Reduction in inventory brings CO2 reduction 

Andreas Kemmner

Reducing the CO2 emissions of companies is now a major topic of discussion and an area of optimisation for both manufacturing and trade companies. What can better planning and scheduling mechanisms contribute to reduction in inventory and to reducing the carbon footprint as well?

The question whether better planning and scheduling mechanisms contribute to the reduction of a company’s carbon footprint is very difficult to answer. For scheduling decisions to have a clear positive impact on reducing CO2 consumption, many constraints must be precisely aligned with that scheduling decision or, conversely, the scheduling decision must take all significant constraints into account.

Smaller batches do not necessarily cause more CO2

Ordering in smaller batches, for example, does not need to have a negative influence on CO2 emissions, even though there are supposedly more deliveries, which cause more CO2 emissions. As long as the delivering truck is full anyway and does not have to make a diversion, order frequency and delivery rhythm do not play a significant role for the carbon footprint. With the many scheduling decisions that must be made every day in most companies, it is not possible to consider the entire process from order initiation to production, storage and delivery for every scheduling decision. Of course, transporting goods via environmentally friendly modes of transport contributes to CO2 reduction. However, the decision in favour of a more environmentally friendly mode of transport is typically not a decision made by the planning and scheduling systems. Reducing the number of variants also has a positive impact on CO2 emissions by reducing unnecessary inventories. However, the reduction of the number of variants is also not within the power of the planning and control systems. At best, they make the problems transparent.

The extent to which individual functionalities of APS, inventory management or planning systems contribute to reducing the carbon footprint cannot in fact be determined at all. However, it would be wrong to conclude that such systems have no positive impact.

Material efficiency helps the climate

The mechanism of action of APS-, inventory management or planning systems to reduce CO2 runs to a large extent through the improvement of material efficiency, a parameter that is coming back into focus more strongly, especially in the current situation of the global procurement markets. Simply put, everything that reduces the amount of material used in relation to an end product contributes to material efficiency. For the importance of logistical levers on material efficiency, please refer to one of the following blog posts.

Raw, semi-finished and finished materials that must be disposed of because they are technically obsolete or have passed their expiry date, materials that show wear and tear due to long storage or frequent relocation, materials that have been damaged or lost in storage, all this represents waste of material whose production and delivery caused CO2 and whose disposal may lead to further CO2 emissions.

 The result of the planning process determines the contribution to climate protection.

From numerous surveys on warehousing costs that we carry out as part of our consultancy projects, we know that ageing, wear and tear, loss and breakage are largely proportional to the level of inventory and account for approximately 5.5 to 9% of warehousing costs.

Every percent of inventory reduction brings 55 to 90 per mille of CO2 reduction

So, if it is possible to keep the readiness to deliver constant and still reduce inventories, it can be assumed that ageing, wear and tear, loss and breakage and the associated CO2 use will also decrease proportionally. Every percent reduction in inventory then results in a reduction in the carbon footprint of 55 to 90 per mille; regardless of how much CO2 the production of the stored products has caused. The prerequisite for this is that the readiness to deliver demanded by the market is not affected, since a reduction in the readiness to deliver compared to the level demanded by the market tend increase CO2 consumption, e.g., through extra transports or partial deliveries.

Regarding the reduction of CO2 consumption, those planning and scheduling mechanisms or APS-, inventory management or planning systems that know how to ensure the required readiness to deliver with the lowest possible inventory therefore achieve the most: competition is open!

Andreas Kemmner

Autor | Author

Prof. Dr Kemmner has carried out well over 150 national and international projects in over 25 years of consultancy work in supply chain management and reorganisation.

In 2012, he was appointed honorary professor for logistics and supply chain management by the WHZ.

The results of his projects have already received several awards.

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