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The Supply Chain Management Management Essay

Greening supply chains aims to balance marketing performance with environmental issues. Not to mention that, it is not just being environment friendly, it is also helps the business to get higher profits because of the concept “Green” known as environmental that people prefers in their daily life. Green supply chain management (GSCM) policies are preferable since it can apply the “3R” concept as reduce, reuse and recycle. Other than that, it is a better way as proactive strategic and competitive advantages. Of particular concern is how to arouse organizational environmental awareness and put environmental activities into practice in the logistics activities of their supply chains. To meet with challenges such as energy conservation and pollution abatement, enterprises have tried to green their supply chains, that is, to create networks of suppliers to purchase environmentally superior products or to build common approaches to waste reduction and operational efficiencies.

For this is the reason we decided to do a research and examine the drawbacks of Green Supply Chain Management(GSCM) from several journals and come up with a strategies to improve the weakness and strengthening the companies operation.

Literature Review

A lot of companies in Malaysia are still behind and yet to adopt the green supply chain concept in their business operation, said by Wooi, G. C. & Zailani, S., (2010). According to Eltayeb and Zailani (2009), Malaysian fully owned companies have lower level of adoption and participation in green supply chain practices compare to foreign based companies and MNC (Multinational Company). According to Lee, S., (2008) and Anbumozhi, V. & Kanada, Y., (2005)The barriers in the adoption of GSCM in Malaysia depend on the companies’ size and high cost of adopting green supply chain practice.

Under pressure from foreign customers and partners and increasingly strict domestic environmental regulations, Chinese manufacturers will probably further their adoption of the five major categories of GSCM practices. There is evidence in the literature of significant environmental and economic benefits (win-win’s) that can be accrued from the adoption of these practices. However, Chinese manufacturers are still lacking the knowledge, experience and tools to effectively and efficiently improve their environmental performance from the adoption of these principles. With a relatively long-history of international business experience, the electrical/electronic industry in China has the highest level of the adoption of GSCM and seems best positioned to most rapidly innovate to close the manufacturing supply chain loop there. This positioning is most evident in this industry’s internal environmental management and external cooperation with suppliers and customers practices. Given increasingly high regulatory pressures and governmental scrutiny, power supply chain companies and chemical/petroleum supply chain companies have also started adoption consideration of nascent GSCM practices, while their external GSCM implementation is still relatively weak.

According to Ryder Center for supply chain management (2008) identifies that the three main challenges facing while the businesses trying to green supply chain management are there is lack of appropriate technology to support companies to green their supply chain, trade-off between the green requirements and lean practices and the failure to integrate supply chain optimization efforts with green supply chain efforts. On the other hand, in some of the literature review notified that the barriers or challenges to establish green supply chain management practices for a company have the internal and external sources.

The main external sources while establish green supply chain management are the regulations, government compliances, customer requirements, competitors’ dynamics, poor supplier’s commitment and industry specific barriers while the main internal sources are includes cost, unawareness of supply chains, poor expertise in green supply chain approaches and lack of commitment or legitimacy.

Robert & Benjamin(2010) thinks that increasing environmental concerns with common transportation modes has lead to an increased interest in the adoption, utilization and acceptance of “Green” and the sustainable practices in the area of supply chain management. Some organizations have been able to convert their public’s interest in green issues into increased profits of the organizations. A number of projects within some organizations have shown that there is a clear link in between improving environmental performance and organizations’ financial gains. For example, manufacturing companies in India are fairly well advanced in the types of green transportation focused initiatives they have adopted. It is also similar to their production and warehousing initiatives, there is a crossover between the implementation of green and the level of efficiency.

According to Hall J.(2000) environmental supply chain dynamics emerge when environmental and supply chain pressures are synthesized. The consideration of environmental liabilities and fines is very important for the selection of suppliers as was demonstrated by Min and Galle (2001), but‘green consumers’also play an important role in pressuring those suppliers to take environmental concerns into account, said by Elkington J.(1994). They force high-profile suppliers to reorient their policies and to launch new products and services to seize the green consumption demand and to compete with innovative green firms.

