GREEN SUPPLY CHAIN

By : Rishabh(6)
Green
Samar Productive Supply Chain
Masood(7)
Ex-PGDM

Rishabh
Samar

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 Green SCM
• Green Supply Chain Management (GSCM)
– process of using environment friendly inputs
– transforming these inputs into outputs that can be
reclaimed and re-used at the end of their lifecycle
– thus, creating a sustainable supply chain

• GSCM = Green purchasing + Green

manufacturing/materials management + Green
Distribution / marketing +Reverse logistics.
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Carbon Footprint in Transport
Transport of tuna from Spain to Japan Transport of 1 pair of shoes

450 kg 372 g
CO2 CO2

China North
Europe
Spain
Japan

20 KM 0 KM

7500 kg 3700 g
CO2 CO2
 Competitive Advantage

• Types of SCM: Efficient, Responsive, and Agile

• With
– Increasing customer awareness
– Regulatory norms
– greener supply chain management practices will
have a competitive advantage

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 untapped potentials
mounting pressure ambitious CO2
in global supply
from stakeholders reduction targets
chains
 Examples
• Dell saves over $20mn annually by supply chain and
packaging improvements.
• GM reduced its disposal costs by $12 million by
– establishing a reusable container program with its
suppliers.
• Wal-Mart recently set the goal of a 5% reduction in
packaging by 2013
– It has been widely reported that the retail giant expects the
cut in packaging will save 667,000 metric tons of carbon
dioxide from entering the atmosphere
– Moreover, the company anticipates $3.4 billion in direct
savings and roughly $11 billion in savings across the supply
chain
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 Examples
• Johnson & Johnson's energy efficiency program resulted in an
estimated $30 million in annualized savings over the 10 years
prior to 2006.
• Johnson & Johnson's Green House Gas reduction projects are
achieving an average 16% internal rate of return, according to
the company's 2006 sustainability report.
• Nestlé's packaging material savings between 1991 and 2006,
part of an ongoing, company-wide sustainability program,
Resulted in $510 million of savings worldwide

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 4-step methodology based on internationally
recognized emission standards

Implement
solutions 4
Simulate carbon footprint
& costs of alternative
3
scenarios
2 Evaluate CO2 emission &
cost reduction potential

Estimate current supply

chain carbon footprint &
costs
 Step 1: Estimate Current Carbon Footprint
As a first step, we map your current carbon emissions and provide you with a snap-
shot of the carbon footprint of your supply chain

Carbon Footprint Calculator

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1 2 4
Estimate Simulate Evaluate Implement

Global supply chain scope

Carbon mapping of current supply chain
with Maersk Carbon Footprint Calculator

Internationally recognised
emission standards &
calculation methodology

Result: Snap-shot of the supply chain’s

current carbon footprint – the ‘AS IS’
scenario
Step 2: Simulate Alternative Scenarios
We then estimate carbon emissions for alternative configurations of the supply chain and
compare the results with the current footprint

TO BE 1
3
1 2 4
Estimate Simulate Evaluate Implement
A B C D

AS IS

Simulation of alternative supply chain set- TO BE 2

ups – ‘TO BE’ scenarios
A B C D
Calculation of carbon emissions and total A B C D

supply chain costs for each scenario

Comparison of ‘TO BE’ scenario with

‘AS IS’ scenarios TO BE 3

Identification of CO2 reduction potentials

A B C D
Step 3: Evaluate CO2 Reduction Potentials
Reduction potentials are evaluated under various aspects

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1 2 4
Estimate Simulate Evaluate Implement

Evaluate carbon reduction potentials based

on:

Strategic fit

Impact on carbon footprint ?

Impact on total supply chain costs

Ease of implementation

Concrete recommendations for

implementation
Step 4: Implement Solutions
Maersk Logistics assists in implementing the agreed solutions, thus helping you tap the full
potential of carbon footprint reduction in your supply chain

3 CO2 Reduction
1 2 4
Estimate Simulate Evaluate Implement

Preparation of roadmap for implementation Solution C

Maersk Logistics assists in putting agreed solutions Solution B

into practice

Solution A
Estimation of actual achievements in reducing
carbon emissions after implementation phase
Time
 Creating a green supply chain
• Many organizations have introduced ‘greening’
requirements
– purchasing clauses, targets, practices, and technologies
• Automotive firms frequently require suppliers to
certify to ISO 14001 (Toyota and Ford)
• Starbucks Coffee as well as Ben and Jerry’s require
raw material suppliers to meet guidelines for
sustainable farming.

