Green Suppl y C hai n Implementation: Best Practices and Challenges

Muchir i Thom as Kan gan gi, Schoo l of Bu sin ess, University of Na irobi kangangi@students.uonbi.ac.ke Abstract In recent years, climate changes such as g lobal warming have been a topic tha t has attra cted a lot of interest world o ver. Such chang es have necessitated the n eed to identify the cau ses and so lutions to these clim atic changes. In an effort to m itigate these changes, legislations and environm ental requirem ents have been put forward by governm ents and environm ental agen cies. The demand for en vironm entally friendly products has increased over the yea rs and so is the shifting of loyalty of consum ers . Also, the ever increasing costs of en ergy and inputs ha s fo rced bu siness to find new wa ys to reduce energy use in order to reduce co sts. The supply chain has been identified to have a significant im pact on the natural environment As a result, busin esses a re deeply trying to green their supply chain b y introdu cing green strategies in their o rganization s and in the supply chain. This has resulted in a g rowing need fo r integra ting en vironm entally thinking into supply chain m anagem ent and processes. It is in light o f this realiza tion tha t this paper tries, through a thorough literature review, to find the b est pra ctices that can applied in g reen supp ly chain stra tegies. For this rea son, fou r best app roaches were iden tified; Aligning the goals of the green supply chain with th e goals of the business, evalua ting th e supply cha in as a single life cycle system , innovation u sing green supply chain analysis, reducing o f wa stage at each supply chain stag e. It wa s also iden tified that Lack of app rop riate technology in place to support companies and their effo rts to go green and the Trad e-off b etween green requirem ents and lean p ractices among other factors act as challeng es to green efforts.

Key words; Gr een Supply Chain, Implem entation, Best Practices an d Challen ges

TAB LE O F CO NTEN T

1.0 INTRO DUCTIO N3 2.0 DEFINING G REEN SUPPLY C HAIN MANAG EMENT.3 3.0 GREEN SUPPLY CHAIN IMPLEMENTATIO N BEST PRAC TIC E S4 1 Align green supply chain goals with business goals .4 3.2 Evaluate the supply chain as a single life cycle system .5 3.3 Use green supply chain analysis as a catalyst for innovation...6 3.4 Fo cus on source reduction to reduce waste...7 4.0 CH ALLENG ES IN IMPLEMENTING GREEN S UPPLY C HAIN MANAG EMENT...7 4.1 Lack of appropriate technology and business processes needed.8 4.2 T ra de-off between green requirements and lean practices..8 4.3 Failure to integrate supply chain optim ization efforts with green supply chain efforts .....9 5.0 CO NC LUSIO N....9 6.0 REFER ENC ES.......10

1.0 INTRO DUCTIO N In the last few y ear s or ganizations have fo un d themselv es un der pressur e to green their supply ch ain. This pr essure com es from custom ers, regulators and competitive and strategic o bligations and supp lier s. As the in creasin g cost of energy an d raw materials has forced businesses to find new ways to reduce their en er gy use in order to reduce co st and r emain competitive in the in the market. This has made Green supply Chain m anagem ent am important strategic tool.

Or ganizations op erations or activities have been kno wn to have an impact within the environments in which they operate. Bloemhof- Ruward, et al., (1995) ar gues that the wastes an d em issions caused by the supp ly chain have become the main source of current environm ental problem s. It is due to this realization that Governments, regulators in effort to conserv e the environment have passed regulations aim ed at controllin g the effect of businesses activities on the environment. Despite the lar ge n um ber of businesses that under stand the importance of GSCM, the num ber of f irm s that actually engage in such practices is significantly lo wer (Wilkerson, 2003) this because m any procur ement professionals an d their organizations are still unaware, uncertain or strugglin g to fin d the best way to approach it. This paper will try to identify the best practices to be applied when implem enting green supply chain.

