Tutorial

How to model carbon costs in AIMMS Network Design

  • 15 October 2021
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How to model carbon costs in AIMMS Network Design
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Traditionally, network design focused on optimizing costs and service levels. More recently, designing for resilience and agility has become more prominent. Going forward, another dimension will require more attention: designing for sustainability and responsible business.  

At AIMMS, we are enabling this type of modeling. While we will release more functionality to support this in the future, custom costs in our app already allow companies to start modeling environmental impact. Here’s a quick tutorial for introducing carbon costs into your network model. 

  1. Create a custom cost called “Carbon Costs” in Data Navigator, and indicate at which points in the supply chain carbon emissions occur. 
  2. Use publicly available data on emission factors to calculate the carbon tons emitted by the activities in your supply chain. For instance, you can use data from:
  1. Use a publicly available source of carbon pricing to convert the carbon tons to carbon costs. This article by McKinsey can be helpful to understand how other companies are doing this.
  2. Convert the carbon costs into cost coefficients per unit of activity, and capture these in your model. 
  3. You can now run some scenarios to start exploring the impact of carbon costs:  
  • Optimize for physical costs only  
  • Optimize for carbon costs only  
  • Optimize for physical and carbon costs  
  • Compare the scenarios to see how much additional physical costs you will incur if you optimize carbon costs, and how much additional carbon costs you will incur if you optimize for physical costs. 

These types of scenarios provide some interesting insights and a concrete way to start modeling the impact of carbon in your supply chain network design. 

Download our full Guide for more implementation best practices.

Also in this series:

 

 

 


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