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The need for someone to make a similar speech to inspire people to change their way of living, has arose .The earth we live in is a beautiful place. Time and again research has proved that no place would suit and sustain prevailing life better than Earth does. It is our primary duty to safeguard her and keep her alive. Most of the activities in the world follow a chain or sequence, in order to reach completion. Ensuring that every supply chain is targeted towards benefiting the environment will surely be beneficial to the world.
A supply chain is a system of organizations, people, activities, information and resources involved in moving a product or service from supplier to customer. Using supply chain activities, raw material and components are converted into a finished product which is then transported to the end customer. Of the various practices in supply chain, Green Supply Chain Management (GSCM) has been emerging in the recent past.
A Green Sustainable supply chain can be defined as the process by which reusable inputs can be transformed into reusable outputs through agents whose by products can be recycled within the environment. Green Supply chain can also be regarded as the integration of environmental consciousness into supply chain management, starting from design of a product, material handling, manufacturing processes, logistics services and product handling after its expiry.
The concept of sustainability can be applied to various areas of supply chain and thus the concept of green supply chain grew. The focus is on setting the unbalanced impact of supply chain activities on the environment, on the right track.
The concept of "Green" can be viewed in various perspectives based on environment and man, the most popular of which are given: scientific green, government green and customer green. In scientific green, the effects caused by products on the environment are determined using a technique called life cycle assessment (LCA).In the concept of ' Government green' , the view is from the perspective of the effects caused by population density and geographical issues as these factors will affect the Government's strategy to increase environmental sustainability. In 'customer green', the concept of "green" is related to the attitude and expectations of people with respect to environmental issues. Green supply chain leverages the role of the environment in the area of supply chain management. Higher quality of life, environmental sustainability and long term environmental benefits can be obtained by applying supply chain initiatives to the environment.
NEED FOR GREEN SUPPLY CHAIN
Mass environmental changes have been occurring in the recent past. Extreme weather patterns due to heavy, unprecedented rain, rough hurricanes have been taking its toll on the environment. This scenario is due to the improper disposal of oil and fossil fuels which have given rise to carbon dioxide gases which on rising and forming a blanket, trap the heat. However, public awareness on environmental issues has been increasing in the recent times.Â People are becoming more conscious of environmental problems such as global warming, excessive usage of toxic substances and the like. This can be mainly attributed to the efforts taken by the Government and the media coverage given for these environmental issues. Several organizations are playing their role by applying green principles such as maximal usage of renewable materials for their processes. The increasing consciousness of this scenario among the public makes them question the companies about the recyclable nature of their products and their carbon footprint. Therefore, in some situations, the companies are forced to go about the implementation of green principles so as to not lose customers.
OBJECTIVES OF GREEN SUPPLY CHAIN
Focus on making the business eco-friendly
The entire business flow can be revolutionized by the implementation of green supply chain management in a company. It will project a view among its business partners to use eco -friendly means to handle all the transactions.
Acquiring competitive advantage through GCSM practices
Implementation of GCSM practices will attract customers and will help the company acquire an edge over its competitors and it will a major factor for the company to get high performance levels.
Integration of green supply chain with its processes
Application of green principles to the corporate policies and business strategies will help in making the operation across the various sectors uniform and hassle-free.
Making a difference
Green supply chain implementation in a company can also be viewed as an attempt to revolutionize the industry and stand out distinctly among its peers in this regard. It is also regarded as a way to be socially conscious by setting an example as to how to conserve the environment and sustain the existing resources. It will also help in demonstrating the extent to which business activities can impact the environment.
DESIGN OF GREEN SUSTAINABLE SUPPLY CHAIN
A green sustainable supply chain within the company can be designed the following way.
