Green Supply Chain and Its Key Elements - Case Study Example

Green Supply Chain and Its Key Elements and Its Role in the Overall Supply Chain This report is going to handle supply chains in a specific view. This perspective is the Green Supply Chain which is a recent trend of supply chains and generally of businesses in the globe. This takes into account both national business undertakings as well as international operations. The processes of strong, moving, producing, packaging, repackaging, recycling as well as delivering products can be hazardous to the environment. These may lead to disposed materials of packaging, emissions of carbon monoxide, waste toxic products, industrial pollution and noise. The supply chain management is upgrading its operations approach and companies along with their respective governments are working towards the reduction of the abovementioned environmental predicaments. A big number of governments are implementing regulations on the environment that prohibit inbound shipments of commodities that pose a threat to the environment. Subsequent to Europe who enacted this in the year 2006, China implemented their first step in 2007. China especially sought to restrict those products with mercury, lead, cadmium, and other components posing a threat to the environment. This follows that the exporters who take their products to China cannot succeed in exporting the products with such components to China. The undertaking would eventually cause some disruptions as appertains the supply chains, call for the close working of managers and engineers to take note of the restricted portions and communicate them and a vast inventory of toxic products. Other countries like Japan, Canada, Switzerland, South Korea and Taiwan have also implemented or proposed similar types of legislation. Relations between various firms in an integrated system of supply chain provide an environment that befits a proactive action to reduce the ramifications that are negative towards the environment. As time goes by, customers have taken up sentiments aimed at adopting environmental friendly activities as well as the prevention of the greenhouse effect, increasingly. One of the studies conducted has shown that three quarters of consumers in the US said that buying decisions have been influenced by a company’s environmental reputation. Firms have also started to realize that control of pollution processes as well as reduction of waste can lead to reduced outlays and at the same time pull clients that are environmental conscious towards them. In addition to the rising awareness and concern among the public for those processes that are environmentally friendly is the escalating cost of the natural factors of production like oil, wood products and natural gas. The strategies under green supply chains to gain a competitive edge are with the inclusion of utilization of returnable, recyclable materials and reusable pallets and containers, designing of an effective transportation system, repackaging strategies, warehousing and usage of environmental systems of management from the first producer to the final buyer in the supply chain. Some companies have adopted the green supply chain system. For instance; the world retail Giant Wal- Mart has adopted this. (Wisner, et al 2008 pp26, 27) The concept of green supply chain did not emerge long ago and it seeks to cover all the steps in a product life cycle. It sets in at the point of design and ends at the point of disposal of the product after use. An example of green supply chain practice of management is the reduction in waste as well as the development of supply chain; including material sourcing, design of product, manufacturing, the delivery of a final good to the consumer and lastly the disposal after its useful life. A green supply chain includes such activities like green sourcing, green design, green manufacturing and green operations. Green sourcing refers to the consideration of environmental issues while dealing with suppliers as well as supplier commodities and the commodities’ life cycle. Green design is the product design with given considerations on the environment. Green manufacturing refers to the taking in to account the environmental and social concerns during the step of products manufacturing among other Green Supply Chain activities. Green distribution puts into consideration the environmental and social concerns while distributing the product in focus. Following manufacturing stage, there is the putting into account the material inputs as well as the processes that the product requires to be taken closer to consumers. As a United Arab Emirates representative, there were about 38.17% of Dubai Companies that had taken in to consideration the green supply chain function. This shows that there is the essentiality of creating widespread environment awareness of supply chains in Dubai. (Brik, 2008) Major Benefits of Green Supply Chains Practice There are two major benefits that emanate from the green supply chain approach. These are business and environmental benefits. Environmental benefits are somehow straight forward and refer to the low-cost approaches which every business can take to realize positive changes as far as the environment is concerned. Often the focus of the efforts is upon the in-business changes, but the choices in the supply chain can have a positive impact as well. To make supply chain green enough it does not need to be process that is resource-intensive. It