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Carbon and Energy Efficient Supply Chains

10/27/2009 4:00 PM 32"124
Edgar Blanco, Research Director at the MIT Center for Transportation & Logistics

Description: Consumers will soon be able to quantify the carbon footprint of products they consume, and that could begin to change consumer behavior. The common banana you buy, say organic or not, is probably labeled by the country or origin. Increasingly, you might see a second sticker adorning your beloved yellow fruit _ it will be a tally of the banana's total carbon emissions as it moved from farm to table. That single number is not a simple one. If the bananas you bought this week were transported from Indonesia by boat__they have a different carbon footprint than the bunch you consumed last month grown, say in Mexico, and moved by rail. Behind this labeling system are a complex supply chain, logistics, and transportation considerations. And behind the measurement of this network is the research of Edgar Blanco and his colleagues at MIT. He begins with a consumer perspective.

Beginning in 2006, in reaction to climate change, consumers, many large companies and the media wanted to assess the full environmental impact of finished products, be they bananas, potato chips, or cars. Blanco compares the measurement of the carbon trail for consumer goods to, "developing a really large map of what happens behind the product". He challenges, " If you have a number (of how much emissions a product creates), what should you do about it?... Partially, the exercise gives consumer information, but it is also vital so that you have information about emissions, so you can do something about redesigning the supply chain."

The measurement of the carbon trail is vastly complex, and goes well beyond knowing the CO2 emissions produced by the transport sector. In one exercise, the research team compared the carbon footprint of bottled water manufactured and shipped in the U.S. versus bottled water originating in Fiji but sold in the U.S. The product imported from Fiji turned out to have a lower carbon footprint. Despite the 4,800 miles of ocean transport, the thermal/solar/wind energy used by the Pacific Islands plant was cleaner than the U.S. plant manufacturing relying on energy from fossil fuels.

In 2001, the Environmental Protection Agency (EPA) began to explore a measuring system to help mitigate pollution from U.S. shippers and carriers. For trucks the task was daunting because there were more than three million vehicles and 800,000 separate carriers involved. However, it was also important because trucks move close to 70% of all U.S. freight and therefore remain a growing contributor of greenhouse gases.

Blanco's research on supply chains and CO2 emissions helped the EPA act a broker between shippers and carriers. In 2004 the EPA launched a program called "Smart Way" with 100 firms. Today it has grown to more than 1,200 partners. The EPA hopes that as more shippers and carriers join "Smart Way" there will be positive network effects. And, importantly, system models show that a ton of CO2 reduced by the Smart Way program is a less expensive option than other carbon trading schemes. Smart Way is also among consumer programs that have helped develop a carbon labeling system.

Blanco says the carbon and energy efficient supply chain analysis develops tools so that shippers have the ability to better select carriers. In a global world, in which many partners operate using many alternative routes and multiple location points, a single number is a singular achievement. These research methods are now being diffused internationally. Depending on the societal importance consumers place on C02 and the amount they will pay to reduce it, the models have the potential to change how and what banana reaches your breakfast table, as well as everything else.

About the Speaker(s): Research Director, MIT Center for Transportation & Logistics Executive Director, MIT SCALE Latin America Edgar Blanco is a Research Director at the MIT Center for Transportation & Logistics and is the Executive Director of the MIT SCALE Network in Latin America. His current research focus is the design of environmentally efficient supply chains. He also leads research initiatives on supply chain innovations in emerging markets, disruptive mobile technologies in value chains and optimization of humanitarian operations. Dr. Blanco has more than thirteen years of experience in designing and improving logistics and supply chain systems, including the application of operations research techniques, statistical methods, GIS technologies and software solutions to deliver significant savings in business operations. Prior to joining MIT, he was leading the Inventory Optimization practice at Retek (now Oracle Retail). He received his Ph.D. from the School of Industrial and Systems Engineering at the Georgia Institute of Technology. His educational background includes a B.S. and M.S. in Industrial Engineering from Universidad de los Andes (Bogotˆ, Colombia) and a M.S. in Operations Research from the Georgia Institute of Technology.

Host(s): School of Engineering, Transportation@MIT

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