The entire operation of a green sustainable supply chain can be explained as a sequence starting with green procurement. The materials which are received as input should be environmental friendly. This is then followed by green manufacturing or materials management, which signifies the processing of the raw materials into finished goods, in an environmentally friendly way. Following this is green distribution and marketing, which means the environmental friendly handling of the finished product and its transportation. Reverse logistics also play a major role due to the importance of processes such as recycling, refurbishing, land filling, salvaging in the green supply chain management
DRIVERS TO ADOPT GREEN SUPPLY CHAIN MANAGEMENT
COST SAVINGS AND RETURN ON INVESTMENT
Application of green supply chain is a definite factor through which the company can realize appreciable cost savings and can also obtain their return on investment. Many companies implement reverse green logistics in terms of recycling, refurbishing, reusable packaging, reclaiming, appropriate methods of land filling. Reverse logistics account for about 4% of the total logistics costs. In the year 1999, reverse logistics amounted to about $37 billion in 1999. As per a survey conducted across the supply chain sector, it was observed that around 27.5% of respondents' purpose was the recapture value of the products. Around 26.5% of the respondents' purpose of implementing reverse logistics with respect to the environment was to recover assets.
In today's market, companies have to strive to hold their position in the competitive business environment. Being environmental friendly is a definite way to distinguish the company. This further becomes an important issue when its competitors are employing green principles in their supply chain strategy. Irrespective of whether the competitors have adopted this strategy, it is still advantageous to implement green supply chain management, mainly due to the customers. These days, customers are highly aware of the implications of non -environmental friendly products and reject products based on the product's environmental performance requirements. Hence, the companies have to strive to keep the customers satisfied in this regard.
In majority of the countries, companies are answerable to many government agencies which have established regulations, laws with respect to environmental friendly nature of the supply chains. These agencies monitor the extent of pollution in terms of emissions, amount and rate of release of toxic substances. However, regulations vary depending on the industry.IN the United States, the Environmental Protection Agency is the major government organization established to protect human health and environment. Their major responsibility is to enforce regulations that monitor the implementation of environmental laws enacted by the Congress. (U.S Environmental Protection Agency, 2007)
Of all the environmental guidelines that are implemented, ISO 1400 is the most prominent. It was brought into implementation in 1996 by the International Organization for Standardization. It is to ensure that the company is following all the environmental guidelines and it is also proven that this ISO1400 regulation has a positive impact on the company's performance due to its monitoring system.
In Europe, companies are required to follow a regulation called Restriction of Hazardous Substances (RoHS) which ensures that the amounts of substances such as lead are within limits. This regulation came into existence after July 1, 2006 .Thus, regulations of this kind were a great stimulating factor behind the adoption of GCSM in companies.
Apart from these critical factors, others such as ethical imperative, brand reputation and the employer morale are also the driving forces behind the implementation of green principles in their supply chain by companies.
GREEN SUPPLY CHAIN MANAGEMENT PRACTICES
The company ensures that the products being acquired in terms of raw materials and other types of services are all aligned with the green principles. Purchasing of materials has begun to have a definite impact on the environment. Procurement is generally monitored by a team with respect to conforming to different standards and regulations, as per the type of industry.
Controlling the use of environmentally prohibited substances.
The use of harmful substances in the flow of processes is controlled and continuous monitoring of their levels of usage is maintained according to some predefined limits.
Design and manufacturing according to green principles
The implementation of green principles should be done from the design stage itself. Design engineers are expected to conform to certain environmental regulations with respect to the raw materials which will be required for the process, the intermediate products and the finished products which are expected to result, during the design stage itself. They focus on designing the product so that it is environment friendly and less toxic. Also in the design of automobiles, advanced lightweight materials and fewer materials in vehicle design could be considered in order to make the design environment- friendly. This concept is regarded as EcoDesign in the recent times. Manufacturing engineers should also continuously monitor the work in process goods which result such that the processes do not give rise to any harmful by products. They implement green in their manufacturing by reducing the energy and resource consumption. For example, in the manufacturing of a hybrid car, the focus is to reduce the amount of gas consumption by redesigning the engine with respect to the standards.
