Strategic Advantages

of Green Supply Chains

MP14017
MP14021
MP14023
MP14027
MP14036

ANOOP SRIVASTAVA
AYAN LAHIRI
AYODHYA PRASAD
JAI KISHAN INDIWAR
PRABHAS KUMAR

Supply Chain Management

PAG E 2
2005 LMI

Green SCM integrates environmental

and supply chain management.
Green Supply Chain Management

Plan

P1 Plan Supply Chain

Source
S1 Source Stocked Products

S2 Source MTO Products

S3 Source ETO Products

P3 Plan Make

P4 Plan Deliver

Make
M1 Make-to-Stock

M2 Make-to-Order

M3 Engineer-to-Order

Deliver
D1 Deliver Stocked Products

D2 Deliver MTO Products

D3 Deliver ETO Products

Return
Deliver

Return
Source

Environmental
Management

P5 Plan Returns

Customers

Suppliers

P2 Plan Source

Enable

Supply Chain
Management

Green Supply Chain Management

Green
GreenSCM
SCM recognizes
recognizesthe
the
disproportionate
disproportionateenvironmental
environmental
impact
impactof
ofsupply
supplychain
chainprocesses
processes
in
inan
anorganization.
organization.

PAG E 3
2005 LMI

Contents
What is Green Supply Chain Management?
Green Supply Chain Management Principles
Green Supply Chain Management Best Practices
Implementing Best Practices
Summary

PAG E 4
2005 LMI

Green SCM leverages the role of the

environment in SC value creation.
Environmental Value Drivers
Tangible Outcomes
Green
GreenSupply
Supply
Chain
ChainPrograms
Programs

Profitability
Profitability
Asset
Asset Utilization
Utilization
Service
Service Level
Level

Supply
SupplyChain
Chain
Value
Value

Employee
Employee
Satisfaction
Satisfaction

Stakeholder
Interests

Environmental
Environmental
Sustainability
Sustainability
Community
Community
Quality
Quality of
of Life
Life

Customer
Customer
Reputation
Reputation
Continuity
Continuity
Alliances
Alliances
Technology
Technology

Intangible Value Drivers

Source: Forging
New Links, GEMI,
2004
GSCM Definition:
Integrating
environment
thinking into SCM and end-of-life
PAG E 5
management of the product after its useful life
2005 LMI

Commercial firms have had early

success using Green SCM principles.
Texas
Texas Instruments:
Instruments: Saves
Saves $8
$8
million
million each
each year
year by
by reducing
reducing its
its
transit
transit packaging
packaging budget
budget for
for its
its
semiconductor
semiconductor business
business through
through
source
source reduction,
reduction, recycling,
recycling, and
and
use
use of
of reusable
reusable packaging
packaging
systems
systems (20%
(20% annual
annual savings).
savings).

Commonwealth
Commonwealth Edison:
Edison: Produced
Produced
$50
$50 million
million in
in financial
financial benefits
benefits
from
from managing
managing materials
materials and
and
equipment
equipment with
with aa life-cycle
life-cycle
management
management approach.
approach.

Pepsi-Cola:
Pepsi-Cola: Saved
Saved $44
$44 million
million by
by
switching
switching from
from corrugated
corrugated to
to
reusable
reusable plastic
plastic shipping
shipping
containers
containers for
for one
one liter
liter and
and 2020ounce
ounce bottles,
bottles, conserving
conserving 196
196
million
million pounds
pounds of
of corrugated
corrugated
material.
material.

Dow
Dow Corning:
Corning: Saved
Saved $2.3
$2.3 million
million
by
by using
using reconditioned
reconditioned steel
steel drums
drums
in
in 1995.
1995. Also
Also conserved
conserved 7.8
7.8
million
million pounds
pounds of
of steel.
steel.

PAG E 6
2005 LMI

Green Supply Chain improves operations

by employing an environmental solution.

Improves AgilityGreen supply chain management help

mitigate risks and speed innovations.

Increases AdaptabilityGreen supply chain analysis often lead

to innovative processes and continuous improvements.

Promotes AlignmentGreen supply chain management

involves negotiating policies with suppliers and customers,
which results in better alignment of business processes and
principles.

