Going green costs too much….
Drew Merrill
…or does it? Throughout the course of a week, we repeatedly hear from companies, “we want to green our supply chain, but right now cutting costs is key”. The assumption seems to be that these two things must be mutually exclusive – but is that really the case?
Reusable packaging seems to solve both of these problems – in the long and short term. By utilizing reusable containers throughout the supply chain, the waste of expendables can be significantly reduced, and because the same container is used repeatedly, companies can save their precious capital to focus on their core business long term.
If the focus is more short term, renting reusable containers can reduce costs immediately and because it eliminates the need for disposal and cleaning, operational costs are significantly reduced.
Have other ideas for cutting costs while going green? I’d love to hear them!
Drew Merrill
CAPS (www.UseCAPS.com)
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Cost of going green
innovative
I think there is costs and benefits to both, just merely going green via using recycled content or bio-polymer materials alone will cost more. It will also cost more to initiate green and sustainable programs on the front end but if done carefully and with accuracy it can have cost savings.
Bottom line yes it costs more if you want to just use green materials. Yes it will cost more to implement, but yes it will save money and possibly increase revenues if implementation is done properly.
Why Not Do Both....or Better Yet all Three?
Adam Pawlick
If we look at what we are trying to accomplish, building sustainable packaging systems, I think it is important that we look at the packaging system from the Triple Bottom Line approach.
I've encouraged the companies I've worked with to start looking bigger picture. Being environmentally friendly, while important, does you no good if you can't afford to sell your products at a profit or if you significantly increase damage (which depending on where you are drawing your boundaries actually has huge negative environmental impacts).
When you are striving to improve your package from an environmental stand point you have to take a no trade offs approach. Basically if you want to change your pack to be more environmentally friendly (be it recycled materials, bio-polymers, reusables, etc) you should not negatively impact cost or performance. In an ideal world your solution would actually improve environmental impact, improve your financials (either through cost reduction or through allowing you to margin up or increased market share) and improve performance.
While we are all looking and focused on the environmental impacts we are having, lets not lose sight of the fact that the package has to meet consumer needs (performance) and we have to be able to sell enough of it at a profit to make money (financials).
Cost effective green packaging - it depends
Timothy Bohrer
Drew,
I agree that moving towards "greener" solutions doesn't have to cost more. One of the best examples is light-weighting packaging, which the industry has been doing for as long as any of us can remember. In addition to the cost savings which were always recognized, there is a clearer recognition that there may be environmental advantages as well, depending on materials involved, product damage and waste, converting intensity, etc. There is a also a long history of the use of recycled materials in packaging, with the folding carton, corrugated, glass, steel and aluminum industries' longstanding success incorporating recycled materials only possible because there were economic advantages in doing so.
While humans find it attractive to create simple rules and categorizations to keep track of all the complex interactions with which we have to deal, most of the time, the right answer is 'it depends'. Part of the richness of the packaging manufacturing industry and package users' experiences is the variety of answers possible for packaging needs, and a realization that one size does not fit all.
Returnables have a growing and valuable place in the constellation of transport packaging solutions, but like other approaches, it depends on the circumstances. Once a returnable has been shown to be conceptually useful for a specific product or component and a specific value chain segment, other factors must be taken into account. These can include the expected number of reuses vs. the cost of the returnable (minus any recovery value after final use), return distances and back haul availability and costs, efficient use of truck weight and volume capability and any cleaning requirements that a specific company may have for containers leaving and re-entering their processing areas. These and other application specific criteria are all part of the equation a user must evaluate in reaching a decision.
I see reusable plastic totes used extensively for restocking the shelves of a local chain drugstore, but know while this returnable is a good solution to get the specific, highly varied mix of products each store needs in this final step in the value chain, it is not efficient for long distance, high volume transport from the manufacturers of those products through several distribution steps to end up at the chain's distribution centers. Other returnable solutions might be developed to fit the bill for these earlier stages, but for a variety of criteria, returnables may not be the right answer.
As it has in the past, competition between approaches (to the extent that accurate and transparent information is supplied for comparisons to be made) will continue to improve the relative efficiency of all parts of the value chain, both economically and environmentally.
Cost of Green
innovative
The reality is that no matter what, it will cost more to be green out of the gate. The key is planning the turn to make it profitable. There is a trade off for everything, if you replace expendable with reuasble you lose revenue, that is a cost...Sustainability needs to be managed just like Sales, Operations, Marketing, and so on.
Costing More Out Of The Gate
Adam Pawlick
I disagree that it will cost more to "green" your package out of the gate. There are several great examples of not having to do that. A few of examples are:
1. Lightweighting your package. Companies do this all the time, reducing the thickness of a bottle, carton, corrugated case, etc. This typically has very little cost associated with it (assuming no new tooling is required) and delivers an immediate cost savings along with an improved environmental footprint.
2. Becoming more efficient on your pallet patterns. If you are able to resize your cases or simply revamp your pallet patterns to allow for more product to get on each pallet you can improve your environmental impact by reducing the number of trucks required to ship your product while immediately improving your costs.