does not call for the reviewing of the credentials of the environment at every step in the operations of the supplier. Minute undertakings like ensuring that the business’ suppliers are utilizing recyclable materials in the situations that are possible and also that their process of packaging is sustainable and minimized, can lead to a vast impact. This is possible particularly when numerous businesses opt to adopt the idea. Business benefits on the other hand are increasingly becoming precise. From a certain perspective, these show the impacts of a ‘virtuous circle’ where the more consumers and businesses undertake the issues of the environment with seriousness the bigger the gains will be. Business benefits are usually of two major kinds. The first is that there are potential outlay reductions. Environmental changes lead to escalated efficiency in resource usage and these result to overall improvement. The second benefit comes in where the business enhances its reputation and customer preferences. More companies are tending towards the utilization of environmental issues in their buying decisions, and this can lead to the high sales as well as marketing operations. Customers especially would like to witness that the business is environmental friendly in all the functions in the supply chain. It is of vital importance to note that even if there would be ways of presenting quantified benefits emanating from the external costs saved. Mostly, these are in terms of social cost outlays saved from the green supply chains. The benefits are in most times estimates, but no actual amounts can be found about the same. The reason for this is that, the benefits are with the inclusion of improved quality of living and also of the overall environment. Many are the moments that the gains are realized in a virtual manner rather than a direct way. So as to realize the mentioned benefits a company or firm can assess the levels of emissions of greenhouse gases caused by various products and eventually this information will aid customers in making decisions that are more informed. This may be realized by way of implementing the PAS 2050:2008 environmental standard. This standard serves as an aid in computing products’ carbon footprint. Through this process the business can concentrate on areas that help to lower the levels of emissions as well as reassure the esteemed customers that the commodities have passed through the assessment against this approved standard of achievement. (businesslink.gov.uk, 2009) Major Risks/Cost of the Green Supply Chains Being environmentally friendly or going green for a firm means that there will be short-term costs and thus, the focus on benefits should be long-term. Recently, pressure has been mounting on managers to make decisions that include costs of environmental undertakings. There has been significant progress while developing approaches of determining effects on the environment by products and substances over their respective life cycles. These assessments have been divided or categorized into two. That is, design for environment and life cycle analysis. However, these two assessment approaches would not be applied if all outlays relating to externalities were included in the prices of inputs in entirety. Therefore, in the absence of precise or accurate pricings, the two methodologies have to be utilized so as to capture the social costs. A company is there after expected to change its behavior depending on the outcome of their application. The tools are used under the major steps of a product’s life cycle. Internalizing the environmental externalities thus shows that companies are in the process of achieving social efficiency within the economic constraints that are usually there. Due to the new costs (external costs) besides the usual economic costs, decisions based upon the new criteria are in the company’s long-term interests. (Richards and National Academy of Engineering, 1997 p 105) Outlays of green supply chains or rather going green are usually short-term. They may discourage a firm from going green if such were looked at from the short-run point of view. Thus, it is very essential to note that these costs of going green are often overcome in the long-run and therefore they just exist in the short-run. Key Issues in Designing and Implementing the Green Supply Chain The traditional approach of supply chains has been that they are one way. That is, an integrated process of manufacturing where raw materials are processed up to the point they are final products, ready for delivery to prospective consumers. While utilizing this definition, supply chains then refer to the activities that involve manufacturing in entirety (from acquiring raw materials up to the point where a final product is realized for the purposes of delivery.) The changing face of environmental concerns has changed the whole perspective of supply chains that bring in strategies of environmental management for these supply chains. Green supply chains are a form of an extended type of supply chain from the traditional one. Thus, there will be a look at the measures of performance of an extended kind of supply chain. A general approach to the achievement as well as maintenance of green supply chains will be developed. Generally, the effect of operations of manufacturing upon the environment can be said to be three; waste, resource use and energy utilization. So as to achieve the requirements of a green supply chain firms have to come