Supply chain management is one of the most important business processes within organizations. Supply chain is meant to ensure that products are delivered at a lower cost and quickly. Globalization has led to increased connectivity between different parts of the world. Most organizations are expanding their operations across borders in order to gain and retain a competitive advantage. The current business environment has become more complex due to the fact that firms have to rely on a chain of service providers and suppliers so that they can be able to deliver the required products and services. The complexity also arises from the global dynamics that have brought about the alteration of the supply chain for instance global production and sourcing, the volatilities in the pricing and availability of the products, the global financial conditions, shifts in compliance and the increased usage of ICT have all combined to bring about complexities.
There are increased risks that are associated with the supply chains of today due to a number of issues. There is faster growth and innovation, the lead times are shorter, the area of service is wider due to the process of globalization and both the demands and technology are changing. Environmental issues have also been raised leading to development of green supply chain (Hall, 2000). This essay seeks to analyze the environmental issues that led to the development of green supply chain, the main differences as compared to the traditional supply chain approaches, and the new challenges that this new approach might encounter.
Environmental factors leading to the development of green supply chain
There has been an increase in the amount of greenhouse gases emitted into the environment in recent years. The main reason behind this increase is the high rate of industrialization taking place across the world. This has led to several environmental challenges including global warming which have forced various governments and environmental bodies to implement laws aimed at protecting the natural environment and reducing carbon emissions. The carbon emission levels for the globe as increased by 41 % as compared by the carbon emission levels in the early 1990s (Chowdhury, 2010). The impact of the scenario that is being experienced would be an increase of about 70 Celsius. The current global practices especially the business has necessitated implementation of carbon auditing and foot printing measurement. There has been a need for adaptive measures to be undertaken by the firms so that recovery from the effects can be reduced significantly.
Secondly, there has been an agreement that there is a global need to reduce the carbon footprint of firms. There has been the application of the trade carbon markets as a guide for the prices that firms should pay for the emissions (Chowdhury, 2010). There has also been a push from the customers for the firms to continually have products that are green. Business organizations are therefore required to adopt practices that do not pollute the environment (green practices). This has led to the development of green supply chain as firms seek to minimize on their environmental prolusion.
Today`s consumers have also become aware of environmental issues and how they affect their daily lives. For that reason, consumers that consider themselves green always want to associate with eco-friendly and ethical businesses (Hall, 2000). Similarly, business organizations that consider themselves green seek to associate with suppliers that are eco-friendly and ethical. This has significantly contributed to the development of green supply chain in recent years. Various companies across the world have embarked on improving their environmental programs by taking green actions at various stages of their supply chains. Some of the objectives of adopting green supply chains include reducing environmental impacts, minimization of risks, compliance to regulations and making of long-term profits.
The main characteristics of green supply chain
The green supply chain (environmental supply chain) refers to the supply chain policies that are held by the firm, actions that are taken as well as relationships that are formed in response to the natural environmental concerns (Zsidisin & Siferd, 2001). These policies provide guidance on the design, production, acquisition, distribution, consumption, reuse as well as disposal of goods and services. For instance, the supply chain of a manufacturing company has several environmental impacts that need to be addressed. These impacts may arise from the purchase of component and raw materials, logistics arrangements, supplier manufacturing processes, disposal of the final product or the location of supplier plants. The green supply chain therefore provides environmental initiative in all these processes in order to minimize impacts to the environment. It outlines the raw material or components to be purchased and determines the minimum standards that must be fulfilled. It also provides guidance on how to utilize by products in different ways such as reducing waste or recycling of the packages.
According to Richard Wilding, sustainability of any business organization starts with materials used by the companies, whether indirectly or directly (Zsidisin & Siferd, 2001). Jim May outlined the four guiding principles for green and sustainable supply chains. These principles are based on human rights, environment, corruption and labor. According to him, a green company should ensure that its business practices do not cause any harm to the environment. They should proactively support establishment and usage of eco-friendly approaches. In order for a company to successfully become a green business, it should ensure that the eco-friendly practices are not just followed by itself but also all its business partners and subcontractors.
The green organizational buying can change the manufacturing processes of suppliers since the buying firm can choose its suppliers based on how well they run their own production processes (Hall, 2000). Some of the measures that can be taken include requiring the suppliers to have viable environmental policies, introduction of an environmental award program for the suppliers, establishment of a joint cleaner technological programs with the suppliers or emphasizing the need for supplier accreditation either ISO 14001. An organization can therefore use its influence to minimize environmental impacts caused by supplier operations.
Implementation of the green supply chain has several benefits to the organization and the society at large. The greener supply initiative helps the company to reduce operational costs and improve on efficiency. This is mainly due to the fact that environmental initiatives reduce excess materials and waste. The green supply chain also helps the company to improve its image among the regulators as well as the general public. Greener supply chain also promotes a holistic approach to the process of managerial decision-making. The supply and purchasing processes can be improved so that greener supply enhances co-operative relationships and sharing of information within the supply chain. The entire society also benefits from greener supply chain environmental improvements, reduction in amount of hazardous materials, more efficient utilization of the scarce resources as well as minimization of waste.
