Supply Chain Management – Greening Beyond Reverse Logistics.
In a world which is experiencing climate crisis in the form of increased ecological footprint because of environmental damage caused by various businesses, there is an immediate need for value seeking and proactive approach based on increasing the efficiency of reverse logistics aspect of modern supply chains.This paper looks at steeps to lower the ecological footprint of the supply chains, challenges involved in adopting green steps and the practical problems encountered in the making of green supply chains.Key words:
Supply chain management, ecological footprint, environmental management strategies, green issues Introduction: Supply chain management is the coordination and management of a complex network of activities involved in delivering a finished product to the end user or customer .
it is a vital business function and the process includes sourcing raw materials and parts, manufacturing and assembling products, storage, order entry and tracking, distribution through the various channels and finally delivery to the customer.
A company’s supply chain structure consists of external supplier’s ,internal functions of the company and external distributors as well as customers (commercial or end-user). firms may be members of multiple supply chains simultaneously . the management and corporation is further complicated by global players spread across geographic boundaries and multiple time zones . the successful management of a supply chain is also influenced by customer expectations, globalization, information technology, government regulation, competition and the environment.
Management of the supply chain is taking an important role in lowering environmental impact of business in this aspect the principle of ecological footprint shows how relevant are the green initiatives in maintaining ecological balance. It is aurgived that companies should assess the impact of their economic on the environment and resource consumption, the footprint is defined as the amount of land required to meet a typical consumer’s needs for many countries the ecological footprints exceed the actual area of the respective countries, for example the ecological ootprint of the Netherlands is 15 times the area of the country
Environmental management is gaining increasing interest among researchers in supply chain management, the concept of greening is becoming a critical avenue of this area, also the organizations are assigning increasing importance to the environmental issues. Despite some early steps a well knit theory or framework for greening of supply chains is lacking. Research initiatives are needed to overcome this problem, especially the research may have to move beyond reverse logistics, into the development of green supply chains.
It is proposed that reverse logistics alone may not be enough and that a focus on the entire supply chain is more relevant for understanding the impact of business practices on the environment . this approach gels with value seeking approach of the environment that leverages the potential contribution of greening to the business organizations. The focus of greening as a competitive initiative by the business organizations represents a more proactive approach of greening instead of reacting to compliance measures of environmental regulations of several governments. The concept of reverse logistics:
Reverse logistics stands for operations related to the reuse of products and materials which are part of the supply chain, it is the process of planning, implementing and controlling the efficient, cost effective flow of raw materials, in-process inventory ,finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or for attaining proper disposal, simply reverse logistics is the process of moving goods from their typical final destination for the purpose of capturing value or proper disposal, the reverse logistics process includes the management and the sales of sapless as well as returned equipment .
Normally logistics deals with events that bring the product towards the customer. In the case of reverse logistics atleast one step back in the supply chain. For example, goods move from the customer to the distributer or to the manufacturer. As reverse logistics is gaining increasing interest and relevance, the question becomes whether it is enough to limit greening efforts to one segment of the supply chain and to single company. Following is a diagram given below which gives a commonly used scheme for implementing environment friendly initiatives in a company.
Thisscheme depicts that there is much more to greening than the reversed flow of goods only. reening can start rite at the source with supply conditions and can work its way through storage and packaging practices to distribution and to end-consumers all of which is referred to as green supply chain management (GSCM). green supply chain management is adding the “green component” to the supply chain and it involves addressing the influence and relationships of supply chain management through the natural environment. Green supply chain management (GSCM) =green purchasing+ green manufacturing/materials management+ green distribution/marketing+ reverse logistics This reverse flow in reverse logistics can take different forms,from collection to return shipments into the distribution channel followed by disassembly and reuse of selected parts. Alternatively, goods could be scrapped and re-entered into production as raw materials.
Return goods or elements of the product, could even be returned to suppliers and supply chain partners for them to re-manufacture. Other possible supply chain applications should be taken into consideration. for example, disassemblies operations in the reverse flow can be replaced by incorporating a proactive “design for disassembly “ right in the initial product design stage of both supplier and customer. What are the approaches for going green. The implementation of greening as a competitive initiative was explained in detail by porter and van der linde(1995) they reasoned that investments in greening can be recourse saving, waste eliminating and productivity improving.
As a result, green initiatives can lower not only the environmental impact of a business, but also rise efficiency, possibly creating major competitive advantages in innovation and operations. Kopicki et al. (1993),introduced three approaches in environmental management: the reactive, pro-active and value-seeking approach. in the reactive approach companies commit minimal resources to environmental management as they start to procure some products with some recycled content, start labeling products that are recyclable.in the proactive approach, companies start to implement new environmental laws by realizing a modest recourse commitment to initiate the recycling of product and designing green products.
