By Jim Tompkins, CEO, Tompkins Associates
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Hi, my name is Jim Tompkins, President and CEO of Tompkins Associates and Tompkins International.
I am pleased to be with you today as we present our fifth and final installment of the sustainability podcast series on recycling and reuse relating to supply chain.
Our previous podcasts in this series have been on a general overview of sustainability, and we had special guest Ralph Cox review Packaging Sustainability and Chris Ferrell on Transportation Sustainability.
Today I am pleased to have with me Greg Hazlett, a Principal at Tompkins Associates.
Greg, glad to have you with us. Let’s get right to the topic.
Jim:
Greg, can you first help clarify the fundamental difference between recycle and reuse?
Greg:
Jim, that is a great question to kick off this discussion. Reuse and recycle are fundamentally very different. Reuse is the prolonging or extendingof a product’s useful life in order to receive the optimized return from the value of the product. This is accomplished through various mechanisms e.g. procuring used products, charitable donations of items or maintenance, repair and refurbishment of the product. Recycling on the other hand is reprocessing of an item into a different form, which could either be used as a raw material for another product or be sold in its raw form as a finished product.
Recycling essentially terminates the useful life of the product, as it exists today. For example, tires converted into small chips to be used as a replacement of wood chips for kids' play areas (as finished product) or as a raw material to create soft surface for gymnasiums or kids' play areas. So that would be an example of a recycling activity.
Jim:
Greg, what would be advantages of one over the other?
Greg:
Jim, from a sustainability perspective, reuse has many advantages over recycling, for instance:
Having listed these examples, a company may choose to select one option over the other or at times may choose a combination of these two together. A great example of reuse and recycle combination could be re-treading of tires. In this case, you are reusing the tire to prolong its useful life by using recycled material for re-treading it. However, from a supply chain perspective, one needs to evaluate every scenario on case-by-case basis in order to arrive at what is optimal.
As an example for many applications, recyclable packaging reduces environmental impact more effectively than reuse, notably when packaged goods are transported over long distance. The packaging in that case does not need to be sent back empty to the original packager for reuse so it requires less transport, reducing greenhouse CO2 emissions; no cleaning is required reducing use of water and detergent, etc. So in many cases, just using a recyclable packaging makes more sense that using a reusable container for packaging.
Jim:
Greg, what are industry players doing to incorporate sustainability initiatives, like reuse and recycling, into their value chain?
Greg:
Jim, I am glad that you asked this question. Some industry players are ahead of rest of the pack in incorporating these concepts by redesigning their material and process flows. A great example comes to my mind is Canon.
They have incorporated sustainability in their end-to-end value stream starting from research and product design to the final recycling of the product. From the design and development stage, Canon strives to make product 75% recyclable by mass (for reuse and recycling). Canon started remanufacturing (including the concept of reuse) with previously owned copiers. The remanufacturing process involves cleaning of the old products, replacement of worn out parts or hardware and update of software in almost all cases, to incorporate new technology.
Using this new technology, essentially the life of a copier is doubled, which is the core principle behind reuse. In order to accomplish this, Canon had to re-design their processes and supply chain, and now that entire supply chain includes the collection of old or off lease products, sorting, disassembling cleaning, upgrading, quality assurance and redistribution of remanufactured product. In the meantime, Canon has also developed some patented technology to recycle their toner cartridges, which allows them to separate iron, aluminum, and different types of plastic, and use some of those components for different types of output, such as manufacturing of roof tiles.
Another great example comes to my mind is ATNI, a company located in the mid-west with whom Tompkins has been collaborating for some time now. They are helping a leading power supply manufacturer with the recycling of their products. The process involves harvesting precious metal and different types of plastics, which can either be sold to commodity market or sold as new as a raw material for other products enabling them to capture optimum residual value from their products while disposing of the hazardous waste and the non-reusable components in an environmentally safe manner.
What's really interesting about this product is, the consumer receives a credit for the return of the end of life product that can be used to buy new products, and portions of the returned product can be either reused or recycled – at a value commensurate with the credit given the consumer. Everybody wins.
Therefore, Jim if companies reevaluate their supply chain they can find not only opportunities to give momentum to the sustainability movement, but could become catalysts and thought leaders in their industry, paving a way for other others to join in the movement forward.
Jim:
Greg, I know manufacturing and power industry players are able to measure the impact of their carbon emission to environment. Do you see other industries creating measurement systems to track their progress, for example what's going on in the retail industry?