Assessment tables and auditing mechanism for green management
Continuous assessment of the environmental friendly nature of the processes is performed with respect to tables, formulated for this purpose. Auditing mechanism is also a part of their management strategy as this tool is regarded as a critical way of regulating the green management in companies. Green product standards should be followed throughout the flow of the entire supply chain.
Recovery and reuse of used products.
Reuse of the products is planned based in whether the returned items are based on products or packaging. If a product generally is in the reverse flow, it is either recycled, salvaged, land filled, resold or reconditioned. If packaging is in reverse flow due its reusable nature such as plastic totes and pallets, they are refurbished, recycled, salvaged, land filled or the materials are reclaimed. For example, in a Chinese sugar industry, the wastes resulting from the upstream processes are included in the downstream processes for manufacturing purposes.
BENEFITS OF GREEN SUPPLY CHAIN
The benefits of green supply chain are not specific to reducing toxic emissions and waste. However, much more value can be added to this concept. The concept of green supply chain management can be applied to various sectors of an organization in both tangible and intangible aspects.
Many companies have proven that they realize many financial gains by implementing green supply chain management. They have also identified areas in the supply chain where any form of environmental improvement can produce profits. Therefore, cost savings have been identified as a major benefit in implementing green principles in an organization.
The advantages of the supply chain can be extended to different stages of the supply chain in terms of material, immaterial and emotion. In terms of material, green supply chain management can be regarded as a tool to reduce the load on the environment, less costs for the producer and supplier and less cost of ownership for the customer. In terms of immaterial, green supply chain management helps to transcend any narrow mindedness which is held against these issues, better fulfillment towards the needs of the society, developing customer satisfaction. For emotion, green supply chain management helps the customer in developing a feel good factor, boosting the employer morale, better portrayal of the company to the society.
Also since this is a joint effort by all the members of the supply chain, the investments are combined and correspondingly, the risks are also shared among the partners in the chain.
The company also develops a better control over the product quality and safety and this will result in increased sales. Sharing of information among the various partners of the supply chain in this regard of green supply chain management will also result in more transparency, thereby leading to increased collaboration among the partners.
SYSTEMATIC APPROACH TO IMPLEMENTING GREEN SUPPLY CHAIN
The approach for implementing the green supply chain can be executed in four steps. This four step decision framework can help the company in narrowing down on the environmental impacts that result and the costs incurred because of their actions. This decision framing network is based on the environmental practices which were successfully implemented by several companies. Companies will adapt the steps as per their existing industry framework.
Companies are required to identify areas in which high environmental costs are incurred. The primary step is to monitor the materials management processes to determine the activities which are expensive. It is important to find out if material losses are caused by spillage or other issues. To determine if the discarding of materials occurs due to quality issues, obsolescence is also crucial. It is also essential to determine if the material specifications can be changed in order to simplify the processes and reduce the environmental costs.
It is also necessary to determine if there are any recyclable materials in the waste stream which can be reused. However, this process should be implemented in two steps.
Primarily, the existing waste streams should be examined to determine the processes which add to the environmental costs. The secondary step is to attribute costs to these activities. This identification of activities which lead to environmental costs are materials tracking and EH&S performance reviews. Through the method of materials tracking, we can determine which type of material is being consumed in which section, the quantity and the reason behind its usage, and the products which it produces and how much quantity reaches the waste streams. This can be done with the help of process maps, mass balances, dispensing records and other sources.
EH&S performance reviews can also be used to determine the health risks which arise and will track safety issues. By conducting interviews with the factory personnel using questionnaires and consistent monitoring of the process records, performance reviews are implemented. This performance reviews are usually focused on determining the extent to which the company follows the predetermined limits. However, reviews are not as effective as material tracking unless the review checklists are designed appropriately. Apart from these techniques, activity based costing can also be used to attach costs to activities. Over head costs ranging from training and paper work should also be taken into consideration.
To collect the cost data, various sources can be utilized such as production records, maintenance logs, utility bills, procurement records.