Toyota Australia is one of the companies that have implemented the green supply chain approaches in their operations. There are three carbon footprint responses that are used by Toyota Australia to be able to deal with the case of the emissions of the firm. One of them involves footprints from the supply chain. There are a number of steps and activities that have been undertaken. First, there has been a focus on the reduction of the emissions from the vehicle logistic activities (Toyota Australia 2012). The firm has entered into program such as Ecostation which is geared towards reducing the emissions from the logistics activities.
There have also been attempts to reduce the emission from logistics of vehicle parts for instance through better packaging utilization and reduction of the travelled distances. Finally, the firm is considering the reduction of the emissions that result from business travels through the implementation of videoconferencing. Statistics indicate that there has been a massive improvement in the part and vehicle logistics of Australia due to the reduction of the total distance covered and the efficiency in the packaging of the parts and the products. However, the firm has been lagging behind in the reduction of the CO2 emissions from the business travels.
The differences between the traditional supply chain and the green supply chain
One of the main differences between traditional supply chain and the green supply chain is the environmental factor. While the traditional supply chain is basically focused ensuring that products are delivered at a lower cost and quickly, the green supply chain is primarily focused on minimizing impacts to the natural environment. The main aim of a traditional supply chain is to ensure that the company products or services are delivered on time and at a lower cost regardless of the environmental impacts. This has led to adoption of such as purchasing cheap raw materials manufactured in environmentally hazardous manner and using a large number of vehicles to ensure that products are delivered on time. However, green supply chain takes into consideration the environmental impacts of any process. In this case, a green company can only purchase from suppliers that are ethical and have adopted eco-friendly practices. The green supply chain will also seek to reduce the number of vehicles and other vessels as a way of minimizing environmental pollution.
The tradition supply chain also differs from the green supply chain in terms of scope. While the traditional supply chain is mainly focused on the acts of a single company, the green supply chain is concerned with business processes of suppliers, business partners and consumers. A company that has adopted a green supply chain only associates itself with organizations that are eco-friendly and requires that all its suppliers are accredited. Such a company ensures that the acts of suppliers are environmental friendly. It also provides ways through which by products can be recycled or disposed by the final consumers in order to minimize environmental impacts.
The new challenges presented by green supply chain
Despite the many advantages associated with green supply chain, there are also several challenges that are associated with this approach. One of the greatest challenges is cost. Most of the environmental friendly processes are relatively expensive as compared to the traditional approaches (Hall, 2000). For instance, petrol vehicles are much cheaper than solar vehicles. It is also cheaper to use fossil fuels than installing solar systems that can run the entire company. Such cost implications have forced most business organizations to stick to the traditional supply chain in order to realize higher profits. The number of suppliers using eco-friendly practices is also low. It is difficult to a green supplier in some areas hence most organizations are forced to either purchase from any supplier or import the products which may be costly. The level of competition is also very high and business organizations are looking for ways through which they can survive by establishing business networks with other companies. The requirement only associating with eco-friendly organizations may therefore limit the company`s ability to develop networks.
However, my recommendation is that business organizations should adopt the green supply chain regardless of the initial costs involved. Most of the costs are only incurred when implementing and eco-friendly process but such processes have long-term benefits. For instance, the cost of purchasing solar vehicles may be too high but it is much cheaper to maintain since the vehicle does not require fueling. The cost of business travels, for instance, can be reduced through improvement in the telecommunication methods for instance telepresence through video conferencing can be used by the firms to reduce the need to travel. Customers are also attracted to buy from eco-friendly companies thus adoption of green supply chain will enable the company to earn more business.
Supply chain is meant to ensure that products are delivered at a lower cost and quickly. The current business environment has become more complex due to the fact that firms have to rely on a chain of service providers and suppliers so that they can be able to deliver the required products and services. Several environmental issues have also been raised leading to development of green supply chain. There has been an increase in emission of greenhouse gases raising several environmental challenges including global warming which have forced various governments and environmental bodies to implement laws aimed at protecting the natural environment and reducing carbon emissions. The green supply chain (environmental supply chain) refers to the supply chain policies that are held by the firm, actions that are taken as well as relationships that are formed in response to the natural environmental concerns. The greener supply initiative helps the company to reduce operational costs and improve on efficiency. The green supply chain also helps the company to improve its image among the regulators as well as the general public. It also promotes a holistic approach to the process of managerial decision-making. Business organizations should adopt the green supply chain regardless of the initial costs involved. Most of the costs are only incurred when implementing and eco-friendly process but such processes have long-term benefits.
Chowdhury, G 2010 "Carbon footprint of the knowledge sector: what's the future?” Journal of Documentation, 66(6), 934- 946
Hall, Jeremy (December 2000). "Environmental Supply Chain Dynamics". Journal of Cleaner Production 8 (6): 455-71.
Zsidisin, George; Siferd Sue (March 2001). "Environmental purchasing: a framework for theory development". European Journal of Purchasing & Supply Management 7 (1): 61-71.
Toyota Australia 2012, Accessed on March 21 2013 from www.toyota.com.au