It's never easy going green, but it's especially challenging for apparel makers that outsource production to countries thousands of miles away. Here's what one apparel company, Adidas, is doing to make its supply chain more eco-friendly.
John Johnson joined the DC Velocity team in March 2004. A veteran business journalist, John has over a dozen years of experience covering the supply chain field, including time as chief editor of Warehousing Management. In addition, he has covered the venture capital community and previously was a sports reporter covering professional and collegiate sports in the Boston area. John served as senior editor and chief editor of DC Velocity until April 2008.
You may not have given much thought to the carbon footprint of that T-shirt or Armani suit you're wearing, but apparel makers are paying a great deal of attention to their garments' environmental impact these days.
That might strike some as odd—after all, jackets, running tights, and jeans are hardly in the same league as a Hummer when it comes to environmental impact.What many people don't realize, however, is that apparel items often have a surprisingly large carbon footprint—particularly if they were manufactured in a country thousands of miles away.
There are a couple of reasons for that. For one thing, apparel is typically supply chain more eco-friendly. manufactured in low-cost countries where the factories are likely to run on coal-generated power and use antiquated—and highly polluting—equipment. For another, these garments typically travel long distances from the point of manufacture to the store shelf. The farther they travel, of course, the more fuel is burned and carbon dioxide emitted.
As Americans become more and more concerned about global warming, some garment makers have been taking aggressive steps to clean up their act—particularly their supply chain act. Take athletic footwear and apparel maker Adidas, for example. "It's pretty clear that global warming, emissions, and energy efficiency are in everybody's mind," says Marcus Kuerner, senior environmental manager at Adidas. To help battle global warming, Adidas has established a far-reaching cradle-to-grave environmental program for its products. Its multifaceted initiative includes strategies to reduce the environmental impact of its merchandise from design and sourcing to production and packaging to end-of-life disposal and recycling.
Cleaning up the factories
One of the primary fronts in Adidas' war on pollution is the network of plants that produce its footwear and apparel. "Our programs are ... focused on the environmental impact we can most influence, which is during manufacture at the supplier sites of our mostly Asian-based factories," says Kuerner.
That's an ambitious undertaking for an operation of Adidas' scale. Adidas outsources production to approximately 1,280 independent factories in 65 countries, with the majority located in China, India, Indonesia, Thailand, Turkey, and Vietnam. In some cases, it contracts directly with its suppliers. In others, it works with them through intermediaries. The amount of influence it has with any given partner varies according to the type of relationship it has and the volume of business Adidas does with that company.
In working with suppliers to reduce pollution at their plants, Adidas has opted for the soft sell approach—offering advice and support rather than handing down mandates. For example, to encourage its suppliers to upgrade their equipment to lower-emissions machinery, Adidas recently joined with a number of other international companies to promote a public-private sector partnership known as "P2E2."
P2E2 (the name stands for "pollution prevention and energy efficiency") is essentially a government- backed match-making program that seeks to bring together environmental services companies, banks and other investors, and Asian factories, according to an article in The Wall Street Journal. "Banks and equity investors provide the funding and loans to environment and energy service companies, as they are called, which then strike deals with the [Asian] factories, offering to upgrade their equipment free of charge," the newspaper reported. "The factories will pay back the environmental service companies over time by giving them a cut—to be agreed on between the two parties—of the savings the plants are achieving on energy costs." Though the focus has been on Chinese factories, factories in other Asian countries are also eligible as long as the business has a legal or financial presence in Hong Kong.
Attitude adjustment
Though the P2E2 program has both the U.S. and the Chinese governments' backing, persuading Asian factories to participate in the initiative will likely take some doing. Adidas is well aware of the challenges it faces. "It's a daunting task when you think about all of the factories, especially the 300 or so in China, that need to be educated about the program," says Lyn Ip, Adidas' areas manager for the environment for the Asia-Pacific region. "We can't force them to change because that's not part of the Adidas culture. You can change the equipment, but not the mindset."
