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This paper basically talks about the concept of green supply chain management that is being incorporated by many organizations in their management styles today. This paper will help introduce the term to the readers by giving them a detailed definition of the concept and its key elements that help implement this style of management. The paper will also discuss the benefits of implementing such a management strategy in their management style along with the risks that organizations face by implementing this management strategy.
The paper will also talk about the key issues that organizations face while designing a green supply chain for their organization by analyzing separately the companies which are suitable for such a supply chain and also the companies which won’t be able to benefit from such a management practice. In the end the paper will also talk about the companies in UAE that are using this concept and are successfully using the best practices that makes such a supply chain management idol for their management.
The methodology for the compilation for the information used in the report will be through a research based net search and literature review of many books written on the topic. The net search helps to identify the companies which are already using this management technique and the books help understand the basic concepts, benefits, risks and the types of companies that can use such a management practice. Introduction
The world is facing issues relating to climatic changes and environmental threats to a great extent today particularly because of the emissions of Greenhouse Gases that is the CO2 which is one of the major cause of global warming. According to research, the major portion of Australia’s energy related greenhouse gases were emitted by the production of goods and services by the production sector. This proportion was estimated to be as big as 56%.
The issue that many organizations face today is although it is the consumption of fuels that contribute to a great extent for the emission of the gases, consumers themselves are thinking on these lines that they are also to be held accountable for the emissions of these gases because it is them who demand and consume the products that lead to emission of such gases and chemicals into the atmosphere.
The consumers are concerned about this issue to a great extent and it seems that in the future their decision making model will also include the factor of environmental concern as well. Thus from the above discussion we can deduce that the pressure of such a behavior from the consumers is eventually going to go back to the producers who are producing these services and products and hence they will have to incorporate a lean green supply chain management in order to provide them a competitive edge over the competitors who have not yet focused their plans towards this side.
However, those companies which have already started to make use of this management technique have started to realize that it is not just the competitive edge over the competitors, but a green supply management technique also helps them to attain management efficiencies and reduces their expenses and costs figures in their profit and loss statements. The basic formula for the implementation of a green supply management basically has two major elements.
The first one being conservation of natural resources, and the second one is the reduction of pollution that is caused by manufacturing of goods and services. This report will discuss both the elements separately because each of the elements has a lot of other factors that need to be discussed under their heads. Green Supply Chain Management Starting with the conservation of resources, first we need to identify the problem that organizations and the production sector faces in the global market today.
The most important reason that has lead to firms adopt strategies to conserve natural resources is the depletion of natural resources worldwide due to increasing demand and population. We can see that as new technologies in production are coming on the stage, the cost of production is decreasing day by day making it more attractive for both producers and consumers to produce and consume respectively. New methodologies are adopted by producers to increase the quality, come up with substitutes and provide more facilities to consumers from their product.
It is not only the production sector, the agriculture sector is also facing the same issues because of the fact that as there is a limited supply of land, when more will be cultivated the land will lose its fertility more quickly. Even if farmers use fertilizers and nutrients to maintain the fertility of soil, the most they do is to sustain the fertility and prepare the crop for another cultivation, however, when we look it from the perspective of the whole society we see that using fertilizers is also one of the causes for emission of greenhouse gases because fertilizers are hundred percent chemicals.
Therefore, organizations who have switched towards a greener supply chain management are focusing towards this issue from both, the environmental and the business point of view. From the environmental point of view, these organizations might have a competitive edge over the competitors because of the consumer’s preferences for environmentally products, but, saving of natural resources by reducing wastes and recycling the used material will also end up in reducing costs for these organizations which will have a significant impact on their profit and loss accounts (Dethlof, 2007).
Moreover, when we come to the reduction of wastes, we see that companies reduce the emission of pollution by recycling these wastes. Rather than dumping them into trash and burdening the society with the cost that they have to pay for the consumption of goods, organizations are trying to use resources in such a way that they reduce the wastage and even if there are wastes from production of goods, these wastes must be reutilized.
For example, when organizations use paper for their daily operations, they are trying to automate their data processing to such a level that the use of paper is reduced to a great extent, however, even if papers are used wherever they are necessary, they should be recycled again rather than buying new papers which will eventually lead to cutting of more trees (Danaher, 2007). The above picture explains the green supply management from an aerial view.
Three processes of production that we can see in the diagram suggest that the organizations need to acquire material and natural resources that are environmental friendly, they must be processed in an environment friendly manner and lastly the outputs that are the products must be environment friendly as well. This is the idol supply chain for green management. We see that the wastes and even the used products are disposed and recycled to be used again or to make by products that can be used in any other manufacturing facility in order to save natural resources and provide material for another manufacturing cycle.