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 Creating a green supply chain
• Many organizations require
– suppliers avoid specific materials such as
chemicals that may be deemed hazardous to the
environment (DuPont, Seventh Generation, and
organic supply chains)
– Many firms invest in recycling systems intended to
retrieve waste or used product from customers
(Kodak, Hewlett Packard, and Fuji-Xerox).

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 Drivers for GSCM
• Rising energy costs
• Global concerns about green house gases
• Climate change
• Technology innovations
• Increased public awareness of environmental
issues

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 Challenges in Adopting a GSCM
• Lack of information about the green supply
chain best practices
• Global sourcing makes tracing of carbon
footprint difficult

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 Strategies
• Setting up GSCM
– Align green initiatives with the strategic objectives
– Adopt GSCM best practices
– Use technology solutions with a special focus on end-to-
end solution
– Reduce packaging and in-transit damage when shipping
– Reducing inventory and identifying optimal distribution
solutions.
– Perform lifecycle analysis for choosing products/solutions
to minimize environmental impact.

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 Strategies
• Risk-based Strategies
– In response to stakeholders requirements
• Efficiency-based Strategies
– ‘eco-efficiency’ or ‘lean-and-green’ approach
• Innovation-based Strategies
– is more environmentally specific.
• Closed-loop Strategies
– Often referred to in its simplest form as ‘reverse logistics,’
– closing the loop involves the capture and recovery of
materials for either re-manufacture (high-value) or recycling
(low value)

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 Green Productive SCM
• For a firm are these separate?
– Pollution prevention initiatives
– Manufacturing needs such as Quality & Productivity
improvements
• Most Pollution prevention programs fail to derive
vital synergies & working relationships with
manufacturing
• For a firm it is essential to drive competitiveness on
both Pollution prevention and Manufacturing fronts

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 Concept of Green Productivity
• Green Productivity is the integration of two
important developmental strategies
– Productivity improvement
– Environmental protection
• Productivity provides the framework for
continuous improvement
• Environmental protection provides the
foundation for sustainable development.

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 Green Productivity
• Green Productivity is a strategy for enhancing
productivity and environmental performance
for overall socio-economic development
• By applying
– appropriate techniques
– Technologies
– management systems
to produce environmentally compatible goods and
services.
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 GP and SCM
• These have synergies and help firms to
– enhance their productivity & quality
– improve the environmental performance
• GP improves environmental performance by
– First reducing the waste at the source
– Then reusing, recovering, and recycling waste
– Any residual waste will be treated by the End Of
the Pipe (EOP) system

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 GP and SCM
• GP enhances productivity and quality of
products and services
• GP
– improves the profitability of the organizations
– creates an advantage on competitiveness by
reducing the cost of production and operation

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 GP and SCM
• Synergy of GP & SCM will create a win-win
situation by enhancing the productivity,
quality, profitability, and environmental
performance of the entire supply chain
• GP-SCM applications will provide
organizations with strong competitiveness for
the global market.

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 A poster green SCM story...
October 2005, Wal-Mart CEO Lee Scott committed
the company to three ambitious goals:

•To be supplied 100 percent by renewable

energy

•To create zero waste and

•To sell products that sustain Wal-Mart's

resources and the environment.
To meet those goals, Wal-Mart would seek to transform its supply
chain, in cooperation with suppliers and environmental nonprofit
organizations.
Significant Initiatives
Significant Initiatives
 Concrete Steps
1. Identify Goals, Metrics and New
technologies
--entire supply chain based upon each company's ability to use less
packaging, utilize more effective materials in packaging, and source
these materials more efficiently relative to other suppliers.

--The scorecard is an important enabler for Wal-Mart to achieve its

public goal of reducing the packaging.

-- expected to generate $3.4 billion in savings.

