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Definition Of Green Supply Chain Management Commerce Essay

Paper Type: Free Essay Subject: Commerce
Wordcount: 5433 words Published: 1st Jan 2015

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There is no precised definition of GSCM (Srivastava, 2007). However in this context, the aim of the researcher and the given problems will determine the scope of there green supply chain. Whiles some researchers channel their attention at the procurement phase, others considers the entire supply chain activities (Zhu et al., 2008).

To begin with, Handfield et al., (2005) and Kogg (2003) considered green supply chain in the environmental perspective whereby environmental supply chain management can be used to represent green supply chain management. Businesses are developing and introducing green strategies in order to green the supply chain activities to build common approaches towards energy conservation, pollution abatement, waste reduction and improve their operational efficiencies. Subsequently, the increasing importance of sustainability brought to bare the term “triple bottom line” of all enterprises – highlighting the values enterprises must embrace to continue to operate and become more competitive. Thus when executing their professional duties, enterprises are required to simultaneously factor into the strategy or planning economic, social and environmental issues (Elkington, 2004). Even though social and ethical issues can be related to green supply chain management (Markley and Davies, 2007), social issues will not be further elaborated in this paper.

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In another school of thought, GSCM is viewed in another angle as industrial ecology (Jackson and Clift, 1998) and industrial metabolism (Frederick and Kurato, 2009). Industry is a collective word referring to mutually dependent firms belonging to the same economy (Chang and Singh, 2000). According to (Jackson and Clift, 1998) the industrial ecology focuses on improved efficiency and increasing production output of the whiles making the manufactured goods cheaper as well as preventing the pollution into the ecosystem. On the other hand, industrial metabolism which was conceptualise by Robert Ayres from the biological point of view whereby the convertion of raw materials, energy and labour into finished goods and waste are regarded as integration of physical processes (Frederick and Kurato, 2009). This biological metamorphosis is applicable to the manufacturing enterprises whereby the finished by-product of a firm becomes the input or raw materials for the other (Baily et al., 2005).

In another approach, GSCM can be linked to the “lean paradigm” which was conceptualised by (Womack et al., 1990). Womack et al. (1990) stated that lean thinking which was the core practice of the Toyota Production System (TPS) – the Japanese motor manufacturing and termed as muda, has close synergy with environment management (Hampson and Johnson, 1996) whereby companies were required to do more with less. Thus avoiding spoiled production, purposeless movement of employees and goods, unnecessary processing steps and services that fail to meet the requirement of customers. And by doing so, the organisational activities which do not create value but absorbs resources are cut off. So the ultimate aim of the lean concepts as developed by Womack et al. (1990) is targeted towards cost reduction in the manufacturing companies through value engineering and analysis so as to provide the optimum prices offered to their customers. Hines et al (2004) claim that lean exist at the strategic and operational levels. The customer value-creation strategic thinking applies everywhere in relation to cost, delivery and quality. However, Fisher (1997) argues that the lean thinking is not a supply chain strategy applicable to all sorts of product manufacturing.

Yet in another approach Lin et al. (2001) green supply chain management is also connected to Environmentally Conscious Manufacturing (ECM) of which they viewed it as involving developing and putting into operation manufacturing processes that curtailing and getting rid of all forms of waste, improve material utilisation efficiency and improving operational safety as well as reducing energy consumption across the supply chain. McKinnon et al., (2010) supported Lin et al. (2001) views and added few expressions stating that issue of green supply chain focuses on the reduction of energy consumption and emissions, elimination of solid, chemicals or hazardous waste by material suppliers, contractors, service contractors, vendors, distributors and end users within the supply chain whiles increasing recycling and reuse. Ernst and Young (2008) pointed out energy savings and managing resources efficiently as the best option for green supply chain. Sarkis, (2001) Concluded that environmental conscious manufacturing is an important strategy the enables companies to lower their environmental impact, improve efficiency whiles achieving profits and market share targets.

