Green Supply Chain Management - Term Paper Example

? Supply Chain Management Supply chain management is the committed management of supply chain activities designed to maximize customer value and achieve a sustainable competitive lead. Supply chain management is a representation of a conscious effort by firms involved aimed at developing and maintaining of the supply chains. Activities involved in supply chain management range from product development, logistics, production, sourcing to information systems used for coordination purposes. All firms that contribute to the delivery of commodities or services to clients or end users they are all referred to as the supply chain. The active participants in a supply chain are linked by information flows and physical flows. Information flows are the various communication channels that these firms use to coordinate and control the daily flow of goods and services in the supply chain. These channels are used by various partners in the supply chain as a conduit of information regarding their plans. Physical flows are the storage, transformation and movement of goods and services, and they constitute the most visible component of the supply chain. Supply chains find themselves competing against other supply chains due to the competitive nature of today’s markets (Lu 2012: 59). This has led to the creation of various forms of supply chain management modules. One of these modules of supply chain management is the green supply chain management. This involves the incorporation of environmental friendly practices in activities and processes that take place in supply chain. Green supply chain management requires integration of environmental friendly practices in all levels of the chain of supply. This includes product design, material selection and sourcing, delivery of the final product to the consumer and manufacturing process. Firms should also consider the end of life handling of the product after it is used or after fulfilling its intended purpose. This paper aims to discuss green supply chain management. Green supply management is the process of using environmentally friendly implements and their transformation into byproducts that can improve or be recycled (Ehrgott 2009: 271). The basic principle of green supply management is to reduce costs while at the same time conserving the environment. When a company reconsiders its options and adopts environmental friendly solutions for their production activities, they are likely to reap substantial benefits (Worthington 2012: 104). This is because, instead of focusing on reducing the unit cost of production, a company strives to reduce overall production costs. This can be achieved by applying environmental friendly innovations, which can have a substantial impact on production. This is because most environmental solutions are cheap and easy to implement at no extra cost (Zhang 2010: 2). An example of this is a top European company that designed a system that would be using 95 horsepower. The engineer in this company re-designed the system by using pipes with a bigger diameter than the initial ones and reducing their length. This saw a significant reduction for energy in terms of horsepower to 7. This goes to show that environmental friendly designs do not necessarily mean spending a lot of money, but small changes can bring about tremendous benefits to a firm. Various factors have influenced the management of supply chains around the world ranging from the beginning of the global economy to changes in the environment. The environment has played a significant role, in influencing supply chains, to change their orientation towards environmental solutions. These solutions are effective and efficient in terms of costs and resource utilisation. Human utilisation of natural resources has been an on-going process since the beginning of life, which until a few hundred years ago, was a sustainable activity (Cohen 2010: 213). This is because up until then, the environment was able to cope and sustain the demands of humans. Today, human activities have intensified with the advent of the industrial revolution, which promoted over exploitation of the environment. The continued environmental degradation led to depletion of resources (Basu & Wright 2012: 3210). Scarcity of resources has made it necessary for people to seek alternative ways of conducting business. The main environmental factor that led to the development of green supply chains is climate change. This is characterized by extreme weather conditions like tsunamis, droughts and famine, hurricanes and floods. The impacts of climate change led to scarcity of resources, which affected all sectors of life. In supply chain management, this increased the cost of raw materials and the overall price of commodities and services. Consumers were unable to deal with the increased prices of goods and services, which saw a decline in the volume of sales. A decreased volume in sales is an indication of reduced purchasing power, which translates to inevitable losses to businesses. All of these factors lead to the emergence of movements with the aim of finding means of preventing and controlling the effects of global warming on supply chains around the world (Sarkis 2010: 288). People are shifting their loyalty to environmental friendly products in an effort to contribute in environmental conservation (Dornfield 2013: 47). Companies involved in the production commodities have also been forced, by circumstances, to make their supply chains greener by implementing sustainability strategies, in their organizations and supplier relationships. This has resulted in the integration of environmentally sound choices into the supply chain management. The increased awareness of customers on the need to conserve the environment has made companies integrate ecological factors with supply chain management principles. Environmental conscious customers will always buy products that are focused on environmental conservation (Burritt 2011: 188). Companies with greener supply chains are afforded a competitive advantage over companies that are hesitant to embrace GSCM. This is because of increased customer awareness and regulatory norms that have been implemented by governments to control and curb environmental degradation (Bidgoli 2010: 742). The adoption of green supply chains has seen companies shift from merely complying with the regulations set on environmental conservation, to creating value for their shareholders and customers. Green supply management also positively