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Green Supply Chain

Green Supply Chain

1.0 Description of Green Supply Chain
With the increasing change in the world environment and the global warming people have changed their views and interests in the products they buy. Consumers now are more concerned of the environmental changes and how they can go about in changing their habits. One of the main changes in the consumer habits are the products they buy. Consumers now look for products that are environmental friendly or in other words recyclable and energy saving. Therefore, companies now are looking to produce green. Here comes the idea of green supply chain.

Green supply chain is manufacturing products that are green or environmental friendly and have parts that are recyclable. Green supply chain could come in different forms or is achieved in different ways. A production process could become green by using more energy efficient and greener equipment (Murray, N.D). While companies are looking to adopt a green supply chain should first look at their production process to see where a change could be made to simultaneously improve the business and produce in a greener manner (Murray, N.D). When reviewing the supply chain process companies could be able to identify the areas where changes could be made to a more environmentally sound approach and that could at the same time help in areas that are inefficient.(Murray, N.D) Through this process companies may find that resources are being wasted or not used efficiently. During this review companies may also find that the equipment they are using is not helping the process or could be changed to environment friendly ones. While companies are reviewing their supply chain process they should also look for suppliers that are producing in way that reduces their environmental impact and at the same time not reducing their quality or raising their costs. Therefore, the benefits of green supply chain are not limited to the recycling or helping the environment but are also very closely linked to improving the supply chain process and reducing costs.

2.0 Benefits of Green Supply Chain
One of the major benefits of green supply chain is improving the supply chain process. When companies go green in their supply chain process it means that they are cutting on the misuse of machinery and resources (Murray, N.D). In this process companies improve on the way they produce and what they use to produce their products which eventually cuts on the costs of production and in return increases their profits. By re-evaluating the supply chain process of a company in terms of planning, buying, shipping, distributing and use of resources many cost reductions could be made when managing supply chain in an environmental friendly manner (Murray, N.D). This information could not be the goal of managers in a company but many come to realize that the benefits of green supply chain could be worthwhile. Some of those benefits are the decrease in waste- disposal, training costs, reduction of resource costs, and less environmental permitting fees (Murray, N.D).
Green supply chain management is a great way to improve the areas of the business that are inefficient and improve the business in a way that cuts the costs of production. When a company decides to go green they should look at their business goals and strategies in order to know how the transition to green supply chain management could help them to achieve those goals and maintain their strategies (Murray, N.D).
3.0 Risks and Costs of Green Supply Chain
One of the major risks and cost related issues in green supply chain is the increased cost it could have on the production process. Sometimes a company would be very interested in green supply chain but the suppliers they deal with are not using environment friendly processes (Murray, N.D). Therefore, unfortunately many companies are falling in this pitfall, where they are working on improving and reducing their environmental effects and their suppliers are going the other way around.

Another major risk for green supply chain is the climate change risk (GSCeditorial staff, 2007). For companies in the U.S. and Europe a disclosure is now required of them to say how are they contributing to the climate change and what are they doing to make a change in this area. Therefore, most companies are going forward in their green supply chain process as it is becoming a legal issue (GSCeditorial staff, 2007).

4.0 Issues in Designing and Implementing Green Supply Chain
The supply chain of any company or organization has always been defined as a process with integrated manufacturing where the raw materials are transformed into the final products and thereafter consumed by customers. Traditionally defined the supply chain includes all those activities related with manufacturing and converting the raw materials to finals goods which are delivered to customers. Recently there has been a vital need for an environmental supply chain or a green supply chain. (Beamon, 1999). In order to design such a supply chain, there are number of barriers and obstacles. The barriers can be internal or external