The above opinions expressed regarding green supply chain management create the environmental consciousness will not be completed without the flow of information across the upstream and downstream. Gattorna (2006) viewed supply chain as the enterprises involved in the coordinating process, functions, activities and building relationships and pathways along which information, goods, services and financial transactions are moved from the upstream to the downstream. However for the purpose of the study, the researcher will agree to Hervani et al. (2005) definition of green supply chain management embedded with Gatorna’s opinion of supply chain. Hervani et al. (2005) viewed green supply chain management as the activities of supply chain in regards to the support of the protection of the environment. The activities range from green purchasing, green manufacturing, green distribution and marketing to reverse logistics.

The reason is to make known the flow of both information and material as well relationship building among the supply chain members. It is equally important to note that the major practices of organisations that have introduced green supply chain management which varies across different organisation.


Sarkis (2003) assert that the decisions about the environmental practices are influenced by the four stages of the product life cycle. The introduction stage of the product is emphasised on the product research and development where investment occurs, the growth stage focuses on increasing of production capacities where the logistics channel is significant, whereas the maturity stage is concerned with the implementation of cost and efficiencies and finally the decline stage where the product divestment are necessary. According to Rao (2007) the end-of-life practices has resulted in the operational life cycle of manufacturing company which includes the inbound logistics, work-in-progress, outbound logistics and the possible reverse logistics. Sarkis (2003) focused on to the procurement decision phase as the stage that can expertly influence the suppliers and impact the environment by purchasing green products. In view of this Green et al. (1998) re-emphasize that the most effective way for businesses to improve their environmental performance within their supply chain activities can be achieved through green purchasing and supply.

2.2.1 Inbound Logistics (Green Purchasing)

Majority of the inbound function fundamentally entails green purchasing strategies implemented by enterprises to react to the growing global issues related to environmental sustainability (Rao and Holt, 2005). Min and Galle (2001, p.1223) defined green purchasing as

“an environmentally-conscious purchasing practice that reduces sources of waste and promotes recycling and reclamation of purchased materials without adversely affecting performance requirements of such materials”.

Rao and Holt (2005) opine that engaging in green purchasing can deal with issues such as material substitution through environmental sourcing of raw materials, reducing waste of hazardous materials and other waste produced. The inbound function requires the maximum support and involvement of teh suppliers if the firms can achieve their goal. The companies develop the habit of continually managing the environmental performance of their suppliers to make certain that environmentally-friendly materials and equipments by nature are produced using environmentally-freindly processes to be supplied to the companies. A consultancy firm Carbonfund based in the United States categorically stated that acquiring any input for production should be purchased from an organisation with a carbon-free product certification. This is because such inputs will require less energy, reduce or eliminate equipment stress and lesser carbon emission during the work-in-progress as well as reducing the footprint where possible and offsetting the remaining carbon emissions through third-party validated carbon reduction projects. Furthermore the end product that differentiates the brand and product of the company, reduces its total cost of operations, increase their sales and profit margin, and improve customer loyalty whiles strengthening its CSR and environmental goals (Marshall, n.d).

According to the Conservation Value Institute (2008) “green” refers to products, services and practices whose procurement, manufacturing and use should simultaneously facilitate economic development whiles preserving the natural resources which provides quality of life and components to the global economies for the future generations. So green produced products and services would possess any of the following attributes: the products

should have low maintenance requirement, durable,

energy efficient and savings;

should be biodegradable or incorporate recycled content and can readily be recycled; easily to be reused;

do not contain highly toxic compounds and or ozone depleting substances which can result in highly toxic by-products when undergone production stage; and

finally the products are to be obtained from nearest resources and manufacturers using the lowest carbon footprint transportation.

Min and Galle (1997) used a specific industry groups (heavy producers of scrap and waste materials) to outline the advantages of green purchasing as contributing factor geared to source reduction of pollution in regards to recycling, re-use and low-density packaging, and towards eliminating waste in terms of dumping or scrapping, recycling and sorting for bio-degradable packaging or non-toxic inceneration. However, Min and Galle (1997) pointed out the uneconomical recycling and re-use as the three main barriers associated with green purchasing whereas lack of state or federal regulations, lack of management commitment, lack of suppliers awareness, lack of buyer awareness, deficient company-wide environmental standards or auditing programs are also important issues.