Source: The Triple-A Supply Chain, Lee, Harvard Business Review, October 2004
Environmental Supply Chain Management, Carter and Narasimhan, CAPS
Research, 1998
2005 LMI

PAG E 7

The big picture

PAG E 8
2005 LMI

Contents
What is Green Supply Chain Management?
Green Supply Chain Management Principles
Green Supply Chain Management Best Practices
Implementing Best Practices
Summary

PAG E 9
2005 LMI

The product life cycle is the basis of

green supply chain management.
Supply Chain in the Environmental Life Cycle
Designing the supply chain
concurrently with the product is a
supply chain management best
practice.

Concept

Design

Raw
Retail/
Transport
Manufacture
Transport
Material
Consumer Transport Disposal
Extraction
Use

Typical Supply Chain Scope

P A G E 10
2005 LMI

The environmental impacts of each LC

stage are examined for reduction.
Environmental Life Cycle
Inputs

Stage
Concept

Design

Water

Water

Energy

Energy

Raw
Retail/
Transport
Manufacture
Transport
Material
Consumer Transport Disposal
Extraction
Use

Air

Impacts

Water
Waste

Air
Air

Water
Waste

Air
Air

Air

Water

Air

Waste

P A G E 11
2005 LMI

Water
Waste

Historically, GSC management focused

on the upstream supply chain.
Typical Green Supply Chain Analysis

Supplier

Supplier

Manufacturer

Manufacturer encourages
suppliers to adopt green
practices, environmental
management systems, etc.

Focus is on the material

content and environmental
practices of suppliers.

Supplier

P A G E 12
2005 LMI

Now, GSC programs are moving from

compliance to value creation.
Environmental, Safety, and Health Business Contributions
Assure Compliance

Raise Productivity

Minimize Risk

Enhance Relations

Maintain Health

Support Innovation

Protect the Environment

Enable Growth

Traditional
Cost
Avoidance

Emerging
Value
Creation

Source: Forging New Links, GEMI, 2004

P A G E 13
2005 LMI

Companies are starting to view GSC as

a strategic analysis tool.
Pollution Prevention Hierarchy

Long
Term

Strategic

Source Reduction

Recycle/Reuse
Control
Technology
Short
Term

Disposal
Tactical

The
ThePollution
Pollution
Prevention
Prevention
Hierarchy
Hierarchygauges
gauges
the
thevalue
valueof
of
environmental
environmental
programs.
programs.

Source: U.S. Environmental Protection Agency

P A G E 14
2005 LMI

Efficient Green Supply Chain

P A G E 15
2005 LMI

Contents
What is Green Supply Chain Management?
Green Supply Chain Management Principles
Green Supply Chain Management Best Practices
Implementing Best Practices
Summary

P A G E 16
2005 LMI

Green supply chain best practices focus

on the business results first.
Green Supply Chain Best Practices

Align
Align green
green supply
supply chain
chain goals
goals with
with
business
business goals
goals
Evaluate
Evaluate the
the supply
supply chain
chain as
as aa single
single
life
life cycle
cycle system
system
Use
Use green
green supply
supply chain
chain analysis
analysis as
as aa
catalyst
catalyst for
for innovation
innovation
Focus
Focus on
on source
source reduction
reduction to
to reduce
reduce
waste
waste

P A G E 17
2005 LMI

Aligning GSC improvements with your

business goals creates strategic value.

Before embarking on green supply chain improvements, you

need to determine the role of the environment in your business.

Product Differentiation?
Managing Competitors?
Cost Reduction?
Risk Management?
Redefining Markets?

When green supply chain programs are properly aligned to

corporate goals, successes become leading indicators of
business success.
Environmental indicators on the Balanced Scorecard
Greater drive for innovation
Stakeholder support
Source: Bringing the Environment Down to Earth, Reinhardt, HBR, July-August 1999
Environmental Supply Chain Management, Carter and Narasimhan, CAPS
Research, 1998

2005 LMI

P A G E 18

Evaluating the supply chain as a system

leads to life cycle optimization.
System View of Environmental Life Cycle
Inputs

Raw Material

Energy

Stage
Concept

Outputs

Design

Raw
Retail/
Transport
Manufacture
Transport
Material
Consumer Transport Disposal
Extraction
Use

Product

Maximize
Maximize the
the
good
good outputs.
outputs.

