Transportation and supply chain decisions play a key role in reducing carbon emissions
Reducing carbon emissions has become a growing concern for governments and companies worldwide. Firms are taking action to reduce their carbon footprint because of regulatory requirements and pressure from their own consumers and shareholders. Most of the carbon-cutting measures taken by companies, however, have focused on often-costly strategies such as replacing equipment, redesigning products and packaging, finding less-polluting sources of energy, or instituting energy-savings programs.
“While there is clearly value in these efforts, they tend to overlook a potentially significant source of emissions driven by business and operational practices,” says industrial and systems engineering professor Saif Benjaafar. “For example, determining how frequently supply deliveries are made could be as important in mitigating carbon emissions as the energy efficiency of the vehicles used to make these deliveries.
U of M researchers found that firms could reduce their carbon footprint—without significantly increasing their costs—by changing business practices and operational policies, such as:
- Reducing the frequency of supply deliveries
- Using closer suppliers
- Choosing a more-efficient mode of transportation
- Locating facilities strategically
- Collaborating with other members of their supply chain
In a paper published in the journal IEEE Transactions on Automation Science and Engineering, Benjaafar describes how relatively simple and widely used models can integrate carbon emission concerns into operational and supply chain decision making. By incorporating carbon emissions into existing supply chain models, Benjaafar and his co-authors offer a new way of thinking about the supply chain.
“Many popular business practices, such as just-in-time manufacturing and lean production, favor frequent deliveries with less-than-truckload shipments, small production runs, and multiple regional warehouses. These practices have a significant impact on the carbon footprint of a firm,” Benjaafar explains. “By extending supply chain models that typically focus on either minimizing cost or maximizing profit to include carbon footprint, the models can then be used to understand how accounting for carbon emission might affect operational decisions.”
Through the development and use of these updated models, researchers gained a series of important insights—most notably, that reducing carbon emissions need not be an expensive endeavor. “Conventional thinking is that reducing carbon emissions will require significant capital investments or a switch to more expensive sources of energy,” Benjaafar says. “We show that firms could effectively reduce their carbon emissions without significantly increasing their costs by making only operational adjustments and by collaborating with other members of their supply chain.”
Not only will the models outlined in this research prove useful to supply chain practitioners, they can also be used by policymakers looking to craft effective carbon emission regulations. “We found that different types of regulatory policies affect the value of collaboration within the supply chain to reduce carbon emissions, with some policies providing greater benefits from collaboration than others,” Benjaafar says.
The journal article, coauthored by Yanzhi Li (City University of Hong Kong) and Mark Daskin (University of Michigan), is based on CTS-sponsored seed research. Since its publication in 2013, the paper has had a significant impact: it has been listed as a Highly Cited Paper by ISI Thomson Reuters for receiving enough citations to place it in the top 1 percent of the academic field of engineering, and it is listed by IEEE Transactions on Automation Science and Engineering as one of the top most downloaded papers in 2013 and 2014.
- Carbon Footprint and the Management of Supply Chains: Insights from Simple Models (1.8 MB PDF), IEEE Transactions on Automation Science and Engineering, vol. 10, no. 1, January 2013