Supply Chain Management

Green Supply Chain Management

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 Outline
The role of sustainability in the supply chain
Metrics for sustainability
Sustainability and the supply chain drivers
Design for sustainability
Returns and Reverse logistics

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 Sustainability in the Supply Chain

A focus on sustainability allows a supply chain to better

serve environmentally conscious customers and improve
supply chain performance
Three distinct factors driving an increased focus on
sustainability:
Reducing risks and improving financial
Attracting customers
Making the world more sustainable
Most of the gains made in the first factor, with customers
not always consistent between wish for sustainable
practices and the resulting prices
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 Sustainability Examples
Firm Responses
Wal-Mart Began sustainability investments as defensive move from
consumer activists
Uses high efficiency light bulbs to reduce energy costs
Reduced packaging to reduce transport and material costs
Redesigned containers for improved shipping and handling
efficiencies
Starbucks Future growth linked to artisanal coffee production
Initiated equitable practices (CARE) to evaluate and certify
sustainable coffee production
CARE suppliers have preferred supplier status and pricing
premium
84% of coffee sourced from certified CARE and Fairtrade
practices

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 Drivers of Competitive Strategy
Three main adoption drivers in terms of business strategy:
Legislation: product handling regulations extend producer
responsibilities, while energy consumption or waste disposal
regulation an guidelines have leading to the adoption of more green
supply chain practices
Economics: Direct gains from cost reduction, new revenues and
benefits on capital returns. Indirect gains include competitive and
market advantages such as improved image and customer
satisfaction with product claims and services
Corporate Citizenship: Part of customer attraction and role within
society. Specific programs with community or sustainability theme
are public shows of a companys commitment to sustainability and
pro-social values
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 Barriers to Sustainability
Business leaders identified:
Insufficient return on investment
Customers unwillingness to pay the green
premium
Difficulty of identifying sustainability over a
products life cycle
These makes building sustainable supply chains much
harder

WATCH: Greening the supply Chain with UPS https://www.youtube.com/watch?v=GqU8Wng1K0Y

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 Sustainability Metrics
There are variations in how sustainability is measured and reported
Recommended measures:
1. Energy consumption
2. Water consumption
3. Greenhouse gas emissions
4. Waste generation
Different industries will use different standards:
. Transportation green house gas emissions, fuel consumption and
efficiency
. Pharmaceuticals waste reductions and water consumption
To reduce contestability, sustainability metrics require clear
definitions of scope and performance definition: absolute or relative

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Sustainability and the 6 SC Drivers
Driver Examples of Opportunities
Facilities Energy efficiency from low-power lights, sky-lighting, redirect waste
to recycling, smart appliances using off-peak energy, reuse heat from
production processes
Inventory Introduce life cycle assessment and design for environment to reduce
landfill volumes, harmful materials and eco-labelling

Transportation Reduce fuel consumption by efficient and correct loading, product

packing, efficient schedules and reverse logistics for recycling
Information More use of common standards would produce transparency across
supply chains, e.g. Starbucks CARE, LCA ISO14040, Wal-Mart
Sustainability Index Consortium labelling
Sourcing Question and select suppliers with sustainability goals and practices,
apply targets to monitor performance, cooperation and alignment

Pricing Reduce product costs, e.g. lower energy consumption , minimise

price gaps, take advantage of govt credit schemes
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 Sustainable Supply Chain Design
Introduces a second loop in the supply chain that
returns, recycles, refurbishes or reuses product
components Consumption

Recyclable design is not enough, the supply chain

must also have the capability to return products
Life Cycle Assessment and
Returned products can be:
Design for Environment

Repaired and resold

Remanufactured or used in other products
Recycled with base materials reused

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 Group Discussion

What are some of the challenges that limit the

effort put in by supply chains to improve
sustainability?

What changes could a grocery store or

supermarket make to its supply chain drivers to
improve supply chain sustainability?

