Best practice report: Green Supply Chain Management

July 18, 2014 by BPIR.com Limited

Expert Opinion

 

Green Supply Chain Management (GrSCM) aims to integrate environmental thinking into supply chain management. This includes product design, material sourcing and selection, the manufacturing process, delivery of the final product to consumers, and end-of-life product management. According to Vishal Gupta and his colleagues from the Jaypee Business School in Noida, India, organisations in today’s business environment know that supply chain capability and capacity are key components for successfully competing in the global market economy. [1]

The following are some of the central concepts associated with GrSCM:

  1. Green purchasing and procurement, which involves the selection and acquisition of products and services to minimise any negative impacts over product lifecycles associated with manufacturing, transportation, usage, and recycling. In many countries, governments, industries, and civil society organisations work collaboratively to purchase eco-friendly products.
  2. Green manufacturing, which uses production processes that have relatively low environmental impacts, are highly efficient, and generate little waste or pollution. Green manufacturing can lead to lower raw material costs, production efficiency gains, reduced environmental and occupational safety expenses, and an improved corporate image.
  3. Green distribution, which relates to packaging and logistics. Packaging characteristics (such as size, shape, and the materials used) have an impact on distribution and transportation. Better packaging—together with rearranged loading patterns—can mean a reduction in the quantity of materials used, better use of space, and less need for handling.
  4. Reverse logistics, the process by which manufacturers accept previously shipped products from the point of consumption for recycling and remanufacturing where possible.
  5. E-waste, which is waste associated with used electronic devices and household appliances no longer fit for their original purpose and, therefore, destined for recovery, recycling or disposal. E-waste includes a wide range of electrical and electronic devices such as computers, cellular phones, portable audio equipment, refrigerators, and air conditioners. This sort of waste can contain more than 1,000 different substances, many of which are potentially hazardous to the environment and detrimental to human health. [1]

 

GrSCM principles can be applied throughout the entire supply chain. Sandip Kadam writes that in addition to being good for the environment, these principles have important economic and social benefits. The following are aligned with the numbers shown in Figure 2, see above:
1.    Cleaner materials sourcing and manufacturing are associated with:

  • improved environmental design
  • improved packaging
  • designs that use recyclable materials
  • minimal use of hazardous and environmentally damaging materials
  • better waste management and end-of-life planning
  • reduced product sizes and mass.

2.    Lower transport emissions through:

  • more efficient transportation systems
  • alternative fuels and improved fuel efficiency
  • optimisation of shipping, aircraft, road, and rail transportation
  • use of environmentally friendly logistics providers.

3.    Cleaner warehouse operations through:

  • strategically placed warehouses and distribution centres
  • improved warehouse layouts
  • minimising total costs/carbon footprint
  • improved efficiency and productivity.

4.    Consolidated movement of goods through:

  • use of green sourcing for both indirect and direct materials
  • collaboration with suppliers
  • use of local suppliers where possible
  • consolidation of both inbound and outbound traffic
  • using backhaul of goods.

5.    Reduction of transit distances by:

  • rerouting fleet vehicles
  • optimising truckloads and reducing empty trailer space
  • reducing mileage and improving fleet use.

6.    Reduction of volumes and total mass shipped through:

  • better design of packaging and products
  • good management of containers.

7.    Reduction of nodes and legs for transportation by:

  • using rail or mixed modes
  • using computerised route planning.

8.    Reuse and recycling by:

  • using product designs that maximise reuse/recycling
  • providing incentives to consumers to return products
  • designing and employing reverse logistics systems.

According to Chet Chaffee, director of sustainability at FirstCarbon Solutions in the United States, organisations need to optimise their supply chain operations and reduce their carbon footprint. To achieve this, trade-offs throughout the supply chain are normally required. [3] Monitoring and reducing carbon footprints makes good business sense because it eliminates waste and reduces costs. The exercise to reduce carbon footprints can also help organisations when choosing efficient business partners; it can also help them be better prepared, by mitigating risks associated with sudden changes in energy and fuel prices. Additionally, a lower carbon footprint can lead to an improved corporate brand and provide an advantage over competitors.
It is important for organisations to create metrics to determine the environmental impacts of their supply chains. With metrics in place, ideal baselines can be set and performance optimised. Successful organisations often work on incremental solutions to gradually improve environmental performance, while minimising the burden of change in other areas. To understand fully the trade-offs inherent in their choices, executives must be able to analyse the entire value chain of a product or service in terms of cost and environmental impact. In doing so, they can make certain that the various components in the chain interact in ways that benefit the whole system. Ultimately, no green initiative will succeed unless it has proven value such as:

  • a better economical outcome for the organisation
  • improved benefits for customers, and
  • marketing advantages for its products and services. [3]

Benjamin Hazen and his colleagues from Auburn University in the United States write that green reverse logistics involve the practice of Reuse, Remanufacturing, and Recycling.

  • Reuse requires customers to return products and reusable packaging to the place of purchase for potential cleaning, replacement of accessories, and repackaging. The returned items can then be injected back into the supply chain. Products that are no longer serviceable must be sent further down the reverse logistics chain for restoration, if possible back to new condition.
  • Remanufacturing encompasses the repair, refurbishment or overhaul of products to extend their life. Remanufacturing can create lucrative business opportunities and recapture value that would otherwise be lost.
  • Recycling involves the recovery of valuable components from returned products. Recycling may encompass the cannibalisation of sub-assemblies or the extraction of various materials for resale as raw materials or parts.

From the point of view of energy use and sustainability, the order from most desirable to least desirable in terms of reverse logistics for manufactured products is as follows:

  1. Reuse.
  2. Remanufacture, or product upgrade.
  3. Recycle, or materials recovery.
  4. Waste management.

When the ideal option is not feasible, organisations should move down the hierarchy to the next highest value-producing, and least resource-demanding, option. However, while consumers consider recycling to be desirable, there remains some ambiguity about the remanufacture and reuse of products. Figure 3, see below, depicts consumer perception compared to actual sustainable best practices.

Ali Vahabzadeh and Rosnah Yusuff of the University Putra Malaysia state that both suppliers and manufacturers play important roles in product life cycle management, as they seek to minimise waste and carefully manage the use of natural resources. [5] Importantly, they must have a “cradle-to-cradle” vision for their supply chains, and encompass the recovery, recycling, and reuse of resources. Government bodies can also exert a strong influence by creating regulations to provide directives for end-of-life management, including, waste, hazardous materials, and packaging. In addition, international certification standards such as ISO 14000 have incorporated environmental concerns into their requirements. As a result, manufacturers and suppliers are developing sustainable reverse logistics networks, which minimise the cost of returns. Manufacturers and suppliers are focusing on the design of reusable packaging and pallets, reducing unnecessary movements in operations, providing more efficient transportation schemes, and using sustainable materials in product designs. The following reverse logistic decision tree, see Figure 4, below, provides a guide for the evaluation of cradle-to-cradle production systems, and for deciding whether to refurbish, remanufacture, resell, recycle or dispose of returned products.

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