influences firms’ operational costs positively by reducing these expenses. GSCM increases the shareholder value, which is a goal every company sets out to accomplish. For example, a company like dell saves over $20m annually because of supply chain and packaging improvements (Wisner 2011: 341). Green supply chains are characterized by management of a company and its interactions with the environment and how this relates to its business for improved performance. Supply chains are inculcating cognitive functions to produce a perception of environment, value and the satisfaction of environmental stakeholders’ needs. The focal point of all green supply chains is to drive carbon emissions down through tracking, reporting and reducing operational carbon emissions (Cuthbertson & Cetinkaya 2010: 132). They concentrate on reducing direct emissions from fuel combustion and indirect emissions related to use of electricity. The efficiency of green supply chains is characteristic of these entities because they use ingenious innovations to ensure they have lean supply chains. Lean supply chains enhance the responsiveness of a supply chain to market dynamics, which ensure survival of a company. Customers, in the green supply chain, are characterized by their willingness to spend more on goods and services, which are environmental friendly. Green supply chains are post-lower operational costs across the board because the technologies they use are subsidized to encourage their use. For example, Pepsi saved $44 million by switching from corrugated to reusable plastic containers for one litre and 20 0z bottles, conserving 196 million of corrugated material (Wilkerson 2010: 48). A characteristic of green supply chains is that they operate on the premise that being mindful of the environment is beneficial to businesses. In green supply chains, suppliers of raw materials used in production are found to be actively involved in environmental friendly practices. This leads to a significant increase in opportunities for firms because of decreased time and money in procurement of sustainable materials (Arlbjorn 2010: 69). When supply chains work in tandem with their suppliers, they are able to deliver products to the market quickly. This is because the raw materials delivered to them are already modified to their specifications, so no time is wasted in the production stage. Green supply chains assure compliance through environmental friendly practices. They minimize risks by involving their raw material suppliers in environmental friendly practices. Through their practices, green supply chains promote health of the environment and people. GSCs are characterized by raised productivity because their practices ensure the conservation of the environment to sustain their demand for resources. GSCs promote the creation of relationships, which are beneficial, between the key players in the chain which enhances productivity and value addition. GSCs support innovations in all sectors of the industries they are involved in because these innovations enable companies to enhance their performance and productivity. GSCs are identified by their ability to enable growth in areas they participate in because their practices create room for advancement. GSCs use systematic environmental considerations in their product design and all aspects of operations are oriented towards environmental conservation. GSCM has a characteristic waste management strategy focused on source reduction, curbing pollution and disposal methods that put emphasis on re-usability and recycling of their products. GSCM concentrates on reverse logistics and network design that suits their overall objectives of environmental conservation. According to Gupta, reverse logistics are methods of planning, implementation and controlling the efficient, cost effective movement of raw materials (Gupta 2013: 300). Traditional supply chains do not consider their impact on the environment as characterized by GSCs. Traditional supply chains highly depend and focus on the success of their sales persons in marketing of their products and services. Products are not marketed on the environment friendly principle, but their sale is based on conventional methods. Traditional supply chains concentrate on customer satisfaction at any cost without considering the effects of their actions on the health and the environment. Their emphasis on product quality is not focused on environmental conscious principles like GSCs, which concentrate on environmental friendly product design. Traditional supply chains operate on the premise that the end justifies the means. GSCs are characterized by transaction executions that are tailor made to suit the specific requirements and needs of each customer. Customers in traditional supply chains do are mostly unaware of the negative impact that the products they buy have on their health and the environment. Traditional supply chains unlike GSCs, exhibit reluctance in adopting or promoting innovations because, these new ways of conducting business represent change (IRMA 2011). Traditional supply chains are characterized by concentrated efforts in controlling the final product without addressing the negative effects that occur during the production process (WANG 2011: 89). Traditional supply chain management practices do not focus on value addition with reference to customers and shareholders unlike GSCs, which emphasize on value addition on all fronts. Compared to GSCs, traditional supply chain principles exhibit continual deterioration in profitability, competitiveness and economic sustainability. In conventional supply chain management practices, the supplier and buyer selection criteria are set by price while, in GSCs, ecological goal is part of the selection criteria (Vrijhoef 2011: 128). Traditional supply chains do not establish lasting relationships with their clients because of they do not specialize in clients’ specified needs and wants. This is in contrast to GSCs, which exhibit trained attention to acquiring raw materials, and products that meet environmental friendly qualities. Unlike GSCs which are involved in customer education on the benefits of environmental products on their health and the environment; traditional supply chain practices emphasize on sales successes (Blanchard 2010: 120). In relation to green supply chains (GSCS), traditional supply chains have relationships with their clients, based on the clients’ purchasing power. Traditional supply chains do not benefit from innovations the same way that GSCs benefit. This is