Green Supply Chain
Contents
What is Green Supply Chain Management? Green Supply Chain Management Principles Green Supply Chain Management Best
Practices Implementing Best Practices Summary
What is Supply Chain management?
Supply chain management (SCM) is the oversight
of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer.
What Is Green Supply Chain Management
Integrating environment thinking into supply chain management, including product design, material sourcing and selection, manufacturing processes, delivery of the final product to the consumers, and end-of-life management of the product after its useful life".
Green Supply Chain Management
Green SCM integrates environmental and supply chain management.
Green Supply Chain Management
Environmental Management
Supply Chain Management Green Supply Chain Management
Green SCM recognizes the disproportionate environmental impact of supply chain processes in an organization.
Industrial Ecology: a systematic organizing framework for the
many facets of environmental management..industrial world as a natural system - a part of the local ecosystems and the global biosphere ... offers a fundamental understanding of the value of modeling the industrial system on ecosystems to achieve Industrial Ecosystem Boundary sustainable environmental performance (Lowe, 1993).
Energy and Limited Res ources
Materials Extractor or Grower
Materials Processor or Manufacturer
Limited W as te
Waste P rocessor
Consumer
Management of Materials and Resources from Suppliers to Manufacturer/Service Provider to Customer and Back, with the Natural Environment Explicitly Considered (hopefully in a conscientious manner).
Green Supply Chain => Management
Green SCM leverages the role of the environment in SC value creation. Environmental Value Drivers
Tangible Outcomes
Profitability Asset Utilization Service Level Employee Satisfaction Customer
Green Supply Chain Programs
Supply Chain Value
Stakeholder Interests
Environmental Sustainability Community Quality of Life
Reputation Continuity Alliances Technology
Intangible Value Drivers
Source: Forging New Links, GEMI, 2004
Commercial firms have had early success using Green SCM principles.
Texas Instruments: Saves $8 million each year by reducing its transit packaging budget for its semiconductor business through source reduction, recycling, and use of reusable packaging systems (20% annual savings). Pepsi-Cola: Saved $44 million by switching from corrugated to reusable plastic shipping containers for one liter and 20ounce bottles, conserving 196 million pounds of corrugated material.
Commonwealth Edison: Produced $50 million in financial benefits from managing materials and equipment with a life-cycle management approach.
Dow Corning: Saved $2.3 million by using reconditioned steel drums in 1995. Also conserved 7.8 million pounds of steel.
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
Benefits Of Green SCM
Improvements By Green SCM
Improves operations by employing an environmental solution Improves Agility: Green supply chain management help
mitigate risks and speed innovations
Increases Adaptability: Green supply chain analysis often
leads to innovative processes and continuous improvements
Promotes Alignment: involves negotiating policies with
suppliers and customers, which results in better alignment of business processes and principles.
Why Do it? (Benefits)
USAEP, 2001, USAEP, (2001), Greening the Supply Chain, U.S. Asia Environmental Program,
http://www.usaep.org/ctem/greening.htm.
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. 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. Improved product quality. Supply chain partnerships help maintain relationships between buyers and suppliers leading to increased control over product quality. Consistent corporate environmental goals. In an era of multi-faceted, nonvertical manufacturing, companies include supplier outreach to address corporate environmental goals. Improved public image. Consumers, investors, and employees respond positively to companies with a reputation for good environmental performance.
Contents
What is Green Supply Chain Management? Green Supply Chain Management Principles Green Supply Chain Management Best
Practices Implementing Best Practices Summary
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 Consumer Transport Disposal Material Extraction Use
Typical Supply Chain Scope
The environmental impacts of each LC stage Environmental Life Cycle reduction. are examined for
Water Water Energy
Inputs
Energy
Stage
Concept Design Raw Retail/ Transport Manufacture Transport Consumer Transport Disposal Material Extraction Use
Air
Air Air Water Waste Air
Air Water Waste Air
Air Water Waste
Impacts
Water Waste
Historically, GSC management focused on the upstream supply chain.
Typical Green Supply Chain Analysis
Supplier
Manufacturer
Supplier
Manufacturer
Supplier
encourages suppliers to adopt green practices, environmental management systems, etc. Focus is on the material content and environmental practices of suppliers.
