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Sun Microsystems is hardly the first global manufacturer to cut the number of distribution centers in its supply chain. What's unusual about the company's move are the reasons behind it. Less cost, handling and time to market are still big factors, but Sun is also pursuing the strategy out of a desire to be more environmentally responsible.
Companies used to adopt green policies because they were forced to, or needed to spruce up their public image. Now they're finding that a reduction of pollutants and wasteful practices can have a positive impact on the bottom line. Internal processes become more efficient, and customers are happier, too. It's even good for the environment.
Changes are taking place at every stage from product design to recycling or disposal at end of life. In the design process, Sun maintains a list of dangerous substances that are not permitted in its products, says Leann Speta, supplier relationships program manager. At the far end of the chain, an intensive recycling program recovers materials that can be incorporated into the design of new products. The European Union's new Waste Electrical and Electronic Equipment (WEEE) directive requires that 65 percent of product waste be put back into the manufacturing stream. Sun is currently at better than 80 percent, says Speta.
The big maker of servers, workstations and software has also cut down on the amount of paper documentation that accompanies its products, relying on the internet to give customers needed information. That effort alone has slashed paper costs from $10m to $1m and saved two million pounds of paper each year. "That's about 6,000 trees saved," says Speta.
One of the company's biggest environmental efforts occurs within the physical supply chain. Sun has boosted the amount of finished product that ships directly to customers, bypassing a distribution center. Currently between 40 percent and 50 percent of all orders move in this manner. There are just two distribution facilities in the Sun network, one in Northern California and the other in the Netherlands, for items that can't be shipped direct. And they belong to Sun's third-party logistics providers-DHL in the U.S., and Frans Maas in Europe.
Some companies focus on instilling green policies within their warehouse operations. Sun has a different strategy. "Rather than trying to make our DCs energy efficient, we're trying to eliminate them," says Kurt Doelling, vice president of supplier management and operations strategy.
Sun's heavy reliance on outsourced logistics carries additional environmental benefits. By itself, the company is far from a small shipper, especially in terms of product value. But Sun prefers to hand over much of its freight to third-parties so that it can be combined with the shipments of other customers. The results are twofold: lower per-unit shipping costs, and better utilization of existing capacity.
Sun is also working to increase the efficiency of its products. Multi-server data centers are energy hogs; a typical facility consumes as much as 2,000 homes do, says Doelling. Compared with rival machines, Sun's latest line of servers offers four times the computing performance per unit of energy consumed, he claims. Customers might pay extra up for some components, "but it more than pays off down the line."
Timberland Takes Steps
The Timberland Co., maker of outdoor footwear and apparel, also takes a multi-step approach to forging a green supply chain. The company's "sustainability agenda" covers the use of energy, materials, chemicals and systems, says Gary Smith, senior vice president of global supply chain.
For many manufacturers of consumer goods, outsourcing is the order of the day. But Timberland continues to make its own products, a decision that simplifies the monitoring of facilities for environmental compliance. In addition, it has allowed the company to equip its factories with energy-saving equipment. Last year, Timberland installed a wind tower at a site in the Dominican Republic. Solar panels heat the water used for steaming materials that go into hand-sewn shoes.
More than 10 million pairs of shoes made by Timberland now incorporate water-based adhesives, versus nearly zero just four years ago, Smith says. That represents only about a third of the company's product line; its popular Classic Boots still require the injection of molten polymer, a polyvinyl chloride (PVC). Smith says the company is on track to replace PVC, a widely used plastic that is thought to have adverse health and environmental side-effects, with greener materials by 2008.
In the meantime, it has launched an initiative to recycle the chemical, which can be remelted and recast. About 10 percent of recycled PVC is pure enough to be used in the main part of the shoe, while the rest goes into fillers, heel plugs, outsoles and other areas. The goal, says Smith, is zero PVC waste. The company also relies heavily on recyclable packaging materials.
|"We make sure every supplier adheres to an environmental responsibility list. That's non-negotiable."|
- Bonnie Nixon Gardiner of Hewlett-Packard
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