Following legal issues related to supply chain management.

Monday, February 2, 2009

Let it SNOW - New program aims to improve supply chain efficiencies and reduce pollution

IBM announced a new consulting program offering to help companies improve not only the efficiency of their supply chains, but also their carbon footprint. The program aims to help companies reduce carbon dioxide emissions, fuel usage and costs by providing a detailed analysis of their supply chain logistics and suggesting improvements. IBM says “the Supply Chain Network Optimization Workbench – or SNOW – uses advanced mathematics to provide a smarter, deeper understanding of overall supply chain logistics. This allows clients to optimize decisions for cost, service levels and lower CO2 emissions.”

So not only are competitive forces making supply chain management an imperative, but environmental forces are contributing as well. Making a supply chain more robust, leaner and more cost-efficient are clear objectives in any supply chain improvement plan, but IBM adds environmental impact to the list.

Under President Obama’s New Energy For America plan, a carbon credit cap-and-trade plan will be implemented to establish an annual (and declining) national aggregate cap on carbon emissions. This cap will be divided up among companies in individual allowances. The companies are then free to buy and sell allowances in order to continue operating in the most profitable manner available to them. Those that are able to reduce pollution at a low cost can sell their extra allowances to companies facing high costs. Now, in addition to adding value to a company’s overall competitive position, an efficient supply chain may credit “bottom line” value by allowing a company to sell carbon credits.

As companies continue to review and improve their supply chains in 2009 and beyond, the “carbon footprint” may become another important criterion in the mix. In addition, your customers may begin to require a shrinking “footprint” under supply agreements, and buyers may want to consider adding these competitive factors to their agreements as well.

-- Greg Chabon


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