Now, GSC programs are moving from compliance to value creation.
Environmental, Safety, and Health Business Contributions Assure Compliance Minimize Risk Maintain Health Protect the Environment Traditional Cost Avoidance Raise Productivity Enhance Relations Support Innovation Enable Growth Emerging Value Creation
Source: Forging New Links, GEMI, 2004
Companies are starting to view GSC as a strategic analysis tool. Pollution Prevention Hierarchy
Long Term Source Reduction Strategic
Recycle/Reuse
Control Technology Short Term Disposal Tactical
The Pollution Prevention Hierarchy gauges the value of environmental programs.
Source: U.S. Environmental Protection Agency
Contents
What is Green Supply Chain Management? Green Supply Chain Management Principles Green Supply Chain Management Best
Practices Implementing Best Practices Summary
Green supply chain best practices focus on the business results first.
Green Supply Chain Best Practices
Align green supply chain
goals with business goals Evaluate the supply chain as a single life cycle system Use green supply chain analysis as a catalyst for innovation Focus on source reduction to reduce waste
Before embarking on green supply chain
Aligning GSC improvements with your business goals creates strategic value.
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
Evaluating the supply chain as a system leads to life cycle optimization.
Inputs
System View of Environmental Life Cycle
Raw Material
Energy
Stage
Concept
Design
Raw Retail/ Transport Manufacture Transport Consumer Transport Disposal Material Extraction Use
Outputs
Product
Waste
$ Minimize the bad inputs and outputs.
Maximize the good outputs.
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
Focusing on source reduction programs drives higher value improvements.
Waste Reduction Opportunities in the Life Cycle
Concept
Design
Raw Retail/ Transport Manufacture Transport Consumer Transport Disposal Material Extraction Use
Reduce
High Potential for life cycle cost savings
Reuse/Recycle
Control Technology
Dispose
Cumulative life cycle costs Low
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 technology lowers fuel cost but has greater
Hybrid HMMWV
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
Theater Fuel Distribution
Source: Economics of Hybrid Electric Technology: Military Vehicles, 2002, LMI Resource Costs of Supplying Power to a Battlefield, 2004, LMI Research Institute
USPS worked with direct mail vendors to reduce supply chain cost and waste. Direct Mailers realize higher response rates and lower operating costs
Direct Mail Supply Chain Ensure Ensure changes proper do not affect addressing sorting capability
Direct Mailer Post Office Sorting Facility Post Office
Target mailings to generate less waste
Customer
Waste
Target recycled content and recyclable materials Estimated
Recycle undeliverable mail
Undeliverable Items
Problem: Excessive direct mail waste and cost
savings (USPS) = $500 Million (1997)
Source: Greening the Mail, 1999, 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
innovate to reduce costs (e.g., new harvesting methods).
Source: Green and Competitive, Porter and van der Linde, HBR, Sept.-Oct. 1995
Xerox implemented a take-back program redefined customers expectations.
Xerox Copier Take-back Program
70-90% (by weight) of machines reused 144 million pounds diverted from landfills (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. Source: Bringing the Environment Down to Earth, Reinhardt, HBR, July-August 1999 Xerox estimates several hundred million dollar savings Environment, Health, and Safety Progress Report: 2004, Xerox Corporation annually.
Contents
What is Green Supply Chain Management? Green Supply Chain Management Principles Green Supply Chain Management Best
Practices Implementing Best Practices Summary
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
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 outsideNew Links, GEMI,where in-house expertise doesnt exist. Source: Forging experts 2004
Use tools such as Green SCOR to help define and analyze GSC problems.
GreenSCOR Concept
Environmental Management
Supply Chain Management
Managing the environmental impacts of operations, including compliance, emissions, and remediation
GreenSCOR Model
Managing the flow of material from supplier to end customer, including procurement, transportation, inventory management, and production
GreenSCOR is a modification of the SCOR model that includes environmental elements.
GreenSCOR Content
Environmental Management
SCOR Model
GreenSCOR modifies the existing SCOR structure to include environmental processes, metrics, and best practices. GreenSCOR Model
GreenSCOR maintains the integrity of the current SCOR model by adding to the existing elements.