Waste

Minimize
Minimize the
the
bad
bad inputs
inputs
and
and outputs.
outputs.
P A G E 19

2005 LMI

Green supply chain management is a

driver for process improvements.

In general, pollution and waste represent incomplete,

ineffective, or inefficient use of raw material.

Green supply chain analysis provides an opportunity to review

processes, materials, and operational concepts.

As with continuous improvement programs, green supply chain

analysis targets:
Wasted material
Wasted energy or effort
Under-utilized resources
Green Process Improvement Approach
Identify the
waste streams

Measure or
identify the
opportunity
cost of the
waste

Create
innovation vs.
treatment bias
toward waste
reduction

Source: Green and Competitive, Proter and van der Linfde, HBR, Sept.-Oct. 1995
Environmental Supply Chain Management, Carter and Narasimhan, CAPS
Research, 1998
2005 LMI

P A G E 20

Focusing on source reduction programs

drives higher value improvements.
Waste Reduction Opportunities in the Life Cycle

Concept

Design

Reduce

Raw
Retail/
Transport
Manufacture
Transport
Material
Consumer Transport Disposal
Extraction
Use

Reuse/Recycle

Control
Technology

Dispose

High
Potential for life
cycle cost savings

Cumulative life
cycle costs
Low
P A G E 21
2005 LMI

The Army looked to using hybrid

HMMWVs to reduce the fuel SC footprint.
HMMWV Fuel Supply Chain

Army reviewed acquisition, maintenance, and fuel costs

associated with conventional and hybrid HMMWV.
Fuel costs included cost of supply chain.
Evaluation based on military operations.

Costs are break even for the two platforms

Hybrid HMMWV

Hybrid technology lowers fuel cost but has greater

maintenance requirements.
However, hybrid platforms can also serve as power
generators in theater and can offer some operating
advantages (e.g., silent operation).

Domestic
Fuel Storage

Transportation
Into Theater

Transportation
Within Theater

Theater
Fuel Storage

Source: Economics of Hybrid Electric Technology: Military Vehicles, 2002, LMI

Resource Costs of Supplying Power to a Battlefield, 2004, LMI Research Institute
2005 LMI

Theater Fuel
Distribution
P A G E 22

USPS worked with direct mail vendors

to reduce supply chain cost and waste.
Direct
Direct
Mailers
Mailers
realize
realize
higher
higher
response
response
rates
rates and
and
lower
lower
operating
operating
costs
costs

Direct Mail Supply Chain

Ensure
Ensure changes
proper
do not affect
addressing
sorting capability
Direct
Mailer

Post
Office

Recycle
undeliverable
mail

Sorting
Facility

Target mailings
to generate less
waste
Post
Office

Customer

Waste

Problem: Excessive
direct mail waste
and cost

Target recycled
Undeliverable
content and
Items
recyclable
Estimated savings
savings (USPS)
(USPS) == $500
$500 Million
Million (1997)
(1997)
materials Estimated
Source: Greening the Mail, 1999, LMI
P A G E 23
2005 LMI

The Dutch flower industry greened its

production to increase throughput.

Netherlands produces 65% of the worlds cut flowers, yet has

limited land.
Mass cultivation in a confined area resulted in
fertilizer, herbicide, and pesticide contamination.

To correct the problem, growing was shifted to

rock wool and water vs. soil.
Fertilizer in the water is recycled through the
system to reduce waste.
Water based growth also reduces the risk of
infestation by weeds and pests, reducing the
need for chemical treatments.
The new system also greatly reduced variations
in growth conditions, greatly improving the
predictability of output.

Producers were able to increase output per space and further

Source: Green and
and van(e.g.,
der Linde, HBR,
Sept.-Oct.
1995
innovate
to Competitive,
reducePorter
costs
new
harvesting
methods).
P A G E 24
2005 LMI

Xerox implemented a take-back program

redefined customers expectations.
Xerox Copier Take-back Program
70-90%
70-90%(by
(byweight)
weight)
of
ofmachines
machines reused
reused
144
144million
millionpounds
pounds
diverted
divertedfrom
from landfills
landfills
(2003)
(2003)

In early 1990s Xerox launched a new initiative to take back used

copiers as a source of material for new machines.

Customers like the program because they no longer worry about

machine disposal.

Xerox estimates several hundred million dollar savings annually.

