted 2 years, but used 30 percent less electricity.

"When I ran the actual numbers, including real costs of electricity for all of our facilities around the world, plus labor and disposal costs, and showed them the data, their eyes just opened up," says Cawein. "I showed them that the cheapest bulb would cost us $50 million more than the most efficient bulb."

Cawein's message was clear: greening the supply chain is a strategic, bottom-line issue. Largely as a result of Cawein's light-bulb inspiration, Baxter has embarked on an effort to integrate environmental thinking into every aspect of supply-chain management.

Of course, Baxter is just one example of a company recognizing that buying green supplies, even if they cost a bit more up front, end up saving the company money that it would rather spend elsewhere. Companies are also finding that the farther they look up and down their supply chains, the more elements they can identify for greening, and for saving. Joel notes that companies engaged in SCEM (that's supply chain environmental management for the rest of us) are generally concerned about environmental issues to begin with, but that the money saved is the real clincher:
In the end, it's the economics, stupid. If you can convince the powers that be that there's a way to save money beyond the purchase price -- and then can show them that it comes out of a specific budget -- you can break through the purchasing department's traditional reluctance to change vendors or products, says Cawein. "You've got to show them the link and prove it to them. Once they understand that it's not funny money, they go out and start negotiating."
What I find particularly encouraging about this (and call me Captain Obvious if you must) is that any business can do it, and the argument is a strong one regardless of a firm's environmental commitment. That's a winner, and business people, regardless of their ideological blinders, tend to know those when they see them...

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