Arguably, green purchasing revolves around two key element and these include the evaluation of suppliers’ environmental performance and mentoring to assist the suppliers to improve their performance (Rao and Holt, 2005). Green purchasing research traditionally focused on the former element wherby the companies use range of technique and tools to assess the environmental behaviour of suppliers to enable them choose supplier. Nontheless, the adoption of environmental management standards such as ISO 14001 certification accredited to the suppliers has reduced that stress (Noci, 2000). On the other hand the latter element goes beyond monitoring and evaluation, geared towards providing guidance and support for the suppliers requiring a extensive change in the attitude of the lead corporations in a supply chain (Hines and Johns, 2001). However, Hines and Johns (2001) from a positive standpoint pointed out building teamwork, non-threatening, sharing potential benefits and supplier mentoring proactive as advantages of mentoring culture, whiles the critical weaknesses is associated with cost implications, lack of physical facilities, lack of trained personnel to deliver such mentoring initiatives and above all lack of facilities.

2.2.2 Production (Green manufacturing)

Handfield et al. (2005) supported the initiatives of green design, substitution, extension of products’ life cycle through material selection, support of suppliers and life cycle assessment (LCA) as the strategies for environmental impact reduction. The green design of the product takes into consideration the product level (thus the environmentally friendly materials to be used) and the manufacturing process of the product. The substitution is essential in the green design so as to eliminate hazardous materials in the manufacturing of the product. Also the extension of the products life ccycle linked to the green design is characterised by the reuse of the parts of an obsolete product to manufactrure new products. In doing so, there is procedures that enables the suppliers to improve their manufacturing process. Geyer and Jackson (2004) pay much attention to the end-cycle strategy of the products which includes the recycling of the end-of-life product which is redirect from being dumped. The life cycle assessment is concern with the complete physical life cycle of the product from cradle-to- grave (Heiskanen, 2002). So manufacturer are to take into account the environmental pollution throughout the production process.

Green manufacturing is interlinked to the content of manufacturing strategy (Dangayach and Deshmukh, 2001) which focuses on three braod approaches namely: manufacturing capabilities, strategic choices and best practices. Kerr and Greenhalgh (1991) viewed manufacturing capabilities as aligning cost, quality, delivery and flexibility which is termed as competitive priorities (Spring and Boaden, 1997) to the requirements of the marketplace. Spring and Boaden (1997) outline the competitive priorities as:

Cost: production and distribution of product at lower cost.

Quality: manufacture of products with high performance or quality standard

Delivery: meet delivery schedules

Flexibility: respond to changes in product, product m ix, modifications to design, fluctuations in materials, and changes in sequence.

Hill (1987) enumerates the strategic choice areas of the manufacturing strategy into two pillars; the structural and infrastructure. Skinner (1969) identified the structural pillar as process and technology for operations (plant and equipment, product design and engineering and production planning and control) whiles the infrastructure provides it with long-term competitive edge through continuously improving human resource policies, organisation culture, information technology and quality systems (Hayes and Wheelwright, 1985). Best practices in manufacturing strategy has increased in recent years and these encompasses manufacturing resource planning, flexible manufacturing system, group technology, optimised production technology, just in time, total quality management (TQM) and lean production and concurring engineering (Dangayach and Deshmukh, 2001). Hayes and Wheelwright, (1985) highlighted the characteristics of world class manufacturing (WMC) as a typical example of what green manufacturing within a particular company will entail. These are: formal thrust on strategic planning; communication of strategy to all the stakeholders; long-range orientation; strategic role of manufacturing; stress on continuous improvement through TQM; supplier-customer integration and strategic focus on development of human resources.

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However, procedding from the above, product life cycles are shortening and the evidence is in the computer industry. The environmentalist Lee (2008) criticise the dynamic trait of technological innovation as being problematic in the sense that the rate at which technology is used by companies to create new products in order to be continuously competitive makes that same products obsolete within a short time, which poses risk to the environment. Whiles the consumers have gained from greater variety and improved performance, the trend inexorably results in increased unsold products, increased packaging materials, increased waste and increased returns (Van Hoek, 1999) therefore it is argued that shorter product life cycles has resulted in the increment of the volume of product returns and waste entering the reverse logistics network and the cost of managing them (Giuntini and Andel, 1995).

