Greening the Supply Chain

Rahul Agarwal Rajdeep Choudhuri Riddhi Mazumdar Sahil Ahuja Group 9-B B10101 B10103 B10104 B10105

Definition
GSCM includes integrating environment thinking into supply chain management, including product design, material sourcing and selection, manufacturing processes, delivery of the final product to the consumers, and end-of-life management of the product after its useful life. Srivastara, 2007

Green supply refers to the way in which innovations in supply chain management and industrial purchasing may be considered in the context of the environment Green, et al (1998) The practice of monitoring and improving environmental performance in the supply chain Godfrey, et al (1998)

Definition
Takeaways: Range of author focus on green supply chain management Variation in the purpose of green supply chains Reactive monitoring of general environmental management programs Proactive practices, e.g.: incorporating innovations Reasons? Foundational elements are relatively new areas of study and practice Corporate environmental management Supply chain management

Definition
In summary: Adding the green component to supply chain management involves addressing the influence and relationships of supply chain management to the natural environment. GSCM = Green purchasing + Green manufacturing/materials management + Green Distribution / marketing + Reverse logistics.

Development of GSCM
The quality revolution in the late 1980s and the supply chain revolution in the early 1990s have sparked businesses to become environmentally conscious Since the early 1990s, manufacturers have been faced with pressure to address Environmental Management (EM) in their supply chains Global market demands and governmental pressures are pushing businesses to become more sustainable Companies are starting to view GSC as a strategic analysis tool.

Green Supply Chain Framework

GSCM Principles
Environmental Life Cycle: The Product Life Cycle Is The Basis Of Green Supply Chain Management.
Designing the supply chain concurrently with the product is a supply chain management best practice.

Concept

Design

Raw Material Extraction

Transport

Manufacture

Transport

Retail/ Consumer Use

Transport

Disposal

Typical Supply Chain Scope

GSCM Principles
Environmental Life Cycle: The environmental impacts of each LC stage are examined for reduction.
Inputs
Water Energy Energy Water Energy Energy Energy

Concept

Design

Raw Material Extraction

Transport

Manufacture

Transport

Retail/ Consumer Use

Transport

Disposal

Impacts

Air Water Waste

Air

Air Water Waste

Air

Air Water Waste

Air

Air Water Waste

GSCM Best Practices

Green supply chain best practices focus on the business results first: Align green supply chain goals with business goals Evaluate the supply chain as a single life cycle system Use green supply chain analysis as a catalyst for innovation Focus on source reduction to reduce waste

GSCM Best Practices

System View of Environmental Life Cycle: Evaluating the supply chain as a system leads to life cycle optimization.
Inputs:

Raw Material

Energy

Concept

Design

Raw Material Extraction

Transport

Manufacture

Transport

Retail/ Consumer Use

Transport

Disposal

Outputs:

Product

Waste

$ Minimize the bad inputs and outputs.

Maximize the good outputs.

GSCM Best Practices

Green supply chain management is a driver for process improvements
In general, pollution and waste represent incomplete, ineffective, or inefficient use of raw material. Green supply chain analysis provides an opportunity to review processes, materials, and operational concepts. As with continuous improvement programs, green supply chain analysis targets: Wasted material Wasted energy or effort Under-utilized resources Green Process Improvement Approach

Identify the waste streams

Measure or identify the opportunity cost of the waste

Create innovation vs. treatment bias toward waste reduction

Source: Green and Competitive, Proter and van der Linfde, HBR, Sept.-Oct. 1995, Environmental Supply Chain Management, Carter and Narasimhan, CAPS Research, 1998

GSCM Best Practices

Focusing on source reduction programs drives higher value improvements
Waste Reduction Opportunities in the Life Cycle

Concept

Design

Raw Material Extraction

Transport

Manufacture

Transport

Transport Retail/ Consumer Use Dispose

Disposal

Reduce Potential for life cycle cost savings

Reuse/Recycle

Control Technology

High

Low

Cumulative life cycle costs

GSCM Best Practices

Green supply chain efforts need to rise above the cost center view
Green supply chain projects need to be clearly defined in terms of the business value to the organization. Clear value will gain senior management support. Clear value will help secure buy-in from other organizations Environmental programs are viewed as business cost centers. Environmental, safety, and health (ESH) resources are often scarce in an organization. ESH offices are targeted early during cost cutting programs. ESH offices have difficulty articulating their business value. The inability to articulate the value of green supply chain effort in business terms lowers their profile. Many executives have misconceptions of how green supply chain efforts will impact their operations. Without a clear business value proposition, it is difficult to get executive support for projects.

