Logistics and Supply Chain Management
Next Generation Supply Chains
How will green supply chains affect and drive the design of next generation logistics and supply chains?
Next Generation Supply Chains
How will green supply chains affect and drive the design of next generation logistics and supply chains?
Green issues are those concerns relating to the natural environment. They have become prominent in society today as people are becoming more aware of the increasing number of environmental issues and particularly the effects of global warming. As a result, businesses are being pressurised by customers, suppliers, regulatory authorities and public bodies to address the problems (Cousins et al 2008). In particular, consumers are starting to question how environmentally friendly the manufacturing processes and supply chains (SC) are for the goods that they buy and are demanding green supply chains (GSC). Consequently, organisations at all stages of the SC now have to consider environmental issues to ensure that their SC is green as ‘every product generated, transported, used and discarded within the SC causes a certain impact on the environment.’ (Tsoulfas and Pappis 2006). All of this has become a concern because we do not want the actions carried out today to harm future generations. This desire to be green has implications for future SCs as new environmentally friendly procedures will have to be introduced.
One of the major concerns driving the desire to become green is the increase in carbon emissions resulting from the burning of fossil fuels to generate power. Consumers are becoming more concerned about the distance their goods travel because of the environmental damaged caused by the transportation used, this damage has become known as the carbon footprint (Mangan et al 2008). In particular, the distance travelled by food before it is consumed (food miles) is becoming a concern (Mangan et al 2008). To try and address these issues, a 60% reduction in carbon emissions by 2050 has been proposed by the Kyoto Protocol which has lead to countries having to seriously consider the causes of the current high levels of harmful emissions in order to attempt to reduce them (French 2007). This obviously impacts SCs in the world today and those of the future which are currently contributing to these high levels of carbon emissions.
Some companies are choosing to take part in ’emissions trading’ which involves giving something back to the environment that has a positive impact to try and strike a balance with the damage caused by the carbon emissions e.g. planting trees (Mangan et al 2008). Although emissions trading is good for the environment, there are many ways in which carbon emissions can be reduced along SCs to try and reduce the carbon footprint instead of just trying to counteract the damage being done. One of the main problems in addressing these issues is that there is no way of measuring how environmentally friendly a SC is (French 2007). Therefore, producers need to consider every stage in their SC and gain all the appropriate information on reducing carbon emissions in order to start to tackle the problem.
According to French (2007), 80% of carbon savings can only be realised during the design stages. The implication of this for future generations is that they will need to integrate this into the early stages of their process which will clearly take more time and money. This may in fact be easier for new ventures as they are starting with a blank slate thus making it simpler to incorporate this into their new plan than it is for already existing businesses who are going to have to readjust their current systems.
Despite the majority of carbon saving occurring at the design stage, it is not just forward planning that helps reduce the carbon footprint. As highlighted by Miller and Szekely (1995), it is ‘erroneous to suggest that “green” is a fixed state that users of the environment can eventually reach’ (p.403). Therefore, companies cannot become green by just planning ahead, they should constantly be striving to become ‘greener’ throughout the whole SC (Miller and Szekely 1995). Consequently, producers need to continuously monitor their whole SC as the process can often be made more efficient at many different stages throughout the life cycle of the chain. For example, French (2007) highlights that European governments are improving rail and sea networks to help reduce carbon emissions and congestion, these changes in shipping, road and rail options could reduce the length of a route and in turn helps the environment and reduces financial costs for the company.
A specific way in which next generation SCs will be influenced by GSCs is their use of low emission transportation. The number of efficient forms of transport is growing. It is no longer just road haulage using lower emission methods, low emission aeroplanes are now becoming available (Mangan et al 2008). In order for the SC to become more eco-friendly, they are going to have to start using low emission transportation for the distribution of their products. Not only that, but if manufacturers are aiming to make the whole SC more environmentally friendly, they will also need to consider the modes of transport used by their suppliers and either convince them to use efficient forms or find new companies that do. Governments are trying to encourage companies to become more environmentally friendly, the 2010 budget in the UK includes car tax exemption for zero carbon cars and increases in fuel duty (Vidal 2010). These are further factors to be taken into consideration with regards to transport when developing the next generation of SCs.