2.2.3 Outbound Logistics (Green distribution and marketing)

The concerns of businesses and consumers mostly in the industrialised countries in relation to the environment and the future of the planet has partially been transformed into corporate organisations in pursuing green or environmental marketing. The outbound function of greening the supply chain encompass green marketing, environmental-friendly packaging and environmental-friendly distribution, an initiative combine to enhance the environmental performance of an organisation and its supply chain (Rao, 2003 and Sarkis, 1999). Business-to-business (B2B) green marketing encompasses a broad scope of activities connected to: product design, the manufacturing process, packaging, service delivery processes, recycling, construction, renovation of buildings and other areas such as communication. Green marketing involves green products as well as greening enterprises (Vaccaro, 2009). The Chartered Institute of Marketing (2007) defined green marketing as the management process responsible for identifying, anticipating as well as satisfying the requirements of customers and society.

Packaging which also forms part of the organisational life cycle of can also be made to minimise waste and its impact on the environment (Sarkis, 2003). The use of packaging contributes to the waste stream whether it is made of plastic, paper, glass or metal. As a result, several countries now have adopted legislation and programmes with the objective of curtailing the environmental impact of the amount of packaging that enters the waste stream such as the Packaging Directive in the EU (Rao, 2001). Managing of waste and waste exchange can also enhance competitiveness and lead to cost savings (Rao, 2003). Several environmentally conscious enterprises are implementing an on-site waste management treatment facilities and waste exchange networks whereby plastic containers are collected by an outsources firm and brought back to the company for recycled or empty paper carton used as a packaging material by the supplier are sent back to them by the customer for re-use (Rao, 2001). Also other stakeholders such as NGO’s and governments are tupping in efforts to enhance industrial ecology concepts for corporations whereby a closed loop approach utilises all the waste through recycling, re-use of energy and materials

Warehousing and packaging design are the major components in the outbound logistics and distribution (Wu and Dunn, 1995). Wu and Dunn (1995) argued that good warehousing layouts, easy information access reduce storage and retrieval delays and standardized reusable containers whiac are all environmentally sound leads to operating costs savings. In terms of transportation for distribution, an environmentally-friendly transportation system such as transport type, sources of fuel, infrastructure and operational practices and enterprise should be considered (Kam, et al., 2003). An example is just recently, Tesco reveal its plan to open a ‘green’ distribution center (Teesport Distribution Center) in Middlesbrough. The plans are to get rid of more than 12,000 lorry journeys off the UK’s roads annually. The idea is to transport all the goods that arrive from ships by rail into the various stores throughout the UK (Just-food, 2009).

2.2.4 Reverse logistics

Rogers and Tibben-Lembke, (1999) viewed reverse logistics as the method of moving a product from the consumption point to another point of with the aim of recapturing the remaining value or for the final proper disposal of the product. Reverse logistics today involves more than the sheer recycling of packaging materials and re-use of containers. Sarkis (2003) outline four environmentally conscious end-of-life practices as reuse, remanufacture, recycle and disposal alternatives of which Tan et al. (2003) included into the scope of reverse logistics logistics. Reduction which is the fifth practice is necessary during the manufacturing or production stage and distribution and its not just applicable as the end-of-life strategy. Even though the reuse, remanufacture, recycle are related, the variance is between the degree of reuse of the material. The reuse is exemplified by the impact of the physical structure of the material whiles the remanufacture uses parts of the original material and components are being replaced with other substitute. Finally the recycling then changes the physical structure of the material completely. Tan (1999) highlighted the importance of third-party logistics providers who are anticipated to offer complete solution for collection, transportation and other value-added services.