4.1 Internal Barriers:
Cost of designing such a supply chain will pose as an important barrier. Customers have always opted for lower prices. This may slow down green supply chain management procedure. A research study held in the US show that the most important concern and obstacles while taking into account environmental factors is caused by costs. For small scale industries that have less access to resources are more exposed to such a barrier. They also function as an issue if organizations act with a mind set of environment versus profit. To change this trend the best approach would be training and teaching about the environment.
One of the biggest concerns is that managers today still do not know how to incorporate social responsibility into their daily decisions. Managers are used to concentrating on efficiency and profits and have less experience with issues related with society and environment.
Most companies do advertise that they follow a green approach but rarely do. Most people have a negative view about issues concerning the environment. To design and implement a successful green supply chain it is vital to make employees understand the concept and to train and development in this project.
4.2 External Barriers:
At times drivers of such a process can also act as an issue in designing and implementing the same process. Environmental rules, regulations and legislations can slow down creativity and innovation in the supply chain.
The most important issue created externally would be the poor or bad supplier relationship. If an organization has more than ten supplier’s discretion or confidentiality would be difficult in green supply chain management. Organizations those are not willing or ready to exchange information on green supply because of the fright of exposing and showing their weak points or due to the fear of giving their competitors a competitive advantage. It is always good for any company to adopt a good customer and supplier relation, which will result in tackling environmental issues effectively and efficiently. Research has proven that organizations that have good rapport with suppliers have more likely to be leading in waste reduction and environmental novelty.
Different industries will have their own related drivers and barriers in designing a green supply chain. These factors will play a vital role in how successful their initiative to a green approach will be. (Walker, 2008)
It is important to design the supply chain according to the organization structure and plans. But in accordance to the organization it is also vital to implement the supply chain in the most appropriate manner. To implement a green supply chain it is necessary to implement the following, but often issues arise while doing so.
a) Green Procurement
Procurement can also be termed as purchasing. Therefore green procurement is environmental purchasing that involves acts like reduction, recycling and reusing while purchasing. Businesses who want to implement green supply chain need follow this method of purchasing which is not always easy. Businesses need to and adopt a process to select products and services that have less impact on the environment. An important part of green procurement is supplier selection. For a green supply chain organizations need to find “Green Partners” who have the quality standards in their raw materials as per the environmental standards. It is always better to purchase raw materials from suppliers who heed to environmental standards like ISO14000 which exist to help companies to lessen the impact of their operation on the environment. Organizations also need to check if the suppliers control and decrease the dangerous and hazardous substances within the company. It is always good to see if the supplier company had green certificate achievements. Apart from this suppliers need to heed to reusing and recycling practices. Therefore a business implementing a green supply chain will have to find a supplie who also goes by a green approach.
b) Green Manufacturing
Manufacturing is a significant part of any organization. In a manufacturing process lot of damage is usually done to the environment. In green supply chain the manufacturing process is green manufacturing which means it leads to lower raw material cost, lessens environmental impact, increases efficiency and also improves the image of the organization. Green manufacturing includes methods and ways to control the hazardous substances in an organization which can pose as an environmental threat. In addition businesses will need energy efficient technology which can lessen the power consumption, increase the products life span. Improvise on the machine’s uptime and also result in efficiency and effectiveness. Businesses will also have to concentrate on waste reduction Therefore the main issue in implementing a green supply chain is that the technology is quite different from a normal supply chain.
c) Green Distribution
In a green supply chain the packaging is known ad green packaging and green logistics. Characteristics which relate to packaging such as size, materials used for the package, shape and so on, have an effect of the distribution. Green packaging concentrates in downsizing the package by minimizing the usage of materials used to package and using environment friendly materials. Certain companies also promote returnable packaging schemes and encourage reuse and recycle plans.
Green logistics include the method of transportation and so on. In green logistics it is important to reduce the consumption of fuel, so alternative fuel vehicles are used and instead of delivering small batches of products it delivers in bigger batches. Products can also be delivered directly to the customer. Hence for a green supply chain businesses need to invest transportation methods that use very little fuel. Moreover activities like packaging which can me outsourced need to be done by themselves or by firms who also go by green packaging. (Ninlawan, 2010)
Therefore from all the above it can be said that to implement a green supply chain, organizations need to work towards it step by step. The costs incurred may be high, but in the end many benefits can be attained.
5.0 Industries for which Green Supply Chain is appropriate
The green supply chain is a very easy method to adopt and thus it is suitable for mostly every industry, right from manufacturing industries to assembling and distribution industries. Examples are going to be provided by which it can be proved that the green supply chain can be adopted in any industry. Companies can adopt the green supply chain (GSC) in ways such as ‘green-manufacturing, green-marketing, and green logistics’. (Talley, W., 2010)
A European based leading company used to run its pipes at 95 horsepower. One of the project engineers then re-structured this process by simply using ‘fatter pipes’ which lead to the use of only 7 horsepower. This not only benefited the company, but also led to saving power.