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 Group Discussion
What are some of the challenges that limit the effort put in by supply chains to
improve sustainability?
Insufficient return on investment, Customers unwillingness to pay, Difficulty of
identifying sustainability over a products life cycle
What changes could a grocery store or supermarket make to its supply chain
drivers to improve supply chain sustainability?
Facility - Energy consumption, through low energy appliances or bulbs. Look to have
more natural light and ventilation
Inventory Packaging changes can reduce plastic and cardboard wrapping, sell to 3rd
party for recycling
Transportation- more efficient packing and vehicles will reduce CO2 emissions
Suppliers working in alliance to share sustainability values and activities to reduce
supply chain costs and to improve sustainability outcomes
Information - seek better knowledge of life cycle issues and costs. Seek to use
sustainability standards to measure suppliers, transport options and tracking energy use
levels
Pricing - understand who in the market will pay premium prices for sustainable goods
and target these people for behavioral change
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 Design for Sustainability
Life Cycle Assessment (LSA)
A process that
Compiles energy input and release data
Evaluates the impacts associated with these inputs and releases
Analysis to rate or assess the overall impact over life cycle
Example: Wal-Mart Canada analysed transportation and
shifted to rail from road to reduce carbon emissions by
2,600 tons. Saved $4.5 million and 1,400 tons of waste by
changing from cardboard to durable plastic shipping crates
WATCH: Life Cycle Assessment https://www.youtube.com/watch?v=fGhoInz-VUs
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 Design for Sustainability
Design for Environment (DFE)
DFE acknowledges that design influences how a product is
made, shipped, used and recovered.
A design process that aims to:
Avoids the use of toxic materials,
Minimises energy inputs, and
Facilitates disassembly, repair and remanufacturing
Example: Hewlett Packards design processes identify, prioritise,
recommend environmental innovations and apply features such
as modular design, snap-in construction and colored plastics to
reduce need for glues, chemical adhesives and paints
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 Return or Reverse Logistics Function

The logistic processes that returns

goods, packaging material and
transportation equipment, or:
An organization's management
of material resources obtained
from customers
Returns or Reverse Logistics are
commercially orientated, while
Green logistics are primarily
motivated by environmental
considerations
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 Product Returns
Customers return products due to:
Dis-satisfaction
Installation or usage problems
Warranty claims
Faulty orders
Retail overstock
Manufacturer recall (product or part failure)
The supply chain must have the capacity to collect, transport and
address the reason for return
This may include replacement, resale, repair, recycling, and
remanufacturing of the product or parts
Some goods are considered hazardous and must be disposed of or
handled using special methods
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 Reverse Logistics

Green Logistics Reverse Logistics Processes

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 Return activities
WATCH: Reverse Logistics: Recycling and Remanufacturing - https://www.youtube.com/watch?v=tY1l-wCdSbQ

Activity Description
Resale Immediate selling of returned unused or near-new products such
as catalogue returns or customer lease to secondary markets
Repair Bringing damaged components back to a functional condition
Reuse Using good components from old used products (mostly spare
parts) for refurbish or remanufacture of products
Remanufacture or Restoring a product to a like-new condition by
refurbish reusing, reconditioning and replacing its parts
Recycle Taking component materials and processing them into useful
material
Scrap Disposal of products if no alternative course of action is
available

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 Five stages of returns
Stage Description
1. Receive Receiving products more complicated than forward supply, with
more packaging and transportation variation Cost reduction benefit
in making disposition decision as close to receiving as possible
2. Sort & Stage Arranging by product or recovery type and size, quick cycle times
less than 3 days
3. Process Correct classification or product numbers helps with unused
product returns, warranty and other procedures followed
4. Analyse Recovery option decision taken with different recovery options
having higher costs and lower financial return. E.g. fix for resale
provides more value than refurbish or remanufacture, scrap has
lowest values
5. Support Distribution for recovery options, to repair center or return to
manufacturer, with transportation adding to costs. Higher recovery
rates from repair and refurbishment compared with remanufactured
and recycled. Costs include transport, storage, handling and labor.

