For The Kroger Co., the nation’s largest grocery-only chain, swapping out the bulbs at its distribution centers resulted in an immediate overhead savings of 30 percent.
The action represented only a small piece of Kroger’s sustainability program, which ranges across the full distribution network, as well as 2,500 stores in 31 states. Nevertheless, Kroger considers the return on investment from the new light bulbs to have been “huge,” according to logistics sustainability manager Ashley White.
At Kroger, every penny counts. Revenues for fiscal 2013 were $96.8bn, but the company operates on tight margins, making about 3 cents on every dollar. So even the smallest improvement in energy savings is welcome.
Speaking at the Global Summit of Supply Chain Insights in Scottsdale, Ariz., White said Kroger is undertaking energy audits at all of its D.C.s and manufacturing centers. The effort has generated a long list of ways to cut energy consumption throughout the network.
“We’ve started ticking away at it,” she said. “We’re well on our way. We’ve succeeded more than we originally thought.”
Recent initiatives include the adoption of variable-speed drives on refrigeration units, “our most successful project to date,” said White. In addition, Kroger is looking at installing insulated dock doors that automatically close when no truck is present. It’s monitoring the flow of all wastewater and chemical content. It’s acquiring forklifts fueled by hydrogen. And it’s engaging in the mass procurement of solar power, to the tune of 20 megawatts.
Perhaps Kroger’s most ambitious bid for sustainability is a clean-energy production system at a D.C. in Compton, Calif., powered by food waste. The complex takes materials from Kroger’s Ralph’s and Food 4 Less stores and places them into an anaerobic digester. The resulting gas supplies some 20 percent of the electrical needs at the Compton facility. It even powers the boiler at an on-site dairy creamery.
According to White, the system keeps 55,000 tons per year of food waste out of landfills – that’s 150 tons per day – and cuts out 500,000 miles of truck trips. The initiative “is opening new doors we hadn’t even considered,” she said.
Projects for the future include the expanded use of natural-gas trucks, 40 of which are now being placed into service in Oregon. Ultimately, said White, Kroger wants to become its own net producer of fuel, through recycling of the waste stream. “You become so renewable that you’re reducing over 100 percent of your carbon,” she said.
Manufacturers with more globalized supply chains, of course, face another even stiffer set of challenges in their efforts to achieve sustainability. Like every big high-tech manufacturer, Dell Inc. relies on multiple tiers of international suppliers to bring product to market. Since 2007, it has been working to fulfill the ambitious but vaguely defined goal of chairman and chief executive officer Michael S. Dell “to become the greenest I.T. company in the world,” said director of sustainability operations Bruno Sarda.
Around the time of Chairman Dell’s dictum, the company became the first I.T. manufacturer to join the Supply Chain Leadership Collaboration of the Carbon Disclosure Project. CDP is a non-profit group aiming to create a standard means of measuring and disclosing the environmental impact of global businesses. The SCLC represents a first step toward initiating climate-change reporting.
Dell asked suppliers representing 90 percent of its spend to join in the CDP survey, said Sarda, who also spoke at the Supply Chain Insights Summit. While participation was voluntary, the company received 100-percent participation from Tier 1 suppliers. (The response was identical for a subsequent survey asking about water usage.)
The mere act of participation by suppliers represented a kind of success, said Sarda. The survey motivated them to begin tracking their carbon emissions, and created a new level of environmental awareness throughout the supply chain. “When you start shining a spotlight,” he said, “you always gain.”
When it comes to seeking cooperation from one’s supplier base, it helps to be a $57bn manufacturing powerhouse. “Failure to meet these requirements can impact your supplier ranking and potentially diminish your ability to compete for Dell’s business,” the company told suppliers at the time.
But Sarda insisted that Dell’s effort wasn’t intended to be punitive in nature. Original equipment manufacturers can’t just threaten not to buy materials from major producers. “You really have to help them see the value, where they’re going to benefit,” he said. “You have to be collaborative.” Dell spent several years conducting educational and training workshops with key suppliers.
It also helps to set an example. Simultaneously, Dell launched an internal program to reduce emissions. It has targeted a 40-percent reduction by 2015, compared with 2007 levels. Already the company gets 26 percent of its electricity from renewable sources.
Dell has done a lot of work around the issue of packaging, exploring alternatives to cardboard and plastic. One highly effective substitute is bamboo, which the company grows near its production facilities in Asia. (“At least 1,000 miles away from the panda habitat,” Sarda noted, answering the question before it was asked.)
A compostable, biodegradable resource, bamboo possesses “remarkable strength qualities,” he said. Moreover, less of it is needed than traditional materials, allowing Dell to reduce its overall amount of packaging. The use of bamboo alone has yielded more than $20m of savings in packaging costs, Sarda said.
In the end, the success of any sustainability program comes down to the willingness of individuals, both within and outside the organization, to participate. “Most organizations have different people buying, using and paying for energy, and usually not talking to one another,” said Sarda.
White called Kroger’s workforce of 350,000 people “a powerful force” for achieving corporate sustainability goals. The company “finally understands that if you give employees the right tools,” she said, “they will willingly do so.”
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Keywords: supply chain, supply chain management, supply chain sustainability, green supply chains, supply chain planning, retail supply chain, Carbon Disclosure Project