3. Line efficiency improvements. The better your lines run the less energy/scrap/waste/GHG production, etc you produce per unit of production. This also typically has huge cost advantages. I've found quite frequently this can be done for little or no costs, a lot of time it is just matching material specifications with equipment capabilities.
There are countless other examples where you can reap immediate financial benefits while positively impacting your environmental footprint.
I'm not saying that all environmental impacts don't have costs associated with them, in fact many do (either per unit costs while size ramps up or capital costs). All I am saying is that it is actually relatively common to be able to positively impact your environmental, financial, and performance levels as the same time, it just takes some creativity and unique thinking.
RE: Costing More Out Of The Gate
DavidPadula
Depending on how you choose a material or new process, it could cost more, but I agree completely with Adam.
Reduce is the first "R" for a reason!
Source reduction can usually generate immediate cost savings and positive environmental impacts.
David
Cost-short term versus long term
steve kelsey
Interesting debate. I am in complete agreement that there are some short term solutions that can also deliver cost savings. However, the incremental sustainability benefit that this delivers may not support the longer term reduction goals. Mass reduction and efficiency improvements are good short term solutions but we will reach diminishing returns quite quickly (Germany experienced this problem in the 80's which is where my firm first learnt about the problem). We need to deliver better than incremental gains to meet future growth needs to ensure that environmental impact is decoupled from economic growth so there will be a need for significant investment in new materials and methods. In addition to this investment cost, existing plants will need to be written off.
To an extent this is just business as usual, however the rate of change required could increase the cost burden as it may not be feasible to wait for end of life before replacing existing plants.
This may seem like tomorrow's problem, but be we always advocate allocating some resources to looking further out as this can lead to smarter solutions and even bigger cost gains.
More than step changes
Adam Pawlick
I agree that more than step changes are necessary. I'm advocating getting those improvements where possible since they are the short term solutions. I do think revolutionary changes can be done cost effectively, I have in fact been involved in at least two projects that have introduced new materials into the packaging world that had significantly better environmental impacts than the materials they were replacing, but were cost effective. This is why it is extremely important that these revolutionary changes are not carried out by one section of the supply chain (resin manufacturers, convertors, brand owners, retailers, etc) but is done through partnerships across the entire supply chain to maximize the benefits while minimizing costs.
Remember, if you can't afford to sell it at a price people will buy it, you're not being sustainable. You are just putting yourself out of business.
Cost of going green
innovative
I disagree that you will save money from the start, there will always be an implemenatation cost. Yes, the benefits down the road could cover that cost but initially it cost's. Plus there is a difference in the cost based on the user vs. the manufacturer of packaging.
The user of packaging that implements "Green" will see ROI much faster than the manufacturer of packaging. Except in cases of using materials that come from renewable sources or material that have Post Consumer Recycle properties. They presently and will always cost more because they are still in the process of becoming a part of the packaging infrastructure. I get many inquiries of PC materials or renewable materials, but once the associated cost is shown it is back to what they know costs less.
The manufcaturer will have a much greater time to wait on ROI. Just the processes involved in manufacturing will cost more. The lost revenues on Remove, Reduce, and Reuse will cost in REPLACE. If "Green" is not done methodical and strategical it will not work. History shows this already.
Upfront Costs
Adam Pawlick
I agree there may be upfront costs. But everything has upfront costs. If those dictated what business opportunities were chased and followed no innovation would ever be done because upfront costs are a part of every innovation out there. A huge portion of cost savings projects have upfront costs either in write offs, capital purchases, etc.
What I am suggesting isn't that upfront costs don't exist, but we have to look at the total cost of a project and the total benefit of a project the same as we would any other area of the business. If I am going to have a three year payback on a $12MM investment to save money, I better have a savings of $4MM per year (yes this math is overly simplified but it is done so purposely). The upfront costs are heavy ($12MM) and the first year return doesn't cover it, but looking at the life of the project and the total cost versus the total benefit a company would invest in this. Too often companies get tied up in "green" packaging will cost more right now, so I can't do it. My push back is if you fully develop the business case and financials on that project and it makes financial sense over the life of a project (just like most companies do on innovation for new products, Year 1 may not make any money, it may lose money, but they have a three or five year plan that shows how it can become profitable and more than offset the initial loses) then you pursue it. Fiscal responsibility does not mean you have to drive costs down right now, it means you have to make wise investments that over the life of the product your company can make more money than it otherwise would have and meets all guidelines.
For a long term problem that will have long term solutions we too often take a short term view on costs when talking "green" packaging.
So, in short, I do agree that some green projects will cost more right now, but I do not agree that they all have to cost more right now. I also think that we need to look at these not just as environmental projects, but as methods to truly differentiate our products, drive sales, create new and exciting products, all why driving a return on investment that makes sense. I'm not saying what that ROI is, it will vary by company, but why not judge these the same way we judge anything else from a financial standpoint?
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