Strategy & Management

Sustainability through Supply Chain Optimization

Minimizing Your Carbon Footprint While Maximizing Value

06.06.2014 -

Good for Environment, Good for Business - Reducing energy consumption and emissions with optimal supply-chain management is a commercial necessity for many manufacturers today. Incorporating sustainability into standard strategies and policies will make the supply chain more efficient from a greenhouse gas perspective.

The carbon footprint of a process manufacturing enterprise spans the entire supply chain. Companies are now continuously analyzing their footprints to understand the influence of each segment of the supply chain. With the increased consumption of fossil fuels, more demand leads to higher prices for everyone. The threat of global warming and its effect on the environment has led to international regulations that must be factored into a company's business plan.

Regulations have led to an emissions trading market to control worldwide pollution. There are also increasing expectations from consumers, investors and other stakeholders for corporations to disclose the environmental credentials of their products or services.

"Cap and trade" is an environmental policy approach to controlling greenhouse gases with a mandatory cap on emissions while providing flexibility on sources and how they are compliant. The cap sets a limit on emissions designed to reduce the amount of pollutants released into the atmosphere. The trade creates a market for carbon allowances, helping companies to turn pollution cuts into revenue. The option to buy or sell allowances or carbon credits gives companies flexibility in meeting each year's cap.

Companies can address sustainability in fundamental ways through supply-chain optimization. With global demand for fossil fuels and prices on the increase, pursuing a sustainability initiative needs to be an integral part of a company's supply-chain strategy. For many process-industry companies, manufacturing represents the largest component of the carbon footprint because of the energy-intensive nature of the materials produced. History has shown that energy consumption as a result of global industrial material demand has consequential increases in total energy use and CO2 emissions.

Managing the Supply-Chain Network

There are effective ways that companies can incorporate sustainability into the standard supply-chain strategy. One such way is to better manage the supply-chain network. For materials that can be made in multiple locations, AspenOne Supply Chain Management software can help companies select the optimal source location from both an economic and sustainability perspective. Long-term visibility into what needs to be produced allows companies to optimally position inventory throughout the supply-chain management network to best fulfill customer orders.

With flexibility in the network, using alternative modes of transportation could effortlessly reduce emissions while maintaining profit margins. For example, simply switching from relying primarily on trucks for distribution to rail cars can adhere to both your company's sustainability and profitability goals. Aspen Plant Scheduler can effortlessly create a "what if scenario" of this example, and evaluate its economic effect on your supply chain before the company commits to it.

Aspen Supply Chain Planner is a key component of AspenOne Supply Chain Management. The software enables manufacturers to increase operational efficiency through improved planning and scheduling of the production process, providing the agility to respond to dynamic market demands and opportunities. The Supply Chain Planner develops the most optimal plan taking into account labor and equipment, raw materials or feedstock, inbound/outbound transportation, storage capacity and other variables. An easy-to-use interface with streamlined workflows helps to quickly navigate through supply-chain complexity and respond faster to unexpected market conditions to profitably meet production and management goals.

The software typically determines production levels by product or family, location and time period for an intermediate time horizon up to two years. The goal is to meet expected demand in the most profitable manner while considering:

  • raw material availability and price
  • cost of changing production levels from one period to the next
  • production costs
  • transportation costs

To obtain the best production and distribution plans, each business unit needs functionality to align as closely as possible with its unique practices and priorities. With this tool, business operations from the most simple to the most complex can be modeled for optimum results, in both make-to-stock and make-to-order environments. This end-to-end supply-chain optimization solution is fast, flexible and easy-to-use.

The role of supply-chain planning software in the sales and operations planning (S&OP) process is to focus on businesswide supply and inventory planning, specifically determining "where to make what." It involves allocating production across various plants while minimizing transportation and operating costs. By considering both the production and distribution, software provides a globally optimal solution while respecting capacity and other constraints.

Issues addressed include:

  • where to procure raw or intermediate materials
  • sourcing of production, both across and within plants
  • use of internal finite capacity versus purchases, tools, contract production, exchanges or infinite capacity
  • movements of intermediates between manufacturing sites

By enabling users to quickly hone in on the information that is most useful to them, the supply-chain planning software can help planners evaluate several alternatives and determine answers that will increase profits and improve customer service, all within the context of your specific business constraints.

Achieving Long-Term Sustainability

Significant greenhouse gas emissions reductions can be obtained from improved technologies and operations. From a planning perspective, supply-chain planning software allows companies to take advantage of any flexibility the company may have in terms of energy sources. The ability to allocate production using alternate sources of energy, such as a plant that uses hydroelectric power versus fossil fuels, can lead to a significant decrease in the carbon footprint while still optimizing the supply chain.

Those companies that have the opportunity for off-peak production will have energy rates that are substantially less than during peak hours. Factoring this into the current energy plan will make a huge difference. A key question companies should ask themselves is "How does my utility vary as a function of my production?" Supply-chain planning software can track and report utilities consumption even if it is not a constraint or basis for optimization. From a scheduling perspective, Aspen Plant Scheduler can minimize transitions and operations involving higher energy requirements, such as unit startups or shutdowns.

Key planning decisions will be influenced by greenhouse gas emissions limits. Supply-chain planning software can model these constraints and manage trade-offs. When a company can calculate what emissions will be for a certain process, then it is possible to track and report emissions against annual limits. This also provides forward visibility into potential violations. Allocating production so that companies can avoid exceeding emissions limits at a specific plant can optimize sourcing.

The economics of buying or selling allowances like carbon credits can also be incorporated into the company's plan. By optimizing the supply chain in relation to the primary sources of emissions, supply-chain planning software delivers key capabilities to help manufacturers minimize their carbon footprint while maximizing the value of the company's assets for long-term sustainability and profitability.

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