The Concept of Green Initiative in SCM
1 Illustrate the concept of ‘green initiative’ in context of supply chain and logistics management. Do you think being green pays off for companies? Why or why not?
Green initiative has been the emerging trend in the supply y chain due to increasing awareness for environment. Green supply chain refers to those supply chains that integrates environments and shows concerns for the environment in all of their activities consisting of material sourcing, product design, manufacturing processes, and product delivery to customers and taking delivery back from customer after end of life. This refers to the inclusion of green in all the activities encompassing from product design to product end of life i.e. from womb to grave. Take example of Wal-Mart. It has numerous suppliers. It implemented green supply chain not only itself for also made it mandatory for some if its suppliers and thus improving the ecosystem. Its CEO has committed to supply 100% renewable energy, create zero waste and create similar guidelines for suppliers.
Being green definitely pays off for the companies because they get publicity by the government and environmental agencies and they can also show off their initiatives in the corporate social responsibility to get the attention of customers. Environment aware customers would definitely prefer the services of such companies.
Traditional SCM have little focus on wastage of resources and the utilization of resources however Green SCM stresses on minimizing the wastage of resources and improving their efficiency from economic perspective and this is more sustainable for a company as it will be able to reduce it cost.
Apart from this, traditional supply chain does not concern itself with carbon footprints of the company, packaging waste, reverse logistics which are not good for the society and environment specially today when global warming is all time high and planet is working at its capacity with natural resources getting used up very fast. All this is not sustainable for long time. Green supply chain brings the awareness about recuing wastage on packaging, measuring carbon footprints, going more digital; include environment related parameters in key performance indicators to make SCM practices more sustainable. Example, Procure to pay cycle consists of printing purchase orders and posting it to suppliers which results in wastage of paper and fuel. Now, this can be done in real time using e-procurement.
There are 3 main and external stakeholders of the green supply chain which are as follows:
- Government: Government of each country work towards improving the environment conditions and carbon footprints. They levy the higher taxes on the organizations that cause high pollution and give more benefits to organizations that have positive carbon credits. Government can trade its carbon credit and can earn money. Government also imposes various rules, compliance laws pertaining to environment for green adoption and those who do not agree will have to pay a penalty.
- Markets, competitions and people expectations: This is one of the criteria. Companies want to differentiate themselves in this world of massive competition and want to create a long lasting impact on the society to maintain their status and goodwill. Adopting green supply chain is one of the ways of doing this. Take example of Cadbury and Nestle which boasts of their green initiatives in supply chain by designing new packing structure and also talks about this in their corporate social responsibility. Consumers would definitely be inclined towards such companies and their competitors also feel pressurized to include green processes in their supply chain.
- Environmental agencies: There are many local as well as International environmental agencies EPA (Environmental protection agency) takes care of human health and environment. ISO 1400 series is also international environmental guidelines. ISO 14000 families of compliance standards is quite comprehensive and provides all the practical tools for the organizations that are looking to improve their environmental impact and reduce the carbon credit. ISO 14001:2015 basically defines the criteria for the company to manage its environmental related responsibilities. In short, if the company is ISO 14001: 2015 certified, it can safely be assumed that company is measuring its environmental impact and working towards improving it. Such certification also provides assurance to customers, stakeholders and other environment related agencies worldwide. There are also international environmental agreements that put pressure on the organizations to become more environmental friendly and include green initiatives in their supply chains.
- Effective transportation management which means that vehicles routes are optimally scheduled using software techniques and there should be more usage of full truck loads. Also, better logistics policies related to material receiving at dock like cross docking can help the company to save on the fuel costs. Shipments should be delayed until fill truck load is achieved.
- Physical distribution should focuses on reducing the impact on the environment. Facilities should be designed in accordance with LEED ((Leadership in Energy & Environmental Design) and should consume the natural and solar energy much more and should be environment friendly.
- Preventive maintenance of machines, vehicles would ensure that they are effective and consuming optimal fuel. If machines will be maintained periodically, they will give better output at same input and green is all about using resources more efficiently.
- Innovative packaging not only helps the environment but also helps the company to save the money. Walmart has save 34 billion in 2013 by reduction in packaging. Johnson and Johnson’s have saved over $ 30 million over a period of 10 years by using innovative packaging technique. Cadbury and HP are other players that also leveraged the innovative packaging.
- Innovative business processes could also help the company to be more efficient Like better product design which results in less processing. Also, more use of technology and going digital will also speed up the process. One disruptive example of this is when Airlines industries are competing for their share in business travel, Cisco invented online meetings to cut the share of travels. Such blue ocean based ideas are needed for implementing green strategies.
Strategy to implement green SCM solutions:
- Organizations which are looking to adapt to green SCM can follow 4 step solutions:
- Organization should do the feasibility analysis and come up with the environmental costs within the facility.
- Once these costs are identified, feasible process improvements and opportunities needs to be brainstormed that could lead to savings and reduce the negative impact on environment.
- Next step is to calculate the savings achieved by the new proposed process
- Last step is to implement the solution in a phased manner with proper transitioning and monitor the new solution if is working as per the expectations. If not, make the changes as required.
There is a lot of usage of paper. Papers are very expensive for the environment. IGA warehouses were using paper to check the quantity received in the warehouse and reconciling them. The better way would be to use the bar code technology and every item with bar code enabled technology. This could expedite the receiving process and well as retrieving process while fulfilling the customer orders. Not only this, In some of the high frequency items that have relatively stable demand, Cross docking can be employed. Currently, organization is storing these items in warehouses and then retrieving them for outbound logistics. If it could use a technology and coordinate the inbound and outbound logistics using advanced shipment notifications, it could use cross docking.
Also, this warehouse should delay the shipments until the full truckload has been achieved. Not only this, it could also combine multiple shipments in a single trip and can find out the most efficient route for fulfilling all the orders. Warehouse could also efficiently use sub-inventories, locators and bins to store the more materials. Also, some of the items are also packed in the warehouse. Their packing can be such that they can occupy the minimum space while in transit. It can also use environment friendly packaging material. It can also ask its partners to contribute in green logistics. Apart from this, according to recent report, UPS and FedEx reports 2-2.5% of their shipments as damaged and organization has to bear the additional cost to rectify that. They could be due to mishandling, poor conveyor belts, sorting, and compression from all sides in loading additional load. There should be proper guidelines to avoid that and this will also add to the saving of extra material and thus will be good for environment.
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