Wal-Mart Green Supply Chain Management - Case Study Example

GREEN SUPPLY CHAIN MANAGEMENT Contents 1.0 Introduction 1 2.0 Green supply chain overview 4 3.0 Wal-Mart green supply Chain management 5 4.0 Wal-Mart going green with its logistics 6 5.0 Wal-Mart method of managing the supply chain 9 6.0 Wal-Mart developing strategies for green supply chain management 11 6.1 Risk based strategies 11 6.2 Efficiency based strategy 11 6.3 Innovation based strategies 12 6.4 Closed loop strategy 12 7.0 Challenges faced by Wal-Mart in implementing green supply chain 13 8.0 Conclusion 14 1.0 Introduction Today, the globe is being confronted with environmental changes that are affecting the world population. There have been increased debates on climatic change which have created cross nation movements to identify the causes of climate change and develop solutions to it before it is too late. In an effort to address the issue of global warming, many nations with main focus on organization are passing rules and regulations which are largely aimed at reducing the world carbon emission (Bowen, Cousins, Lamming and Faruk, 2001). Similarly, businesses, consumers and various stakeholders are becoming environmental conscious. Recently, customer loyalty is shifting into more environmental friendly products whereas companies are adopting the green supply chains through introducing more sustainable strategies in their organization. It is clear that the focus on the different sustainable strategies continue to result in a growing need for effectively integrating strong environmentally sound choices into organization supply chain management practices (Bowen, Cousins, Lamming and Faruk, 2001). This paper aims at discussing how Wal-Mart is adopting the principles of environmental and social sustainability both in its logistic and supply chain management operations. Figure 1: Timeline of Wal-mart sustainable activities 2.0 Green supply chain overview According to Corbett and Klassen (2006), the green supply chain is defined as the process of incorporating environmental friendly inputs as well as transforming these inputs into outputs that can be re-used and reclaimed at the end of their defined lifecycle thus creation of a more sustainable supply chain. Figure 2: Environmental impact at each stage of the supply chain Corbett and Klassen (2006) asserts that, in order to address the issue of global warming and climatic change, it is important to integrate environmental factors with supply chain principles so as to understand how the process of a given organization supplies chain impact on the environment. Therefore, a more sustainable supply chain is not only optimal to a particular organization but rather it is optimal relative to its limited impact. Corbett and Klassen (2006) asserts that, greening supply chain can be defined as the process of implementing a sustainable development plan which is aimed at achieving improved safety, environmental and health performance. This ensures efficient use of energy and other natural resources while at the same time reducing both societal and environmental impacts of business operations. One of the main aspects of green supply chain is that they work towards improving both a company economic as well as environmental performance through establishing a stronger suppliers and buyers relationship (Lenox and King, 2004). Companies such as Wal-Mart have developed different initiatives for ensuring that green supply chain management which include screening its suppliers for environmental performance. Also, the company provides training to build on its company supplier’s environmental management especially in enhancing reverse logistical system. According to Lenox and King (2004), green supply chain management has various environmentally preferably production of products as well as services that conserves the water and energy while at the same time minimizing generation of waste and greenhouse gasses. Green supply chain management= Green purchasing + green manufacturing/ material management + green distribution/ marketing + Reverse logistics 3.0 Wal-Mart green supply Chain management Over years, supply chain management has been considered to be the cornerstone to Wal-mart success and it still stand as the company primary competitive advantage in the departmental or retail store industry (Liker and Choi, 2004). Wal-mart supply chain is defined by a distribution system that largely emphasizes visibility through effective sharing of information by its suppliers. It is clear that although there are various logistical functions that allow the company to be both the logistical and price leader, the company primary focus is on making both the logistical and supply chain management processes “green” and more environmental conscious (Liker and Choi, 2004). According to Wal-Mart CEO Scott Lee, the company is largely committed to three key goals namely; to be supplied 100% by renewable energy, to create a more zero targeted waste and to sell products that widely sustains Wal-Mart resources as well as the environment. The CEO push for sustainability has greatly transformed Wal-Mart into a more environmental friendly powerhouse that continues to cut on its product prices and remain at the frontier of distribution system technology (Liker and Choi, 2004). Wal-Mart greening strategy came to being in February 2010, when the company announced its plan to cut 20 million metric tons of greenhouse gas emission from its supply chain by the year 2015. Kocabasoglu, Prahinski and Klassen (2007) maintain that, the company plans was to largely focus on reducing carbon which is associated with product categories with highest carbon embedded to it such as clothing, milk, meat and bread. In realizing its dream of reducing carbon emission, the company focuses on urging its suppliers to examine the carbon life cycle of products from raw materials. In its greening supply chain management, the company aims at working closely with its suppliers advising them on practices that ensure the products produce are eco-friendly (Kocabasoglu, Prahinski and Klassen, 2007). Wal-Mart is largely designed to widely incorporate environmental considerations into decision making at every point of the company supply chain management and logistical processes. The company has simplified the definition of green supply chain management to a simple green purchasing existing between its retail store and their customers (Krause, Scannell and Calantone, 2000). 