Clearly it will take many years for all transportation to become environmentally friendly, in fact, it may never happen. Therefore, logistics companies need to consider other ways of making the distribution side of materials and finished goods green. Although it would appear that shorter routes are more environmentally friendly, this is not always the case and the specific form of transport being used needs to be considered. For example, sea based transport is better for the environment than air based forms but takes much longer. In addition to this, the types of goods being transported also affects the mode of transport used, such as some fresh produce needs to be shipped faster and so will travel by air. One response to this is to use local produce instead of importing it which many believe should happen so as to reduce food miles. However, the form of transport used to distribute these locally grown products needs to be considered as it may not be environmentally friendly, and as mentioned above, a shorter route does not necessarily mean it is better for the environment. All of these concerns will impact the future generation of SCs as they will have to decide how best to transport goods throughout all stages of the chain. In some cases there may be limited options. However, in a world where consumers and regulations are demanding companies to be environmentally friendly, if efficient forms of transport are available then they need to be considered. A further point which needs to be mentioned in relation to transportation is obviously the financial costs involved. At present, the most environmentally friendly methods of transportation are more expensive to buy and to use, one reason for this being that “ethanol is often more expensive than gasoline” (Combs [n.d.]). This is further highlighted by Handfield et al (2005) who found that one company could save 15% in distribution costs if their company used non-environmentally friendly forms of transport. In addition, sourcing goods locally is more expensive which is why companies manufacture abroad and import products (Mangan et al 2008).
‘Relocating warehouses, increasing sea transport and switching distribution centre configurations are moves that will have the greatest impact on carbon emissions overall.’ (French 2007). Here, French (2007) succinctly describes further actions that can be taken by companies to become more environmentally friendly. Reconfiguring the distribution channels can happen in a number of ways, all of which will need to be considered when the next generation of SCs are designed. Firstly, the positioning of warehouses is key as their accessibility impacts the efficiency of the transportation used both in receiving and distributing goods (Elkin 2009). For next generation logistics this could mean finding or even building new warehouses which are in a more suitable position.
Secondly, the way in which distribution centres function can play an important role in reducing carbon emissions. The idea of centralised deliveries is seen to be more environmentally friendly, it is based on the idea that the further down a SC goods can move in bulk, the more eco-friendly they are (Mangan et al 2008). This can be achieved in many ways, one way is for freight to be delivered to a distribution centre and then individual customers collect their smaller packages. It could also be that distribution centres are used to gather together many orders from different suppliers to send on to retailers in one consolidated delivery (Mangan et al 2008). Additionally, distribution centres are now being used by companies at ports in order to reduce road miles, this is known as port centric logistics. The idea being that by emptying containers at the port and then re-grouping goods to send to individual destinations reduces the number of empty containers travelling on the roads. These distribution centres can be run by companies themselves or by 3PLs. Sainsbury’s estimate that by using this method of distribution, they save 700,000 road miles for every 5,000 containers/TEUs they handle (Mangan et al 2008). All of these methods of distribution help to reduce the number of road miles travelled, this needs to be considered by future SC designers as consolidation and centralisation are key to lowering emissions and so the most appropriate methods need to be chosen. It could be that all of the different techniques are used at some point in the SC.
Aiming to become greener does not just lie within the production/distribution side of the SC, it can also involve attempting to make employees more environmentally friendly. For example, in 2006, IKEA gave each member of staff a bicycle and offered 15% subsidy on public transport (Hickman 2006). This identifies another area for future generation SCs to make reductions in carbon emissions.
Reducing carbon emissions is not the only way GSCs address concerns related to the damage being done to the environment. A second issue is the amount of waste being produced in the world today. There is a need to reduce this waste and increase efforts to recycle and manufacture products which are recyclable. Just as with the reduction of carbon emissions, reducing waste/recycling can be done in many ways at different stages along the SC and again, it is not just the responsibility of the manufacturer but everybody in the SC.
Waste can be reduced during manufacture by using lean operations which can be linked to the just-in-time (JIT) approach (Slack et al 2007). The lean approach aims to reduce waste, involve everybody and aims for continuous improvement (Slack et al 2007). JIT links to this because it involves only producing what is needed and therefore stock from suppliers is only ordered and delivered when needed which reduces levels of inventory. This all helps reduce wastage because there are only enough products to cater for the demand. In addition, energy is not wasted in maintaining warehouses to hold inventory. However, the JIT approach is not necessarily good for the environment because it requires frequent small deliveries which are an inefficient use of transport (Mangan et al 2008).
A further way to reduce wastage is to use standardised parts to manufacture products and postpone differentiation of products for as long as possible to avoid unwanted inventory. Standardised parts may be used to make different products by the same company or may be used by different companies. For example, Toyota, Citro�n and Peugeot all use the same factory to produce a new range of cars, all of which have 92% of the same components (Mangan et al 2008). This collaboration and sharing of parts means there is less waste and transportation is being used more efficiently as parts are only being delivered to one factory instead of three, in turn reducing carbon emissions.
