Impact of Green Supply Chain on Performance

Green Logistic

by Shamsul
Green Logistics
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Impact of Green Supply Chain on Organizational Performance

Introduction

Environmental issues and Green Supply Chain are now the main focus of all economic, political, social, and entrepreneurial debates (Arvis et al., 2010). The result of this was that environment, which was in the previous decade, not a major priority of industries and businesses have now until recently, has gained a great deal of momentum with respect to strategic planning and interest and which will also revolutionize both industrial as well as logistics systems (Yeung, 2008). 

Almost all companies, especially during this period of major economic difficulties, are constantly waging war against all sources of waste and favoring all sources of cost optimization in a continuous improvement process. This is how “green” logistics attempts to reach the topmost levels of corporate management (Sydor, 2006). 

This state of affairs has the requirement to integrate a more competitive and sustained integration of actions that focus on protecting the environment at all levels of Corporate Management (Operational, Tactical and Strategic). The result of this is that the Supply Chain Management, which is the “spinal cord” of every business and industry as well as of the logistical service providers, will serve to be a major source of improvement and optimization opportunities. It works to protect the environment and achieve overall performance (economic, social, and environmental) and sustainability (Arvis et al., 2010). 

Handling the issue of sustainable and green logistics within businesses and amongst logistics service providers is not that easy. This report attempts to present the role of green logistics over organizational performance, to present a typical approach for its implementation through a restructuring of the supply chain from upstream to Integrating environmental and societal requirements. 

Supply chain management and organizational performance

Does there exist a link between good supply chain management practices and the productivity levels of businesses? The answer to this question relates to the results of different empirical research (Beaulieu and Roy, 2009). From this analysis, it was seen that: 

Environmental friendly logistics and delivery practices surely have a deep and positive impact on the operational performance of businesses (the speed of delivery, flexibility, responsiveness as well as the delivery capacity) also over their commercial performance (the average growth on the part of the market, average sales volume growth, average sales growth with respect to dollars). The results were derived from research in the US manufacturing sector. Here, they collected samples from 142 participants from those organizations that hire employees above the ratio of 500 (Ilgin and Gupta, 2010). 

The use of effective logistical practices (outsourcing, integration, and customer service), as well as the placement of logistics skills (services and quality, distribution and operations as well as design efficiency), might impose a positive effect on the organizational performance of companies, specifically with respect to their competitiveness level. The survey was carried out amongst more than 100 manufacturing companies operating in Taiwan and the US (Chow et al., 2008). 

The implementation of quality control practices with that of the suppliers helps to solidify their participation and collaboration, which translates into improved organizational performance. The results are obtained from a survey of about 103 businesses operating in Taiwan and Hong Kong (Lambert and Cooper, 2000)

Finally, strategic logistics management, supported by quality improvement initiatives, positively links service performance. The indicators are (speed and reliability, cycle time, stock rotation) and operational efficiency (operating costs), which translates into increased customer satisfaction along with improved business performance (sales volume, market share, and profitability). This data is obtained from 225 research respondents located in Hong Kong, but 75% of these respondents have their headquarters in Japan, the United States, Netherlands, along with others (Walker et al.,, 2008). In general, effective practices should result in improved organizational performance. Moreover, these best and effective practices need to be linked with a particular context. Their study should be carried out from a holistic perspective (Sheriff et al. 2012), which tends to confirm the impact of the deployment of best practices on the performance of the company.

From these studies, it can be concluded that effective logistics practices do have a very positive impact on the business’s operational performance. Nevertheless, the influence over the financial standing of any business might rather be indirect. There are some studies that determine a direct link. Among these is the survey by Ballou (2001) in which 636 companies are in the top 3,000 global companies.

The same study discloses that almost 90% of the research respondents have considered supply chain management to be a crucial dimension towards the performance of an organization. In addition to this, experts also present the fact that there is a strong connection between the financial performance of a company and supply chain management. Other investigations show that firms with more established logistics practices tend to be 40% more lucrative in comparison to manufacturing concerns that lack such advanced logistics practices (Beaulieu and Roy, 2009).

Alongside this, apart from the positive impact on companies’ financial and operational performance, it is increasingly recognized that supply chain management is also an important source of attaining competitive advantage for the organization that surpasses within their activities. As examples, we can cite world-famous companies such as Dell, Wal-Mart, and the clothing brand Zara, whose success is primarily based upon forward-thinking logistics strategy. Additionally, companies like L’Oréal, Groupe Dynamite, and Uni-Select also stand out by adopting innovative logistics practices in their respective markets.

Aims and objectives

The report aims to determine the effect of the green supply chain on business performance.