 Concrete Steps
2. Certify Environmentally Sustainable products
-- According to an international study released in 2006, all species of wild
seafood are greatly depleted and predicted to collapse within 50 years.
-- Within this ominous business environment, Wal-Mart sourced
approximately $750 million in seafood in 2006, and the company's volume
of seafood business is growing at roughly 25 percent a year.
-- The Marine Stewardship Council (MSC), established by Unilever and the
World Wildlife Fund (WWF) in 1997, has defined standards for certification
as a sustainable fishery.
-- The MSC certifies third parties to audit and certify fishery and processor
compliance throughout the supply chain, from "boat to plate."
-- Wal-Mart sources only MSC certified fish, lately!
 Concrete Steps
3. Providing Network partner assistance
to suppliers
Wal-Mart is able to provide suppliers with valuable knowledge
and process assistance through its strong relationships with
the environmental nonprofits in its networks.
Eg: when the Chinese government threatened to shut down a
number of textile dye houses, including one of Wal-Mart's
suppliers, in order to reduce pollution in Beijing ahead of the
2008 Olympics, Wal-Mart immediately took action
- put the dye house in touch with one of the NGOs in their
network, which helped it formulate a more environmentally
friendly process that reduced its toxic output very quickly.
 Concrete Steps
4. Committing to larger volumes of
environmentally sustainable products
-- By making a commitment to buy a specified quantity of
each product certified as environmentally friendly, Wal-
Mart gives its suppliers an incentive to develop and
produce that product.
-- Wal-Mart (which became the world's largest purchaser of
organic cotton in 2006) also agreed to purchase the
organic cotton farmers' alternate crops.
 Concrete Steps

5. Licensing environmental innovations

if one factory is significantly more energy-efficient than
others, it's got an advantage. If it shares that
information, the competition might gain a much better
understanding of its production costs and therefore its
profit margins.

"Information about how much energy a product

consumes is not particularly sensitive."
 Top 10 Environmental Initiatives
• Automation
– more you automate —such as B2B e-commerce—the
more efficient it becomes and the less paper is consumed
• Outsourcing
– Most outsourcing solutions have a cost benefit, but there
is also an environmental benefit of data centre
consolidation and increased use of electronic transaction
processing

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 Top 10 Environmental Initiatives
• Increase supply chain visibility
– to better control of inventory (reduce over-ordering and
warehouse space required)
– optimize logistics processes and transportation, and reduce the
need to expedite shipments or duplicate orders. The less we ship
and store, the less our carbon footprint!
• Consider telecommuting
– there’s value in face time, but given transportation costs and
commute distances for many employees—as well as the
advancements in remote technology—it makes sense for many
workers to work for home at least one or two days a week.

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 Top 10 Environmental Initiatives
• Utilize video conferencing
– an eco-friendly way to interact with remote
employees and ensure their engagement in critical
discussions and important meetings
• Reward eco-friendly behaviour
– consider having a reward program for employees
that take actions to reduce their own carbon footprints
 by buying a hybrid or fuel cell vehicle
 organizing and participating in office carpools
 organizing recycling programs for hardware and home electronics
 use of permanent drink ware instead of plastic or Styrofoam cups

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 Top 10 Environmental Initiatives
• Deploy a viable Transportation Management System
– Optimize the transportation of goods
– Eliminate less-than-truckload deliveries
– Ensure route optimization to minimize fuel consumption
• Green the exterior and roof of the building
– Make the building more environment friendly by upgrading the
heating and cooling systems to be energy efficient
– use fewer machines with higher capacity and lesser cooling needs
– consider adding a ‘greenroof’ which has been shown to minimize
heating and cooling needs by 25% or more.

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 Top 10 Environmental Initiatives
• Make sure your vendors are earth friendly
– Ensure that your suppliers and vendors have green
projects and standards in place as well and ask for
documentation of these initiatives
• Get the CEO’s support
– Obtain support at the highest levels of management to
ensure that green initiatives will be followed through and
encouraged by the company

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 Rewards of Sustainability
• Operational cost savings due to reduced waste
• Compliance penalty reductions–the benefits of which go
straight to the bottom line
• Reduced health and safety costs
• Lower labor costs–better working conditions can increase the
motivation and productivity, and reduce the absenteeism of
logistics workers
• Reduced water, energy, fuel and transportation costs
• Reduced dependence on fluctuating prices of resources

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