Carbon charges will change supply chain practice

26 May 2008
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27 May 2008 | Paul Snell

Reducing the carbon footprint of supply chains will become an "inescapable obligation" for buyers in the future, according to a study.

A report by IBM's Institute for Business Value said buyers should soon expect to be charged for their CO2 emissions, forcing them to abandon common supply chain practices such as long-distance air freight and just-in-time production.

"The goal will be to optimise supply chain products, processes, information and cash-flow in the face of four main factors, or 'trade-offs': cost, service, quality and carbon emissions," the report said. "The supply chain will not fundamentally change. But with carbon as an added criterion, the economics behind traditional practices will change, and optimising the supply chain will become more complex."

One area expected to change will be shipping. Just-in-time policies and direct-to-customer delivery require small loads to be shipped more frequently. Although consolidation of deliveries would cause firms' storage and inventory costs to rise, they would be outweighed by increasing carbon emission duties.

But the first action for buyers to take, warned the study, is to get a complete understanding of the whole of the company's supply chain. Only then will they be able to identify improvements and set targets.



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