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Impact of Green Supply Chain on Organizational Performance

by Shamsul

Impact of Green Supply Chain on Organizational Performance

 
Introduction
 
The spectacular development of technologies and sales techniques has greatly caused the overconsumption of industrial products, especially high-tech products whose life cycles are increasingly short (Ahi and Searcy, 2013). On the other hand, this development has led to increased consumption of raw materials and energies as well as to the growth of the quantities of greenhouse gases and of waste in landfills. So, the Importance of Green Supply Chain is crucial on Organizational Performance
 
The rapid economic growth of emerging countries like China and India along with changes in their lifestyles will aggravate the problem. Awareness of the planet’s ecological problems has taken on a global dimension since the UN Conference on the Human Environment, held in Stockholm during1972 in the capital of Sweden. The years that followed saw the birth of an international environmental movement. Long separated, questions of economy and ecology have become linked to define what is called “sustainable development.”
 
 
The Logistics Chain and the Concept of Sustainable Development
 
Ever since its inception in the early years of the 1990s, the idea of “supply chain management” is established itself as a key driver of corporate competitiveness. Initially, this concept was only functional management of each activity of the industrial company to become, at the beginning of the year 1990, a logistics chain integrating a greater number of business partners upstream or downstream of a business (Bechtel and Jayaram, 2007). The supply chain can be represented by a sequence of activities starting with the supply of raw materials and ending with the delivery of the finished product to the consumer (figure 1). Supply chain management thus pursues an objective of integration, not only by sharing information between its partners but also by continuously reviewing value-added activities (Christopher, 1998). Globalization has enforced most organizations to remain at least a part of one supply chain the result of which is that there is increasing competition amongst the existing supply chains instead of insulated companies (Gold, Seuring and Beske, 2009).
 
 
 
Figure 1: Traditional supply chain representation (Chouinard, 2007)
   
 
 
Thus, in the context of market globalization, the main objective of supply chain management is the creation of value which is based upon the premise that an integrated and effective supply chain subsidizes the minimization of financial risks and to increased profits (Fawcett, Magnan & McCarter, 2008). Therefore, the business models that are implemented by industrial companies involve logistics chains within which the raw materials are changed into finished products using non-renewable technologies and energies, and then transported to the end consumer, regardless of the disposition of the products. Along with the economic challenge, sustainability has been seen as a second major challenge for companies in recent years (Kleindorfer, Singhal and Van Wassenhove, 2005). The operationalization of sustainable development in the company is reflected in the corporate social responsibility approach (Boukherroub, 2013). The relationship between supply chain management and sustainability is more approached from an environmental perspective using different terminologies such as green sourcing, responsible product stewardship, reverse logistics, and chain management green logistics (Vachon and Mao, 2008).
 
Traditionally, the regulations governing environmental aspects have been seen as equal to that of additional costs and consequently seen as a barrier to a company’s competitiveness. The hypothesis of Porter and Van der Linde (1995) states that “in case there are strict environmental regulations however they are flexible and can be adapted; the restrictions created tends to encourage innovation and may sometimes improve the level of competitiveness of the business”. In their statements, the authors quoted some cases in which firms that were in alignment with environmental laws saw their profits increase. It is therefore not surprising, in this context, that the sustainability of the company has gradually extended to logistics networks through pressure from stakeholders (customers and shareholders). Vachon and Mao (2008) claimed that there is a considerable relationship between the strength of the supply chain and environmental innovation and which also supports the hypothesis of Porter and Vander Linde, (1995). 
 
Indeed, today in the context of sustainable development and for several reasons such as the economic advantages that the recovery of certain products used, the government legislation, and growing consumer demand for environmentally friendly products, several pioneer companies have felt the need to review the management strategy of their supply chains in order to integrate end-of-life product processing activities and reduce as much as possible environmental impacts. The classic linear model of the supply chain is therefore gradually giving way to a cyclical model through which the recovered products are reinjected into the traditional supply chain to build a value loop. Thus, the concept of the circular economy seems to be the most recent practice of sustainable development and is defined, according to ADEME (2014) as “an economic structure of production and exchange which, at every phase of the life cycle of the product, seeks to escalate the efficiency regarding the usage of resources along with reducing the impact over the environment”
 