Reverse logistics can also be used to clean out slow moving inventories or customers’ obsolete, in order to enable customers to buy more newer products (Andel, 1997). For example, Caterpillar Asia and other industrial equipment companies have implemented liberal returns policies that enable them to collect obsolete componenets and spare parts back from their appointed dealers. In return, they then remanufacture these mechanical spare parts to recaliam many remaning value (Fites, 2000). However in the case whereby much sale is not made on the new spare parts held by the dealers, the companies will reimburse their dealers with generous allowance in excahange for spare demanded by their customers. Catterpilar also uses e-commerce program for their dealers to return their existing spare parts in the exchange for those required by new products (Tan et al., 2003).

However, the execution of reverse logistics encounters several obstacles or barriers such as lack of manangement attention and company policies, concerns about competitive and legal issues, shortage of personnel and financial resources, the absence of standardized processes and technologies, etc. the poor managing of reverse logistics is due to the fact that more than one firm is generally involved in the process (Rogers and Tibben-Lembke, 1999).

Significance of green supply chain management

It is vital for the various enterprises to know the importance of practicing green supply chain management since the environment is a major concern to lots of stakeholders such as the customers, consumers, governments, competitors, trade associations and sector bodies, environmental regulators, community groups, business support organisations, partnership groups and Non-Governmental Organisations (NGO’s) are becoming environmentally conscious and that firms’ supply chains are being scrutinise currently than former (Simms, 2006; Holt et al., 2001; Min and Galle, 2001).

Policies (existing scm)

Prooceeding from the unfolding regulations and legislations from Montreal Protocol (Mascarelli,n.d), Kyoto Protocol (Kolk and Pinkse, 2006) and Copenhagen Climate Summit (Black, 2009) point towards the significance of environmentally conscious manufacturing and distribution will contuinue to develop.

The acceptance of the ISO 14001 to provide an international standard for environmental manangement system (Alexander, 1996) is to pressurise enterprises to pay more attention to environmental concerns in the supply chain reproduction so as to prevent exclusion from markets requiring compliance (Thomas and Griffen, 1996). Though the research bodies that are meant to tackle environmentally conscious supply chain management is quite scanty (Thomas and Griffen, 1996), research on environmentally manufacturing has primarily concentrated on product and process design including the concepts of Life Cycle Analysis (LCA) and Design for the Environment (DFE) (Cattanach, 1995).

The recent developments on environmental policy motivated Bloemhof-Ruwaard et al. (1995) to argue that the shift in focus from end-of-pipe control to waste prevention through integrated modelling approach, similar to supply chain management is to adequately address environmental issues. Beckman et al. (1995) presented a qualitative discussion by illustrating TQM concept to be corresponding with environmentally conscious supply chain management which Handfield et al. (2005) and Kogg (2003) term as green supply chain management (GSCM) in addressing supplier relations and product design. Beckman et al. (1995) concluded that modification or development of environmentally conscious supply chain management as an integrated model can assess the impact of the flow of products throughout the supply chain. Rao and Holt (2005) cited an example of 212 US manufacturing firms, 75 per cent respondents identified pollution prevention as important to their overall corporate performance of which 37.7 per cent identified customers as a key component in pollution prevention whereas 49.1 per cent of the firms’ pointed out the suppliers as the key players of pollution prevention (Florida, 1996).

Reverse logistics- Clegg et al. (1995) design a linear programming model to find out profit-maximizing materials flows for both new and recycled or reclaimed parts in manufacturing operations. The reclaimed parts can either be partially or totally disassembled and the various part or parts may be discarded (perhaps sold) or reused in manufacturing. Clegg et al. (1995) concluded that the model can be used to check the sensitivity of the models parameters such as disassembly capacity, availability of reclaimed parts and limits on disposal. Rao (2002) and Ho et al. (2002) commented on the concept of green by throwing the challenge to suppliers, manufacturers, distributers, etc to welcome the concept since it fosters collaborative decision-making process that promotes creative thinking resulting into environmental-products innovation through cost reduction, waste and pollution minimisation and efficient use of resources. Citing example, Nike’s official team jerseys for the 2010 World Cup were produced through the recycling of plastic bottles found in landfills. These eco-friendly shirts required 30 per cent less energy to produce the shirts compared to the use of traditional materials. Through this green practices, Nike prevented almost 13 million plastics bottles (approximately 254,000 kilogram of polyester waste) from being dumped to the landfill sites (Messenger and Alegre, 2010). Billington et al. (2009) openly stated that it is obvious that the reputations of organisations that fail to be socially responsible in their operations will be tarnished through bad publicity and mostly become vulnerable to and open to attack from NGO’s.

