As per the definition by Samir K. Srivastava, Green Supply Chain Management is to integrate environmentally beneficial thinking in the regular supply chain management. This integration should be done right from the stage of designing the product, sourcing of material, selection of the cheapest yet environmentally friendly options, various manufacturing processes, delivering and distributing the product to the end customers till the end-of-life management of the product.
Supply Chain Digest acknowledged "Green Supply Chain" to be the most preferred and most likely to be undertaken as of 2007. Based on the above definition we can understand that: firstly, green supply chain works towards improving the environmental performance of its existing supply chain through the use of various environmental monitoring tools and collaboration through application of environmental technologies. Secondly, the supply chain is augmented to include reverse supply chain management that builds a closed-loop system for the products.
Initiative in green supply chain:
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The economic meltdown is compelling companies around the world to make cut-throat choices about maintaining, improving or initiating a green supply chain management. Times during the strong economy, companies were more willing to initiate and implement newer processes in supply chain management as it portrayed promising returns in the future. Since, there is a downfall in the economy; companies rather hesitate to invest in projects that are expensive or those which will not give immediate resulting returns.
As such any "Green" initiative taken in supply chain management are usually tested with time. In other words, most of the companies resort to the "wait-and-watch" principle. According to experts in the industry, most of the firm use the excuse of economic meltdown as a reason to curtail various expenditures on green supply chain initiatives. In spite of the downturn in the economy, benefits pertaining to immediate nature as well as long term are achievable by undertaking planned green initiatives.
The following are the five elements Dr. Jon Kirchoff, mentions in order so that the companies can verify the standing on their green initiatives projects.
Evaluating the risks: in today's world the consumers are aware of the issues raising safety and health concerns by the products and processes. Consumers may act unfavourably towards such companies who do not play an active role in protecting environment. This may lead to rather expensive public relations and marketing campaigns. Undertaking green supply chain initiatives can help to diminish these risks. Management control at the stage of designing and manufacturing would help in reducing any risk of faulty product. A strict and stringent process for selecting of suppliers could help the companies to follow the environmental friendly processes as the suppliers are already in compliance with the issues.
Legislations and regulations must be considered: in the coming years the government will enforce new legislations and regulations to protect the environment and reduce carbon footprints irrespective of the global economic situation. Thus in order to comply with the new government regulations the companies will have to make several changes in most of its business functions. As a result companies which already have green initiative strategies in place will be better off than their competitors which shall benefit them in following ways:
Competitive advantage over competitors
Cost of compliance will be lower
Avoidance of fees and penalties for non-compliance with the law
Better relationship with government and legal agencies
Improve efficiency: costs and wastages can be lowered considerably if supply chain is managed efficiently. Companies can aim at improving their bottom line by undertaking initiatives that would help in reducing wastages and costs. Thus, by considering all the stages of product development and manufacturing till the sale and after-sale, if efficiency is achieved, it will benefit the environment as well as the company.
Assessing capital investment: heavy capital resource or significant human resource is not required to be invested for the initiative in the green supply chain management projects. Example of various companies been there and performing on similar basis shall be given in the later part of the essay. Innovative ways can be developed in achieving smaller but worthy goals in green supply chain projects in order to reduce costs significantly as the budgets for the companies during economic slowdown is tried and kept as less as possible.
Always on Time
Marked to Standard
Maintain Strong Supplier Relations: having a strong relationship with the supplier will prove to be a cost efficient way of leveraging the expertise of supplier's technology and knowledge to develop better supply chain performances. Companies can gain advantage and better image if it can include its supplier's strength in order to comply with government's environmental laws and regulations.
To summarise, to help the bottom line of supply chain and implement the initiative in green supply chain projects does not have to be highly risky or capital intensive. Value to the company can be added even in times of economic meltdown or crisis.
Benefits from shifting to Green Supply Chain Management:
Greening the current supply chain management of companies will help to reduce the adverse impact on the environment as well as provide other potential benefits. Benefits are directed towards stake holders, consumers, employees, government, society, etc. Adopting the green supply chain management is a win-win situation. In the context of green supply chain, one may consider only about banning toxic chemical substances used in manufacturing or various ways to reduce harmful emissions or wastages into the environment.Â However, there is more to it than what just meets the eyes and these results of Green supply chain management spread out to all areas of business both tangibly and intangibly.