up with procedures concerning their operations regardless of whether they are manufacturing organizations. Designing a green supply chain focuses on analysis of operations, day-to-day improvement, measurement, as well as objectives. Major issues come in at the point of implementation of a green supply chain. Implementation has major tasks to make the procedure successful. The procedure includes these stages; identifying processes, developing a measurement system of performance, measuring the supply chain system, prioritizing, developing alternatives as well as picking the approach and lastly, launching an auditing and the improvement procedures. Identifying processes has to be done for every product in the supply chain. The management has to identify the product’s inputs in entirety, all its outputs, by-products as well as the factors of production. Developing a measurement system of performance is essential especially due to complexities of many supply chain systems. Mostly, one check or measure on performance is enough while assessing a supply chain’s true performance. Such a measure on the supply chain system has to involve the three categories of the environment and the existing measures of the operations. Measuring the supply chain system refers to the computation of the true performance at every supply chain process, step. This has to apply to each product. It will be a function of the above developed measures of performance. The composite measure of performance may be one numerical value or a vector of the numerical values. Prioritizing comes after measurement has been done for all products. Thus, prioritizing refers to the consideration of the steps of processing so as to raise the composite performance in line with the measuring of the supply chain system. Developing alternatives as well as picking the approach that relates to the development of performance improvement alternatives. This may call for targeting the alternatives that reflect the worst composite performance at first depending upon the prioritizations. Then, pick the apt approach. Launching an auditing and the improvement procedure means the schedules’ establishment and then the auditing procedures followed by a continuous upgrading with the inclusion of emerging and those procedures of non-compliance. (Beamon, 1999 pp339, 340) Which Companies Is/Are The Green Supply Chain Ideally Suited For? Green supply chains are most befitting to those companies that involve themselves in manufacturing of products. As the members of public increase their awareness of the issues to do with the environment as well as greenhouse effects, customers are likely to enquire more about the commodities they are buying. Firms should brace themselves of questions concerning how environmental friendly or green their processes of manufacturing are also the supply chain of the products. Also in focus will be their ways of recycling and carbon footprints. Most manufacturing companies have found going green to be a good thing and have sought to change the interest of the public in all the ‘green’ things to raise their profits. A good number of firms have proved in many ways that going green is indeed associated with improved financial gains as well as environmental performance. Many companies have looked into areas that can lead to improved financial performance and increased their profits through their operations. For instance, there is the General Motors Company that operates supply chains. Going concern has led to a decline in costs of disposal by around US$12 million by way of establishing a program of reusable containers with the suppliers of the company. This reduction in disposal costs came as a surprise to the company since it was only as a process of trying to reduce the outlays in supply chains. Subsequently, the company’s management realized that the reductions in costs coincided with GM’s commitment towards the environmental issues. Thus, those companies that involve themselves in manufacturing should take up Green Supply Chains besides others. This is due to the fact that these are the companies that impact most on the environment. (Murray, 2009) Despite the fact that green supply chain approach is applied in all these levels of a product life cycle. Some companies like insurance or financial institutions that are service-oriented may play part in the life cycle process. That is, either as consumers or in the point of disposal of the product- this might have been an asset to the company. Thus, this has the implication that all companies in entirety are suited by this approach at various points and time. Which Companies May Green Supply Chains Not Be Suitable For? One may argue that green supply chains do not really apply to service-oriented companies as the case has been before. Green supply chains apply to all companies as per the argument by Kolk and Pinkse justifies. Companies like insurance and finance which were pervasive have led to some debate. The trend has been changing in the most recent years. Reports are increasing which concentrate on how responsible the insurance and finance sectors have been with regards to asset management and climate implications. (Kolk and Pinkse, 2009 p101) Judging from this argument thus there is no company than does not need the relatively new business approach of green supply chains. This is due to the fact that in one way or another, the business will involve or take part in activities that lead to impacts on the environment. This