Green supply chain management can then be seen as integrating environmental concerns within the supply chain management (Sarkis, Zhu and Lai, 2011). The term “green” has become more and more abundant, it can have several meanings depending on the perceptions of its users, but all refer to the environment (Boks and Stevels, 2007). The concept of “green supply chain” has been initially suggested by the University of Michigan Manufacturing Research Consortium in 1996, in view of evaluating the different environmental influences and the optimization of resources of manufacturing supply chains (Hanfield, 2016). The key motivations for the implementation and management of the green supply chain can be grouped into 4 distinct categories (Zhu and Sarkis, 2004; Walker, Di Sisto and McBain, 2008): regulations, the search for a competitive edge, pressure from that of the stakeholders and internal company innovation. The level of these motivations with respect to their importance is difficult and is dependent upon various factors like the country, the field of activity, and the size of the companies studied. 
 
In the Canadian aspect, a recent study reveals that the companies that have implemented practices of green products such as reduced consumption of energy, packaging, and waste have reported improvement in terms of reducing their distribution costs, customer loyalty, and opportunities to access foreign markets (Industry Canada, 2009). Today, companies are increasingly proactive when it comes to environmental sustainability. The results obtained have been confirmed by the results of a current survey undertaken over 582 European companies. The results clearly show in Figure 2 that regulation is no longer seen as the most important motivation for the establishment of sustainable actions and instead gives way to corporate branding and management leadership. According to research carried out by Zhu and Sarkis (2006), there always is an impact on the environment at every stage of the product life cycle, from the extraction of raw materials to the discarding of the product after its consumption (Solvang and Hakam, 2010; Andiç, Yurt, and Baltacioglu, 2012).
 
   
 
 
Figure 2: Motivations for the implementation of green practices (Bearing Point, 2010)
 
 
Green supply chain management processes
 
Within the green supply chain, various procedures tend to combine as well as complement each other so as to assure the product delivery to that of the end consumer as well as its return after use. These processes vary according to the business sectors of the company and link one link with another or with several links in the network. Stadtler (2002) subdivides supply chain management into two distinct parts: integration as well as the coordination of the network of the various flows. Network integration involves the choice of organization, partners, management, and collaboration within the network. Network coordination tends to constitute planning along with the control processes of the chain along with the process of information sharing and the technologies that are used for this purpose. Lambert and Cooper (2000) describe the different processes defining the management of a supply chain. The transversal functions allowing the management of flows and the integration of the basic functions of a company in a supply chain are:
 
  • customer service management
  • customer relationship management
  • demand management;
  • order management;
  • production flow management;
  • product development and marketing;
  • supplier relationship management;
  • reverse flow management (recycling, after-sales service)
 
in order to further illustrate the major processes within a green supply chain, the GreenSCOR model is rendered to be an example (SCC, 2006), illustrated in figure 3. This model assumes that the supply chain is divided into four processes: planning, green procurement and manufacturing, green logistics, and carbon management
 
 
Figure 3: Green supply chain management processes (SCC, 2006)
 
Planning
 
is a process aimed at organizing other processes in the supply chain? At this level, the strategic decisions for the configuration of the integrated closed-loop logistics network and the ecodesign of products are determined
   
 
Paquette (2005) states that key variables which can influence the environmental performance of a system or product are determined in this planning phase of the supply chain.
 
 
Supply procurement
 
Mainly because of its upstream position within the logistics chain, the “supply procurement” process plays an essential strategic role; it is able to prevent when selecting suppliers and service providers, the transfer of goods, environmental risks of raw materials and acquired products.
 
 
Green manufacturing
 
The “manufacturing” process encompasses the processing of raw materials and the assembling of that product. In order to assure the implementation of green manufacturing, businesses should focus on improving their manufacturing procedures by working through the triangle which comprises three main elements: energy, technology, and materials.
 
 
Green distribution
 
The “deliver” procedure comprises two sub-procedures: transport and storage.
 
  • Green transportation. This assures the movement of the material flows from that of the supply chain. Nevertheless, this sector does hold a huge impact on the environment, for example, freight transport accounts for around 14% of total industrial emissions
  • Green storage. The logistics buildings have a very important role in the management of flows both upstream as well as downstream of the logistics chain, it also ensures storage along with other order finishing operations (packaging, labeling, etc.). The objective of green storage is primarily to plan logistics buildings in compliance with eco-construction standards (eg, standard NF EN 15643-1) which reduces environmental impact. Business warehouses can be built using materials such as wood and can operate with alternative and renewable energies such as solar and wind energy
 
 
Reverse logistics/ Carbon management
 
The ‘return’ process is the last process in the green supply chain. It allows the closure of the value loop through the extension of the product lifecycle to allow its reuse (Fleischmann, 2001).
 