Recycling is another way to reduce the amount of harmful waste being produced. Recycling needs to be addressed at all levels from materials and waste during manufacture all the way through to the end product and its packaging. As the number of recyclable products increases, next generation SCs will have to consider this when designing their products to ensure that they are re-usable and/or recyclable, this impacts decisions made about components used and hence the suppliers chosen.
Addressing the environmental issues involved in SCs does not stop when a finished product is sold. Recently, there has been emphasis on companies being required to take responsibility for the recycling/disposal of the products and packaging they produce, this is known as reverse logistics or as a closed loop supply chain (Mangan et al 2008). Companies are encouraged to manufacture products that are reusable or recyclable so that their entire SC is environmentally friendly. However, return flows in the SC are not easy to handle which poses challenges for the next generation SCs. In order to ensure the efficient use of transportation for example, forward supply chain transport should be used for the reverse supply chain avoiding unnecessary miles and empty containers (Tsoulfas and Pappis 2006). Further considerations involve how end-of-life products will be dismantled and recovered or recycled to be reused and hence how it is possible to make these processes environmentally friendly.
In order to reduce the amount of waste, Tsoulfas and Pappis (2006) suggest that packaging needs to be standardised or designed to either be refilled or recycled, for example, Xerox set up packaging-reuse centres. Companies are trying to reduce the amount of packaging required for their products. For example, Kenco have created an “Eco Refill” pack which they claim has ‘97% less packaging weight than the complete jar,'(Kraft Foods UK Ltd [n.d.]). Persil have gone further by creating a product which is better for the environment and requires less packaging. Persil “small and mighty” detergent works at lower temperatures, requires less water to manufacture and has 40% less packaging than their other products (Unilever UK Limited [n.d.]). These examples indicate how not only the processes involved in the production of a product, but also the product/packaging itself is key to helping the environment. Therefore the design of products and the materials used to make and package them need to be assessed as to their affect on the environment.
One of the largest challenges faced by the designers of the next generation of SCs is that the idea of becoming green is not just limited to their individual company activities, it involves co-operation with everybody involved. Vachon (2007) found that ‘joint environmental planning and cooperation’ was stronger with suppliers than with customers. Therefore, companies have to try and ensure that all other parties involved in the supply chain partake in environmentally friendly practices, this encompasses suppliers and maybe even their suppliers all the way through to the end customer. De Brito et al (2008) suggest that in order to address the environmental issues, reorganisation within the company and between all the actors in the SC needs to occur. This highlights the sheer enormity of the task faced by these designers in selecting members of the SC who are already green or attempting to educate and change those that are not.
Being green is obviously becoming important to businesses and is of benefit to them as Slack et al (2007) estimate that 35% of the world’s largest businesses, who are clearly taking part in environmental practices, now publish reports on their environmental policies and performance. The benefits of green reporting involve motivating companies to understand the processes involved in the SC and identify ways of saving costs; identify environmental risks; and give the company a competitive advantage in a society where being green is important. Due to this, it is clear that the next generation SCs need to embrace some of the techniques to become environmentally friendly and publish reports on their procedures. It is obvious that it does not just help the environment it helps the business and as mentioned by Slack et al (2007) “green reporting makes good business sense” (p. 687).
Overall, it is clear that the growing awareness of environmental issues means the goal of a GSC is desirable for designers of next generation SCs. This growing awareness is clear as Carbone and Moatti (2008) found that 83% of companies claim that when making strategic decisions, they do consider environmental concerns. The goal of a GSC affects future SC design because it requires both knowledge of the issues and co-operation throughout the whole SC with everybody taking responsibility to be eco-friendly. Therefore, it may be necessary to redesign SCs to incorporate some of the techniques mentioned in order to be greener.
Customers are now demanding environmentally friendly products which have been produced in a way that helps to sustain the environment, and without the demand for products companies will not survive. Therefore, it is clear that GSCs will drive future generation SCs because being green adds a competitive advantage both by adding value for the customer and improving the company image (Routroy 2009). In addition to this, although costly to implement, GSCs are of benefit to businesses and should be considered by future generation SCs not just because they reduces environmental damage but in many cases also help to make financial savings and improve operational efficiency (Routroy 2009). However, despite the fact that going green is now a necessity for future generation SCs, it is essential that they do not implement procedures that won’t pay for themselves as they will be impossible to sustain particularly in today’s economic climate (Mc Crea 2010).
References
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