Ip and other Adidas executives have set out to educate the management of supplier companies about the benefits of going green as well as the financial benefits—mostly from potential energy savings—they can reap by installing new equipment. Education must come before implementation, Ip says, especially since so many manufacturing sites have done things the same way for years and are reluctant to change.
"What we want to try to do is change the cultural thinking that the factory management has and help them visualize what the economic benefits are," says Ip. "There are environmental benefits as well, but at the end of the day, they are businessmen. They have to see the economic sense in it. If they don't, you will see resistance to making any changes in the factory.
"We've moved more away from a compliance effort to more of really partnering with our factories," she adds. "We'd like to see them succeed. It's a win-win situation for both parties."
Taking the sea route
Even as it works to raise environmental awareness at suppliers' factories, Adidas is also scrutinizing other links in its supply chain for opportunities to become greener. One of those areas is transportation.
To reduce the amount of carbon emitted in the distribution process, the company has made it a priority to cut down on the distances its goods must travel. For example, Adidas is making a conscious effort to locate raw material suppliers around the big factory locations in Asia to reduce transportation between these links in the supply chain.
It also tries to use factories in China that are located close to ports, cutting down on the trucking required to get products to the docks. In cases where it can't find a suitable factory within easy driving distance of a port, Adidas uses railroads for transportation.
The company is also looking at the way its products are transported to market. Specifically, Adidas makes it a point to ship by ocean whenever possible. Shipping via ocean container is more cost effective and more fuel efficient (and therefore, more environmentally friendly) than the alternative, shipping by air.
Although the company occasionally resorts to air freight (see sidebar), it has largely achieved its objective of shipping mainly by sea. In 2006, 97 percent of the shoes and sneakers made by Adidas were moved by ocean containers.
Kuerner says he's optimistic that ocean transportation will soon become even more eco-friendly than it is today. He points to recent experiments using giant computer-controlled sails on container ships to take advantage of wind power. Advocates of the wind sails say use of the devices could cut diesel usage by up to 20 percent.
As for the future, Kuerner says that Adidas is in the process of surveying its primary carriers to learn what environmental management systems, if any, they have in place. Adidas will review the idea of creating a scorecard for its carriers to measure their performance against a set of green metrics. To show that it's serious about going green, Adidas might even consider getting tough and shifting business to those carriers that follow the best environmental practices.
no fly-by-night decision
Although Adidas makes every effort to ship its products by the greenest mode possible—which usually means ocean carrier— sometimes market demands take priority over the environment. That was the case in 2004, when the Greek national soccer team stunned the world by capturing the UEFA (Union of European Football Associations) European championship.
Greece's upset victory caught the whole world off guard (at the time it entered the competition, Greece had never won a match in a major tournament). But for Adidas—an official licensee of Euro 2004—the upset also had business implications.
Almost out of nowhere, demand exploded for caps and other goods proclaiming Greece the champions, as well as for T-shirts emblazoned with the name of Angelos Charisteas, the lanky striker who helped to write history by scoring the winning goal for Greece.
"As they moved through the tournament, there was increasing demand, and when they won the final, there was an explosion of demand," says Marcus Kuerner, senior environmental manager at Adidas.
That kind of unanticipated demand places enormous pressure on production facilities, of course. But it also puts a strain on the supply chain. In this case, Adidas was forced to ship its goods by air freight. Air is less fuel-efficient and more costly than shipping by sea, but the company had no choice: Shipping the goods by ocean would have taken six to eight weeks.
"Because the victory was such a big surprise, nobody had these fan items like T-shirts and caps in stock," says Kuerner. "But the [stores] were saying they needed it today. If it got there in eight weeks, the hype would be gone and they wouldn't be able to sell those products."
Though the company remains committed to using container ships, Kuerner concedes that the same thing could happen again. Despite Adidas' preference for ocean, he says, "air shipments will continue to be used when market demand requires quick response times."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.