Are Your Company’s Products Earning Frequent Traveler Miles?
By john.bermudez on May 01, 2009
Ever stop to think about the miles traveled by the products that your company produces from the point at which the first component is manufactured until the completed product reaches the final customer? Products and the components inside often accumulate thousands of miles before they reach the customers. Every single one of these miles adds to a product’s carbon footprint. While bottled water from Fiji and French Alps has taken a big public relations hit lately, they are not the only products guilty of seemingly excessive travel. If we reduce the miles traveled, we can reduce the carbon footprint whether the product is bottled water or a bulldozer.
The globalization of supply chains has increased the number of miles traveled by products (let’s call these product miles) by moving manufacturing farther away from the major markets. Some of these product miles are obviously unavoidable, but do manufacturers, distributors, and retailers know how many product miles result from supply chain inefficiencies? If some of product miles are unnecessary, how can they be identified and eliminated?
The first step in reducing product miles is gaining a better understanding of the miles traveled. Some manufacturers have already begun to measure product miles to get an overall sense of supply chain efficiency. For these manufacturers, the metric is simple: the higher the miles, the more likely their supply chain is inefficient. Oracle’s Supply Chain Management applications including Oracle Transportation Management and Value Chain Planning provide capabilities to help you quantify the miles traveled. Oracle Transportation Management can help companies reduce product miles by optimizing the utilization of the trucks, trailers, and containers used to ship the products. Oracle Transportation also reduces product miles by linking multiple shipments into efficient routes, thereby eliminating unnecessary empty miles for the drivers and trucks.
Part of the Value Chain Planning suite, Strategic Network Optimization enables manufacturers to compare different supply chain scenarios to determine where product miles are added. For an example, trying to lower the total landed cost (of the product), may be taking advantage of the difference in tariffs on currency exchange rates but increasing the product miles by adding an unnecessary stop at an interim distribution center. By using the scenario comparison capability in Strategic Network Optimization, you can compare the cost advantage of the alternate supply chain plans to determine whether the anticipated cost savings warrant the increase in carbon footprint.
Strategic Network Optimization models can consider green house gas emissions as part of the supply chain network design. Beyond miles traveled, this capability can also be used to penalize supply sources that may have lower labor rates but use power generated from inefficient plants that produce high levels of greenhouse gases or are in countries with lower emission standards. Various scenarios can be compared with different penalties placed on greenhouse gases and product miles.
Unexpected changes in demand can also increase product miles as inventory is moved from one distribution center to another to cover demand shifts. The advanced demand sensing capabilities of Demantra Demand Management can help companies detect local changes and improve forecast accuracy. The improved forecasts can be used with Strategic Network Optimization to better align sourcing to distribution center replenishments. This will reduce the need to transfer product from one distribution center to another.
Oracle’s Value Chain Planning and Transportation Management applications provide a number of capabilities that can have a real impact on the carbon footprint of your company’s products. More importantly, Oracle Supply Chain Management applications can help companies address the carbon footprint issue in a cost effective manner that turn a “green” initiative into an profitable one.