In supply chain management, the term “outbound” typically refers to all activities that take place after manufacturing is complete. While some organizations label this phase as distribution or logistics, it fundamentally involves the movement of finished goods to customers.
Traditionally, the two main priorities in managing the outbound supply chain are controlling costs and maintaining high service levels. The encouraging aspect of these priorities is that improvements in cost efficiency and service quality are relatively straightforward to measure and demonstrate. However, there is a third factor that deserves equal attention: sustainability.
Sustainability in the outbound supply chain is more complex to quantify and lacks universally accepted measurement standards. Yet, adopting a sustainability mindset not only enhances supply chain performance but also enables organizations to better track and report on their environmental impact. This sustainability focus can be understood through two key lenses:
- It offers a fresh perspective on identifying and eliminating waste, complementing established process improvement methods like Lean and Six Sigma.
- It motivates companies to measure sustainability outcomes, which often emerge as a natural consequence of uncovering other operational savings.
Sustainability Savings in Practice: A Warehouse Example
Imagine a warehouse that disposes of approximately 100 pounds of plastic shipping materials every day. Most of its products come from a small group of suppliers who deliver daily shipments. By partnering with these suppliers to implement a system of returnable containers, the warehouse incurs an upfront cost but eliminates the daily disposal of 100 pounds of plastic. This change not only reduces environmental impact but also cuts costs related to purchasing and disposing of plastic materials.
Focusing specifically on the warehousing segment of the outbound supply chain, we will illustrate how sustainability principles can be applied effectively:
Overview
Warehousing Defined
Warehousing refers to the physical facilities where finished goods are stored and managed before distribution. These spaces rely on various systems and processes to handle the movement and storage of inventory efficiently.
Identifying Sustainability Waste in Warehousing
- Examine the types and volumes of materials discarded regularly, along with their origins. Reducing waste benefits the environment and lowers operational costs.
- Evaluate whether warehouse locations are strategically placed to meet customer demand. Although relocating a warehouse involves significant upfront investment, positioning closer to customers reduces transportation distances, yielding both sustainability and cost advantages over time.
- Assess the frequency and volume of stock transfers between warehouses. A more holistic approach to inventory management across the warehouse network can minimize unnecessary replenishment movements.
- Analyze energy consumption patterns within the warehouse. Identifying major energy users presents opportunities for sustainability improvements that also reduce expenses.
The Data Challenge
Measuring and Quantifying Sustainability Efforts
- Easier to track metrics: Utility bills provide data on electricity and water usage, while waste volumes can be estimated by physical measurement.
- More complex metrics: Determining the exact source of energy (e.g., coal versus renewable) and precisely measuring waste by weight, including transportation distance and disposal method (landfill, incineration, recycling), requires deeper data collection and collaboration.
Addressing Data Gaps
For the more straightforward metrics, it’s important to establish automated systems that can consistently collect, aggregate, and analyze data on resource consumption and waste generation. Automation both saves time and reduces the risk of human error, ensuring more reliable insights.
When it comes to the more complex data—such as the precise sources of energy or detailed waste disposal characteristics—collaboration is key. Facilities managers should work closely with suppliers, utility providers, and waste management companies to obtain accurate or estimated information. Utility companies often have data on energy sources, while waste disposal firms can provide measurements and suggest alternative disposal methods that may be more sustainable.
Using Data to Build a Strong Business Case
Having precise and trustworthy data on resource use and waste production allows facilities managers to reveal the true costs of warehouse operations. This transparency builds confidence that any identified savings are real and measurable, making it easier to justify sustainability initiatives to stakeholders. When savings are backed by solid data rather than estimates, they become more compelling and easier to communicate across the organization.
Conclusion: The Strategic Value of Sustainability in Warehousing
Focusing on sustainability within warehousing is a practical and effective way to reduce costs, improve operational efficiency, and demonstrate meaningful progress in today’s business environment. Some sustainability initiatives may start with a negative return on investment, but the savings realized through sustainable warehouse practices can help improve the financial outcome, moving towards breakeven or even profit.
By identifying and capturing these savings, companies unlock the financial resources needed to pursue more ambitious sustainability goals across their supply chains. Facilities management professionals are uniquely positioned to lead these efforts, driving measurable improvements that benefit both the bottom line and the environment.
Nate Chenenko is a principal at strategy consulting company Ducker Carlisle. He has 13 years of experience in supply chain strategy and benchmarking and works with companies to improve service levels, costs, and sustainability. He is a member of the Auto Care Association’s Market Intelligence Committee, where he and his team share data-driven industry insights.