Supply Chain Management

Sustainability and the Supply Chain

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 Learning Objectives

• Understand the importance of sustainability in a supply chain

• Discuss the challenge to sustainability posed by the tragedy of

the commons

• Describe key metrics that can be used to measure sustainability

for a supply chain

• Identify opportunities for improved sustainability in various

supply chain drivers
Dr. Srikanta Routroy.
 The Role of Sustainability
in a Supply Chain
• The health and survival of every supply chain and every
individual depends on the health of the surrounding world.
• Expand the goal of a supply chain to others that may be
affected by supply chain decision
• Factors driving focus on sustainability
Reducing risk and improving the financial performance of the
supply chain
Attracting customers who value sustainability
Making the world more sustainable

Dr. Srikanta Routroy.

 Key Metrics for Sustainability

• Energy consumption

• Water consumption

• Greenhouse gas emissions

• Waste generation
Challenges with scope
Absolute or relative measures of performance

Dr. Srikanta Routroy.

 Sustainability and Supply Chain Drivers

• Opportunities identified by matching the four categories with

supply chain drivers

• Facilities
Significant consumers of energy and water and emitters of
waste and greenhouse gases
Separate the improvement opportunities into those that
generate positive cash flows and those that do not

Dr. Srikanta Routroy.

 Sustainability and Supply Chain Drivers

• Inventory
Raw materials, work in process, finished goods and
inventory sitting in typical landfill
Life cycle assessment (LCA) can be used to assess a
product’s environmental impacts
Goal is to reduce harmful inventory and unlock the unused
value in products when they are discarded

Dr. Srikanta Routroy.

 Sustainability and Supply Chain Drivers

• Transportation
Lower transportation costs also tends to reduce emissions
and waste
Product design a significant role in reducing transportation
cost and emissions
Reducing packaging and allowing greater density during
transportation

Dr. Srikanta Routroy.

 Sustainability and Supply Chain Drivers

• Sourcing
Majority of energy and water use and waste and emissions
occurs in extended supply chain outside the enterprise
Extended supply chain and work with their suppliers to
improve performance
Verifying and tracking supplier performance on
sustainability is a major challenge

Dr. Srikanta Routroy.

 Sustainability and Supply Chain Drivers

• Information
Good information is a big challenge
Absence of standards leads to claims of improvement that
are not verifiable
Leads to company-specific standards and an explosion of
certifications and certifying agencies
Use of consistent measures within a supply chain

Dr. Srikanta Routroy.

 Sustainability and Supply Chain Drivers

• Pricing
Consumption visibility and differential pricing by load or
time of day may make a significant difference in the usage
of energy
Change customer’s willingness to pay for a product that is
produced and distributed in a more sustainable manner but
costs more
Sustainability cannot be improved simply by focusing on
reducing costs or the use of incentives

Dr. Srikanta Routroy.

 Green Supply Chain Practices
1) Jointly develop cleaner technology with suppliers

2) Conduct life cycle analysis in cooperation with suppliers

3) Engage suppliers in design for environment (DFE) product innovation

4) Develop tools that assist in the DFE effort

5) Coordinate minimization of environmental impact in the extended supply

chain

6) Reduce packaging waste at the customer/supplier interface

7) Reuse/recycle materials in cooperation with the supplier

8) Launch reuse initiatives (including buy backs and leasing)

9) Give supplier an incentive to reduce the customer’s environmental load

Dr. Srikanta Routroy.
 GSCM – Critical success factors
1) Top Management Commitment:
1) It supports long term GSCM process
2) It prefers GSCM over budget schedule
3) It plays key role for resource allocation for GSCM
4) It assumes that GSCM is a best way to increase profit

2) Government policies and regulations:

1) Extent to which regional environmental regulations adopted by firm
2) Regulation are still the most prevalent pressure for GSCM throughout
the globe
3) Extent to which international environmental regulations adopted by
firm
4) There may be possibility of firm to be thrown out of business if not
comply with the regulation or deny it
Dr. Srikanta Routroy.
 GSCM – Critical success factors
3) Eco-literacy amongst supply chain partners:
1) Empowerment and autonomy should be given to GSCM team
2) ISO 14000 certified suppliers should be given preference
3) Supplier selection based on green practices rather than price or
schedule
4) Technical assistance to improve the green quality and
responsiveness of supplier

4) Green Product development:

1) It includes design for disassembly, remanufacturing and recycling
2) It involves analysis of customer requirement in product
development
3) It involves creating product whose design, composition and usage
minimize adverse impact on environment
Dr. Srikanta Routroy.
 GSCM – Critical success factors

5) Green Procurement Practices:

1) Procurement of products and services that have no adverse effect
on environment
2) Allow an organization to offset financial and environmental risk
3) Collect environmental information on product and supplier
4) Analysis of product from mining of raw material to disposal
6) Availability of Clean Technology:
1) Adopting automation in production helps GSCM
2) Feedback system for green practices for employee performance
3) Green innovation reduced the resource need and cost and fulfills
the fundamental goal of better, cheaper and faster

Dr. Srikanta Routroy.