Source: Bringing the Environment Down to Earth, Reinhardt, HBR, July-August 1999
Environment, Health, and Safety Progress Report: 2004, Xerox Corporation

2005 LMI

P A G E 25

Contents
What is Green Supply Chain Management?
Green Supply Chain Management Principles
Green Supply Chain Management Best Practices
Implementing Best Practices
Summary

P A G E 26
2005 LMI

Green supply chain efforts need to rise

above the cost center view.

Green supply chain projects need to be clearly defined in terms

of the business value to the organization.
Clear value will gain senior management support.
Clear value will help secure buy-in from other organizations

Environmental programs are viewed as business cost centers.

Environmental, safety, and health (ESH) resources are often scarce
in an organization.
ESH offices are targeted early during cost cutting programs.

ESH offices have difficulty articulating their business value.

The inability to articulate the value of green supply chain effort in
business terms lowers their profile.
Many executives have misconceptions of how green supply chain
efforts will impact their operations.
Without a clear business value proposition, it is difficult to get
executive support for projects.
Source: Forging New Links, GEMI, 2004
P A G E 27

2005 LMI

Consider the existing business model

when planning GSC projects.

Many businesses have internal hurdles that must be overcome

for any improvement effort.
Inconsistency in supply chain operations (by unit, region, product,
etc.)
Business viewed through existing operationsresistance to change
Focus on short term goals and short term results
Limited partnership experienceespecially in the environmental
office.

To be successful, the project manager needs to understand the

organization and plan for the applicable hurdles.

Develop communication/evangelization plan.

Build a project team with broad functional representation.
Clearly articulate project business value.
Use outside experts where in-house expertise doesnt exist.
Source: Forging New Links, GEMI, 2004
P A G E 28

2005 LMI

Use tools such as GreenSCOR to help

define and analyze GSC problems.
GreenSCOR Concept

Environmental
Management
Managing the
environmental
impacts of
operations,
including
compliance,
emissions, and
remediation

Supply Chain
Management

GreenSCOR Model

Managing the flow of

material from
supplier to end
customer, including
procurement,
transportation,
inventory
management, and
production

P A G E 29
2005 LMI

GreenSCOR is a modification of the SCOR

model that includes environmental elements.
GreenSCOR Content
Plan

P1 Plan Supply Chain

Source

P3 Plan Make

P4 Plan Deliver

Make

S1 Source Stocked Products

S2 Source MTO Products

S3 Source ETO Products

M1 Make-to-Stock

M2 Make-to-Order

M3 Engineer-to-Order

D2 Deliver MTO Products

D3 Deliver ETO Products

Enable

SCOR Model

Plan

P1 Plan Supply Chain

Source
S1 Source Stocked Products

S2 Source MTO Products

S3 Source ETO Products

P3 Plan Make

P4 Plan Deliver

Make
M1 Make-to-Stock

M2 Make-to-Order

M3 Engineer-to-Order

P5 Plan Returns

Deliver
D1 Deliver Stocked Products

D2 Deliver MTO Products

D3 Deliver ETO Products

Return
Deliver

Return
Source

Customers

P2 Plan Source

Suppliers

GreenSCOR modifies
the existing SCOR
structure to include
environmental
processes, metrics,
and best practices.

Deliver
D1 Deliver Stocked Products

Return
Deliver

Return
Source

Environmental
Management

P5 Plan Returns

Customers

Suppliers

P2 Plan Source

GreenSCOR maintains
the integrity of the
current SCOR model
by adding to the
existing elements.

Enable

GreenSCOR Model

P A G E 30
2005 LMI

Contents
What is Green Supply Chain Management?
Green Supply Chain Management Principles
Green Supply Chain Management Best Practices
Implementing Best Practices
Summary

P A G E 31
2005 LMI

Implementing Green supply chain

properly will drive real business value.

Green supply chain concepts manage environmental impacts

where they occurideally before they occur.

Best practices focus on the business, not social, value that

green supply chain management creates.

Align green supply chain goals with business goals

Evaluate the supply chain as a single life cycle system
Use environmental analysis as a catalyst for innovation
Focus on source reduction to reduce waste

Successful implementation requires raising the profile and

perceived value of environmental projects.
Articulate project value in terms of business value
Create the project to work within the organizational culture
Use effective tools (e.g., GreenSCOR) to enable project execution
P A G E 32

2005 LMI