4.0 Wal-Mart going green with its logistics In 2000, Wal-Mart adopted a new strategy of making the company logistical process more environmental process. Krause, Scannell and Calantone (2000) maintain that, the company defines its logistic process as green whereby a system has been implemented and it independently monitors the company suppliers to ensure their practices meet all the environmental and social standards. Clearly, becoming eco friendly is important; an international company such as Wal-Mart must consider the green transformation effect on its bottom line (Richey, Chen, Genchev and Daugherty, 2005). While the company is building value added networks of suppliers, nonprofits employees and government agencies to effectively green its supply chain, Wal-Mart is using this same approach in lowering its environmental and carbon footprint so as to increase its profitability while at the same time increasing its margins (Krause, Scannell and Calantone, 2000). As a way of enhancing its logistical process, Wal-mart reached out to its external stakeholders so as to develop area of environmental impact and identify logistical network that will assist the company achieve its green goals. In its logistical operations, the company ensures that it logistical cycle employs material and product use, reuse as well as management from both the company inter and intra perspective (Richey, Chen, Genchev and Daugherty, 2005). The company employs external factors towards ensuring that implementation of green supply chain is effectively implemented. The external factors include both the downstream and downstream factors to the company operational boundaries (Rothenberg, Pil and Maxwell, 2001). The various upstream factors being considered by Wal-Mart are; inbound logistics which include activities such as vendor management and green purchasing. Here, the company involve in providing the suppliers with various design specifications which largely incorporates environmental standards for purchased products. Further, the company ensures maximum cooperation with suppliers for environmental objectives and environmental audits for their suppliers. According to Rothenberg, Pil and Maxwell (2001), the company downstream factors widely include green outbound logistics which incorporates activities such as green distribution and marketing. The company has to maintain customer and suppliers relationships ensuring they collaborate in environmental issues. Figure 3: Wal-Mart reverse logistical process 5.0 Wal-Mart method of managing the supply chain It is quite evident that Wal-mart has been a position to assume leadership in the retail industry due to effective and efficient integration of manufacturing warehousing, suppliers and distribution to stores. According to Rothenberg, Pil and Maxwell (2001), Wal-Mart supply chain strategy has four distinct components namely; integration, cross docking, vendor partnership and technology. According to Rothenberg, Pil and Maxwell (2001), the company supply chain initialize by strategic sourcing to find products at the best price from different suppliers who are in a defined position to ensure that clients’ demands are met. The company establishes various strategic partnerships with most of its vendors through offering them potential high volume of purchases for the lowest prices possible. Suppliers then ship different products to Wal-mart where the products are effectively cross docked and delivered to the company stores (Zhu and Sarkis, 2007). Figure 4: Wal-Mart compliance to value creation Zhu and Sarkis (2007) maintain that, Wal-Mart have developed some environmental conscious practices in its supply chain management such as green design which incorporates engineering and marketing, green procurement practices which entails certifying its suppliers in purchasing environmental sound products, total quality environmental management in pollution prevention and finally, environmental friendly transportation and packaging which is defined by recycling, remanufacturing, reduction and reuse. Zhu and Sarkis (2007) maintain that, Wal-Mart key element in its green supply chain management is largely concerned in inter-organization sharing of responsibility to ensure maximum environmental performance. For the company, green supply chain management largely promotes sharing of environmental responsibility as well as reducing environmental burden caused in the manufacturing of products (Melnyk, Sroufe and Calantone, 2003). The company has adopted various techniques that assist its managers in mapping out environmental impacts along all processes in its supply chain such as product stewardship, life cycle assessment and effective designing the company environmental principles. Wal-Mart life cycle assessment can be defined as a more comprehensive structural approach that evaluates the total environmental load that is associated with the production of the company products (Melnyk , Sroufe and Calantone, 2003). 6.0 Wal-Mart developing strategies for green supply chain management 6.1 Risk based strategies According to Modi and Mabert (2007), Wal-Mart uses this strategy of green supply chain management with main focus on resource management. The company adopts this strategy so that it can be in a position to retain minimal internal ecological management of resources (Modi and Mabert, 2007). Here, the company is engages in ensuring that there is inter organizational engagement ensuring that suppliers meet all environmental regulatory requirements. The end result of this strategy is that risk that negatively impact on the environment is minimized while at the same time company reputation is enhanced (Modi and Mabert, 2007). 6.2 Efficiency based strategy For Wal-Mart, this strategy has been efficient in environmental management. For the company, this strategy largely derives environmental performance benefit for its supply management through ensuring that all its processes are in compliance to the laws and regulations governing the environment (Pagell, Wu and Murthy, 2007). Much of the company environmental performance benefits arise from some of its suppliers manufacturing practices that enhances eco-friendly practices. According to Pagell, Wu and Murthy (2007), the company efficiency based strategy ties operational processes to environmental performance in the supply chain which in turn allows the extension of performance requirement and maximization of environmental performance benefits. This strategy requires a comprehensive supply chain as it requires high involvement of all the stakeholders. According to Pagell, Wu and Murthy (2007), the strategy has acted as a competitive edge in the sense that it provides a more cost reduction advantage to the supply chain that greatly fits with the existing organizational goals especially those that focus on optimization of performance. 