EVALUATION OF OPPORTUNITIES
After the initial evaluation of the activities consuming costs, the next step is to determine which areas give chances for opportunities and go about developing cost based solutions. The Pareto principle helps in ranking activity areas by value and can attach costs to them. Using cause and effect diagram to determine the reasons behind the issues is also suggested.
CALCULATION OF BENEFITS
After determining the various alternate activities, the approach is then to conduct quantitative evaluations which rely on experimental data. This can be performed using techniques such as Economic Order Quantity and Internal Rate of Return.
The second method for calculation of benefits is by using qualitative evaluations based on observation and judgment. These techniques are useful when credible information is not available or when the process of quantifying is expected to use the major resources. Often, both the methods are taken into consideration. By qualitatively evaluating the results, the results can determined for issues like the quantity of material which was land filled and the reusability level of a particular container. But the quantification of the results may not be as clear cut as qualitative analysis. It is possible to determine the costs related to quality defects, overtime and the level of employee satisfaction.
Irrespective of which methodology is implemented, these techniques will result in environmental and financial information in combination with other strategies will help managers make the best decision
IMPLEMENTING THE DECISION
After the course of action is decided, the final step involves implementing the decision. The previous attempts taken by the organization in controlling environmental costs should be considered in order to gain some insights on the company's performance. A team should also be established which is thoroughly focused on conducting the analyses. Pilot studies should also be conducted to demonstrate the effectiveness of the proposed plan before a broader implementation is done. Appropriate training should also be provided to the personnel, involved in the implementation program. After these practices are established, periodic monitoring of the waste reduction should be performed. Also, any errors in the information system should be analyzed and handled by the maintenance personnel. This facilitates the monitoring process of the environment management system.
SUCCESS STORIES OF GREEN SUPPLY CHAIN IMPLEMENTATION
HP successfully implemented green principles in its supply chain in the recent past. HP won the design challenge program conducted by Wal-Mart by designing a notebook for Wal-Mart, shipped a stylish bad made of 100% recyclable material and it also provided reduced packaging with 97%.
It also implemented the use of recyclable material in the manufacturing of inkjet cartridges.
HP also focused on promoting the use of renewable energy, reduction in the emission rate per unit of floor space and also combined the IT datacenters thereby resulting in a radical increase in energy consumption. HP is highly committed towards implementing green principles in its organization.
The goals of Coca Cola Enterprises, an established subsidiary of Coca Cola, as stated in its Commitment 2020 program are to use sustainable packaging material in its deliveries and to recover the equivalent of 100 percent of the packaging the company distributes.
Coca-Cola Enterprises has also reduced packaging weight (by 31,000 metric tons in 2008, due small initiatives like reducing the size of the bottle caps) and increasing the rate of its recycling process at its manufacturing plants, with one-third of its plants recycling up to 90% of the waste materials. Two bottle-to-bottle recycling plants use recycled materials to make new packaging, and the recent introduction, Plant Bottle, a recyclable plastic bottle made with 30% plant-based material and this needs less petroleum for its production.
SIERRA NEVADA BREWING COMPANY
Sierra Nevada's vision is to account for its level of high-level greenhouse gas emissions across the entire supply chain. The greenhouse gas emissions will be tracked stating from hops and grain production and end with waste disposal or recycling after using the product. The focus is on accounting for green house gas emissions across all sectors of the supply chain rather than emissions per product.
Sierra Nevada utilizes this emissions data for two purposes. The primary purpose is carbon footprint reduction. This collected data is used as a technique to determine areas which have scope for improvement. It is also necessary that the emissions data should be sent to the California Registry for regulation purposes. This registry makes the emission reports available to people to assist them during their product purchase.
Sierra Nevada records direct emissions for stationary combustion from generators and process emissions (i.e., supporting material production). Another category for direct emissions of green house gases is mobile combustion, where Sierra Nevada calculates the emissions from its vehicles. Sierra Nevada also records indirect emissions from its use of purchased electricity. The company ensures that the emissions measures are consistent by using the standard protocols out-lined by the California Registry which are based upon the GHG protocol.
