Green Supply Chain Management


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This paper discusses why a company should "Green" their SCM and steps to implement this strategy.

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Green Supply Chain Management

  1. 1. To: Reader From: Justine Forrest Re: Research Paper Date: April 3, 2009 I attach here my research paper on the topic of Green Supply Chain Management. Green Supply Chain Management particularly interests me because my grandmother works at Alcon Laboratories in the Supply Chain Management division, and this research gives me a chance to explore what concerns her daily work life. Also, the “green movement” is a topic and a trend on the forefront of everyone’s thoughts. The convergence of these two topics that may seem lacking any similar attributes makes me curious to see how “Going Green” may benefit Supply Chain Management. Ever growing concern about the environment can lead consumers to judge companies based on how they affect the environment, making Green Supply Chain Management essential to businesses, and by making the Supply Chain Green, a company take steps to minimize environmental impacts of its operations. I hope this paper interests you as much as I have enjoyed researching Green Supply Chain Management. Attachments: Abstract Research Paper with Appendices References Page Forrest 1
  2. 2. Abstract This paper explores the concept of Green Supply Chain Management (GrSCM). I first explain what Supply Chain Management (SCM) and Green means, and then explain how these two concepts work together and produce the business concept Green Supply Chain Management. GrSCM may become a goal of SCM and can be looked at in three different sectors: organization, process, and technology. To know the results your greening produces, you must first gather data assessing your current environmental impact, select environmental performance indicators relative to your company’s goals, and then check how well your company achieves its goals. Forrest 2
  3. 3. Green Supply Chain Management Introduction I write this paper to convey to businesses that they should “green” their Supply Chain. This topic interests me because my grandmother works in Supply Chain Management of Alcon Laboratories, and this paper gives me an excuse to research what big picture decisions she must manage every day. I never thought her job might consist of thinking about the environmental impact her company makes in daily operations. I chose this topic because I believe the world’s focus on environmentalism increasingly impacts operations of businesses in every department and every sector of the economy, whether it is to minimize paper use or make a completely recyclable product. This paper will first define my parameters, introducing Supply Chain Management and Environmentalism. Next, I will consolidate the two topics into Green Supply Chain Management and focus on how companies can Go Green with its Supply Chain, relaying the antecedents, the concept, and the outcomes. Finally, I will apply my concept to Alcon Laboratories and relate how well the company performed when it applied the concept to itself. Supply Chain Management Supply Chain Management (SCM) is an essential part of every business. The supply chain of a company is its network consisting of all the companies’ suppliers, itself, and its customers. Without a successful SCM system, no matter how small a company might seem, a business cannot successfully operate. Different definitions of SCM exist. The definition given in “Evolution of Supply Chain Management” by Gunjan Soni and Rambadu Kodali: “The systematic strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole” (2008, p. 1). Bozarth Handfield defines SCM as the “active management of supply chain activities and relationships in order to maximize customer value and achieve a sustainable competitive advantage” (Soni, 2008, p. 19). Though different definitions exist, they generally center around the same principles: efficiency and sustainability. Forrest 3
  4. 4. The supply chain encompasses every aspect of a business’s operations. It begins with raw materials, continues through production phases, creating finished goods, through distribution, and finally to the end consumer (Boone, 2009, p. 434). Appendix A shows SCM’s importance by graphically organizing how it encompasses the daily operations of a business. As you can see, SCM includes every portion relevant to a company’s operations. General benefits a successful SCM presents a company are: • Less uncertainty, errors, delays and losses along the supply chain • Lower costs by improving efficiency and production • Low stock size • Better information sharing and highlighting (Soni, 2008, p. 1-2) These contributions give a company another asset: competitive advantage. If a Company A’s SCM operates more efficiently than another Company B’s SCM, then Company A can produce its product at a lower cost and sell at a lower price. Supply Chain Management is constantly seeking ways to improve itself, to become more efficient and gain the competitive advantage. I believe a company without a SCM