In order to achieve this aim, the following objectives are 

  • Explain the literature review over green logistics; 
  • Present the state of play of green logistics in different industries; 
  • Propose an approach for the implementation of green logistics among manufacturers and logistics providers 
  • Present successful experiences of green logistics 

Research questions

The research will attempt to answer the following research question:

Q.1 What is the impact of the green supply chain on organizational performance?

Q.2 What are the practices which can be learned from theories in the actual implementation of the green supply chain?

Q.3 What is the impact of laws and regulations on the implementation of the green supply chain?

Research problem

Green supply chain management has received a great deal of interest from researchers and industry over the past decade due to pressure from various stakeholders to adopt a commitment to -visible sustainable development. The scope of the green supply chain covers the entire life cycle of a particular product, straight from the abstraction of the raw materials to its end-of-life processing. This implies that the companies committed to it must now review their business strategies to find a better compromise between traditional economic objectives and environmental objectives (Chow et al., 2008).

In addition, the design of the logistics network is a crucial factor in the success and management of the supply chain. In fact, some experts argue that the majority of the costs and environmental impacts of the supply chain can be reduced during the physical structure of the logistics network (Aronsson and Brodin, 2006; Watson et al., 2013; Green et al.,2008) Although the field of closed-loop supply chain design is increasingly attracting the attention of researchers due to the economic and environmental benefits that such a network can offer, most of the work assumes that improving the environmental performance of the supply chain implies a direct improvement in economic gain. However, in practice, this assumption is only valid when the constraints of recovering value in the reverse supply chain are removed (Neto et al., 2010)

Methodology 

As part of our methodological approach, and through the observation of phenomena, we will try to synthesize the work done on the subject studied to present the phenomena in the business context and then propose the approaches likely to remedy the problem. For the implementation of the methodological approach, we will base ourselves on: 

  • The collection of data from several studies made on the phenomenon in question (green and sustainable logistics) 
  • Documentary analysis (books, articles, conferences, conferences, reports) 
  • Proposition of a conceptual model for the implementation of green logistics among industrialists and logistics providers

Research limitations

The study excluded certain aspects of organizational culture and the interaction between suppliers/major customers within the supply chain.

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References

  1. Aronsson, H., &Brodin, M.H.(2006). The environmental impact of changing logistics structures. The International Journal of Logistics Management, 17(3), 394-415
  2. Arvis, J.-F., M. A. Mustra, J. Panzer, L. Ojala, and T. Naula (2010), “Connecting to compete 2007: trade logistics in the global economy”,Washington, DC: World Bank.
  3. Ballou, R.H. (2001). Unresolved issues in supply chain network design. Information Systems Frontiers,3(4), 417-426
4.     Beaulieu, M. and J. Roy (2009), “Optimization of the logistics chain and business productivity”, Center on Productivity and Prosperity, HEC Montréal, September 2009.
  • Chow, W. S., C. N. Madu, C. H. Kuei, M. H. Lu, C. Lin, H. Tseng (2008), “Supply Chain Management in the US and Taiwan: An Empirical Study”, Omega, vol. 36, n° 5, p. 665-679.
  • Green, K. W., D. Whitten, R.A. Imman (2008), “The Impact of Logistics Performance onOrganizational Performance in a Supply Chain Context”, Supply Chain Management: An International Journal, vol. 13, n° 4, p. 317-327.
  • Ilgin, M.A., & Gupta, S.M. (2010). Environmentally conscious manufacturing and product recovery (ECMPRO): Areview of the state of the art. Journal of Environmental Management, 91(3), 563-591.
  • Lambert,D.M.,& Cooper,M.C. (2000).Issues in supply chain management.Industrial Marketing Management, 29(1), 65-83
  • Neto, J.Q.F., Walther, G., Bloemhof, J., Van Nunen, J.A.E.E., & Spengler, T. (2010). From closed-loop to sustainable supply chains:The WEEE case. International Journal of Production Research,48(15), 4463-4481.
  • Sheriff, K.M.M., Gunasekaran, A., & Nachiappan, S. (2012). Strategic perspective. International Journal of Logistics Systems and Management, 12(2), 171-194.
  • Sydor, A., (2006), “Global Value Chains and Emerging Markets”, Global Supply Chains Conference, Industry Canada, Ottawa, February 15-16.
  • Walker,H., Di Sisto,L., & McBain,D.(2008). Drivers and barriers to environmental supply chain management practices:Lessons from the public and private sectors. Journal of Purchasing and Supply Management, 14(1), 69-85.
  • Yeung, A. C. L. (2008) “Strategic Supply Management, Quality Initiatives, and Organizational Performance”, Journal of Operations Management, vol. 26, n° 4, p. 490-502.

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