Sustainability for efficiency
09 February 2009
In an economic climate where there is increasing pressure to reduce costs, Dean Taylor, Operations Director at Axiom Manufacturing Services, looks at ways in which manufacturers can ensure they retain an environmentally sustainable supply chain that won’t be a burden on the company’s bottom line.
Several years ago, it would have been considered by many that achieving a sustainable supply chain would result in reduced efficiency. But this is no longer the case. In fact, being sustainable is now viewed as a source of competitive advantage and a matter of corporate survival, which in this period of economic slowdown, is paramount, rather than a costly inconvenience.
As environmental costs and consequences become factored into policy, regulation and procurement decisions, the economic case for more sustainable and environmentally attractive products and services grows rapidly. Saving the planet is necessary, but it is also good business.
The transition to a low carbon economy is presenting many challenges for all businesses, led by both legislation and customer demand. The key is to find the balance between addressing environmental issues and long term economic benefits.
Many companies now value and embrace sustainability as a top-line priority when considering their suppliers. So it is important that manufacturers can offer the right sustainable credentials across their whole business, including the supply chain. It’s also important that sustainability becomes part of everyday business, not just in isolation for certain aspects of a company.
Traditionally, those responsible for procuring goods and services have done so at the lowest market prices. However, as we have begun to distinguish between market prices and social costs, the supply chain has been re-defined and now looks at value, not just costs. Indeed sustainable procurement can help cut costs by stripping out waste and looking for innovation.
In addition, supply chain managers can foster sustainability by ensuring that suppliers, both up and down the chain, incorporate sustainable innovations in their activities.
This should include opportunities to investigate new processes and technologies that reduce dependency on scarce and potentially expensive resources and those materials that are harmful to the environment.
Managing the supply chain in a sustainable way then becomes a catalyst for triggering corporate behaviour at senior management level that is truly green and socially responsible.
Green supply chain best practices focus on the business results first and clearly demonstrates a company’s values and identifies how it will approach and work with suppliers and partners to meet its green guidelines.
Guidelines that outline how an organisation will operate a sustainable supply chain should be developed at board level which will then secure buy-in from the rest of the organisation and other stakeholders.
As the supply chain becomes more developed there will be a need to incorporate training programmes for staff and introduce sourcing tools that equip buyers to support sustainability goals.
To help them manage the whole life cost of their products, OEM’s are increasingly looking for ‘complete outsourced solutions’ from their partners. In an era when Corporate Social Responsibility is increasingly important to investors, sourcing to an off-shore provider can carry some risks, such as the cost of logistics and production methods which do not always match the green aspirations of the OEM.
In order to keep a close check on its environmental performance, Axiom, who gained ISO 14001 in 2002, and was the first SME in Wales to achieve the Green Dragon level 5 environmental standard in 2003, has developed its supplier audit to include environmental aspects of supply. This allows the company to examine the environmental processes of its suppliers and partners and compare them with the standards it has set for itself.
The benefit of implementing a green sustainable supply chain is that Axiom can improve the profitability of the company and help the environment at the same time.
At Axiom, we have also managed to reduce our carbon emissions by 40% over the last 18 months by consolidating our outbound deliveries and carefully planning our schedules.
We have also recycled more than 10 tonnes of cardboard and over 2000kg of solder dross over the last four years that would otherwise have gone into landfill sites.
The company is now making a £12,000 saving every quarter from recycling paper, cardboard, scrap PCBs and solder dross.
This ethos has also been reflected down Axiom’s supply chain with over 60% of customers now opting for recyclable packaging.
As one of the smaller, more specialist manufacturing companies in the UK, Axiom always tries to source from local suppliers, using standard components wherever possible to ensure purchasing efficiencies, increase product life, and reduce the carbon footprint. In addition, by using standard components it removes the issue of what to do with excess stocks; these are simply consumed by other customers.
However, when components from the Far East are required, to combat the need for air freight the supply chain department plan the supply so that in the majority of cases, orders are consolidated to reduce the impact on the environment and transport costs. Axiom also seeks partners who offer consolidated shipments.
The management of waste streams also contributes to a sustainable supply chain, and Axiom has key partners to help ensure they dispose of their waste products correctly. Plastic, electrical components and cardboard are all recycled, which also makes good business sense as the company receives a small fee for the products it recycles.
Axiom is now in pole position, not only to win new contracts, but also to pick-up outsourcing opportunities from OEMs that are unable to make the necessary energy efficiency and environmental investments of their own.
For many companies, when consolidating business costs the view is that outsourcing is an effective option and when they do, sustainable credentials are often high on the list of their priorities.
Dean Taylor is Operations Director at Axiom Manufacturing Services
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