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Green Supply Chains Need Strategy - Not Hype

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by Staff Writers
Manassas VA (SPX) Apr 30, 2008
INSIGHT has announced concern that hype over "green" supply chains, supply chains that are ecologically-friendly, miss the real opportunity for helping the environment and omit a rigorous approach. Currently, INSIGHT's optimization engine within their flagship software, SAILS 21 gives users the best answer to supply chain planning questions - this is not new.

What is new, for many, is a change in the questions within the strategic supply chain plan, such as minimal energy usage, alternative fuels and sources, and the length of the supply chain, which comes into question when considering outsourcing.

"Balancing minimal cost, green objectives, and customer delivery expectations can produce contrary results," observes Dr. Jeffrey (Jeff) Karrenbauer, president of INSIGHT, Inc. "There are many operational and 'green' advantages to manufacturing locally in the US rather than outsourcing to Asia."

Although the financial markets expect manufacturers to move operations abroad for low-cost labor, many advantages, such as a greener supply chain, are available domestically. Dr. Karrenbauer feels that some financial analysts view supply chain design as a "dark art" or encourage management teams to outsource overseas for low labor cost alone, when that may not be the best answer.

Outsourcing to Asia is intuitively not green. It creates a 12,000 mile supply chain, which adds other issues, such as risk of manufacturing interruption, poor product quality, and higher transport costs, such as from two sets of docking fees, and higher inventory levels to accommodate transit time.

Also, the recent, and continuing, increases in oil prices demonstrate the critical need for firms to regularly evaluate their supply chain strategies. In particular, strategic sourcing (including outsourcing) decisions must be carefully re-examined, especially with respect to international supply chains.

It is also important to recognize that energy price increases affect every level and activity of the supply chain: procurement, manufacturing, ports, distribution centers, transportation, inventory, and so on. Furthermore, these activities and levels are not necessarily affected equally; therefore, it is imperative to reassess strategy in the context of the entire chain, not myopically with respect to only one component such as transportation costs.

For many years INSIGHT clients have had the ability to optimize their supply chains using a variety of criteria: cost, time, energy consumption, etc., or a weighted combination of these measures. "Many of us at INSIGHT started looking at energy consumption issues in the context of network design during the 1970s," adds Dr. Karrenbauer.

"Therefore, the recent spate of breathless announcements notwithstanding, the concept of optimizing a supply chain design with respect to "green" criteria such as energy consumption is not really a new idea at all, at least not for us. Our ability to directly handle such issues enables our clients to directly and quantitatively respond to the energy cost and availability challenges facing every supply chain manager today."

INSIGHT continues to recommend that companies institute a recurring supply chain planning effort and improved staff skills within their organization. Meeting corporate goals for a green supply chain means planning from the top down and implementing from the bottom up. Typically, corporations have continuous improvement efforts, which should include supply chain and logistics.

For the greatest "green" result, supply chain management and staff must influence the organization's long-term approach to raw material sourcing, engineering design, and transport alternatives. Green alternatives are best implemented with far-sighted initiatives, rather that as a reaction to market factors.

INSIGHT has experience across all forms of low-cost and green transportation options from pipeline, ship, barge, rail, truck, and air. They consider all - and mixed - modes of transport. Mixed modes introduce complexity, but are just the type of problem addressed by INSIGHT customers, whether container or piggyback trailer.

In addition, INSIGHT customers routinely do analyses for on-time delivery, assessing safety stock, in-transit stock, lead time, and economic order quantity (EOQ). Ecological transportation still must meet customer expectations for on-time delivery.

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GE Energy Announces State Of The Art Technology Center In Saudi Arabia
Dammam, Saudi Arabia (SPX) Apr 30, 2008
GE Energy has announced the groundbreaking of its Power Technology Center, Middle East, a new state-of-the-art service facility in Dammam, developed in association with GE's joint venture partner Ali A. Tamimi Co. With an investment of SAR280 million ($75 million USD), the center will span 125,000 square feet and expand GE Energy's capabilities to serve its customers in the region.

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