GSCM Best Practices

Use tools such as GreenSCOR to help define and analyze GSC problems: GreenSCOR is a modification of the SCOR model that includes
environmental elements.

SCOR Model Supply Chain Operations Reference (SCOR) has 3 pillars Process Modelling Performance Measurement Best Practices Environmental Management GreenSCOR modifies the existing SCOR structure to include environmental processes, metrics, and best practices.

GreenSCOR Model GreenSCOR maintains the integrity of the current SCOR model by adding to the existing elements.

GSCM Model
Phases in Normal Supply Chain

Plan
This phase involves which product to make and whether it would be stocked, MTO, ETO?

Buy
Buying material by different supply chain stakeholders to make the product

Make
Making of the product

Move
Moving the product using the distribution networks, storehouses, warehouses

Sell
Selling the final product to the end customer

GSCM Model
Plan Post consumption Buy 5 phases are same as the conventional supply chain Taking environmental consideration consumption is also extremely important. The footprint of consumption depends and affects previous phases Post consumption includes return, reuse or recycle. This starts a reverse flow which leads to a closed loop system

Consumption

Make

Sell

Move

GSCM Success Stories

General Motors reduced disposal costs by $12 million by establishing a reusable container program with their suppliers.

Commonwealth Edison: Produced $50 million in financial benefits from managing materials and equipment with a life-cycle management approach. The Dutch flower industry greened its production to increase throughput. Fertilizer in the water is recycled through the system to reduce waste. Producers were able to increase output per space and reduce costs

USPS worked with direct mail vendors to reduce supply chain cost and waste. Estimated savings were $500 Million (1997)

GSCM Success Stories

Texas Instruments: Saves $8 million each year by reducing its transit packaging budget for its semiconductor business through source reduction, recycling, and use of reusable packaging systems (20% annual savings). In early 1990s Xerox launched a new initiative to take back used copiers as a source of material for new machines. As a result 7090% (by weight) of machines were reused. This helped saving 144 million pounds annually Pepsi-Cola: Saved $44 million by switching from corrugated to reusable plastic shipping containers for one liter and 20-ounce bottles, conserving 196 million pounds of corrugated material.

Dow Corning: Saved $2.3 million by using reconditioned steel drums in 1995. Also conserved 7.8 million pounds of steel.

GSCM Pioneers
California based Toyota Material Handling has been named as one of the 25 Inaugural Green Supply Chain Partners by Inbound Logistics magazine. Toyota has been the number one selling lift truck supplier in the U.S. since 2002. 3M which is known for innovation is among the leaders for using environment friendly measures in Supply chain

Wal-Mart saves millions of dollars annually by using green initiatives in its supply chain

Benefits
Sustainability of Resources GSCM helps in proper and effective utilization of available productive resources of organizations Green input resources for environmental friendly production process to produce desired outputs Increased efficiency Effective management of suppliers leads to reduced transaction costs, recycling and re-use of raw materials Wastage reduction results in reduced handling expenses, lower raw material costs and fines

Benefits
Innovation Use of cleaner technologies, process innovation, and waste reduction often results in technologically advanced and environment friendly products competitive advantage Improved product quality Supply chain partnerships help maintain relationships between buyers and suppliers leading to increased control over product quality Brand Image Good environmental performance enhances the brand image of a company among all the stakeholders

Challenges

Standards

Business Case Development

Communication

Implementation

Challenges
Standards Conformity to several standards like EPA, Greenhouse Gas Reporting, Climate Change Interpretive Guidance are required Regulatory requirements and reporting standards vary across nations Identifying the emissions and other sustainability metrics to be reported --whether to an outside organization, governmental body or shareholders is a major challenge Business Case Development Developing a strong business case depends on finding the right problems Capturing the appropriate data for the same is difficult - varying regulatory requirements In many cases immediate benefits are not reaped and negatively impacts the profitability of the organizations

Challenges
Communication Organizations have to develop a communication strategy early in Green Supply Chain planning process Stakeholder engagement is dependent on clear communication of the benefits across the supply chain

Implementation Redesigning the processes ,products, disassembly lines planning and set up, waste collection and recycling modelling involves high investment upfront Difficulty in identifying the standards to be followed across the supply chain Trade-off between green requirements and lean practices