Environmental Benefits: There are many simple and straight forward, low-cost things that every organization can do, which in turn can help to protect and nourish the environment. Changing your current supply chain management to a Green supply chain need not necessarily be resource or capital intensive. It can depend on what a consumer wants and what he expects from the company which can make a huge difference on the companies which in turn will start to be environment conscious. Companies can take small initiatives like ensuring the materials bought from the suppliers are recycled or recyclable in nature, and ensure wherever suppliers can minimize their packaging material or use sustainable ones, such actions can have a great impact when it is undertaken by big businesses. Waste management and bio degradable materials can also be implemented as creates a huge difference to the environment when big organizations shift to such measures.
Business Benefits: There are indeed benefits to the business by undertaking of environmental improvement. This happens to be like a cycle as more and more businesses and costumers get aware of the environmental situation there are greater chances and potential in saving the environment. If you see there are two types of benefits to the business. First, there are some potential and few definite cost reductions. In order to optimize the resource utilization there are improvement made right till the bottom line which reduces costs. Secondly, as more consumers get aware they will be preferring products of the companies which contributes to protecting the environment, since this would be their criterion for deciding products, thus advantage in this field shall lead to increased levels of sales and in turn increased revenue. This will also improve the company's corporate image.
Case Examples of Some Success Stories:
Texas Instruments: as per their 2004 financial reports it has reduced its budget for transit packaging for its business of semiconductors by using 3Rs: Reuse, Recycle and Reduce at source which has saved $8 million every year i.e. approx 20% savings annually.
PepsiCo: has started using reusable plastic shipping containers instead of corrugated plastic, which were used for one liter as well as 20 ounce bottles. Undertaking this initiative they have managed to conserve 196 million pounds of corrugated material and saved $44 million in this change.
Commonwealth Edison: undertook the project according to life-cycle management approach of managing materials and equipment and was able to reap $50 million in concurrent years.
Dow Corning: adopted a simple initiative of using reconditioned steel drums which not only saved $2.3 million for the company but also reduces the carbon footprint as it conserved 7.8 million pounds of steel.
Xerox: it launched an initiative in the early 1990s which was to retract all the used and old coping machines. This would be used as the raw material source for the new machines to be manufactured. Since consumers had no more worries about the disposal of the machine they immediately like this initiative. As per the supply chain world conference and exposition April 5, 2005, Xerox was able to save hundreds of million dollars through this project annually.
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General Motors just by implementing a reusable container program with their suppliers, GM was able to reduce the disposal costs thereby saving by $12 million.
Wal-Mart: in 2009 it announced a unique initiative which required all the fleet of transportation trucks to have a maximum air pressure in their tires as ascertained. This is not only simple and low-cost initiative but also an effective process which along with extending the shelf life of the tires also reduces the operating cost by reducing fuel costs saving millions of dollars every year. It also helps the environment as it reduces fuel consumption resulting into fewer emissions thus conserving environment. It also aims in reducing its packaging requirement by using alternative reusable and bio degradable materials which will save $3.4 billion across its supply chain.
Anheuser-Busch: as per the department of Marketing and Logistics, the University of Tennessee; Anheuser-Busch has saved a whelming12 million pounds and also improved the company's bottom line just by encouraging its material supplier to help it redesign the cans.
Johnson & Johnson: it initiated an energy efficiency program for appropriate and optimum utilization of the electricity. This in turn resulting into an estimated $30 million as savings for over the 10 years from 1996 to 2006 as mentioned in their 2006 sustainability report.
Nestlé: similar to Texas Instruments; Nestlé also adopted the 3R approach of re-using, reducing and recycling by which it saved an astounding $510 million, all over the world between 1991 and 2006.
Amul Milk: One of the milk distributing company in India has come up with a project of a nation-wide returnable packaging which was reusable. This was liked by the customers as they received a token amount for a bulk returned packages. This helped the company save huge amount of money in their waste disposal department as well as packaging department.
Paragon: in order to do their bit for environment conservation, Paragon has installed a new Carbon Minimiser Option in its trucks under the supervision of Paragon Software System. The carbon minimiser helps user to reduce carbon and fuel content of their trucks in their planned schedules. Thus it not only cutting carbon footprint but also cuts operating costs. (Paragons carbon Minimiser article as on July 22, 2010)
CISCO: in partnership with an enterprise has been able to reduce its packaging requirement 20% and packaging waste by 77%. It still continues to eliminate all types of Ozone Depleting Substances (ODS) from its supply chain.
There is a strong association of business with environment. It's the responsibility of every business to sustain itself in an eco-friendly manner and be environmentally concerned along with making profits because the business can sustain only if the environment does. Thus, by initiating Green Supply Chain Management practices, processes and projects it can save the environment as well as continue doing business.