system will flounder at best. The Green Movement The Green Movement is a trendy spin on Environmentalism. Most commonly today, anything that reduces harmful impacts on the environment finds itself labeled “Green.” Environmentalism is a social movement that advocates sustainable management of resources and the protection and restoration of our natural environment. As the world focuses on “Going Green” companies are looked upon to reduce their environmental impact, or footprints. Much legislation passes to increase our planets sustainability. Environmentalism in Businesses Today Businesses must begin thinking green today to retain future competitiveness. “There is now a widespread acknowledgement among business leaders that green will be a core requirement for doing business in the future (Smith, 2007, p.52).” Businesses must adapt to customer preferences. As people in the world become more concerned with environmentalism, businesses must conform to get ahead. The Convergence of SCM and Environmentalism Environmentalism and Supply Chain Management hold the same high-level objectives. Two principles associated with both concepts are efficiency and sustainability. These two concepts Forrest 4
  5. 5. complement each other with their goals. A company beginning a Green Supply Chain Management system must look at both the goals of environmentalism and SCM in order to determine and institute initiatives. Green Supply Chain Management Increased public concern with environmental impacts gives reason enough to contemplate going green in the supply chain. The public contains a company’s customers. If customers see a company not trying to implement green standards, they might switch their buying elsewhere. This section outlines the antecedents of my concept, the concept, how to apply the concept, and the outcomes when applied. See Appendix B for the conceptual model. Antecedents of GrSCM: What comes first? The main antecedents of Green Supply Chain Management are the current existence of a Supply Chain Management System, environmental knowledge, and what environmentalism means to your company. A company cannot develop its SCM system into a Green SCM system without an existing SCM system. You cannot know where to begin your environmental transition without knowing the goals of environmentalism and what extent your company tolerates resource use to achieve those goals. Both of these must exist to have a Green Supply Chain Management System. Two other antecedents to GrSCM are governmental and top-management support of an environmentalist attitude. Due to the long-term time, effort, and resource commitment of GrSCM, and the way in which it can cause conflicting agendas, top-level management commitment must exist (Srikanta, 2009, p.22). A company beginning or continuing a GrSCM system needs top-level management support, throughout the process, otherwise the GrSCM system will not survive. As the world begins focusing on environmentalism, government regulations become a key motivation for companies Voluntary environmental initiatives (VEIs) are one way a government may choose to support environmentalism. A company can choose to adhere to a VEI’s requirements, thought the requirements are not mandatory. (Christmann, 2002, p.121). Government support for environmentalism warrants companies’ close consideration of GrSCM. Concept: Green Supply Chain Management Green Supply Chain Management (GrSCM) makes sense, and I will tell you why. Samir Srivastava, who performed a literature review of available documents pertaining to GrSCM, defines GrSCM as: “Integrating environmental thinking into supply-chain management, including product design, material sourcing and selection, manufacturing processes, Forrest 5
  6. 6. delivery of the final product to the consumers as well as end-of-life management of the product after its useful life” (2007, p. 2-3) This broad definition complements the already broad responsibility of Supply Chain Management and even adds another responsibility to a company: the product’s recyclability, also known as reverse logistics. Appendix C is Srivastava’s model of the responsibilities of GrSCM. As you can see, there are many different issues a company can look at when first beginning the greening process. Big Picture View Companies need a good plan because starting a GrSCM system requires work. You must determine the bigger picture of your company’s SCM goals. “Greening becomes another goal— at times aligned and at times in conflict—with the more traditional supply chain goals of building efficiency, continuous improvement, and profitability (Tohamy, 2009, p.10). Before beginning any initiative, determine how it fits in the bigger picture of the green supply chain strategy (Tohamy, 2009, p.11). An initiative implemented without regard to the bigger picture detrimentally affects a company’s other supply chain operations. Changing products by making them recyclable may cause problems with other company goals, like profitability. Sometimes an initiative is too expensive to be realistic for a company. Current Impact and Performance Standards To know the results your greening produces, you