Recently, Wal-Mart reached out to external stakeholders to try and develop areas of maximum environmental impact and identify key networks which would help achieve their goals. Wal-Mart need to manage their partnerships carefully in order to keep the cost down, they also need to be the balance between offering “green” and conventional “non-green” products in its stores. Because of the very high number of non-profits in the network, Wal-Mart must manage the loss of these partnerships. As Wal-Mart attempts to scale up networks and improve upon “green” initiatives, the company faces three possible obstacles:

1. Increased Costs

2. A Sub-Optimal Product Assortment

3. Criticism of Factory Labor Conditions.

However, if Wal-Mart proves that it is serious about reducing environmental impact and devoted to investing in green initiatives, critics will have to unclench their fists for a round of applause. At least for a moment.

As raw material costs increase and environmental protection legislation becomes increasingly stringent, a focus on one firm’s green operational excellence is becoming the norm in organizations. To attain even greater cost savings from waste reduction, meet comprehensive social and environmental responsibility targets and find new products with smaller ecological footprints, firms are now extending their goals for environmental performance into their suppliers’ operations. This type of activity is an effective mechanism for firms to improve their record on corporate social responsibility, lower reputational risks, reduce wastes, and improve supply chain response-time to new environmental regulations. As possible GSCM strategies become more complex and involve greater levels of relationship investment, their potential for competitive advantage also increases.

Issue Identification

So as you can see based on literature review, we are focusing on the issue pertaining to green supply chain management that is the awareness, regulations and cost factor. The issue that comes to awareness during a supply chain process, it is not easy to evaluate their supplier’s environmental performance and ask suppliers to undertake specific environmental practices. “ Simpson et al. explored the moderating impact of relationship conditions existing between a customer and its supplier and effectiveness of the customer’s environmental performance requirement but practically no research exists on the actual effectiveness of green supply chain management”. Moreover, product standards is not likely to change supplier’s behaviour since the supplier only has to change ingredients. Collaborating with suppliers on environment issue is almost certain to change the supplier behaviour .Since some supplier or distributors doesn’t even care about greening their supply chain that will improve their performances in the future, they only think that it is time consuming and costly. Cash and Wilkerson(2003) also do argue that “most firms implementing green supply chain practices do not actually integrated environmental considerations onto their supply chain process”. They furthest argue that the effect on the environment reveal when that the idea of greening supply chain has the opportunity to emerge. In addition, more than 70% of the companies in Malaysia are still behind and yet to adopt the green supply chain concept in their business operation. “According to Eltayeb and Zailani, Malaysian fully owned companies have lower level of adoption and participation in green supply chain practices compare to foreign base companies and MNC(Multinational Company)”. This is one of the reason why Malaysia is still remain inefficient on their product and services. Other than that, all over the world are aware that greening their operations resulting in increasing value chain complexity, entailing physical, financial and information flows. Western European manufactures have a strong focus on cost reduction and outsourcing of operation. They are trying to move the production to low labour cost regions that result in minimum wages. Even though it helps reducing the company cost but it might result labour does not have the motivation to work hard because of low wages. When labour does not have motivation, business responding too slowly or ineffectually are likely to incur significant cost increase, while if business responding in a timely structured manner can expect to enjoy not only a competitive advantage, but also a potential reduction in cost.

Regulation also plays a crucial part in the green supply chain management. Government regulation can encourage or discourage the adoption of innovation, as Government sets the environmental regulations for industry (Scupola, 2003). Time consuming regulatory requirements, fees or levies may discourage smaller firms. Tax structures that distort incentives can discourage industry to implement GSCM. As the poor environmental performance of small suppliers may affect badly to the performance and image of buying companies (Christmann & Taylor, 2001; Cousins et al., 2004; Faruk et al., 2002; Darnall et al., 2006; Hall, 2001). Therefore, Government institutions are considered as barriers to development in the environmental management in the sense that institutional process for implementing GSCM are going on but very limited institutional support is given for new ideas to implement GSCM. The tendency of government to encourage old practices is major barrier (AlKhidir & Zailani, 2009). Therefore lack of government support systems is a barrier to implement efficient GSCM in all industry. In addition, business operations are subject to increasing pressures and scrutiny from various stakeholders inside and outside organization such as government agencies, workers, neighbours, and not-for-profit groups (Sarkis, 2006). As the government represented by department of environment and promotes national environmental policies which contain green consumerism, the pressure group like green consumer association and media have indirect effect through government authorities to force the companies to make chances and adapt the GSCM.