2.0 DEFINING G REEN SUPPLY C HAIN MANAG EMENT Green supply chain is f airly n ew concept. It is based on t wo concepts; the supply chain m anagem ent concept an d the environm ental m anagem ent concept. Lamm ing and Hampson (1996) explored these t wo con cepts an d liked them together. Gr een Supply Chain Management m erges these two concepts together. Green supply chain management has v ario usly is def ined as the purchasing functions involvement in activities that include reduction, recyclin g, reuse an d the substitution of materials.

(Narasimhan an d Carter, 1998), the practice of monitoring and improving environmental perform ance in the supply ch ain( Go dfrey, 1998), the way in which innovations in supply chain m anagem ent and purch asin g may be consider ed in the context of the environment (Green et al., 1996 188). Gr een supply ch ain management is th us the integration of env ironmental management into supply chain management. Figure 1 : Gr een Supply Chain Management

So urce: Wilker son (2003)

Green supply chain s m anagem ent will aims at confining the wastes within the supply chain system in or der to conserve ener gy and prev ent the release of dan gero us materials into the environm ent.

3.0 GREEN SUPPLY CHAIN IMPLEMENTATIO N BEST PRAC TIC E S

A n umber of approach es for implementing GSCM practice hav e been propo sed in previo us literature (Hsu an d Hu, 2008).W iker son (2005) identified four green supply chain im plementation best practices; align green supply chain go als with business goals, evaluate the supply chain as a single life cy cle sy stem , use green supply chain analysis as a catalyst for innovation, focus on so urce reduction to reduce waste.

3.1 Align green supply chain goals with business goals Most businesses usually define green supply chain goals an d busin ess goals separately. This m ay lead to businesses defin ing supp ly chain goals without a true understanding of the business case an d v alue proposition s behin d such goal in

addition to leading to conf usin g or conflictin g comm unications to the organ ization where goals m ay be contradictory. For exam ple a busin ess goal may be to use ecofrien dly packaging that cost m ore than the traditional packagin g which goes against the business go al of reducing cost. This does not support the infusion of green supply chain goals into business goals (Happek, 2005).

A supp ly chain goal should alway s support the attainment of the business goals. A com pany should therefore look at its overall business goals and identify ho w a transition to a green supp ly chain can help achiev e those goals. For example if a com pany wants to reduce its ener gy costs it sho uld start by evaluating its en er gy consum ption to establish whether a r eduction can be made by usin g energy efficient and environmentally frien dly equipm ents. (Mazumder, 2010)

3.2 Evaluate the supply chain as a single life cycle system A typical supply chain has a n um ber of different business process all linked to gether to form a network, with one process leading to another form ing a sy stem. System thinking looks at the supply chain as bein g composed of activities that have outputs serving as inp uts to other activities an d th us prov idin g a means of un der stan din g systems at a deeper level in or der to see the paths available to br ing abo ut chan ges more effectively. (Prugsam atz, 2010)

Figure 1 : Environm ental life cycle

So urce: Wilker son (2003, 2005

A lif e cycle system allo ws a holistic v iew of the supply chain from raw material extraction to final disposal of materials. This en sures full visibility acro ss the entire supply chain an d an un der standin g of the en d-to-end impact of green supp ly chain management progr ams. In this way, it becom es easier to identify opportunities for the program to deliver business value such as lo wer costs or improved com petitive adv antage ( GSC, 2011).

3.3 Use green supply chain analysis as a catalyst for innovation

Green supply chain analy sis provides an opportunity to review processes, m aterials, and op erational concepts . it targets wasted m aterial, wasted ener gy or effort an d under- utilized r eso urces (Wilker son, 2005). Chatterjee, Mazum der (2010) and Murrey (2011) observe that busin esses that want to make a transition to a greener supply chain should review all their business pro cesses to identify ar eas wh ere adoptin g a greener outlook can act ually improve their business.

Figure 3 : Gr een Process Improvement Approach

So urce: Proter and van de Linf de (1995); Wilkerson (2005)

Since pollution an d waste represent incom plete, ineffective, or inefficient use of reso urces, busin esses sho uld review each process along the supply chain to identify the sour ces then see if a m ore env ironmentally so un d approach will driv e waste

from the supply ch ain processes. This will en sure continuous im provem ent in all your supply ch ain oper ations ( GSC, 2011).

