Written by Peyton at CleanTechies.
Energy efficiency. Renewable energy. Logistics parks and the supply chain. The first two are easy unless you have been buried alive for the past 18 months. However, logistics parks and the supply chain are possibly two terms many don’t think of on a regular basis and like gravity, you would never know they were there until they failed.
Logistics parks are ‘clusters’ of distribution centers located in strategic geographical zones to aid in supply chain management, which is the science of getting the right thing to the right place at the right time in the right quantity for the right price. Easy enough?
Throw pirates, a clogged Panama Canal, a miscount at shipping or miscalculated demand forecast into the picture and you are sitting on a mess. The next time your favorite style sweater isn’t on the shelf at the store or the bread isle looks like a Soviet supermarket, it’s the supply chain that has failed.
What do pirates have to do with energy you ask. Nothing. But where energy is important is in the cost of your sweater or loaf of bread once it gets to the shelf. This is where energy efficiency, renewable energy, logistics parks and the supply chain come together in a x = y, y = z so x = z kind of logic. Not really rocket science, more like 3rd grade reasoning but that’s where the shock of it all comes in.
Why and how has it taken until the 21st century for supposedly extremely intelligent operations directors and CEO’s to realize that lowering the expense of producing a product or service raises the bottom line as does selling the product for x cents more per unit, all at the same time retaining a competitive advantage over the guy next door? It is my understanding that that is typically one of the main goals in running a business – use less and bring in more. However I still speak with decision makers every day who just don’t get it, or maybe just can’t admit to the fact that some of these cost saving measures might have kept a few people from unemployment over the past year.
Energy efficiency. As a wool sweater moves from raw material in New Zealand to being sewn into a sweater Taiwan, dyed in Vietnam, buttons attached in Shenzhen and shipped to Long Beach where it is then trucked to Reno for distribution to regional DC’s and then to your favorite shopping mall, there is a lot of electricity used and carbon being emitted by burning lights, A/C, etc, in these separate nodes. So who pays for the energy being used?
Yours truly.
And what happens when cap and trade becomes a reality and coal burned plants have to buy rights to emit CO2? Yep, you get to pay for those caps as the costs trickle down to the end user (that goes for your direct energy use i.e. charging your iPhone and the cost of producing it). That is, unless energy efficient projects are implemented that decrease the use of energy in a distribution center or factory, making the cost to produce or hold your good or service as low as possible.
What about when your competitor implements smart technologies all the way up and down their supply chain, reducing the cost per unit to a point you cannot compete? Well, I hope they’re hiring – or the guy who takes your place likes the view as much as you do.
Energy efficiency implimentation is not all because of "if you don’t you will suffer." There are great things about energy efficiency that isn’t all about savings. Carbon credits, White Tags, tax incentives and rebates all put money in your pocket for the implementation of new technology while reaping all those savings. In later posts I will write about some of the companies who get it and are pushing the revolution of energy efficiency.
Call it fear of global warming, call it making more than the next guy, call it what you want but whatever your reasons, there is financial logic for lowering energy use in the supply chain and in business operations in general. Is your company putting money back in the budget by cutting energy…or you?
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It is quite easy to get fixated on distance, but mode of transport has a far bigger influence on the transport energy.
Consider a ton of wool gets shipped from New Zealand to Asia where it is made into sweaters, then shipped in bulk to distribution centres and then on to retail shops. Consider then that you decide to drive to the mall and buy a new sweater.
Your few-mile trip to the mall probably used more energy than the rest of the sweater's trip from New Zealand.
Why? Assuming the wool and sweater did their longest parts of the trip as bulk cargo on ships, the shipping cost is very, very low.
What screws things up is when there is a rush due to a supply chain hitch and the cargo starts getting carried by aircraft. That increases the shipping footprint by many, many, times. That's typically done because the shipping cost is still less than the cost of losing the sale. Therefore expensive shipping still makes sense.
One of the problems with carbon trading is how far you should go down the supply chain. Should it end at the factories? Should the eco-footprint of the workers also be considered?
One thing that is certain is that any meaningful level of carbon trading will be highly inflationary. If it is not high enough to be inflationary then it will be pointless (Is 5c on an ipod going to achieve anything useful?)
Written in April 2009