In this approach the ompany assumes responsibility over product re-use and recycling as an element of environmental management. The most far reaching approach is value-seeking, in that companies integrate environmental activities into a business strategies and operate the firm to reduce its impact on the environment as a strategic initiative. The head of the organization establishes a strong environmental commitment and the capital commitment is shared among partners in the supply chain. Operating systems in the value-seeking face may include the re-design of the products for dis-assembly, the use of life cycle analysis of the product and creating and involment of third parties.
Companies are integrating environmental management into corporate strategic planning and into day-to-day process as they adopt a recourse-productivity frame work to maximize benefits attained from environmental programs. Theextention of kopicki et al. (1993) framework offered by Walton et al. (1998) is that they state that companies will only thrive in the final face of environmental management when they act as a whole system that includes customers, suppliers and other players in the supply chain. By developing a supply chain approach in the environmental management process, the impact on supply chain operation gets leveraged throughout the supply chain.
They detail how such an approach requires cross functional and cross company activities including product design, suppliers, processes, evaluation systems and inbound logistics. Walley and whitehead (1994) mentioned the value-based approach as the most far-reaching approach in environmental management. They characterized this approach as systematic, through the strong commitment and integration of flexible strategies and structures, throughout the supply chain. Within this approach three types of activities are undertaken: operational, technical and strategicactivities, depending on the impact on value and the scope of discretionary response. What are the green steps to be taken: If a supply chain approach is so important in a value-seeking greening initiative how should businesses develop such an approach?
The first step to be taken in greening the supply chains involve identifying the various supply chain flows and customizing the greening approaches basing on a particular supply chain flow. There are five supply chain flows- materials, services, financial, information and knowledge, and wasteflows. These flows may also have different scale levels, and thus, are directly related tothe boundaries that envelop them or through which they flow. The types of flows, theirpurpose, and how they are managed may also differ depending on the boundary context. For example, materials flows from an organizational boundaries perspective wouldrequire that materials be cooperatively agreed upon by managers and designers, and froma proximal perspective the decisions on where they are designated to be located andstored.
Another example would be information flows where legal requirements have themmanaging the information so they can be reported to customers, while information relatedto environmental costs may only be of concern to an operations manager orenvironmental department. We now provide an overview of the different flows and somerelationships and studies on green supply chain. Materials Flows Materials flows are typical physical flows associated with supply chains and mayinclude parts, components, raw materials or finished goods. Much of the research insupply chain management has focused on the management of tangible durable goods. One of the basic tools is material flow analysis which has been recommended forevaluating an integrated environmental supply chain.
The environmental aspects ofthese flows are well documented in and between organizations and have implications onall forms of environmental media implications ranging from solid waste management, Resource productivity, dematerialization and climate change issues. Some recentresearch has proposed that material flow analysis be a core aspect of managing supplierenvironmental relationships. Service Flows These flows represent more intangible flows of services amongst organizations. Example service flows would be utilities and transportation services offered toorganizations. Some of the service flows from these two industries are major contributorsto the major environmental concerns facing the world, climate change, and are criticalelements of the supply chain.
Since we incorporate utilities into this flow, we couldinclude energy service and critical water flows, albeit water may also be a physicalMaterial flow. Energy services in the supply chain are essentially pertinent since they aregrouped at levels of importance similar to material flows and are also critical flows for service industries. In fact, the energy service providers have greatly increased inimportance amongst supply chains as deregulation (especially in the US) has seenincreased growth since the early 1990’s. Services may include many supportingactivities that may not be completely carried out by the organization or require specificmaterials. Information and financial services may also fall within this scope for industrial and retail level consumption.
This more generic service industry has seen little researchin the green supply chain management literature, except for some hospitality and tourismservice industry perspectives . Within the supply chain, the shift to dematerialization could be enhanced with servicizing materials flows . Servicizing, also defined as product-service systems, is essentially the process of selling services rather products or materials toorganizations. One example of this is in Xerox’s strategy to offer a service, documentmanagement, for its copiers by leasing them rather than selling them. It provided aleasing service of a product which was taken back and reclaimed after lease expiration.