must first gather data assessing your current environmental impact, select environmental performance indicators (EPIs) relative to your company’s goals, and then check how well your company achieves its goals. Many countries already have directives that a company can or must comply. Without compliance a company cannot participate in that country’s market. VEIs are another way governments help companies self-regulate. VEIs become a great mechanism companies may use to balance their interests with the broader public interest (Christmann, 2002, p. 122). VEIs enable companies to initiate a GrSCM in its current SCM system by giving companies defined criteria for operation. Implement Initiatives Greening some supply chain processes may require more work than others. Some easy first ideas for greening your company’s supply chain are: • “Reduce energy consumption through plant redesign and machine preventative maintenance. • Measure and minimize [your] transportation carbon footprint in the distribution network. • Work with [your] suppliers to minimize excess packaging… Forrest 6
  7. 7. • Incorporate product reuse and recycling into [your] product development initiatives (Tohamy, 2009, p.10).” Measuring and minimizing transportation is probably one of the most apparent first steps a company can implement. Reducing transportation costs makes less impact on the environment from transportation vehicles along with saving gasoline, which reduces cost and the draining of our fossil fuel resources. Managing transportation better not only realizes goals of SCM, but also those of environmentalism. Measure Environmental Impact of New Initiatives Many different initiatives a company can take to become green exist. The company must be careful that the initiatives it takes do not negatively affect other performances of the company. As long as the company takes steps guarding against negative impacts on performance in other sectors, good outcomes will follow. Outcomes of Implementing GrSCM Many different outcomes may arise from implementing a Green Supply Chain Management system. A company may find difficulty spelling out exactly every little minute detail that occurs. As long as a careful watch is kept on the costs versus the perceived benefits, GrSCM will produce positive outcomes such as: • More efficient resource use • Increased sustainability • Customer satisfaction • Competitive advantage • Cost advantage Green Supply Chain Management lends itself as a concept and a goal. You either begin environmentally friendly Supply Chain Management system, or you do not. You can achieve it fully or partially. Using fewer resources, while still effectively maintaining product integrity, enables more efficient resource use. Companies can achieve increased sustainability for themselves as well as the environment. Exhausting fewer resources, reducing harmful ingredients, and choosing cost effective uses of those resources improve sustainability. Businesses cater to customers. When customers are concerned with the environment, so should the company selling to those customers. This lends to customer satisfaction. Through GrSCM companies may gain a competitive advantage and a cost advantage. More efficient resource use, increased sustainability, and customer satisfaction all lead to these two things. As long as a company keeps an eye on the big picture, the outcomes will be positive. Responsibility to Green your SCM? Forrest 7
  8. 8. The environment today constitutes as a global problem. Many experts are worried about our futures and our responsibilities to the future. Christmann and Taylor suggest multinational companies (MNCs) have a responsibility to help “MNCs have financial, technical, and organizational capabilities (2002, p. 122).” These capabilities enable resource transference towards actions combating environmental issues (2002, p. 122). Research and Development resources used determining useful ways to green the supply chain potentially helps the local area as well as the world. If a company holds the means, it should make itself more efficient and sustainable, even if it means helping the rest of the world. Businesses have a social responsibility. Kurtz says social responsibility “includes contributing resources to the community, preserving the natural environment (2009, p. 24).” Businesses have a dual responsibility; it must be profitable, while also helping the community. This social responsibility concept gives companies reason to begin GrSCM initiatives. Application of GrSCM to Company I chose to examine Green Supply Chain Management and how well Alcon Laboratories did applying this concept to their business organization and procedures. Alcon Laboratories develops, manufactures, and distributes eye care products within its Surgical, Pharmaceutical, and Consumer Vision Care divisions. I’m sure you have seen their products on the shelves of Wal-Mart and other stores. At Alcon, their Green Supply Chain Management system is known as ASCEM, or Alcon Supply Chain Environmental Management. Alcon applied GrSCM several ways. I derived the following information form Alcon’s ASCEM pamphlet. How Alcon Applies GrSCM Concept Alcon Supply Chain Environmental Management encompasses several key factors. Its mission assures “regulatory compliance by extending the commitment towards Corporate Environmental Responsibility (ASCEM Pamphlet),” and focuses particularly on product stewardship and data management, supplier conformance, and supply chain environmental sustainability. Currently issues ASCEM pursue include: • EU’s REACH Regulations (Registration, Evaluation, and Authorization Chemical substances) • EU’s Battery Directive • EU’s Packaging and Packaging Waste Directive • EU’s Packaging Essential Requirements • And several others. Forrest 8