According to 3M, a plant gives us ‘products, by products and waste materials’. (Penfield, P., 2007). According to them, there is no reason to have wastes, and if any company thought the same way, there would be less pollution and disposal on this earth. In order to adopt the green supply chain, they adopted the 3P practice, which is ‘Pollution prevention pays’. Thus, this shows us how the GSC (green supply chain) can be used in the process of manufacturing.

Now moving on, examples prove that the GSC can also be adopted in logistic companies dealing with distribution. Dell, one of the leaders in the IT sector has adopted the GSC where their delivery trucks earlier carried 18,000 pounds of goods, and they now carry 22,000 pounds worth of goods. Thus, this saves the company money and also works better for the environment in terms of less pollution and energy saving. 3M has also adopted a decking facility that enables them to use a double Decker pallet system. This had proven to decrease their truckload by 40%. (Penfield, P., 2007)

It is seen that groceries and supermarkets charge consumers more for organically grown fruits and vegetables. Due to the growing trend towards a green world, consumers often prefer these goods rather than edibles grown with the help of chemicals. Organically grown cotton is too preferred now compared to normal cotton. Global clothing stores such as New Look, have a separate section just for organic cotton garments. Utility manufacturers, such as GE and others are adopting the GSC by giving customers an option of using ‘environmentally produced power’. (Penfield, P., 2007).

The GSCM is suitable for industries that make products which then need to be packaged. For example, Pepsi saved $ 44 million just by shifting its packaging to re-usable plastic. This switch not only benefits the company in terms of cost, but also makes a great impact on the environment. (Rettab, B., et al, 2008)

“Having been in the business for over 100 years, we recognise the importance of environmental, social and financial sustainability,” said Tim Drury, vice president of supply chain, Unilever North Africa and Middle East. Lipton took the step of adopting the GSC by using ‘slip sheets’ instead of the former wooden pallets that were used. The tea is then transported from India to the Jebel Ali Free Zone, Dubai. As the slip sheets are not as heavy and bulky as the wooden planks, it helps Lipton cut down the amount spent of transport, and is also beneficial to the environment since wood is not being used. (Croucher, M., 2008).

This is a local example, and also proves that GSCM can be used in some way or the other in practically every industry and company.

6.0 Challenges in implementing Green Supply Chain in the U.A.E.
In the U.A.E, there is not enough awareness about the green supply chain. Often, consumers and producers are not aware of what to do to heal the environment, or they are ignorant to the fact that they are harming the environment. Also, in some case, there may be a high initial cost to switch from the traditional supply chain being used to the green supply chain. This may go against the companies’ aim of minimum costs and profit maximisation. (Murray, M. , 2010)

A study shows that in the U.A.E, only 40% of companies knew the importance of the GSC, and are using it, while the other 60% were either ignorant, or planned to adopt the practice in the future. In the U.A.E, big companies often do not know the effects of their operations on the environment. They are unaware of the fact that the modes of transport they use to transport their products, which may be trucks, ships, planes or trains, might be harming the environment.
One of the methods to avoid this may be to use ‘low-emission’ modes, but since they are unaware, there is no prevention. (Rettab, B., et al, 2008)

