TOWARDS AN ENERGY-AWARE OPTIMIZATION OF SUPPLY CHAIN OPERATIONS

By Dr. Ioannis Mourtos
Lecturer @ Department of Management
Science & Technology, AUEB

The ARTISAN project (http://www.artisan-project.eu/) envisions a significant reduction in energy consumption and CO2 emissions of the European Textile Industry by integrating data-capturing technologies, process-based energy measurement and real-time optimization of operations. Its architecture provides enterprise management systems with services for monitoring and real-time operational decision making, available at each supply chain partner, and, additionally, trading services for energy and carbon permits forging collaboration across a supply chain network. Hence, each company is encouraged to become an ARTISAN in energy management, but mostly an ARTISAN in employing energy and environmental indicators in both its day-to-day operations and business partnerships. In the sequel, we provide some motivation behind the development of the ARTISAN idea.

Energy efficiency is considered to be a crucial factor for the minimization of both monetary and environmental cost, especially within developed economies that are simultaneously large energy consumers and environmentally aware social systems. The significance of the energy efficiency for the social welfare may be established both in terms of the “traditional” economic development as well as in terms of “sustainable” development1. Intuitively, energy efficiency considers the impact that the energy consumption of a supply chain process has on the energy requirement of the entire supply chain. Based on that perspective, the ARTISAN project aims to provide the tools and services that will help organizations to capture, communicate and incorporate in their decision-making the energy characteristics of their operations, by utilizing modern ICT modules in their enterprise management systems.

Current information systems supporting supply chain operations, such as production planning and scheduling or warehouse and inventory management or transport and routing, disregard any energy-related key-performance-indicators. Also, managing supply chain operations under an energy-driven perspective has a feedback effect towards more strategic decision-making, e.g., the design2 of products and services in a collaborative manner and the evaluation of their energy profile before deployment. Most importantly, energy-efficient processes tend to have smoother energy consumption patterns thus allowing for better energy forecasts and for more effective medium-term (or even long-term) trading and allocation of both energy and carbon permits.

An indicative, yet both sizeable and representative, case is defined by the supply chains in the Textile and Clothing industry, which recently suffers a severe competition from developing economies (relevant statistics and insights can be found at http://www.textile-platform.eu). Hence, the ARTISAN architecture adopts a special focus on this industry, as a representative business sector suffering from the absence of energy efficiency metrics in the decision procedures and a diversity of implementations in the associated enterprise management systems. Beyond that, a recent study3 reports that more than half of the companies interviewed worldwide have incorporated sustainability initiatives in supply chain strategies and set carbon management goals as part of their manufacturing targets. Further motivation for this project arises from the so-called Life-Cycle Assessment (LCA) tools that measure the environmental impact of products and processes in a nowadays standardised fashion; off-springs of LCA include Life-Cycle Inventory (LCI) and Life-Cycle Impact assessment (LCIA), i.e., repositories holding related environmental and energy data. Notice that the above remain of limited importance unless properly integrated within existing enterprise management systems and also allow for an energy-oriented optimization of individual operations.

Along these lines, the notion of Green Supply Chains has received substantial attention; a recent study has identified six Green Supply Chain management dimensions, namely green manufacturing and packaging, environmental participation, green marketing, green suppliers, green stock, and green eco-design. Each of the above dimensions signifies an imperative requirement for appropriate components missing or remaining underdeveloped in standard enterprise systems. For those components to operate efficiently and responsively (i.e., in real time), energy has to be monitored in a transparent and verifiable manner, exactly as envisioned by the ARTISAN concept.

Apart from stand-alone, organisation-based energy optimization, there are two further aspects that require the communication of energy data to foster collaboration across the supply chain; these are energy trading and emissions trading. Such services are neither standardised nor properly linked to enterprise systems in a collaborative fashion that uses energy monitoring at each supply chain partner. Also, the fact that energy can nowadays be produced virtually by everyone (e.g., small-scale renewable sources like wind farms or photovoltaic cells) together with a more ‘open’ European energy market imply that more strategic discourses like “purchase vs. produce” arise, provided that process-based energy data account for decision-making. Therefore, apart from optimizing operations, ARTISAN services intervene with broader decision support for long-term strategic thinking.

1Tietenberg T. and Lewis L. (2009). Environmental Economics & Policy, Prentice Hall.

2Expert Systems with Applications 38 (February 2011), Special issue on Intelligent Collaboration and Design, Edited by A.S. Vivacqua, A. James, J.A. Pino, M.R.S. Borges and W. Shen.

3IBM (2010) The Smarter Supply Chain of the Future. Insights from the Global Chief Supply Chain Officer Study. http://www-935.ibm.com/services/us/gbs/bus/html/gbs-csco-study.html. Last Accessed November 2010.