Once this cycle is established, researchers and analysts believe that the usage of material by the organizations will reduce up to around 30-40%. This reduction in the use of material means that these companies will incur less costs on the acquisition of material in the same percentage and also the amount of emissions and pollution that will be reduced will be proportionate to this reduction in material use as well. The best practices that we can deduce from the above discussion regarding the implantation of a green supply chain are that organizations need to align green supply chain goals with their business goals.
This means that both of these goals need to be taken simultaneously and the extreme bias towards any of the will lead nothing but in efficiencies. If the organization only thinks about the use o environmental friendly goods and material which are twice as costly as before, then the operations of the business will become inefficient to a great extent. Similarly if the organization does not focus on the environmental friendly products and services, again the effects of such thinking will have drastic effects on the environment.
Moreover, the companies should keep this in mind that the supply chain is devised in such a way that it becomes the single lifecycle of the product. The material is acquired, processed reduced and is then decomposed to get recycled for the same life cycle. The life cycle does not starts from acquisition of environmental friendly material and production of environmental friendly goods, but the used and wastes materials must be invested back in the life cycle again and this cycle must be kept running as long as the products are produced.
Moreover, another best practice that is very important in this twenty first century is that the implementation of green supply chain management must serve as a catalyst for organizations to indulge themselves in coming up with new innovations and technologies that aimed towards conservation of natural resources along with reducing pollution as well (Shina, 2008).
This can be done by inventing new technology that makes efficient use of natural resources that reduces it wastes, innovation in technology of making new by products, innovation in recycling and innovation in filtering the gases that are emitted from the production of goods and materials. Lastly, another thing that organizations need to focus upon is that they should reduce the use of environmentally hazardous materials and extra materials from the source, i. e.
, when acquiring raw materials, it should be acquired in such a quantity that no raw material is wasted and is extracted in excess because eventually it will lead to depletion of resources at a faster rate. Moreover when acquiring material, the material should be checked for its material friendly characteristics from the very beginning because once the material enters the cycle, the cycle will have to filter its wastes and emissions for a longer period of time. Thus the life cycle of the material will also become efficient if the materials that are used are checked for their environmental friendly characteristics at the source (Sheu, 2005).
Major benefits of the Green Supply Chain Coming on to the benefits of the green supply chain management, we see that the benefits can be subdivided into two categories, environmental benefits and the business benefits. In the above discussion we have discussed a lot about the environmental benefits of green supply chain management that is less use of natural resources and reduction in pollution due to the use of environment friendly materials. However, when we come to the organizations themselves, they enjoy a lot of factors related to green supply management as well.
As we have discussed that this management tactic has a significant impact on the P&Ls of the organizations, bow we need to know how does this happen. The clear answer to this question is that using green supply chain management technique brings a commitment of being efficient in an organization. Implementing this type of management strategy is not a capital intensive one and it just needs a little bit of changes and research in order to identify the suppliers who have the potential to supply environment friendly materials.
We have already seen that organizations that have used this methodology have been able to bring efficiency in all of their departments, from inventory, production, administration and even distribution of the products. these companies buy materials that are cheap and environment friendly, the produce in such a manner that all the material are utilized in most efficient manner reducing the wastes and increasing the productivity.
With the incorporation of new technology the put of the production has also been increased because the new technology is employed to obtain more output from lesser use of material or at least from the same amount of material that was used before. Natural fuels that are used in the production process are also used efficiently keeping in mind the global shortage of fuel and natural gas power generation practices are employed rather than oil and nuclear power generation which are both expensive and environmentally hazardous (Kainuma, 2006).
When it comes to administration costs, the companies have also managed to decrease their administrative costs as well by eliminating all the extra administrative costs like use of paper, extra office lights, transformation of office vehicles from petrol and diesel to natural gas and also reduction of energy use in the offices by conservation of electricity and water resources. Moreover, when it comes to distribution of material and products, the distance between warehouses and production facilities have also been reduced under this green management in order to reduce the use of natural fuels that are wasted due to long distances.
Moreover, organizations have either chalked out plans for recycling or invested in other production lines that make use of their wastes to come up with by products or, they have changed their production mechanism in such a way that most of their wastes are usable by other production facilities in the economy. This means that the organization is able to reimburse the cost of its wastes which was counted as a total waste previously.
More over, as we have already discussed in the beginning, that the consumers who are very much aware of the fact that they are also the contributors of environmentally hazardous emissions are more inclined towards switching brands in order to buy those products that are made from an environmentally friendly manufacturing process. This has provided these organizations with a competitive edge in comparison with those organizations who have not yet thought on environment preservation plans as yet (Makower, 2008). Major risks/cost of the Green Supply Chain
Coming on to the risks and issues related to the green supply chain management, we see that in order to implement this concept, the suppliers and the production facilities need to transform themselves into organizations that are highly perfect and operate at idol production levels. This means that only an organization which is producing cannot alone implement this concept in its management unless it suppliers adhere to this concept as well. When we look at the suppliers, there is not only one supplier of a company, there are many.