3.4 Fo cus on source reduction to reduce waste The recycle an d re- use waste management programs focuses on management of waste after it has been created. On the other han d So urce Reduction focuses on the prevention or the reduction of wastage durin g pro duction rather than m anagin g it after it has been generated with the aim of efficiently utilizin g r eso urces by examining how busin ess is con ducted, ho w m aterials ar e used, and what products are purchased. Figure 2 : So ur ce Reduction

So urce: Serkis (1999); Wilker son (2005)

So urce r eduction can be achieve m easure such as; using reusable in stead of disposable materials, elim inating certain item s, repair an d m aintenance of equipm ents, using dur able pro ducts, usin g recycled pro ducts (Cohen, 2005).

4.0 CHALLENG E S IN IMPLEMEN TING G REEN SUPPLY CH AIN MANAG EMEN T Green supply chain managem ent like any other business investment is without challen ges, especially since is new to many busin esses. Business need to overcome these challenges in or der to their green efforts to become a r eality. The Ry der Center for Supply Chain Management (2008) identifies three m ain challen ges facing com panies while tryin g to green their supply chain; (a) lack of appropriate

technology in place to support companies an d their efforts to go green, ( b) business processes needed to captur e the appropriate data in the supply ch ain an d therefore make great use of their ex istin g technolo gy and (c) the trade-off bet ween green requirements an d lean practices.

4.1 Lack of appropriate technology and business processes needed Technology prov ides ener gy efficient solutions that have a more favorable im pact on the environment. Information technology can make the supply chain gr eener by optimizing the reso urces required to support the business an d also enable m ore effective supply ch ain plannin g, execution an d co llabor ation, thereby r educing reso urce requir ements (Co gnizant, 2008). Green supply chain techno logies cannot work indepen dent of the business processes in the supply ch ain. Both the green supply chain and the supp ly chain are a complem ent of one another. A supp ly chain technology cannot work without which is provided by the business pro cess .there is n eed therefore to have a process that captures such data.

4.2 T ra de-off between green requirements and lean practices Lean an d green strategies are often seen as compatible because of their shared focus on waste reduction. Leanness stresses on reduced am ount of inventory to go through the supply ch ain which m inim izes the negative environmental impact of the supply chain. Ho wever, lean strategies that employ just-in-time (JIT) deliv ery of small batch sizes which im proves sufficiency can require increased transportation, packaging, an d han dlin g which in crease emission s contradictin g the green approach (Mollenkopf, Stolze, Tate and Ueltschy, 2010).

Outsourcin g also m ay involve parts of the m anufacturin g pro cess bein g transf erred to plants on the other side of the world, on ly for the products to be tran sported back

for the next part of the supply chain process which requires additional transportation and thus increasin g em issions ( Simchi-levi, 2008)

4.3 Failure to integrate supply chain optim ization efforts with green supply chain efforts Cash an d W ilk erson (2003) ar gue that m ost firm s im plementing gr een supply chain practices do not actually integrated environm ental consideration s into their supply chain m anagem ent processes. Their approach is usually driv en by a need to green an existing pro cess or a piece of the chain. Although this m ay hav e a positive impact on the environment, the environm ental aspects are fr equently not considered when those respon sible for rev iewing a busin ess s overall supply ch ain perform ance make chan ges in the supp ly chain. They furthest argue that It is only after chan ges the changes in the supply chain h ave been im plemented and their effects on the environment revealed that the idea of greenin g the supp ly chain has the opportunity to emerge.

5.0 CO NCLUSIO N

For green supply chain im plementation to be successful and sustain able; transparency collaboration an d integration of system s bet ween trading partner s in the supp ly chain is requir ed, senior m anagem ent support is a must because not only will the sen ior management play an important function in inf luencin g the busin ess s attitude to war ds green initiative, they can also dedicate reso urces in terms of time, personnel and finances to war ds such initiatives, Green supp ly chain sho uld clo sely align to custom er needs wh ich will give the supply chain on the green pro duct design that is r equired of them by the custom er.

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