The other regulation issue is that some company inputs are fixed no matter what it is, for example, Louis Vuitton products such as handbags. It was made from leather, and the leather is made out of animal hide that has been tanned and cut. Since it was using animal hide to determine the quality and durability of their products, mostly for female, you couldn’t possibly ask them to use recycle plastic as their handbags? Other than that, in every nation are using papers in every working or education area. Without it, it’s hard for us to perform a task. And paper maded from logs, to manufacturers, what they can use besides logs to create a load of paper for us to write? Outsourcing also may involve parts of the manufacturing process being transferred to plants on the other side of the world, only for the products to be transported back. Also for the next part of the supply chain process which requires additional transportation and thus increasing emissions (Simchi-levi, 2008). Holt, D. & Ghobadian also says that “Manufacturers identify the greatest pressure to increase environmental performance is legislation and internal drivers (IDs).

Generally the Information technology can make the supply chain greener by optimizing the resources required to support the business and also enable more effective supply chain planning, execution and collaboration, thereby reducing resource requirements. Due to the lack of money supply, the appropriate technology and business also not followed the trend. To attract more investment, industrial zones in China provide subsidies for enterprises to cover solid waste disposal. Since treatment for waste recovery can be expensive, many Chinese enterprises consider investment recovery such as material recycling and recovery as costly (Zhu and Sarkis, 2004a). However, the size of the companies becomes one of the barriers in the adoption of GSCM in Malaysia and high cost of adopting green supply chain practice causing the low participation of GSCM in Malaysia companies. On the other hand, some of the company forced business to find new ways to reduce energy use in order to reduce cost due to the ever increasing costs of energy and inputs. Due to the increasing cost of energy and raw materials businesses are forced to find new ways to reduce their energy use in order to reduce cost and remain competitive in the in the market.Cost and complexity are perceived as the biggest barriers to implementing GSCM, which highlights the need for cost effective and easy to implement solutions. Electronics industry plays an important role to Thailand’s economic growth in top ranking. In 2008 the export value of electronics products was US$29.2 billion which 60% was computers and their parts. In recent years electronics manufacturers face some barriers such as instability in manufacturing costs, skill labour need, technology change, exchange rate, and impacts of high competitiveness, environmental legislation and directives as well.Sometimes a business goal may be to use eco-friendly packaging that cost more than the traditional packaging which goes against the business goal of reducing cost, if a company wants to reduce its energy costs it should start by evaluating its energy consumption to establish whether a reduction can be made by using energy efficient and environmentally friendly equipment. (Mazumder, 2010). In addition, Wal-Mart’s 14 Sustainable Value Networks, the Network’s structure, new “green” logistics technologies, and additional future initiatives will be considered along with counter arguments which suggest that Wal-Mart’s green initiative is simply unsustainable. The main sticking point seems to be the same one that has long held back the adoption of better light bulbs, home solar panels, or hybrid cars. Upfront costs are unavoidable; and the promise of potential savings down the road does not resonate with consumers, or smaller Wal-Mart suppliers, the same way it does with big corporation.

Issue/ and Area of Study and Operations Management Strategies

So the issue has been clarified on the above, and we will discuss how to solve the problem by using the operation management concept. The very first issue in awareness is that impact of relationship between customer and supplier has no actual effectiveness when using green. It’s because some suppliers could not see the advantages on their long term supply and customers are unaware of the benefits of green and what could lead them a better living environment. Also they can argue that greening supply chain doesn’t help them in the future. Companies should use the supply chain management strategies as to view the ideal relationships between supplier and customer firm as cooperative for mutual benefits. So what’s the reason to globalize? By greening, it actually helps to reduce cost on your production because it able to recycle the product over. Moreover, to understand the markets what the customer seeking for better goods and services and also by looking at that companies could learn to improve operations of the product. Other than that, companies in Malaysia still have not adopt the green supply chain management concept in their business compare to foreign base companies as because they aware that greening their operation resulting in increasing of their cost. On the other hand, The Western country trying to move the production into low labour cost such as South East Asia regions, but in resulting poor motivation to work. To solve both of the problems, companies could attract and retain global talent to improve the supply chain. It’s a better employment opportunities and better growth to a company, search talented labour to able to do multitask compare to labour who only can do a single task.