  9. 9. These initiatives accomplish several objectives. The EU’s REACH Regulations apply to manufacturers and importers with substances over one ton a year. REACH ensures that potentially harmful substances used are controlled. The EU’s Battery Directive prohibits the placing batteries and accumulators that contain mercury or cadmium above a certain point. These two initiatives create a barrier for harmful materials to flood the world. Another initiative, the Packaging Waste Directive and Essential Requirements, minimizes the creation of packaging waste materials along with promoting energy recovery, re-use and recycling packaging. Compliance with this EU Directive includes: • Packaging using the minimum weight/volume allowing for its functionality, safety, hygiene, and customer satisfaction. • Concentration of lead, mercury and other materials under a specified amount • Packaging must either meet one of the following recovery methods: Energy Recovery, Recycling, or Composing The Packaging Waste Directive and Essential Requirements complements one initiative I previously stated as a concept of GrSCM. Alcon goes up and above minimal compliance. They look at other countries and comply with their directives as well as looking at buyer specific initiatives like Wal-Mart’s Score Card. How Did Alcon Do? Obviously Alcon Laboratories believes that a Green Supply Chain Management system benefits the company as well as the supply chain, otherwise they wouldn’t be so heavily involved in regulation compliance and other directive compliances. Alcon knows the current environmental impact of their products. Governments and top-level management have chosen performance standards, such as the level of mercury and cadmium in batteries. Alcon has implemented initiatives, like the EU’s REACH directive. They measure new initiatives environmental impacts. Alcon performs each step of my concept and performs it well. Conclusion- Go GreenSCM! Environmentalism and Supply Chain Management work together well. Supply Chain Management constantly tries to improve itself, and going green accomplishes that aim. Environmentalism and Supply Chain Management both contain ambition for long term performance. Both also aim to achieve sustainability. With a world focusing on ways to better itself, now and long-term, I believe that Environmentalism and Supply Chain Management go hand-in-hand, creating a need for a Green Supply Chain Management system in every company. Initiatives well planned and thought out with the proper management support can greatly impact the sustainability of a company, a goal every company holds. I advise to start out small and increase initiatives as the ability becomes efficient because every company differs. Every little step counts. Forrest 9
  10. 10. Appendices Appendix A: (Soni, 2008, p. 3) Antecedents Concept Appendix B: Conceptual Existence of Supply Chain Model Know Big Picture Management System Determine current Knowledge of “Green” and environemental impact what it means to your Choose performance company standards Top-level Management Implement Initiatives commitment. Measure environmental Government Support impact of new initiatives Outcomes Better use of resources Increased Sustainability Customer Satisfaction Forrest 10 Competitive Advantage Cost Advantage
  11. 11. Appendix C: (Srivastava, 2007, p. 57) Forrest 11
  12. 12. Works Cited Alcon Supply Chain Environmental Management (ASCEM) pamphlet Christmann, P., Taylor, G. (2002) “Globalization and the environment: Strategies for international voluntary environmental initiatives.” Academy of Management Executive. Vol. 16 (Issue 3), p121-135, 15p. Kurtz, D.L. (2009). Contemporary Business. United States: South-Western Cengage Learning. Smith, J. W. (2007). “Green is Not an Attitude.” Marketing Management. Vol. 16 (Issue 5), p52, 1p. Soni, G., Kodali, R. (2008). “Evolution of Supply Chain Management: Developments in Academia and Industry.” ICFAI Journal of Supply Chain Management, Vol. 5 (Issue 4), p7-40, 34p. Srikanta, R. (2009). “Antecedents and Drivers for Green Supply Chain Management Implementation in the Manufacturing Environment.” ICFAI Journal of Supply Chain Management. Vol. 6 (Issue 1), p20-35, 16p Srivastava, S. K. (2007). “Green Supply-Chain Management: A State-of-the-Art Literature Review.” International Journal of Management Reviews. Vol. 9 (Issue 1), p53-80, 28p. Tohamy, N. (2009). “Green Journey Needs a Roadmap.” Supply Chain Management Review. Vol. 13 (Issue 1), p10-11, 2p. Forrest 12