 
 
 
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References
 
  1. ADEME(2014). ADEME & Vous.76, juin.
  2. Ahi, P., & Searcy, C. (2013). A comparative literature analysis of definitions for green and sustainable supply chain management. Journal of Cleaner Production, 52(1), 329-341
  3. Andiç, E., Yurt, Ö., & Baltacıoğlu, T. (2012). Green supply chains:Efforts and potential applications for the Turkish market.Resources, Conservation and Recycling,58, 50-68
  4. Bearing Point (2010). Green Supply Chain: From awareness to Action. 4th Supply Chain Monitor
  5. Bechtel, C., & Jayaram, J.(2007).Supply chain management: A strategic perspective. International Journal of Logistics Management, 8(1), 15-34
  6. Boks, C., & Stevels, A. (2007). Essential perspectives for design for environment. Experiences from the electronics industry. International Journal of Production Research, 45(18-19), 4021-4039.
 
7.      Boukherroub, T. (2013). Integration of the objectives of sustainable development in the strategic and tactical management of the supply chain. Doctoral thesis, National Institute of Applied Sciences of Lyon, France
 
  • Chouinard, M. (2007). Modeling and design of supply loops: multi-product, multi-state and multi-alternative processing context. Doctoral thesis, Faculty of Graduate Studies, Laval University, Quebec, Canada.
  • Christopher, M.G. (1998).Logistics and Supply Chain Management: Strategies for Reducing Costs and Improving Services. Londres: Pitman Publishing
  • Fawcett, S.E., Magnan, G.M., & McCarter, M.W. (2008). Benefits, barriers, and bridges to effective supply chain management.Supply Chain Management:An International Journal,13(1), 35-48.
  • Fleischmann, M. (2001). Quantitative models for reverse logistics. Berlin: Springer-Verlag, 181 p
  • Gold, S., Seuring, S., & Beske, P. (2009).Sustainable supply chain management and inter-organisational resources:Aliterature review.Corporate Social Responsibility and Environmental Management, 17(4), 230-245.
  • Handfield,B. (2016). Green supply chain:Best practices from the furniture industry. Proceedings of the Annual Meeting of the Decision Science Institute(No3, pp. 1295-1297). États-Unis
  • Industrie Canada (2009).Green Supply Chain Management Logistics & Transportation Services –A Canadian Perspective.Industrie Canada, tiré de http://www.ic.gc.ca
  • Kleindorfer, P.R.,Singhal, K., &Van Wassenhove, L.N.(2005).Sustainable operations management.Production andOperations Management, 14(4), 482-492
  • Lambert,D.M.,& Cooper,M.C. (2000).Issues in supply chain management.Industrial Marketing Management, 29(1), 65-83.
  • Paquette, J.R. (2005).The Supply ChainResponse to Environmental Pressures. Thèse de doctorat.Massachusetts Institute of Technology
  • Porter, M.E., Van der Linde,C. (1995).Green and competitive:Ending the stalemate, Harvard Business Review, 73(5),120-133.
  • Sarkis, J., Zhu, Q., & Lai,K.H. (2011). An organizational theoretic review of green supply chain management literature. International Journal of Production Economics, 130(1), 1-15
  • Solvang, W.D., & Hakam, M.H.(2010). Sustainable logistics networks in sparsely populated areas.Journal of Service Science and Management,3(1), 72
  • Stadtler, H. (2002). Basics of supply chain management. InH.Stadtler& C.Kilger (éd.), Supply Chain Management and Advanced Planning. Concepts, Models, Software and Case Studies(pp. 7-28).Berlin: Springer-Verlag.
  • Supply Chain Council -SCC (2006). SCOR Model Overview. Version 8.0. Supply Chain Council Inc
  • Vachon, S., & Mao, Z. (2008). Linking supply chain strength to sustainable development:Acountry-level analysis.Journal of Cleaner Production,16(15), 1552-1560.
  • 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
  • Zhu, Q., & Sarkis, J. (2006). An inter-sectoral comparison of green supply chain management in China:Drivers and practices.Journal of Cleaner Production,14(5), 472-486
 
 
 
 
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  Green Logistics  
 
 
BusinessHealthManagementMarketing
 
Impact of Green Supply Chain on Performance
 
 by Shamsul   
 
 
 
 
 
 
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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