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New Product Helps Companies Gauge the Cost of Being Green Sign Up to receive Daily News Alerts in your E-mail Inbox
Posted on Friday, January 11, 2008 4:01:00 PM |
With the latest iteration of its supply network modeling product, announced this week, software provider LLamasoft aims to help manufacturers gauge their "green" quotient and make educated decisions on how to make improvements.
Supply Chain Guru 4.1 outfits companies with the ability to measure their total greenhouse gas emissions and assess how they can lower that footprint, all with carbon offset purchases factored in, the company said.
To set up the initial model of a supply chain through Supply Chain Guru, manufacturers enter detailed information on the products they sell, their operational locations, inventory, sourcing, transportation structures, and material handling and manufacturing policies. The software then creates a composite picture of the network.
With the 4.1 version of its flagship product, LLamasoft adds greenhouse gas emissions to those inputs and gives users the chance to assess various scenarios — for instance, the cost impact of reducing a plant's greenhouse gas emissions by 10%. Using the simulation engine at the heart of the software, a manufacturer can weigh becoming greener against its impact on cost, inventory, service levels, and other business metrics.
The need for a product that tracks carbon and other emissions is strongest among companies based in or doing business in Europe, but businesses around the globe are in the market for products that can help them understand the trade-offs involved in establishing their environmental bona fides, according to Adrian Gonzalez, director of the Logistics Executive Council at research firm ARC Advisory Group.
"There is great growing demand among companies to really understand their carbon footprint and understand the impact from a supply chain design standpoint," Gonzalez told Managing Automation. Companies are placing more importance on the ability to gauge the effect on their carbon footprint of placing a distribution center in one location over another or designing their transportation network a particular way, he said.
The kind of business intelligence delivered by the LLamasoft product, he said, can sway business leaders in ways they wouldn't have otherwise considered. "Companies may make different decisions around their [supply] network by understanding the impact from a carbon footprint standpoint, especially if they're in a situation where they may have to buy or may want to sell carbon credits."
Under cap-and-trade programs, companies receive credits for keeping their emissions below mandated levels. They can then sell those credits to companies that exceed the threshold, creating an economy in which compliant companies can monetize their environmental successes.
And the prevalence of emissions mandates is growing. In the case of carbon, one of the most heavily regulated greenhouse gases, the bulk of companies obligated to keep emissions below set levels are those in countries subject to the Kyoto Treaty. The United States has not signed the treaty, but a number of states have passed legislation to regulate carbon and other emissions, including nitrous oxide (NOx), and more may soon follow.
Among manufacturers, Gonzalez said, there is a recognition that the greatest opportunity to create a green company exists during the design phase &mdash including both product design and supply network design.
Although LLamasoft is riding the early trend toward green initiatives, it is not alone, according to Gonzalez, as Infor, ILOG, and CarbonView all have similar network modeling products.
The alternative is to use spreadsheets to manually calculate a company's carbon or NOx footprint, but that neglects a crucial differentiator, he said.
"The difference with the LLama solution and the other network design solutions is that really what you're looking for is these trade-offs, and you're looking to optimize," Gonzalez said. "At the end of the day, this whole area of green and sustainability is really a questions of trade-offs."
Founded in 1998 and based in Ann Arbor, MI, privately held LLamasoft maintains a client roster that includes ConocoPhillips, Dell, General Mills, Arcelor-Mittal, and Unilever Corp.
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