Green Supply Chain For Economic and Ecological Efficiency
Posted in Operations & IT Articles, Total Reads: 1410
, Published on 10 March 2016
Green supply chain management is an integral part of a business these days focusing on economic, environmental and ecological development and efficiency. There is rising trend among the firms to link green processes with their corporate strategies recently. Realizing the need to incorporate sustainability as part of their strategic intent, companies focus on assessing the economic, social, and environmental impact of their activities and highlighting the relationship between sustainability and performance. According to a report released by UNEP (2011), global manufacturing industry consumes 35 per cent of the total electricity consumed worldwide and is responsible for 20 per cent of the world's CO2 emissions, which is detrimental to all life on earth. There is a dire need for companies, and especially those engaged in manufacturing activities, to act proactively rather than in a reactive manner in this regard. For example, Chinese manufacturers have taken proactive steps in completing the supply chain loop by adopting GSCM practices.
Green Supply Chain Management (GSCM) caught attention and imagination of academicians since the early 1990s after the oil crisis of the seventies and eighties along with the rise of the perils of air pollution to hazardous levels. The quality revolution in the late 1980’s and the supply chain revolution in the early 1990’s have actually caused the businesses to become environment conscious and environment friendly. This growing and compelling interest in GSCM was happening due to pressures of variety of stakeholders, including, governmental regulations, foreign and domestic clients, competitors, non-governmental organizations, media, neighboring communities, employee and investors’ concerns with aim to reduce the risk of environmental hazards in the supply chain. They had fear of adverse publicity due to non-compliance and the impending government penalties to contribute towards sustainability or to demonstrate their image as an environmentally responsible corporate group.
Main business drivers behind importance of environmental issues
Green supply chain management is defined as integration of environment thinking into the supply chain, including product and process design, material procurement and selection, manufacturing processes, delivery of the final product, and EOL (end-of-life management) of the product after its useful life.
GSCM is an evolving concept generic from the synthesis of two significant developmental strategies, i.e. Productivity improvement and environmental protection. Productivity gives the framework for continuous improvement while environmental protection gives the basic foundation for sustainable development. The key themes that came out of the GSCM literature are the concepts of green design, green operations, reverse logistics, waste management and green manufacturing. GSCM is also defined as the intra- and inter-firm management of the downstream and upstream supply chain aiming to minimize the overall environmental impact of both the forward and reverse flows.
Dimensions of Green SCM
Green SCM includes implementing the best resources available to industry, which can in the long run lead to leveraging a competitive advantage by increasing process efficiency by increasing production quality and desired output at optimal cost .Green manufacturing can lead to reduced usage of raw materials, fewer manufacturing steps, reduction in energy consumption, and lower occupational and environmental safety expenses, along with better and an improved corporate image. The enablers that constitute green manufacturing are:
• Lean and Agility
• Total Quality Management (TQM)
• Supplier Relationship Management (SRM)
• Technologies for cleaner production/green manufacturing
Total Quality Management (TQM)
TQM positively impacts environmental performance. Total Quality Management is a philosophy according to which a company’s mission is to deliver quality products or services to customers. TQM is a continuous process of improvement for individuals, groups of employees and whole company; it encompasses a set of four principles (delight the customer, management by fact, employee-based management, and continuous improvement) .It can be concluded that TQM is a philosophy and a systematic activity to improve the value and quality of the products and services offered to customers through maximization of the potential of all stakeholders.
Supplier Relationship Management (SRM)
Firms who want to successfully collaborate manufacturing with environmental problems should be able to find supplier partners who have minimized their environmental footprint without compromising on the quality of their product or increasing costs significantly .SRM results in lower cost, inventory level, and a higher accuracy .The green vendors can be the greatest assets of the OEM, but a wrong choice can make them the greatest liability too. Vendor relationship management with partners has played a significant role in the successful implementation of green practices in western economies and in India. The OEM has to create a relation with their suppliers and motivate them to provide non-hazardous and eco-friendly raw materials, for example by motivating them to adopt regulation of ISO 14001:2004. Good partnership practices bring in transparency and hence the costs involved in furnishing the eco-friendly raw materials are visible, and hence the risk of over spending is automatically reduced.
Leadership is key driver of GSCM initiatives. Leadership can help a firm to achieve environmental performance successfully in a supply chain network. Leadership is about setting environmental goals and policies to give resources and stimulate improvement and training, It involves establishing processes with a long term vision and mission for the company, driven by dynamic customer requirements. This can help reduces bull-whip effect in the network.
A firm’s internal pressure may be seen as the intermediate factors to adjust the influences of external pressures. A firm will be unlikely to implement GSCM activities if it does not have the basic necessary capacity, no matter how much amount of pressures it faces. Greening any supply chain includes institutionalizing environmental principles in the operation and design of the supply chain. Under institutional theory, companies are not only profit-seeking groups, but realize the significance of achieving social legitimacy. Regulatory and market pressures, including environmental pressures, help an entity to improve as they are believed to influence green purchasing and eco-design.
Increase in profitability (Profitability)
The GSCM practices have tremendous focus on R’s (i.e. reduction, reselling, repair, reuse, refurbishing, and remanufacturing, recycling, and reverse logistics) can help an organization achieve their profitability. At the same time the market share also rises due to increased customer satisfaction and the enriching green experience. A few examples of success stories:
• Texas Instruments saves 8 million dollars per annum by reducing its transit packaging cost for its semiconductor business by source reduction recycling and efficient use of reusable packaging systems.
• Pepsi/Coke saved $44 million by changing from corrugated to reusable plastic shipping containers for 20 ounce and 1liter bottles, saving about 196 million pounds of corrugated material.
• Dow Corning saved $2.3 million in 1995 by making use of ‘reconditioned steel’ steel drums. It also conserved 7.8 million pounds of steel.
A model is built up to present the hierarchical relationships (among enablers) using a level matrix. The conceptual framework depicts causality and the influencers. The enablers (institutional pressures, top management commitment, customer relationship management, TQM possess high driving power and low dependence power.
The GSCM Framework
Ways to implement GSCM:
GSCM can be implemented in following important ways:
• Inbound greening – Selecting suppliers by environmental regulations criteria so as to make use of waste of other firms. Urging vendors to take environment protective actionsThe Greening phase would include green purchasing ,green sourcing, and greening vendors and business partners.
• Main activities involved in GSCM
• Compliance greening – Involving processes for noise reduction and to complying with emission standards by using eco-friendly raw materials.
• Ecological greening – Including processes to reduce water use, reduce solid wastes, and air emissions for better healthier ecosystem.
• Outbound greening – Recycling of waste materials internal to the firm and educating customers on eco-friendly products by duly considering aspects of marketing and sales.
• Technology greening – Initiating environmental improvement of and cleaner technology and packaging processes to increase savings. This is also known as ‘green manufacturing’
Thus we have investigated the relationship between leadership, SRM, TQM and environmental performance and their impact on green supply chain. Also a brief on how institutional pressures have an effect on the process of integration of all these factors on environmental performance was looked at.
To conclude, GSCM is all about making more optimal and efficient use of all resources. When we conduct business, irrespective of whether the business is in service, manufacturing, mining or agriculture, transport; the overall aim of GSCM is to raise eco-efficiency. GSCM is a standard integrated approach for economic and ecological efficiency.
This article has been authored by Ankita Chindarkar from SIBM Pune
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