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Optimizing a supply chain for sustainability is an efficient way for companies to reduce their environmental footprint while increasing long term profits. By 2025 almost two billion people are expected to become global consumers, a 75 percent increase over 2010. This will require increased transport within supply chains, ultimately causing more greenhouse gas production. Sustainable supply chains focus on improving efficiency throughout the entire process, with a strong focus on reducing waste/CO2 production and improving communication. These waste products directly contribute to global warming, which is a worldwide issue leading to a host of further problems. In the metal packaging world a few key components that are focused to improve sustainability are overall production efficiency, location raw materials are sourced from, transportation, and sales. Companies that focus on sustainably optimizing these aspects of their supply chain can expect to see a host of effects relating to their company cost, product cost, and environmental impact.

Companies that are trying to make their supply chain more sustainable can expect to make some very serious changes to their existing supply chain. To improve efficiency they will likely have to complete comprehensive studies to fully understand the current supply chain and how their products are produced from cradle to grave. Furthermore, they might need to find alternative sources for materials, transportation methods, production methods, and even sales methods. All of these different facets require an investment of time and money to complete. Along with this there are a host of other company specific factors that can change, like cost of raw material and cost of implementing new technologies. Even though the initial investment required to undergo this process can be quite large, studies have shown that in the long term it translates to lower company costs. An optimized supply chain should have reduced energy requirements and improved energy efficiency. Energy use is a large cost factor in many supply chains, so small savings over time can often translate to much bigger savings in the future. For example, in aluminum production energy during production accounts for 1/3 of the total production cost. The energy required to produce 1 ton of aluminum is between 12,000-15,000 kWh of energy, so in the United States where as of 2015 energy costs $0.029/kWh, each ton of aluminum has a minimum cost of $350 just for energy. In terms of sales, improved communication throughout the supply chain allows companies to make sure products are in stock and produce the correct quantities. This limits excess production and under production, effectively having the correct amount of product availability. Finally, transportation typically has the largest cost footprint within a supply chain. A focus on producing products locally saves time and fuel.

Final product cost often mirrors production cost. Supply chains are typically responsible for around 55% of the total product cost. When a supply chain is sustainably optimized it translates to long term cost savings. This provides a continual opportunity for companies to keep their product costs competitive over time. In the metal packaging industry this provides the opportunity for packaging to be sold at lower cost and compete with cheaper plastic packaging. 1 ton of aluminum costs around $1,800, where 1 ton of plastic only costs $1,200. This translates to cheaper plastic packaging than aluminum, but when metal packaging is reused at least one time, which plastic rarely is, it already becomes the more cost effective option over plastic. Companies that utilize metal packaging can see these cost savings by not having to continually purchase new packaging materials.

Beyond monetary value the environmental benefits of sustainable supply chain optimization are huge. When aluminum production is optimized only 1.87 tonnes of CO2-e are produced, whereas the global average of a non-optimized aluminum is close to 11.5 tonnes of CO2-e. This difference is massive and can make a huge difference in total greenhouse gas production from the aluminum industry, which produces 1% of global annual greenhouse gas emissions. In terms of transportation, reducing the product travel distance, optimizing transportation methods, and consolidating product shipments represent significant opportunities to reduce GHG production. Finally, by using reusable metal containers companies and people can reuse their packaging instead of purchasing new ones. This effectively reduces overall GHG emissions and can help metal packaging overtake single use plastic as the most popular form of container.

Sustainably optimized supply chains not only benefit companies monetarily, but also helps reduce environmental damage. This is an integral change in a world where the global economy is continuing to expand, while at the same time GHG emissions are projected to increase by 50% by 2050. Producers that use metal packaging sourced from sustainably optimized companies can effectively reduce their own carbon footprint. Contracting companies that have already optimized their own supply chain is one part of a purchasing companies’ own supply chain optimization.

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References

[1] "Environmental impact supply chains" (retrieved April 2019), by Blumeglobal

[2] "Low-carbon Aluminium Boosts Industry’s Green Credentials (2017)" , by Ken Stanford

[3] "Aluminium smelting greenhouse performance"  (retrieved April 2020), by aluminium.org.au

[4] Will Aluminium Cans Replace Plastic Bottles?  (retrieved April 2020), by Pieterjan Van Uytvanck and Uday Patel

[4] "Introductory Chapter: Introduction of Green Supply Chain Management (2018)" , by Syed Abdul Rehman Khan

[5] “First Annual Kent State International Symposium on Sustainable Value Chains (2010).” by Reed, Benjamin, and Alfred Guiffrida.

[6] “The Impact Of Supply Chain Cost On The Price Of The Final Product(2014)”,  by Lapinskaitė, Indrė, and Justina Kuckailytė.

[7] "Global aluminium smelters’ production costs on decline(2016)"by Goran Đukanović

[8] "Financial Cost of Plastics Marking (1999)" , by European Commission

[9] "Aluminium smelting greenhouse performance"  (retrieved April 2020), by aluminium.org.au

[10] Plastic bags and plastic bottles co2 emissions during their lifetime (retrieved April 2020), by Juerg

Topics: Sustainability, Supply Chain, Food, Cosmetic Packaging