Published by MBA Skool Team, Published on July 26, 2016
Green supply chain can be defined as a means of recognizing the complex network of activities which are involved in delivering a finished good to the end user or customer. The activities involve the entire stages of the product’s life cycle, from procurement of raw material, manufacturing, use and reuse till the final recycling or disposal. Thus, green supply chain management (GSCM) consists of improvement over green procurement, green manufacturing, green distribution and reverse logistics. The idea is to eliminate or minimize waste in the form of energy, emission, chemical, hazardous solid waste etc. along the supply chain.
The organization around the globe have commitments and are bound to reduce their carbon footprints. GSCM can be defined as integration of environmental thinking and supply chain management through:
• Green design
• Green Lean
• Green Six Sigma
• Green procurement practices
• Total quality environment management
• Environment friendly packaging and transportation
• Reduction, reuse, remanufacturing and recycling
One of the most widely utilized Environmental Management System (EMS) standard is ISO 14001. The entire family of ISO 14000 standards helps in linking EMS with various tools of quality, namely life cycle management, lean manufacturing and total quality management.
Many progressive companies, such as Walmart, Ford and FedEx, have capitalized on the opportunities of green supply chain management and therefore very worried with the environmental burden of their supply chain processes. Below are the few ground breaking initiatives that these firms have been following to optimize their supply chain.
How companies do it?
1. Wal-Mart, “Sustainability 360”
“Sustainable 360” is a comprehensive highlight on manageability expanded past Wal-Mart's immediate natural impression to attract partners, suppliers, communities and clients. Wall-Mart follow Packaging Scorecard for suppliers that calculates the “green quotient” of product packaging based on a number of attributes, such as greenhouse gas emission, production related material used, product to packaging ratio, cube utilization (i.e. efficient use of space within the storage area), usage of recycled substances, innovation, the amount of renewable energy used to manufacture the packaging, emissions related to transportation and packaging materials and the recovery value of the raw material.
The effort was aligned with company’s overall strategy of gradually reducing packaging cost by 5 per cent thus preventing millions of pounds of debris from reaching landfill areas. The effort will further reduce around 213,000 trucks from the thus saving 67 million gallons of diesel and 324,000 tons of coal per year.
2. Ford Motor Company, Strengthening Value Chain
“Material recovery starts and ends with great design!”
Ford’s connection with its value chain has increased the use of recovered materials in vehicle production. The company also issues recycling guidelines to the world wide suppliers and engineers thus making disassembly of cars and trucks produced by the company. As per the statistics four billion pounds of recycled materials are incorporated into vehicle design. Some design innovation for use of recycle material includes:
• Air cleaner assemblies and engine fan modules
• Splash shields from spent battery casings
• Salvage plastic bumpers becomes new bumper reinforcement
• Used tires become new ones or brakes pedals or floor mats
Currently, In North America, Ford produces 95 per cent of its vehicles using scrap metal recycling facilities. The company proudly claims to recover 86 per cent of the vehicle by weight by means of recycling and remanufacturing.
3. FedEx Initiatives
Global courier delivery giant FedEx has put forward many initiatives to reduce its environmental footprint.
• Company has futuristic plans of converting forest waste into biofuel. The company is collaborating with Red Rock Biofuels to make this plan up and running by 2017.
• Fed Ex possess 329 hybrid delivery truck in its fleet
• It uses around 70 per cent of the recycled fibers for packaging materials.
• FedEx also is replacing its 727’s with 757’s, which is expected to cut fuel consumption by 47 per cent.
4. Kodak Single Use Camera: Reverse Supply Chain
Kodak introduced the single use camera in 1987 positioned as an inexpensive product. At first, it was known to be environmentally unfriendly due to its disposable nature. However, through active participation in photofinishers and other SUC manufacturer (e.g. Fuji, Konica), Kodak transformed the product into environmental success story.
Once consumer returns the SUC to the photofinisher to develop the picture, the photofinishers send the SUC one of the three collection facilities around the world (63 per cent return rate resulting in 51.9million SUC recycled in 1997, equivalent to 549 tractor trailer loads of SUC). They are reimbursed for the camera and the shipping cost. Next, the cameras are shipped to a subcontractor facility where they will undergo disassembly, inspection and remanufacturing. Then, the SUC are sent to one of the Kodak’s three SUC manufacturing plan, where components are reused or recycled materials are used.
Kodak employed Design for Environment to allow reuse, recycling, and disassembly of the camera and the packaging to facilitate the use of the reverse supply chain and extraction of materials. To further enhance the reverse supply chain, it partnered with key organizations to set up recycling programs, pool logistics resources, and share the financial reward.
A significant amount of ground has been covered during the last few years, but still green supply chain is not a formalized management practice. With more firms coming into the purview of benefits associated with it, it is not far when we will see a pollution free, highly efficient supply chain being followed. A lot depends on the government, specially developed economies of USA, Germany and EU where energy is still much cheaper than the energy saving measures. In future, there is an obvious potential in going green and earning profit.
This article has been authored by Saurabh Kumar from IIM Raipur