6.3 Innovation based strategies Krause, Scannell and Calantone (2000) maintain that, this strategy largely involves the use of environmental performance strategy in the company supply chain management. This strategy assist the company to keep up to date with the various environmental legislation changes while at the same time train the suppliers in different relevant changes that guarantees effective environmental resource management. Further, the strategy has assisted the company in developing strong environmental systems and methods in their production, use and distribution of products (Paulraj, Lado and Chen, 2008). 6.4 Closed loop strategy This strategy is also known as reversed logistics and it largely involves capturing as well as recovering materials for either manufacturing which are considered to be of high value or recycling which are considered to be of low value. This strategy widely integrates environmental management to the company supply chain. It is quite evident that designing of an effective reversed logistic is a challenge for Wal-Mart supply chain. Nevertheless, the company closed loop strategy represents an approach that effectively integrates issues of environmental performance, operation and economic benefits (Paulraj Lado and Chen, 2008). The main challenge of this strategy is that Wal-Mart has not been able to have great control to capture as well as return used materials. It is evident for this strategy to be effective; goods need to be properly managed for quality consideration as well as sorting out of activities so as to create better economies of scale. Krause, Scannell and Calantone (2000) maintain that, creation of economies of scale requires high level of coordination, integration and socially complex knowledge that requires several years of development. These relationships are known to provide the foundation of reversed logistics in a company supply chain management (Paulraj, Lado and Chen, 2008). 7.0 Challenges faced by Wal-Mart in implementing green supply chain According to Rothenberg, Pil and Maxwell (2001), implementing green supply chain has never been easy for Wal-mart as the organization has been faced with various challenges. Firstly, the company faces the challenge of lack of information about best practices of green supply chain management. The company CEO reports that the organization has been left with limited view on what to implement towards enhancing its green supply chain management. According to Rothenberg, Pil and Maxwell (2001), the company uses the Green Supply Chain Council framework which provides assistance through offering information on best practices in waste disposal increasing the success of the company green initiatives. Kocabasoglu, Prahinski and Klassen (2007) maintain that, Wal-Mart also faces the challenge of lack of tools to greatly optimize the supply chain with environmental management. Currently, there are no tools that greatly support green supply chain initiatives. Krause, Scannell and Calantone (2000) maintain that, there is need to develop tools that will largely provide environmental metrics which can significantly be used in optimizing supply chain. It is evident that the global sourcing in tracing carbon footprint is very difficult. Krause, Scannell and Calantone (2000) maintain that, tracking of carbon footprint of finished products is difficult in the sense that there is need for new initiatives in requesting carbon footprint from suppliers. According to Lenox and King (2004), the biggest challenge being faced by Wal-Mart toward effective implementation of a green supply chain involve the company ability to identify the different critical opportunities that creates value and best align to the company organizational strategy. Wal-Mart requires developing a new lens through which the company can be in a position to examine green data. According to Lenox and King (2004), Wal-Mart faces lack of appropriate technology in implementing the greener supply chain. It is quite evident that technology provides efficient solutions so as to have a more favorable impact towards the environment. Krause, Scannell and Calantone (2000) maintain that, the company needs improved technology to ensure that resources are highly optimized to meets its green supply chain goals. In addition to new technology, the company also experiences tradeoffs between lean practices and green requirements. It is quite evident that both green and lean strategies are compatible because of their share focus on waste disposal and reduction. Leanness stresses on reducing amount of inventory to go through the supply chain which reduces the negative impact on the environment. 8.0 Conclusion It is quite evident that the present system of functioning of many organizations is creating harm to the environment. It can be conclude that green supply chain management is inevitable if the globe is to be kept green. Organization need to adopt supply chains that are greener and eco friendlier towards conservation and management of the environment. To address the issue of global warming and climatic change, companies need to ensure that they use eco friendly inputs and transform the inputs into outputs that can be reused as well as reclaimed at the end of their product lifecycle ensuring a more sustainable supply chain is managed. With increased debates on different environmental issues, there is need for green supply chain management to be adopted by organizations. It is quite evident that companies must develop well established organizational structures for ecological innovation. These innovations should focus on reducing environmental impacts through production of minimal waste and creating less ecological harm. Organizations need to understand that ecological beneficial innovations are largely motivated by both environment and economic motives. From Wal-Mart innovations, it is quite clear that successful ecological beneficial innovation largely requires new combination of different knowledge about material, product and process characteristics and available markets and new technologies. References Bowen, F., Cousins, P., Lamming, R., & Faruk, A. (2001a). The role of supply management capabilities in green supply. Production and Operations Management, 10(2), 174-189. Corbett & Klassen. (2006). 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