Areas to Green the Supply Chain
Designing Of Products
Production
Material Purchase Packaging
Warehousing
Logistics & Reverse Logistics
Designing Of Products
An eco friendly design approach leads
1] Less material usage
2] Minimum Operations
3] Proper use of Computational fluid dynamics tools can used to reduce the exhaust emissions at designing level
Purchase
Implementing Green purchasing policies Technical support to vendors to reduce the
emissions
Guidelines for usage of less hazardous materials
Production
Achieving Economies of scale in production
Lean manufacturing approach
Fuel efficient tools and machines Selecting less carbon intensive energy sources
Packaging
Mercury free
Non toxic (minimize toxicity)
PVC or DEHP free Recyclability
Hazardous waste considerations
Durability/Reusability Energy efficient
Summary
Logistics
Optimized Truck loads Direct shipment to the customer(Dell model) Routing of distribution Reverse Logistics
Greenness in Logistics
Supply chain management practices and strategies that
reduce the environmental and energy footprint of freight distribution. It focuses on material handling, waste management, packaging and transport.
Green Logistics The Flow
Important Factors
Cost
Reliability
Time Warehousing
IT Systems
The Blue Print
Top Down Approach Greenness is imposed by
regulations
Charging for external costs in Europe & Road Pricing in USA Movement of Hazardous Goods & Mandatory Collection & Re-
Cycling Unpredictable Outcomes
Bottom Up Approach Improvements by Industry
Practices
Business interests of Industry match with Govt. Initiatives IT control over scheduling & routing makes further gains
possible
Compromise Approach Normally by Certification
Schemes
Recycling & Environmental Compliance gives market edge
Application of Green Logistics
Product Design and Production Planning Light materials & Processes which allow high transport density Physical Distribution Usage of LEED certified facilities Shipping strategies & sufficient load factor must be taken into account Materials Management Better Packaging to reduce material consumption & waste Recycled resources as Industrial Inputs Reverse Distribution Manufacturers and domestic waste producers achieve environmental credit.
Other Initiatives
Eco labeling: Labeling that identifies products that
meet certain environmental criteria LEED (Leadership in Energy and Environmental Design): Design and Construction practices that significantly reduces or eliminate negative impact of building on environment Green sourcing: Sustainable procurement
Contents
What is Green Supply Chain Management? Green Supply Chain Management Principles Green Supply Chain Management Best
Practices Implementing Best Practices Summary
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
Carbon Emissions a Global Challenge With global warming being recognised as one of the largest challenges of this century, carbon emissions are increasingly becoming the centre of attention
Global warming is the result
of increasing CO2 concentration in the atmosphere
Global warming is and will be
one of the largest challenges of this century
Transportation activities are
one of the main contributors to global warming
Some examples of the carbon footprints when transporting goods
Transport of tuna from Spain to Japan Transport of 1 pair of shoes 450 kg CO2 372 g CO2
China Spain Japan
North Europe
20 KM
0 KM
7500 kg CO2
3700 g CO2
Transportation - An important source of CO2 Due to globalization and increased outsourced trends, transportation is the only sector that has increased CO2 emissions in the last two decades
EU Change in CO 2 emission in UE (1990-2004)
Transport Energy industries Residential Average Other (non-energy) Services Industrial processes Agriculture Industry (energy) Waste Fugitive emissions
-33% -36%
-40% -30% -20% -10% 0% 10% 20% 30%
26% -3% -4% -5% -10% -11% -12% -13% -15%
Source: European Logistics Users Providers and Enablers Group ( ELUPEG)
mounting pressure from stakeholders
ambitious CO2 reduction targets
untapped potentials in global supply chains
The scope can cover supply chain activities from the pick-up at the vendors factory until delivery to the point of sale
Factory
Truck/ Rail/ Barge
CFS facilities
Load port
Ocean/ Air
Discharge port
Truck/ Rail/ Barge
DC
Truck
Point of sale
SupplyChain CarbonCheck - a standardised approach 4-step methodology based on internationally recognized emission standards
Implement solutions