is regardless of whether the company is service-oriented or goods oriented. Examples of companies in UAE that are successfully using the green supply chains including best practices There is a major paradigm shift as most companies in the UAE are voluntarily taking up eco-sustainability to be part of their economic development integrated program. They play their part as true collaborators together with the government to ensure social welfare. Large companies in the world are in the frontline by way of setting aside huge sums for the purpose of eco-conservation. Most of businesses have seen the need of a living planet. Each and every company no matter how minute it is has a role to play in this process. Two years subsequent to its signing the Kyoto Protocol, the UAE was establishing an own green building system ratings in 2006. Previously, the UAE’s governments were not putting into consideration the environmental checks with buildings in focus. This was particularly astonishing since as per the Global Footprint Network ratings UAE is the biggest resource utilize per person in the globe. Dubai was also named the biggest producers of carbon emissions in the globe by WWF. Similarly, 40 UAE’s business groups were also concerned and following this they formed the Emirates Green Building Council. Ambitious plans are underway to make UAE buildings green as per Sheikh Mohammed who was Dubai’s ruler as well as UAE’s Prime Minister. Some companies like WS Atkins engineering Consultancy Company have gone green as well as sought to create awareness in conjuction with others. (Shepherb-Smith, 2007) According to Chaudhary, most companies in the United Arab Emirates have taken up new projects that are eco-friendly as a way of broadening their coverage of matters to do with Corporate Social Responsibility. They feel that these new programs will help in transforming the world into a better place. Despite the previous refusal by most huge businesses, they now tend to realize the benefits of going green. Therefore, it was not until the recent past that the companies started to consider eco-conservation as well as encouraging, practices that are ecologically safe. This they have included in the plans of various projects they undertake daily. Things have changed in the UAE and several big companies have decided to look beyond their goals, both short and long-term, and considered giving back to the society. This they consider to be Corporate Social Responsibility. Several firms in UAE have been supporting ‘green’ projects. For instance; together with the government, municipalities, environmental agencies, Dolphin Energy Company has sought to conserve numerous vital coral reefs in both Qatar and UAE. The company of Dolphin Energy did not advocate for environmentally friendly activities alone. Several other companies are also on board like Al Fahim group. There is also the Abu Dhabi’s National Bank which organized awareness campaigns on ecological issues. Others may include Nokia Siemens and Nokia Networks, Canon ME and Foundations such as Emirates and Al Dar. Those companies in the program of corporate membership receive advice and information upon the way of getting to have sustainable practices of business and at the same time on the way they can contribute towards a living planet. Few businesses on the UAE have taken up an impressive record of Corporate Social Responsibility. Some of these are Shell, Masafi and HSBC. Among the activities that these companies are involving in are the programs of coordination for which, those companies involved have appointed such approaches like recycling centers’ set up and also establishing campaigns in organizations and schools to make them understand the benefits of taking up the venture. This approach has however, not been there until in the recent past when the companies in the UAE have shown interest on the same, but a part of Corporate Social Responsibility. (Chaudhary, 2009) Reference list: Beamon, Benita M. (1999). Designing the Green Supply Chain. MCB University press. pp339, 340. Brik, Anis Ben. (2008). Green Supply Chain in Dubai. Retrieved October 12, 2009 http://209.85.129.132/search?q=cache:5syejekSMN0J:web2.dubaichamber.ae/pdf/reports /GREEN%2520SUPPLY%2520CHAIN%2520IN%2520DUBAI.pdf+green+supply+chai n+in+UAE&cd=2&hl=en&ct=clnk&gl=ke businesslink.gov.uk. (2009). How to Make Your Supply Chain Greener. Retrieved October 12, 2009 http://www.businesslink.gov.uk/bdotg/action/detail?type=RESOURCES&itemId=107942 2427 Chaudhary, Suchitra Bajpai. (2009). Sustainable Strategies - Eco-Friendly Projects in UAE. Retrieved October 12, 2009 http://www.english.globalarabnetwork.com/200909302959/Economics/sustainable- strategies-eco-friendly-projects-in-uae.html Kolk, Ans and Pinkse, Jonatan. (2009). International Business and Global Climate Change. Taylor & Francis. Murray, Martin. (2009). Introduction to the Green Supply Chain. Retrieved October 12, 2009 http://logistics.about.com/od/greensupplychain/a/green_intro.htm Richards, Deanna J. and National Academy of Engineering. (1997). The Industrial Green Game: Implications For Environmental Design And Management. National Academies Press. Edition illustrated. p 105. Shepherd-Smith, Amelia. (2007). UAE Construction Going Green. Retrieved October 12, 2009 http://www.arabenvironment.net/archive/2007/11/378707.html Wisner, Joel D. et al. (2008). Principles of Supply Chain Management: A Balanced Approach. Cengage Learning. Edition 2, illustrated. pp26, 27.   Read More