 GSCM – Critical success factors
7) Economic benefits from GSCM:
1) Improved environmental performance of firm leads to improve
market share and revenue
2) Waste minimization, better resource utilization, improved efficiency
and productivity ultimately reduces operating cost enhance profit
3) New market opportunities due to GSCM led to economic benefits
8) Green packaging/Eco-labeling
1) Utilization of packing material which is having minimum or no
environmental impact
2) Use of recycled material in packaging
3) Elimination of hazardous chemical and toxic material from packaging

4) Reduction in packaging weight

5) Waste or scrap of one product may be used as packaging material for
another product
Dr. Srikanta Routroy.
 GSCM – Critical success factors
9) Reverse Logistics Practices:
1) After end of life, the product should be returned by end user to reverse leg
of loop
2) RL includes recycle and reuse of material along with Green packaging
3) It includes environmental friendly methods of product recovery
4) RL program reduces the consumption of virgin material

10) Environmental management system:

1) The Certification to ISO: 14001 EMS helps to boost company image
2) EMS Certification is a mechanism for higher profit
3) EMS Certification leads to about good business sense
4) ISO:14001 Certification is legitimate indicator of organizations practices

Dr. Srikanta Routroy.

 GSCM – Critical success factors
11) Competitiveness:
1) Companies would like to brand themselves with a green image
2) Going green should be an integral part of manufacturing process

3) Green image reflects positively over the financial status of firm

4) Consumer awareness for green forced company to adopt green

12) Customer Satisfaction and involvement:

1) Conducting customer meeting for GSCM issue
2) Feedback on green product, cost, and GSCM
3) Survey on customer requirement for green
4) Response to customer needs
5) Interaction with customers
Dr. Srikanta Routroy.
 GSCM – Critical success factors
13) Societal concern for protection of environment:
1) Green disposal integrates environmental thinking into disposal activit
2) It includes end of life treatment i.e. recycling, reusing, refurbishing et
3) Problem faces during disposal led to green consciousness
4) Source reduction/ pollution prevention strategy led to green design
5) Mode of transportation should cause minimum environmental impact
6) Environmental friendly vehicle's (Electric/Solar/Hybrid type) should be
used
7) Elimination unnecessary steps in production process
8) Remanufacturing itself creates a new industry generating employment
opportunity

Dr. Srikanta Routroy.

 GSCM Benefits

1) Economic benefits from increased efficiency: By reducing wastes,

companies decrease handling expenses, fines, and even costly inputs.
Supplier's savings may be passed along to buyer companies
2) Competitive advantage through innovation: Efficient production is
enhanced through the use of cleaner technologies, process innovation, and
waste reduction. Reduction in wastes equals dollars earned
3) Improved product quality: Supply chain partnerships help maintain
relationships between buyers and suppliers leading to increased control over
product quality
4) Consistent corporate environmental goals: In an era of multi-faceted, non-
vertical manufacturing, companies include supplier outreach to address
corporate environmental goals
5) Improved public image: Consumers, investors, and employees respond
positively to companies with a reputation for good environmental
performance
Dr. Srikanta Routroy.
 GSCM Challenges
1) Awareness: Enhancing consumer and supplier knowledge
towards GSCM is a major challenge.
2) Business case development: Corporate social responsibility,
competitive pressures, as well as where to use limited capital will
be a choke point for multi-national supply chains in the future.
3) Sustainability Program Implementation: it is a challenge
because organizations don’t know which rules or standards to
follow.
4) Communications Planning: The communications strategy is
keep to driving long term compliance and reducing emissions.
5) Prioritization: it is difficult to decide which potential
opportunities to consider and in what order.
6) Cost/Budget Constraints
Dr. Srikanta Routroy.
 Closed-Loop Supply Chains

• Supply chains cause significant harm to the environment when

their output ends up in a landfill
• Improve sustainability by designing products that can be reused
and recycled
• Must be supported by a supply chain that ensures recycling
• Economic interests of all the parties must be understood and
aligned for the activities to be performed

Dr. Srikanta Routroy.

 Sustainability of Indian Supply Chains

• How will Indian supply chains adapt and reshape

themselves in an energy constrained, low-carbon
global environment?

• How will the above constraints impact India’s hopes

of becoming the second most preferred manufacturing
outsourcing destination?

Dr. Srikanta Routroy.