GREEN SUPPLY CHAIN MANAGEMENT
June 11 - 17, 2012
Since the public has become more conscious about environmental issues and global warming, questions about the products they are purchasing are raising heads all the more. The manufacturers are also expecting the questions from consumers about how green their manufacturing process is and supply chains are?
However, it seems that many companies are still unaware about the performances of improved environment-friendly or green supply chains e.g. lower waste-disposal and training costs, fewer environmental-permitting fees, and reduced material costs.
The rising awareness about green issues and environmental concern has given birth to green supply chain management (GSCM) that recognizes the disproportionate environmental impacts of supply chain processes in an organisation.
GSCM does not only help an organisation in reducing cost of energy, raw materials and production but also in enhancing efficiency and mitigating the risks. It also speeds up innovation by recycling byproducts within the existing environment, improves effectiveness, and makes a positive impact on the bottom line.
Historically, manufacturers chose production volumes for individual products based on factors such as 100 percent utilization of available labor and manufacturing plant capacity. Thus, businesses did not meet the criteria of the green initiatives. They neglected the carbon footprints within their supply chains. According to a recent report, logistics and transportation activities contribute approximately five percent of the carbon dioxide emissions.
With increasing attention to responsibilities and requirements of the corporations to comply with the environmental regulations, green supply chain management is becoming increasingly important for manufacturers. Japanese automakers have made inroads into the U.S. market only because of the ineffective processes in the local industry.
International negotiations took place and Kyoto Protocol came into effect on February 16, 2005 under which the developed countries are required to reduce their collective emissions by 5.2 per cent compared to 1990 levels. Being the number one emitter of greenhouse gases worldwide, China is likely to face more regulatory pressure to improve its performance by implementing effective energy-savings policies. However, many manufacturers have not yet developed refurbishment programs for their products, which will be returned or exchanged. Therefore, it is assumed that by offering refurbished items businesses can increase purchasing power of their customers, whilst improving the environmental impact of their products. Anyway, this treaty gives exemption to the developing countries to help them catch up with the industrialized world.
Besides the climate problems, we are facing with the depletion of natural resources. For example, high population growth of the world is creating shortages of many resources that we use to take for granted. For example, the World Bank reports that about 80 countries are now facing water shortage, while 40 percent of the world population has no access to clean water or sanitation.
The focus of future research will be environmental friendly supply chain sustainability. In the past, mostly the companies were focusing on unit costs, piece of the equipments, but today this contemporary world is considering what is the life cycle cost of a particular part of a good or piece of equipment in the supply chain process. Every year billions of dollars of excess inventory are moved through the supply chain at great expense to the manufacturers, distributors, and sellers of goods. In addition to the drain on corporate earnings, excess inventories also have a negative contribution to the environment by unnecessarily consuming energy during the manufacturing, warehousing, and transporting efforts.
Companies reviewing their business processes are looking beyond their factory walls with few companies aiming to go for a green supply chain transition without reducing the quality of their products or significantly raising costs.
Many forward thinking companies are using the environmental issues to their advantage. They are innovating and coming up with innovative solutions that help them become more profitable while helping the environment.
Many companies are also focusing on their indirect purchases (packaging and transportation) to reduce environmental issues. For example, some research shows that in Canada few companies have adopted the GSCM practices by focusing on distribution activities and successfully improved their business and environmental performance on many levels.
Firms wishing to rapidly release environmentally themed products and services, or make claims to such endeavors, cannot bypass the earlier phases of supply chain strategy development. Especially the firms with purchasing activities (including the governments) should decide what are their real environmental goals regarding their organizational environmental improvement. In such cases, the buyers will need to educate themselves about the environmental conditions, regulations and other factors in those countries, where they are willing to trade or through their supply chain system.
If the supplier is from a territory with well-enforced environmental regulations, the buyer may have some confidence that at least the supplier is not a serious polluter. On the other hands, if in the country of trade the environmental regulations are poorly enforced or not well defined, the buyer should begin with the assumption that the supplier may be a serious polluter and potentially a risky source due to environmental concerns.
In such situations, buyers should ask suppliers to provide documented evidences regarding pollution discharges and controls in place, or in certain cases, suppliers should be visited to inspect their operations.
Green supply chain strategies should be designed for efficient use and ensure the capture of all waste or byproducts through the product lifecycle. It should not only provide just a high level of environmental performance but also the capacity to withstand approaching resource scarcity or legislative changes that affect and often redefine the industries.
Product categories such as non-perishable food items, consumer packaged goods and entertainment (music, movies and video games) lend themselves to such an approach to ensure that there are neither too many or too few products, but rather just enough.
Of course, by matching supply with demand, excess inventory quantities will significantly be reduced. However, a substantial return on investment will be achieved over a longer term by minimizing waste and excess inventory. There are many ways in which businesses can enter into GSCM. It is imperative to know that it is difficult to achieve results without strong focused leadership, as well as the resources for transition, i.e., both financial and work force. The harsh reality is that we need to change what we are doing from a supply chain standpoint of view in order to ensure that future generations will have resources to use in their lifetime. In near future, the companies will be moving to a sustainable GSCM, where the benefit of implementation is that we can improve the profitability of our companies/firms as well as to help our environment. Green can not only be a profitable, but a right thing to do.
(The writer is a lecturer at Sindh Agriculture University, Tando Jam)