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 Returns Models
Closed loop: Materials or products returned to same
manufacturer as forward SC. Maintains control over
flows, retains IP control and warranty processing
Open loop: Return flow outsourced to third-level
provider (3PL), that may specialise in return
collection, transportation and processing using profit
sharing
Independent Operator: returns completely outside of
forward SC, is dependant on industry, product and
material value conisderations
WATCH: Ryder's Reverse Logistics Solution - https://www.youtube.com/watch?v=NRi6xXMcFII
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 Product Recovery Issues

Issue Description
Unorganised Few formal contracts, young developing industry with high
Sector volatility
Lack of Time consuming to gather information across products and designs
Information& affects retrieval decisions for low value products, with relatively
Skill highly skilled workforce required for some operations
Supply Driven Manufacturing demand driven recovery is supply driven
Manual % recovery steps largely manual processes making recovery slow,
Processes expensive, error-prone and inefficient
Low value and Recovery operates on low margins with time-sensitive items
Margins (become obsolete or out of fashion quickly e.g. consumer
electronics, clothing, books etc). Delays in returns and processing
cycle times affects value and margins.

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 Returns in different Industries
Returns infrastructures vary by industry
Some industries have end-of-life return regulations, such
as:
Automotive
Electronics
Appliances
The automotive sector has the longest returns tradition,
due to the value of steel, aluminum and mechanical
components.
It has the most advanced recycling processes compared
with other industries
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 Improving Returns
Returns infrastructures can be become more developed, faster, more
efficient and cist effective, by
Design for disassembly
Recycling more materials
Increasing product life cycles
Legislation and regulation can force firms to introduce some of
these measures
Golden rules:
1. Returns are like perishables, the longer they are kept, the less
value they provide
2. Returns value chain partnership are vital
3. Returns processes provide valuable customer feedback, used to
adapt product design and distribution (forward and reverse)
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 Case study

In groups, read and discuss the case study of Comet

and Wincanton Recycling and answer the discussion
questions.

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 Case Feedback
1. This case is an example of the open loop business
model. Wincanton is the 3PL recycling provider for Comet.

Comet

Comet
Comet
Sorting Comet
Comet

Comet

Wincanton Wincanton

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 Case Feedback
2. Sustainability measures:
Energy consumption reduce # of in-out trips, located recycle centers closer
to comet, 90% of the deliveries carry both ways
Greenhouse gas emissions reduce carbon foot print
Waste generation reduce waste by collecting old appliances,
refurbishment, repair and recycle
3. Comet and Wincanton had to develop synergies aligning their
delivery and returns competencies. In transitions comet were
delivering goods, while Wincanton was collecting the used
appliance. Once integrated the companies then found they needed
to integrate closer facility location and schedule information for
more efficient handling of out and inbound going deliveries to fit
space restrictions. They had to develop capabilities for sorting,
distribution and reuse, resale and recycling.
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 Summary
What is driving sustainability in the supply chain?
Reducing economic risks and improving financial performance,
Attracting customers, Making the world more sustainable, Legislation
and The rise of CSR
What are key sustainability metrics?
Sustainability metrics generally cover energy consumption, water
consumption, greenhouse gas emissions and waste generation
What is reverse logistics?
The receipt of products from the customer. These maybe unused through
defects, problems, end-of-life or due to economic and environmental
reasons. Reverse supply chains have more commercial values, while
green chains have a strong environmental rationale. Reverse supply
chains assist firms to recover, reuse, resell, repair, remanufacture or
refurbish, recycle and scrap or safely dispose of products.
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 Videos
Greening the supply chain with UPS
https://www.youtube.com/watch?v=GqU8Wng1K0Y
Life Cycle Assessment
https://www.youtube.com/watch?v=fGhoInz-VUs
Ryders reverse supply chain
https://www.youtube.com/watch?v=NRi6xXMcFII
Reverse logistics Recycing and remanufacturing
https://www.youtube.com/watch?v=tY1l-wCdSbQ
IKEAs unique supply chain (no subtitles)
https://www.youtube.com/watch?v=DBrl356VhqQ
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