Thus, the question arises that how will companies be able to audit their suppliers whether the products they are manufacturing are environmental friendly or not. Even if the company does takes the initiative to check its suppliers to supply environmental friendly products, then, what about the supplier’s suppliers? Who will actually check them? This is imperfections and inefficiencies come into play in this highly idealistic model (Preuesse, 2005). Moreover, when it comes to packaging, it is seen that many organizations have changed their packaging processes from plastic bags to paper packaging.
From an aerial view, this looks like the best practice, however, when we look into the matter a little more critically, we see that there is practically no one who is ready to take the responsibility of the extra trees that are being cut in order to meet the supply of papers for the packaging? Thus the net benefit of the society is nullified. Coming on to the transportation of production and materials from one place to another, these facilities can only be provided through vehicles that use natural resources and fuels resulting in emissions.
How to reduce this? Under the green supply management, the best practice is that the organizations must come up with schedules that aim towards supplying goods to different places in only one consignment. This would result in conservation of fuel. However, what about organizations who will have to wait for long hours because of the delayed supplies what about the loss of energy that the factories have to bare because they are left idol without necessary supplies?
Moreover until now, it is seen that in many industries, organizations’ have increased the cost of commodities that are more environmental friendly because of high cost of research, new technology and new equipments that has been apportioned to the cost of production. The question is will the consumers buy the expensive products just because they are environment friendly or would they keep on buying the traditional goods that are cheap and provide equal marginal utility (Rao, 2008). Therefore many originations do face these risks while implementing such a management decision.
In this part of the paper, we will see which organizations in UAE have implemented the Green Supply Chain Management strategy in order to help them bring efficiency in their production facilities and at the same time producing services that are environment friendly. As we know that UAE is oil based economy and oil production constitute the major chunk of their GDP. However, we also know that it is the oil that cause and faces most of the environmental issues that world faces today.
First of all, oil resources are being depleted day by day due to increasing world demand for oil due to globalization and expansion of manufacturing units all over. Secondly, the consumption of oil also is responsible as one of the largest contributor to greenhouse gases that are emitted in to the atmosphere. Be it from factories or be it from transportation, oil is the major source of CO2 about which we have already talked about in the beginning of the report.
However this report talks about an example of a consortium of oil producing companies that have pledged to assume environmental and social responsibilities onto them in order to save the environment from the hazardous emissions and depleting natural resource (Sarkis, 2006). These companies have decided to budget and analyze the amount of production that they need to make in order to supply it to the oil marketing companies both within the UAE and outside as well. These companies only produce only that much amount of oil that is required to meet their targets and the demand.
Excess drilling is banned under the limitations of the consortium between the companies. Moreover, while extracting oil, these companies also take great care of the fact that no resources are wasted due to negligence such as fire in any of the drilling wells or leakage of pipes. When supplying it to oil marketing companies, the company also distributes pamphlets, magazines and literature that is written just to educate the consumers how to save the environment from emissions, how to make use of fuel more efficiently and lastly how to save it from being wasted.
This step includes a campaign started by the company that aimed towards educating the transporters about the above three factors. As far as those companies are concerned which actually cannot make use of such a supply chain management are the fertilizer producing companies. Due to limited land resources and unlimited demand of food supplies, soil needs to fertilize on regular basis in order to maintain its fertility for the next cultivation which is equally important. Thus chemicals and natural resources such as natural gases have to be used by these companies in order to produce fertilizers.
Apart from the two heavy industries, we can also take the example of McDonalds that also uses green supply management and its best practices in order to serve the community with environmental friendly products. The biggest contribution by McDonalds is that it only uses paper packaging and it recycles every possible paper that it uses. Moreover, the material from which the paper is manufactured is also such that it does not harm the environment that much. During a survey, the company has been reported to have saved around$3.
6million dollars by conserving on its packaging materials (Lawrie, 2003). Conclusion Although the need o f the hour suggests that organizations need to adhere to green supply chain management as soon as possible, however the concept is relatively new and does needs a lot of more research to be done to be effectively implemented. At the beginning, organizations might fear the impact of such measures on their cost; however, the benefits of these investments can be reaped for so many years to come. References Danaher, K. (2007).
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McGraw-Hill Preuess, L (2005). The Green Multiplier: A Study of Environmental Protection and the Supply Chain. Palgrave Macmillan Rao, P (2008). Greening the Supply Chain: A Guide for Asian Managers. Sage Publications Pvt. Ltd Sarkis, H (2006). Greening the Supply Chain. Springer Sheu, J (2005). An integrated logistics operational model for green-supply chain management Transportation Research Part E. Elseviser Shina, S (2008). Green Electronics Design and Manufacturing. McGraw-Hill Professional