Next, the second issue was the regulations. Government regulation plays an important role on a nation, it can determine whether to encourage or discourage the adoption of green. Tax is one of the factors in government regulation, if the tax is high in green supply chain management, there’s high possible none of the suppliers will apply green. Also there is a limitation the manufacturers are allow to manufacture goods and the design of goods and services due to the ISO 9001. Therefore, government was a barrier in a supply chain management. To able to face this issue, companies few operation strategies to solve it. Since there’s a rules in government for having a limitation to produce per-day, companies can using scheduling strategies to reschedule their timing of producing output with a break-even analysis to see the fixed point of output through the capacity planning strategies. Not only to see the fixed point, capacity planning strategies able to define the capacity of output per-month and capability annually. Although even the tax is high, but we can do some forecasting and see the influence of product life cycle. If the demand is high by applying green to the company product eventually the sales also will boost. So is best to test it whether it is sustainable or not before made a conclusion. On the contrary, even though some companies are unwilling to change their products into green but if they can try to apply environmental factors to their supply chain such as packaging that able to recycle, using electric vehicles instead of combustion vehicles efficiently is also a good starting for the social world.

Lastly, to provide a more effective solution while applying GSCM, some operations management techniques are required. Location selection is one of an example to improve the GSCM in specific country. This is because some of the country rich in specific resources and therefore some companies decide to locate their office near to specific location based on their requirement. Country like China which declared as a country which rich in industrial zone and the specification within this strategic location attracted investment from other countries. Therefore, in order to optimize GSCM there must have a strategic location. However, the layout design for a company also an important factor to launch GSCM efficiently. A good layout design can contribute an efficient production when all the space, equipment and people are fully utilized, the flow of information and the morale of the workers will be increase and these will increase the interaction among customer. Thus, the company which is smaller in size required to plan their layout in order to maximize the production. Organizations that are specifically into the production of goods or products heavily depend on a well-managed inventory for a number of reasons. A well manage inventory management system enables an enterprise to cut costs. For example, when the festive season is round the corner and the enterprise foresees a surge in demand for goods, it can procure goods in bulk and store them for the season. The main benefits of this exercise are that the enterprise can keep up with the demand and when it buys in bulk, and it will be eligible for discounts too. Inventory management is therefore a challenge with most enterprises. In fact, much before an enterprise even begins its selling, the profit and loss can be partially determined by how well it is managing its entire inventory.

Conclusion

In a nutshell, this research emphasizing on the drawbacks of green supply chain management in the relation of cost, changing the business space or even a minor things may incur a few initial cost, for example, technology, extension line, efficient water, energy fittings and recycling pickups but these cost can be recovered quickly if the company is performing efficiently. As for long-investment such as solar panels may be costly but it was able to turn back into a profit in the long run by reducing the usage of public electricity. Other than the cost issue, awareness also comes into our mind. Running a sustainable business by using green supply chain management, it requires co-operation from all levels of supply chain including consumer to make sure we are all in the same boat and know their roles, it is needed to reduce the impact on the world. Furthermore, regulation is also one of the issues. It is difficult to adapt the changes of the green in performing the role of logistics and transport. There is no other way than using combustion engines vehicles as transportation to send between large intervals of destination. Some retailer or franchise in the international or even domestic wouldn’t change their packaging of their product as because it’s a brand identity to their customer regarding the quality of their product. Companies should takes into account into greening their supply chain even though there is many difficulty and challenges but it able to turn a huge changes on their company in the long run. The best practice for companies is to forecast the progress of their company in the using of green and see the differences in it. The net effect may be an overall increase in environmental sustainability, since mechanisms are in place to enhance network-wide environmental performance.

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