Cost increases in the transportation of raw material and products is clear and well publicized. But another, less obvious supply-chain expense may actually be costing you more – waste.

The cost of waste is determined not only by the cost of raw materials inputs (which are on their way up) but also by production processes, which have risen substantially along with the cost of oil. Yet most companies don’t know the waste rate of their supply chains. Would it surprise you if the true cost of waste in your supply chain was 35% of what you pay? That’s not an unusually high figure.

What are the options for reducing the cost of waste in a supply chain? It is an over-simplification to say, “implement leaner systems.” Even if you aren’t yet on the road to “lean” in your supply chain, there are still things you can do.

First, evaluate the cost of energy and the cost of waste in your supply chain. In a mature and effective supply chain, this type of cost data should flow both ways between the customer and the supplier. If the system doesn’t exist to do it – go out to key suppliers and conduct a survey of waste and energy cost. They are feeling the same cost pressures.

Second, the exchange of data allows you to implement cooperative projects between customer and supplier to reduce waste and energy use in the supply chain. Share the work and share the cost savings. Nothing builds supply chain partnerships better.

Supply chains have always benefited from this of work. Times of high cost provide the motivation to actually do it.

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Phil Berry is SLM's expert-in-residence on sustainable product sourcing and innovation, as well as the host of Sustainable Sourcing Update.