Ina servicizing relationship, both the buyer and the supplier wish to decrease materialusage, where cost savings can be shared. Another aspect of service flows are those services provided by nature and includethe following ecosystem service categories: provisioning such as the productionof food and water; regulating, such as the control of climate and disease; supporting, suchas nutrient cycles and crop pollination; cultural, such as spiritual and recreationalbenefits; and preserving, which includes guarding against uncertainty through themaintenance of diversity. Managing these service flows may or may not be under thecontrol of a man-made supply chain, but certainly have some relationships to all supplychains. Financial Flows
Financial flows are primarily the flow of capital (money) across the supply chain. These flows are critical to the management of supply chain practices. The environmentalimplications of these flows are mostly associated with the funding of practices andservice/material flows which may cause environmental damage and consumption. The management of these flows can have profound environmental implications (forexample financial institutions may not lend due to environmental risks associated withcertain organizational projects). Tools integrating the financial flows into supply chainmanagement have relied on standard accounting tools such as activity based costing.
Financial flow evaluation and analysis integrated into environmental supply chainmanagement has been very limited. As the recent world financial crisis shows, financialsystems will greatly regulate the amount of material flows and requirements for allsupply chains. One of the missing links in evaluating financial (capital) flows is the integrationof nature’s capital into the evaluation of supply chain economics. Integration ofnature’s services into supply chains’ financial flows analyses can provide significantlymore accurate perspectives on the influence of environmental supply chain managementpractices of organizations. The difficulty arises from the various assumptions that have tobe made for such a flow.
Valuation of environmental resources is certainly a mystifyingexercise with significant variances in estimations. Information Flows Information and knowledge flows are also one of the critical management aspectsof green supply chain management. Much of the environmental information withinthe supply chain can be related to product life cycles and LCA type analyses . Operations across the supply chain can also benefit the environment just with regularinformation. Some of these benefits can be tied to the principle of informationsubstitution, having accurate information about material and goods that replace the needto hold durable material and goods.
Information substitution can greatly reduce theamount of energy, transportation, and material inventory in the supply chain. Withthe advent of e-commerce and inter-organizational information systems within the supplychain, information substitution along the supply chain will have significantenvironmentally beneficial influence. Knowledge flows arise from having knowledge of environmental policies,technology, practices, and programs that can be shared across the supply chain. Not onlyare operations effected by knowledge, but supply chain innovation is also influenced. Innovation builds on and requires knowledge, knowledge generation, and knowledgeexchange.
Innovation from knowledge flows are especially pertinent to smallerorganizations within the supply chains who typically lack the knowledge resourcesrelated to environmental actions for their operations. Environmentally orientedorganizational and inter-organizational learning is also dependent on effective knowledgeflows through training and continuous improvement programs and supply chain Collaboration, Information is not only critical for internal supply chain management operations,but can be a very effective regulatory tool which may cause organizations to reevaluatetheir supply chain processes. That is, environmental information flows may be usedto provide certain public images of the supply chain and its members.
Having thisinformation made public can cause significant pressures from external stakeholders onthe overall supply chain to improve environmental and social performance . Recentresearch has shown that within the supply chain, information will have varying impactsand will be used in different ways by supply chain members. Overall, these differences inapplication and sharing of information and management of environmental informationflows is based on a variety of factors including expected costs or expectedrevenues/benefits related to environmental improvements, perception of externalstakeholder demand, perception of supplier relationship (from the perspective of thesupply chain manager) and top-management environmental commitment . Waste Flows
We could consider waste flows as an element of all the previous flows which doesnot necessarily have social (environmental) or economic benefit, non-value adding, to theunit under consideration. These waste flows cause greater costs to occur and may requireseparate programs to minimize them. For example, lean and green typically focus onminimizing waste and inefficiency within supply chains. Thus the management ofthis flow will also be critical, and may be separated within a supply chain. From abroader informational and industrial symbiosis perspective, waste exchanges betweenorganizations can alter the waste flows into useful material flows and have been appliedto disparate materials and flows such as water, construction material ,plastics,electronic products and energy .
These waste exchange networksand flows not only can span inter and intra-organizational boundaries, but also acrossinformational boundaries as the waste exchanges become more available through Information and e-commerce systems. The other aspect of waste flows is that of end-of-lifemanagement or products andthe type of disposal that should be completed. There are issues with landfilling,incineration and returning materials back into the supply chain. Within the landfilling andincineration debate, the type of material may determine which is more economically andenvironmentally feasible. Rather than disposal of these wastes, recycling andreverse logistics network flows can be designed to manage these streams.
Thus, as withany systems decisions, many variables will come into play before a clear-cut solution isavailable and decisions on managing these waste flows will range from individualconsumer level to broad governmental policies. The concepts pertaining to greening the supply chain or supply chain environmental management (SCEM) are usually understood by industry as screening suppliers for their environmental performance and then doing business with only those that meet the regulatory standards the driving forces for implementing the concept into the company operations are many and comprise a range of “reactive regulatory reason to proactive strategic and competitive advantage reasons”.