because traditional supply chains adopt innovations with the sole purpose of increasing production and sales. Instead of utilizing inventions and innovations for boosting sales and production, GSCs utilize these implements to reduce their operational costs (Kutz 2009: 133). This gives GSCs an advantage over traditional supply chains because it enables them to offer better quality products that are readily accepted by consumers. In traditional supply chains, there is little regard for the end of life fate of the product after it has been used unlike in GSCs where emphasis is laid on a products’ re-usability. Green supply chain management is faced by a multitude of challenges, which include compliance to the numerous protocols, and regulations that have been set as benchmarks. Many firms are faced with the challenge of ensuring that their businesses conform to the various regulations that have been set by the relevant authorities. The way to deal with these challenges lies in understanding the nature of the business operations for the intended firm. This enables the firms’ management to decide, which regulations are essential for optimum performance of the company. This step acts as an organizational direction that is necessary for proper functioning of supply chain. The other challenge facing the implementation of green supply chains is the lack of awareness in the greater portion of the population. In other words, this means that most people are not informed about the benefits of consuming goods and services that have been produced in a green supply chain. The best way to change this is to include informative messages highlighting the benefits of these products on health and the environment. Green supply chains are characterized by extensive use of technology based innovations, which in some instances can be expensive. This is can be mitigated by firms taking the initiative to encourage in-house innovations aimed at enhancing efficiency and promoting effectiveness. This translates to reduced reliance on outsourced ideas, which helps companies cut costs (Emmett & Sood 2010: 200). Green supply chains are faced with the challenge of satisfying their clients’ needs, in a market, which is saturated with cheap products from the traditional chain of supply. This is because, even if people are aware of the need to conserve the environment, they do not have the purchasing power to consume environmental friendly products. In today’s market scenario, environmental friendly products do not receive the necessary support from the society and government. This makes the production of these products have a higher production cost than traditional supply chain products. This additional cost in production is transferred to the consumers who are unable to handle the price. The best way to mitigate for this is through public education, which should be aimed creating awareness on the benefits of green supply chains. Green supply chain management is the best way to carry out successful business practices and at the same time conserve the environment. Adopting a green supply chain ensures higher productivity, profitability and better competitive advantage. More organizations are increasingly adopting supply chains in order to gain ISO environmental certification. Greener supply chain management will help reduce operational costs of production, which will see a reduction in consumer goods and services. GSCM enhances value addition to the shareholders and consumers. The most prominent element in green supply chain management is a need for coordination between all stakeholders in the industry. This is to ensure that all key players implement green solutions to achieve uniform environmental change. Bibliography ARLBJORN, J. S. (2010). Supply chain management: sources for competitive advantages. A?rhus, Academica. Basu, R. & Wright, J. N. (2012). Total Supply Chain Management. London: Routleg. Bidgoli, H. (2010). The Handbook of Technology Management: Supply Chain Management, Marketing and Advertising, and Global Management. Illustrated Edition. New York: John Wiley & Sons. Blanchard, D. (2010). Supply Chain Management Best Practices. 2nd Edition. New York: John Wiley & Sons. Burritt, R. (2011). Environmental management accounting and supply chain management Volume 27 of Eco-efficiency in industry and science. Springer. Cohen, N. (2010). Green Business: An A-to-Z Guide. Illustrated Edition. SAGE. Cuthbertson, R and Cetinkaya, B. (2010). Sustainable Supply Chain Management: Practical Ideas for Moving Towards Best Practice. Illustrated Edition. Springer. Dornfield, D. A. (2013). Green Manufacturing: Fundamentals and Applications. Springer, 2013. Ehrgott, M. (2009). Multiple Criteria Decision Making for Sustainable Energy and Transportation Systems: Proceedings of the 19th International Conference on Multiple Criteria Decision Making, Auckland, New Zealand, 7th - 12th January 2008. Volume 634 of Lecture notes in economics and mathematical systems. Illustrated Edition. Springer. Emmett, S. & Sood, V. (2010). Green Supply Chain: An Action Manifesto. New York: John Wiley & Sons. Gupta, S. M. (2013). Reverse Supply Chains: Issues and Analysis. Illustrated Edition. CRC Press. Information Resources Management Association (2011). Green Technologies: Concepts, Methodologies, Tools and Applications. IGI Global. Kutz, M. (2009). Environmentally Conscious Materials Handling. Illustrated Edition. New York: John Wiley & Sons, 2009. Lu, D. (2012). Fundamentals of Supply Chain Management. Bookboon. Sarkis, J. (2010). Greening the Supply Chain. Illustrated Edition. Springer. Vrijhoef, R. (2011). Supply Chain Integration in the Building Industry: The Emergence of Integrated and Repetitive Strategies in a Fragmented and Project-driven Industry. IOS Press. WANG. (2011). Green Supply Chain Management: Product Life Cycle Approach. New York: McGraw Hill Professional, 2011. Wilkerson, J. (2010). Second Edition, Green Supply Chain Management Book Series: Greening the Federal Supply Chain-A Federal Contractor's Executive Order 13514 (Environmental & Energy Policy) Implementation Resource. Asta Publication. Wisner, J. (2011). Principles of Supply Chain Management: A Balanced Approach. 3RD Edition. London: Cengage Learning. Worthington, I. (2012). Greening Business: Research, Theory and Practice. Illustrated Edition. London: Oxford University Press, 2012. Zhang, J. (2010). Iclem 2010: Logistics for Sustained Economic Development--Infrastructure, Information, Integration. American Society of Civil Engineers. ASCE Publications. Read More