Also, while handling a complex supply chain may not put the environment as one of their top priorities. It may be easy to incorporate a green supply chain management strategy when there are 1-2 suppliers since there may be a more personal and direct relationship; however a company may not always be placed in such a situation. Some companies, for example
Wal-Mart has 30,000 suppliers in different parts of the world. (N.A, 2008)

In the case of companies that use raw materials from smaller companies, they may ask their smaller suppliers to account for the sustainability. These small companies may not be able to validate to these costs. (John, J., 2009)

Also one of the main issues in the U.A.E is that oil and petrol prices are cheaper that it is in other parts of the world. This may be a good factor otherwise, but in terms of promoting a ‘green world’, it is a negative factor. Companies are forced to use other, more natural sources of energy since there is an increase in the prices of fuel. However, since fuel is relatively economical in U.A.E, manufacturers are not forced to look for cheaper natural alternatives. (Simchi-Levi, D., 2008)

7.0 References
1. Croucher, M.. (2008). Lipton reinforces green supply chain operations in Middle East. Available: http://www.arabianbusiness.com/526522-lipton-reinforces-green-supply-chain-operations-in-middle-east. [Accessed 18 April 2010.]
2. John, J. (2009). The Green Supply Chain Challenge. Available: http://www.greentechmedia.com/articles/read/the-green-supply-chain-challenge/. [Accessed 16 April 2010.]
3. Murray, M. Green Supply Chain Best Practices. Available: http://logistics.about.com/od/greensupplychain/a/GSC_Best_Prac.htm.[ Accessed: 17 April 2010.]
4. Murray, M. Inroduction To The Green Supply Chain. Available: http://logistics.about.com/od/greensupplychain/a/green_intro.htm.[Accessed: 19 April 2010.]
5. N.A. (2008). Green supply chain – lack of information presents big obstacle to survey results respondents. Available: http://www.communities.hp.com/online/blogs/csremea/archive/2008/03/06/HPPost5888.aspx. [Accessed 16 April 2010. ]
6. Ninlawan C, (2010) “The Implementation of Green Supply Chain Management Practices in Electronics Industry”, Available on : http://www.iaeng.org/publication/IMECS2010/IMECS2010_pp1563-1568.pdf[Accessed on 19th April 2010]

7. Penfield, P. (2007). The Green Supply Chain: Sustainability Can Be A Competitive Advantage. Available: http://www.mhia.org/news/industry/7056/the-green-supply-chain.[ Accessed: 19 April 2010.]
8. Rettab B., et al ,2008. (2008). Green supply chain in Dubai. Available: http://web2.dubaichamber.ae/pdf/reports/GREEN%20SUPPLY%20CHAIN%20IN%20DUBAI.pdf.[Accessed 20 April 2010.]
9. Simchi-Levi, D. (2008). Going Green in the Supply Chain. Available: http://www.logisticsit.com/absolutenm/templates/article-critical.aspx?articleid=3781&zoneid=31. [Accessed 16 April 2010. ]
10. Talley, W.. (2010). Green Supply Chain Management: Trends, Challenges, and Solutions. Available: http://www.elsevier.com/framework_products/promis_misc/tregreen.pdf. [Accessed 20 April 2010. ]
11. The Green Supply Chain editorial Staff. (2010) Green Supply Chain News: SEC says Companies should disclose climate change “risks” to investor, in move that could have large impact on Business. Available: http://www.thegreensupplychain.com/news/10-02-08-1.php.[ Accessed: 16 April 2010.]
12. Walker H, (2007) “Drivers and barriers to environmental supply chain management practices: Lessons from the public and private sectors”. Avilable on : http://www.sciencedirect.com.ezproxy.uow.edu.au/science?_ob=MImg&_imagekey=B7579-4RWRT3N-4-1&_cdi=12893&_user=202616&_pii=S1478409208000083&_orig=search&_coverDate=03/31/2008&_sk=999859998&view=c&wchp=dGLbVzz-zSkzk&md5=c02b4b56a643a12ad6c7d0b7572a5383&ie=/sdarticle.pdf[ Accessed on 19th April 2010]

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