Green Supply Chain-The Evolution

Posted in Operations & IT Articles, Total Reads: 2955 , Published on 25 June 2013
Advertisements

“Will Green be a magical word in 2013?” is the question which most of the companies are asking as green attributes continue to be important factors affecting purchasing decisions, according to Euromonitor International’s survey on green and not-so-green consumers. Green has thus far centered on energy consumption efficiency and the scope will likely be broadened from solely green products to green products that incorporate well-being and health-conscious features. In case of consumer appliances, whereas price and functionality dictated purchasing decisions in the past, saving achieved in electricity and water usage by the appliance will become the next big deciding factor moving forward. Marketers are beginning to generate products and marketing claims that link consumers’ lifestyles and wellness needs to the wider environmental cause in product innovations, thus further lengthening the lifecycle of the green trend as a key selling point in consumer appliances.

image:freedigitalphotos.net


Definitions:

Before we delve deeper into Green Supply Chain evolution and trends, it becomes fundamental to quote some of the famous definitions cited by key researchers during the era of evolution of Green Supply Chain. According to them, “Green supply refers to the way in which innovations in supply chain management and industrial purchasing may be considered in the context of the environment”. While others argue, Green SCM is all about integrating environmental thinking into a supply chain management, including product design, material resourcing and selection, manufacturing processes, delivery of the final product to the consumer as well as end-of-life management of the product after its useful life. Thus, the definition and scope of GrSCM in the literature has ranged from green purchasing to integrated green supply chains flowing from supplier to manufacturer to customer, and even RL i.e. reverse logistics. Mathematically put, Green Supply Chain, GrSCM is-

GrSCM= Green purchasing + Green manufacturing/materials management + Green Distribution / marketing + Reverse logistics

 

 

Motivation for companies behind implementing Green Supply Chain:

For companies, the motivation to incorporate the word “Green” into their Supply Chain comes from the fact that such conversion has resulted in increased profits. A number of companies have shown that there exists a strong link between improved environmental performance and financial gains. As an instance, establishment of a reusable container program with the suppliers at General Motors have reduced its disposal costs by $12 Million. Also with the increased focus of buyers on environment improvement, organizations have begun to regard environment improvement as a social goal rather than it being a practice to polish their public image. Investments in “Green” have so far resulted in reduction in usage of resources, elimination of waste and improvement in productivity. Thus, Green has become the key business value driver in the current scenario.

Evolution and Classification of Green Supply Chain:

Evolution of the GrSCM began with the understanding of importance of GrSCM, followed by Green Design of the Supply Chain. Green Design emphasized on both environmentally conscious design (ECD) and life-cycle assessment/analysis (LCA) of the product. Green Design concentrated mainly on understanding the relationship between Product design and its environmental compatibility. Key aspects which were dealt with in the researches in green design included design for material, design for recovery, and design for compatibility and finally design for waste minimization. ECD i.e. Environmentally Conscious Design requires design strategy to be modified to integrate environmental constraints. While LCD i.e. life-cycle assessment/analysis (LCA) is used to access and evaluate environmental consequences of a product throughout its life cycle stages comprising of extracting and processing raw materials, production, transportation and distribution, use, remanufacturing, recycling and final disposal. Green Design Concept was followed by the concept of “Green Operations” which dealt with the key challenges of GrSCM including integrating remanufacturing with internal operations, understanding the effects of competition among remanufacturers, integrating product design, product take-back and supply chain incentives, integrating remanufacturing and Reverse Logistics with supply chain design. Green Operations further branched into:

  • Green Manufacturing and Remanufacturing - Hoshino defined remanufacturing as recycling-integrated manufacturing. The concept is applicable to industries like automobiles, electronics etc.
  • Reverse Logistics and Network Design – Reverse logistics incorporates all operations with the aim of reuse of products and materials at every stage of Supply Chain and at the same time results in reduction of logistics costs. It mainly deals with returns management.

Disposal has always been a key issue in planning for Green. Thus, Waste Management followed the suite of evolution of Green Supply Chain.  Various mathematical models such as Economic Order Quantity (EOQ) model have enabled planning for Waste management. Thus, Green Supply Chain Management mainly deals with Green Design and Green Operations.

Figure: Classification of Problem Context of Green Supply Chain

Green Supply Chain Implementation Challenges:

Some of the key challenges faced in implementing green supply chain are:

  • Lack of Appropriate Technology- There is a need to have a proper technology in place to compliment business with the Green Practices.
  • Difficulty in integration of Supply Chain optimization efforts with Green Supply Chain Efforts-Researchers argue that only after the implementation of changes in the supply chain, their effects on the environment reveal that the idea of greening the supply chain has an opportunity to emerge.
  • Trade off between Green Requirements and Lean Practices- Leanness stresses on the reduction of inventory travelling through the supply chain in an effort to minimize the negative environmental impact of the supply chain. This employs just-in-time (JIT) delivery of small batch sizes which improves the sufficiency but at the same time, requires increased transportation, packaging, and handling thus increasing emissions, leading to contradiction with the green approach.