Greg:
Jim, there are some industry leaders emerging in this field, one being Wal-Mart. They are setting up measurement systems, which have potential to become industry standards going forward. When Wal-Mart’s waste reduction goals were set in 2005, what they first realized was that their previous waste management system was insufficient to accurately measure and manage their waste systems. Dumpsters were being hauled from stores without measuring how much waste was actually in them.
During the past three years, they worked side-by-side with their waste management vendors to develop a much more sophisticated waste hauling system that allows them to measure and manage their waste stream. At the same time, they actually have began a robust recycling effort and increased the amount of waste being recycled and decreased to a large amount the amount going to the landfill.
Now, Wal-Mart is able to accurately measure waste to the landfill, as they reported from February 2008 until January 2009, so almost a full year period, they redirected more than 57 percent of the waste generated by the Wal-Mart stores and Sam's Club facilities, exceeding the national recycling rate. One of Wal-Mart’s primary goals is to create zero waste, including redirecting all of the waste created by the U.S. operations from landfills by 2025, and reducing packaging within their supply chain by 5 percent by 2013.
In 2005, Wal-Mart was focused on this. They announced a short-term goal to reduce waste in their U.S. operations by 25 percent by 2008. To move toward these goals, Wal-Mart right now is working with suppliers to reduce the amount of packaging and waste that enters their stores so that they don't have to throw it away or dispose of it after the product has been procured by a consumer. They are trying to stem the tide of waste that enters their stores.
Jim:
Greg, so what do you see as future trends and potential challenges.
Greg:
Jim, the movement towards increased sustainability initiatives, including reuse and recycling, I believe it will continue to grow and gain momentum for a few reasons.
First, regulations are in place in a number of regions of the world that will require companies to lower the amount of waste they produce year over year. Some global regions have been involved in this area for years; others have recently made significant strides in puting regulations in place, but the vast majority of industrialized nations are moving forward.
Secondly, companies are beginning to understand the economic benefits of their sustainability initiatives. Wal-mart is moving forward not just because it is the right thing to do for the economy, but because it directly provides benefits to them as well. Many other businesses are beginning to understand this as well. Besides it’s just the right thing to do.
Extending the useful life of a product, or creating a secondary product after the useful life of the first has come to an end should make good sense to everyone. Truly reducing the waste produced will not happen overnight, but we have started down the path, and I believe we will continue to gain momentum going forward.
Jim:
Greg, thanks for your insights.
Greg:
Thank you for having me.
Jim:
This concludes our sustainability podcast series. I hope you got a lot out of it, I certainly did, as we traveled through these five sessions.
I'm really excited about our next podcasts. We're welcoming back to our stage Kent Kedl, the chief operating officer of Technomic Asia and Tompkins of Asia, and also Kent is the featured speaker on the China Business Blog and Podcast. Kent is going to be spending time sharing with us the American Chamber of Commerce Shanghai survey of American businesses doing business in China and will give us insights into what's happening in the fastest growing economy in the world. Really looking forward to that, and look forward to speaking to you again real soon.
i, my name is Jim Tompkins, President and CEO of Tompkins Associates and Tompkins International.
I am pleased to be with you today as we present our third installment of the sustainability podcast series on transportation and supply chain issues.
Our previous podcasts in this series have been on a general overview of sustainability, and we had special guest Ralph Cox review Packaging Sustainability in our last installment.
Today I am pleased to have with me Chris Ferrell, a Principal at Tompkins Associates.
Chris recently completed a survey through the Supply Chain Consortium on supply chain sustainability, which focused on transportation and supply chain issues.
Chris, glad to have you with us and looking forward to having you go through some of the survey results with us.
Jim:
Chris, based on the survey, what Green Business tools are companies using most frequently?
Chris:
Jim, I'd say the two most common tools are ones that would not have even been considered “green” just a few years ago: ROI or cost-payback analysis and also life-cycle assessment.
These financial tools have been staples of the capital expenditure process forever, but what companies are realizing is that the traditional formulas are too conservative, because the analysis gets done in a vacuum.
The most common business tools of the sustainability movement are really the same old tools applied with a more holistic perspective.
Jim:
So green business tools are really just financial tools in a new light?
Chris:
Not all of them; just the most common.