Sierra Nevada also uses the Climate Action Registry Reporting Online Tool (CARROT), a software package that evaluates and reports emissions based on inputs that a company supplies
WALMART'S GREEN SUPPLY CHAIN
Wal-Mart's major strategic decision to strengthen supply chain management processes by employing green principles had a tremendous positive impact on the identity and development of Wal-Mart. The initial initiative was that of the organization convincing its suppliers to provide environment friendly products in bio friendly packages. It further promoted its environmental friendly products using green colored shelf tags. However, as time went on, this green tag strategy lost its importance.
Wal-Mart came up with three main goals with respect to the environment which are given below
1. To obtain renewable energy as its major source of power in the very near future.
2. Focus on creating zero waste.
3. Sell products that maintain Wal-Mart's resources and the environment
These three goals was just a preface to the following full fledged range of goals which Wal-Mart had come up with.
1. Raise the fuel efficiency in Wal-Mart's truck fleet by 25 percent over three years and
doubling it within 10 years
2. Reduce greenhouse gases by 20 percent in 7 years
3. Reduce energy use at stores by 30 percent in 7 years
4. Reduce the consumption of solid waste from U.S. Stores and Sam's Clubs by 25% in three years
5. Reducing the power consumption in trucks by using diesel-electric and refrigerated trucks that could keep the cargo cold without using the engine, which would result in cost savings of nearly $75 million and also eliminating 400,000 tons of carbon dioxide consumption in one year .
6. To buy only organic cotton from farmers and also to buy alternate crops which farmers are required to grow between cotton harvests. Last year, the company became the world's largest buyer of organic cotton
7. Committing itself to sell only seafood which is certified wild by the Marine Stewardship Council, a group committed to preventing the depletion of ocean life from overfishing.
8. Buying (and selling) 12 weeks' worth of Restrictions on Hazardous Substances (RoHS)-compliant computers from Toshiba
Sustainable Value Networks
In addition to creating value added networks of government agencies, non- profit organizations, employees and suppliers in order to make its entire supply chain flow green, Wal-Mart is also focusing on reducing its carbon footprint in order to obtain greater cost benefits. In the past, Wal-Mart's focus in the supply chain field was in regulating the operations and profits. Recently, it has extended its environmental strategy to its other patrons in order to identify areas in which positive environmental impact could be achieved. For their participation in these strategies, the patrons would receive updates about the progress and will also have a role in the decision making process.
Figure: 2 http://www.apicsterragrande.org/Wal-Mart%20Sustainability.pdf
The primary issue lies in managing these partnerships in such a way that cost benefits can be realized. They should be able to maintain a definite balance between the sales of green and non -green products. Wal-Mart has a large number of independent patrons who might not benefit from large reduction on environmental impact. Wal-Mart should be able to manage the high number of loss in cost benefits which result due to this scenario. As these groups might be unable to exhibit their impact, they might withdraw from the network as they might face issues with fundraising.
In its process of implementing "green" principles, the three major obstacles which Wal-Mart faces are:
1. Increased Costs
2. Sub-Optimal Product Assortment
3. Criticism of Factory Labor Conditions.
These issues should be regarded with seriousness because these issues are likely to affect the public reputation of the organization. It may also face issues which result due to its limited group of suppliers. Also, it may have to compromise on its market as it may end up missing opportunities through which it can produce innovative products which might attract customers but not essentially environment-friendly. These are the issues which Wal-Mart should consider in its implementation of "green" principles to their supply chain.
Green supply chain is being implemented in most sectors nowadays. However, this issue requires a high level of social consciousness is expected of all the partners in the supply chain. This would provide great cost benefits to the concerned parties and to the society, in general. Awareness of "green" principles should increase and its implementation should be made mandatory in the supply chain network across the world. Thus, green supply chain management is a highly advantageous practice, which should be put to the best of its use, in the future.