Hayes and Wheelwright (1985) in their four-stage framework of manufacturing emphases the need for companies to deploy sustainable or environmental policies throughout their operations and incorporating into their missions since that could help them to attain their strategic goals.


Preceding from the inbound perspective authors such as Bowen et al. (2001)and Rao (2002) argued that greening the supply chain has several benefits to an enterprise, ranging from integrating suppliers in a paticipative decision-making process that enhance environmental innovation and cost reduction.

Authors such as Rao and Holt (2005) recognize that other stakeholders and customers all the time are unable to distinguish between a firm and its suppliers and in the case of environmental liabilities incurred by a company, the stakeholders intend to charge the leading company in that particular change responsible for the poor environmental impacts of all the enterprises within a particular supply chain for a specific product.

Chatterjee (1998) claim that companies greening the supply chain is a concept that matches customers satisfaction, product and external business which increases the market shares of the company. Vaccaro (2009) stated that manufacturing and marketing green products differentiates the product to create competitive advantage for the company to become global leader as well as saving costs. Also, it is perceived that green supply chain management promotes efficiency and synergy among supply chain members and their lead corporations and enable them to minimise their waste, enhance their environmental performances and attain cost savings. The synergy is anticipated to improve the corporate image, marketing exposure and eventually to achieve competitive advantage. However Bowen et al. (2001) argue that enterprises will only implement green supply chain management practices provided only if they are able to identify that the practice will be lead to particular financial and operational benefits.


Challenge of green supply chain management

Johri and Sahasakmontri (1998) identified high costs, variability in demand and unfavourable consumer perception as the main challenges of green marketing. Several consumers complain of the high prices and unglamorous image of ecologically-freindly products even though the increased awareness of environmental concerns is also resulting into constant development of eco-demand (Johri and Sahasakmontri, 1998) whereas consumer sceptism is used as ecological claims against some enterprise (Polonsky et al., 1997). However Min and Galle (1997) argued that the most serious hindrance towards effective green purchasing is the high cost associated to its environmental programmes. Min and Galle (2001) further raise the concerns about purchasing enterprises who reckon that investing in green products by way of having strong commitment towards environmental programs increases the total purchasing costs of the enterprise which eventually decreases their competitiveness. The reason is as a result of the added cost incur through its commitment in terms of employee training and environmental auditing which positions the company at an economic disadvantage as compared to the other less environmentally responsible companies since the incurred cost will be definitely pass onto the customer or end-user (Vance, 1975). In fact, it will be very difficult for a purchasing firm who has limited financial resources to be willing to adopt green purchasing tactics that can curtail the upstream waste sources which can eventually improve its overall environmental performance (Min and Galle, 2001).

Thierry et al. (1995) found out that at the operational level particularly, managers of companies encounter the decision of buying more expensive environmentally friendly materials or purchasing traditional products based on cost, quality or lead time objectives as well as the challenge of locating the suitable information and data concerning green supply chain management. Nonetheless, Hevani et al., (2005) attributed the bottlenecks to green supply chain implementation to the higher cost of environmentally friendly products, lack of protection for innovations, lack of lead time to provide environmental friendly solutions, existing procurement specifications and technological issues. Nonetheless, considering the impact just-in-time has on the environmental performance of a company Nathan (2007) concluded that, the just-in-time approaches actually conflict with the objective of green supply chain management since the more empty trips of trucks makes their operation less efficient.

It is obvious that the developed market is the main market of green products, mainly North America, Western Europe, Australia and South-East Asia. However, the demand of ecological products cannot be met by a particular economy thereby creating the opportunities for enterprises in transition economies or developing countries (Borregaard et al., 2003). Meanwhile enterprises in the developed countries take advantage of their reputable brand to expand their


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