Green Supply Chain Implementation Best Practices:

Some of the best green supply chain practices from the perspective of researchers are as follows:

  1. Aligning of Green Supply Chain Goals with Business Goals: This includes accommodation of true understanding of the business case at hand and its value propositions in a typical Green Supply Chain planning. This avoids Contradiction of Business goals with the Supply chain goals. As a matter of fact, Supply Chain should always help in achieving Business Goals. For example: - A company can reduce its energy costs by evaluating its energy consumption to establish the feasibility of such reduction by using energy efficient and environmentally friendly equipments.

 

  1. Evaluating the supply chain as a single life cycle system: A single life cycle system provides a holistic view of an organization’s supply chain starting from procurement of raw materials to the finished products delivery to the final consumers, thus, making it easier to identify the untapped opportunities.

 

Source: Wilker son (2003, 2005)

 

  1. 3. Using Green Supply Chain Analysis as a catalyst for innovation: Such analysis targets waste in the system, in an effort to make a transition towards greener practices, thus improving the business.

 

Source: Proter and van de Linfde (1995); Wilkerson (2005)

  1. 4. Focusing on Source reduction to reduce waste: While the Primary focus of waste management programs is on managing waste after its production, the Source reduction focuses on the prevention or reduction of waste production at the source itself.

Figure: Source Reduction

Source: Serkis (1999); Wilker son (2005)

Case Study: An Insider’s View of an Organizations’ Footprint in Green Supply Chain:

Toyota Kirloskar Motor Private Limited (TKM) is a joint venture between Toyota Motor Corporation and the Kirloskar Group, for the manufacture and sales of Toyota cars in India. TKM have employed environment friendly technologies such as water-borne paint, energy efficient equipment and water recycling facility at its Etios Plant at Bidadi, Karnataka. In automobile industry, along with the careful usage of precious oil supplies, trend is now towards developing hybrid technologies which will prove very essential in the upcoming era.

Five Year Environment Action Plan of TKM:

TKM has so far achieved 20% reduction in CO2 emissions at production by reducing the energy consumption such as usage of electricity, LPG etc.


TKM has achieved:-

  • Fuel Efficiency improvement, by monitoring driving speed, maintaining tyre pressure check sheet etc.
  • Volume Efficiency improvement, by changeover of trucks from double axle to triple axle leading to increase in capacity of goods transport by 3 tons from 23 tons bringing down CO2 emissions by 2.72%.
  • Further CO2 emission reductions by utilization of bio diesel as alternative fuel in forklift in a ratio of 1:9 with diesel.

The above strategies have led to 6.26% reduction in CO2 emission as compared to targeted reduction of 4%.

In addition,

  • Packaging of raw materials in returnable carton boxes has reduced the generation of hazardous waste by the company.
  • TKM has also promoted resource conservation by improving steel yield and by reduction in hazardous waste usage.
  • Facts say, it has reduced VOC (Volatile Organic Compounds) emissions by 48.5 gm/m2 and have also achieved 100% elimination of the use of four SOCs (Substances of Concern) namely Lead, Mercury, Cadmium and Hexavalent Chromium.

The above initiatives have been threaded in the TKM goals even though they are not yet made mandatory by law. TKM has adopted “Green Purchase Guidelines” policy. TKM ensures that its face “Toyota Automobile Dealers” adopt rigorous quality standards and sustainable work processes.


 

The article has been authored by Priyanka Goel & Kiran, NITIE

 

References:

  1. Euromonitor portal
  2. Sustainability Tomorrow 2012- Journel
  3. An Review by S. Sakthivelan (Deputy Manager, Business Division, TKM Pvt. Ltd.) in Sustainability Tomorrow 2012.
  4. http://logistics.about.com
  5. http://en.wikipedia.org
  6. An Overview of Green Supply Chain Management in India- A Review Paper by Nimawat Dheeraj1 and Namdev Vishal2, Department of Mechanical Engineering, Singhania University, Pacheri Bari, Jhunjhunu, Rajasthan, INDIA Government Engineering College Jhalawar, Rajasthan, INDIA
  7. Green supply-chain management A-state-of-the-art literature review-  by Samir K. Srivastava
  8. Wilkerson. T (2005), “Best practices in implementing green supply chain” Logistics Management Institute.
  9. Prugsamatz R (2010),” Factors that influence organization learning sustainability in non-profit organizations”, Learning Organization Vol. 17 Iss: 3, pp.243 –267.

10.  Carter and Narasimhan(1998), “Environmental Supply Chain Management”, CAP S Research.

11.  Chatterjee, Mazumder (2010), “Green Supply Chain as a Competitive Advantage Enabler in the FMCG Sector”. Business Process Council (BPC) World Conference.

12.  Christopher M (1992), “Logistics and Supply Chain Management", Pearson Education Limited, Essex-England.

13.  Cognizant (2008), “Creating a Green Supply Chain Information Technology as an Enabler for a Green Supply Chain”.

14.  www.emeraldinsight.com/journals


Advertisements


If you are interested in writing articles for us, Submit Here