Simulate carbon footprint & costs of alternative scenarios 2
3 Evaluate CO2 emission & cost reduction potential
1 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
3
1
Estimate
Carbon Footprint Calculator
4
2
Simulate Evaluate
Implement
Global supply chain scope
Carbon mapping of current supply chain with Maersk Carbon Footprint Calculator
Internationally recognised emission standards & calculation methodology
AS IS
Result: Snap-shot of the supply chains current carbon footprint the AS IS scenario
A B C D
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
Estimate
2
Simulate Evaluate
4
Implement
A B C D
AS IS Simulation of alternative supply chain set-ups TO BE scenarios Calculation of carbon emissions and total supply chain costs for each scenario Comparison of TO BE scenario with AS IS scenarios Identification of CO2 reduction potentials TO BE 3
A B C D
TO BE 2
Step 3: Evaluate CO2 Reduction Potentials Reduction potentials are evaluated under various aspects
3 1
Estimate
2
Simulate Evaluate
4
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 1
Estimate
CO2 Reduction 4
Implement
2
Simulate Evaluate
Preparation of roadmap for implementation Maersk Logistics assists in putting agreed solutions into practice Estimation of actual achievements in reducing carbon emissions after implementation phase
Solution C
Solution B
Solution A
Time
What have we done so far? Case Studies
What have we done so far? case study 1 In this study, we have analyzed the environmental impact of alternative transportation modes
The Project > An electronics company exporting goods from Barcelona to Denmark > Environmental impact analysis of two scenarios: Truck vs. Multimodal Results > The analysis reveals that trucking alternative represents more than 3 times more CO2 emissions compared to multimodal transportation
Total CO2 (KGs) Truck Multimodal Savings 197.120 65.224 131.896
Alternative 1 Truck Total CO2 emissions: 197.120 KGs
Factory (Barcelona)
Warehouse (Denmark)
Alternative 2 Multimodal Total CO2 emissions: 65.244 KGs
Factory (Barcelona)
Truck
DC (Spain)
Rail
DC Truck (Copenhagen)
Warehouse (Denmark)
What have we done so far? case study 2 The aim of the study was to identify main drivers of carbon emissions in the supply chain and provide alternatives to reduce carbon footprint and costs
The project > A leading health and beauty group Alliance Boots > Exports from Asia to United Kingdom
The Scope
Factory
Truck/ Rail/ Barge
CFS facilities
Load port
Ocean/ Air
Discharge port
Truck/ Rail
DC
Truck
Point of sale
What have we done?
Estimated current carbon footprint & costs Simulated carbon footprint & costs for alternative scenarios Evaluated CO emission & cost reduction potentials with Boots Helped Boots to implement solutions
2
Results 29% reduction in CO2 emissions 21% reduction in supply chain costs
Results 29% CO2 reduction The supply chain improvement initiatives led to 29% reduction in CO2 metre)
80 70 Reduction 60 50 40 30 20 10 0 2004 2007
(per cubic
terminal handling reduction increased equipment utilisation improved weight efficiency (air) air shipment reduction carbon emissions (kg/cbm)
Results 21% cost reduction Lower carbon emissions come along with lower logistics costs a win-win situation for you and the environment!
Reduction
terminal handling reduction increase in container utilization air shipment reduction USD / cubic meter
without initiatives
2007
What have we done so far? case study 3 In this study we have estimated the carbon footprint from supply chain related activities
The project > An American retailing brand > Global supply chain with imports to USA
The Scope
Factory
Truck
CFS facilities
Load port
Ocean/ Air
Discharge port
Truck/ Rail
DC
Truck
Point of sale
Results 57,59 million CO2 for shipments in 2007 On average, each cubic meter shipped had a carbon footprint of 101 kg
Rail
Ocean
Truck
What does this mean?* 57,59 million KGs of CO2 is equivalent to; > 10,548 passenger cars driven for one year > 133,939 barrels of oil
not
Air
* : http://www.epa.gov/cleanenergy/energy-resources/calculator.html
Transport Carrier Selection
Network Distribution Optimization
A Greener Supply Chain
Transport Mode Optimization
Equipment Utilization Improvement
Typically, lower carbon emissions come along with lower overall logistics costs and maintained or improved service levels a win-win situation for our clients and the environment!
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