About one-third of survey respondents identified the deployment of environmental mapping systems. The same goes for environmental certification and reporting programs. Those are newer tools, and it’s reasonable to believe that they’ll continue to gain in popularity over the coming months and years. But they are more specialized, take time to achieve acceptance, and require personnel with some pretty specific expertise in order to successfully implement.
They’re coming, but they will take some time.
Jim:
But everybody’s got a finance guy who can do an ROI, right?
Chris:
Exactly right, Jim!
Jim:
What are some of the additional factors, Chris, that need to be considered?
Chris:
Well, carbon footprint is the one that's most commonly referenced. Over 70% of the survey’s respondents have programs in place to reduce that carbon footprint. To a degree, the U.S. is really just playing catch-up with our counterparts in Europe, but Wal-mart really deserves a lot of the credit here. They didn’t invent any of this stuff, but they took it mainstream. I can’t imagine even two years ago that number being higher than 20% for a North American-centric survey. Now? Companies are putting their best and brightest on the task of reducing fuel consumption and lowering carbon emissions.
Jim:
What technologies and strategies are there to reduce fuel consumption and emissions?
Chris:
Quite a lot, actually, but they’re not necessarily new, and they may not be where you expect them to be. When we’re discussing environmental initiatives, transportation is arguably the single most developed component of the supply chain.
Long before Wal-mart put sustainability at the center of the conversation and before Esty wrote Green to Gold, business people intuitively understood that things like shipping fewer, fuller trucks and converting air freight to ocean freight and increasing the MPG of their fleet was a good thing. The fact that all of these initiatives reduce CO2 emissions is, of course, co-incidental to the primary goal of reducing costs, but there’s something close to a perfect correlation between the two objectives.
Jim:
So, again, the new tools are the old tools.
Chris:
The new tools are there too. There’s some really cool and innovative stuff being done with polymers and metals to remove excess weight from trailers, the technology advancements in Cruise Control and APUs...
Jim:
...Alternative Power Units?
Chris:
Yes, Alternative Power Units, has increased to a point where drivers don’t mind using them like they once did. Some of the other ways to reduce carbon emissions range from the creative – things like fuel efficiency incentives for drivers, labor standards that highlight excessive idling – to the cutting edge; innovations like improved aerodynamics, low-viscosity synthetic lubricants, advanced power-train technologies, and automatic tire inflation systems.
But those are by-and-large components of the trucking industry. As a retailer or manufacturer I am limited to partnering with carriers who embrace these initiatives – like those actively participating in the EPA’s SmartWay program – and implementing them into my private fleet... if I even have one. Only about one-fourth of the survey respondents said they were implementing those initiatives.
Compare that with 96% who are coordinating their shipping to ensure the loads are full whenever possible.
Jim:
Earlier you said that the technologies and strategies to reduce fuel consumption may not be where you expect them to be. What did you mean by that?
Chris:
It really comes down to one of the fundamental truths about transportation sustainability: Even though it’s the link that consumes all the fossil fuels, it really is the tale that gets wagged by the dog.
If I’m a soccer mom shocked by the size of my gas bill, pumping gas into my over-sized, luxury SUV that gets terrible gas mileage, I can make a commitment to use less fuel – make fewer trips to the market, plan my trips out so that I’m not doing a lot of driving back and forth, start-up a carpool with other soccer moms – but the reality is that the vast majority of the damage was done when I purchased the over-sized, luxury SUV with the terrible gas mileage.
With business supply chains, every step someone takes back up-stream exponentially increases the opportunity for environmental and financial savings. Improving a facility’s shipping and receiving scheduling will reduce more idling than a driver could ever hope to achieve.
A robust OMS and TMS running un-constrained with multi-modal options will decrease fuel consumption better than a well-run dock. Eliminating excess space and weight in packaging so a company can increase the capacity of each truck does more for the environment than the OMS and TMS.
Getting the forecast right so that suppliers are only shipping what is needed – and doing so via ocean instead of air, or intermodal instead of truck, etc... does the most good of all.
Jim:
So is that the bottom line?
Chris:
I believe so. There is tremendous progress being made in the field of transportation sustainability, but those opportunities pale in comparison to the benefits that stand to be gained through advancements in scheduling and packaging design.
Jim:
Chris, thanks for your insight.
Chris:
Thank you for having me.
Jim:
Our next installment will be on facility and building sustainability. Until then, wishing you a very happy holiday season and terrific New Year; look forward to speaking with you all real soon.
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