These concepts include working collaboratively with suppliers on green product design, holding awareness seminars, helping suppliers establish their own environmental program and soon. Thus there has to be a conscious need to integrate environmental concerns into the economic concerns of the strategy, in order to help contribute to the sustainability of the company’s future. Concern for the environmental performance of suppliers has now become the characteristic of responsible business practices. For instance, ford motor company has demanded that all of its suppliers with manufacturing facilities, comprising about 5000 companies worldwide, must obtain a third-party certification of environmental management system(EMS) for at least one of their plants by the end of 2001, and for all plants by 2003.
o help the suppliers establish their own environmental management system, ford offers awareness seminars and training for its suppliers ,for them to be like any world class organization and attain their goal of environmental excellence . in the same manner, nestle Philippines also conducts seminars and provides technical assistance to its suppliers and contractors to help them implement and environmental management system that is consistent of Nestlé’s environmental management system (NEMS). nestle hopes this initiative will help its suppliershave a fully functioning and effective EMS complies with regulations, judicious use of raw materials, the conservation of water and energy, and the minimization of the waste.
This initiative of urging suppliers and contractors to meet certain standards of environmental performance is among the 16 principles of environmental management listed in the “business charter for sustainable development”, adopted by the international chamber of commerce in November in 1990,it emphasizes the need for contractors and suppliers to ensure that their environmental practices are consistent with those of the enterprise and encourages wider adoption of these principles Supplier chain environmental management is being adopted by industry, though not in a very apparent way, in different parts of the world. The extent and mode of implementation vary significantly. In some instances the implementation takes the form of questionnaires identifying what suppliers are doing, often in terms of quality programmers such as ISO-9001.
More and more of these questionnaires are now adays supplemented by specific environmental questions. In other instances the suppliers are assessed at their own sites either by personnel from the customer company or by a third party or consultant, supported by a examination of company records, documents and by interviews with company personals. gain, in certain other case the large companies are even going for partnering and mentoring with their suppliers: mentoring involving the development of a close relationship between them, say providing guidance to set-up an environmental management system(EMS) or a waste minimization program; partnering involving and integrated approach to their relationship to improve operational efficiency of each. Measuring the performance of supply chains: In supply chains with multiple vendors, manufacturers, distributors and retailers, whether regionally or globally dispersed, performance measurement is challenging because it is difficult to attribute performance results to one particular entity within the chain. There are difficulties in measuring performance within organizations and even more difficulties arise in inter-organizational environmental performance measurement.
The reasons for lack of systems to measure performance across organizations are multidimensional, including non-standardized data, poor technological integration, geographical and cultural differences, differences in organizational policy, lack of agreed upon metrics, or poor understanding of the need for inter-organizational supply chain performance measurement. Performance measurement in supply chains is difficult for additional reasons, especially when looking at numerous tiers within a supply chain, and green supply chain management performance measurement, or GSCM/PM, is virtually non-existent. With these barriers and difficulties in mind, GSCM/PM is needed for a number of reasons (including regulatory, marketing and competitiveness reasons). Overcoming these barriers is not a trivial issue, but the long-term sustainability (environmental and otherwise) and competitiveness of organizations may rely on successful adoption.
The basic purposes of GSCM/PM are: external reporting (economic rent), internal control (managing the business better) and internal analysis (understanding the business better and continuous improvement). These are the fundamental issues that drive the development of frameworks for business performance measurement. It is important to consider both purpose, as well as the interrelationships of these various measurements of GSCM/PM. Corporate performance measurement and its application continue to grow and encompass both quantitative and qualitative measurements and approaches. The variety and level of performance measures depends greatly on the goal of the organization or the individual strategic business unit’s characteristics.
For example, when measuring performance, companies must consider existing financial measures such as return on investment, profitability, market share and revenue growth at a more competitive and strategic level. Other measures such as customer service and inventory performance (supply, turnover) are more operationally focused, but may necessarily be linked to strategic level measures and issues. Conclusion: As supply chains are becoming increasingly globalized and multi-company based, the ecological footprint principle deserves a broader application in the supply chain. Footprints are not only nation-based as suggested by Hart (1997); the scope of supply chains is far broader. This also implies that a focus on reversed logistics, as commonly used in the literature, is no longer adequate.
Based on the existing literature, this paper presents a categorization of green approaches and suggests the value-seeking approach as the most relevant in greening the supply chain as a whole (instead of logistics, and regulatory compliance alone). In order to develop greening approaches as a competitive initiative, various elements have been suggested, including sets of actions for various players along the chain, as well as, measures of success. Much research still has to be done to support the evolution in business practice towards greening along the entire supply chain. Hopefully, this paper has identified some of the steps to take, while minding our footprint.