In this section, this chapter will be continued to discuss about the previous chapter which is focus on green supply chain management (GSCM) in manufacturing industry. Meanwhile, this chapter will review on an overview and definition of green supply chain management, barriers of implementation of green supply chain management, factors that influence of the operation of green supply chain management and benefits of green supply chain management.
2.1 Overview and Definition of Green Supply Chain Management (GSCM)
In business today, the environment has become a critical issue in manufacturing industry and it has been increasing in consciousness of the environment in the last few decades. Nowadays, people are aware of the world’s environmental problems such as toxic substance usage, decreasing in non-replenish resources and global warning. This problem if no deal with well it has the potential to lead to the extinction of mankind on earth.
To promote these environmental problems, government has to organize relevant campaigns to public. As a result, there have several organizations start to apply green principles to their industry. For example the organizations will use environmental friendly raw material, using recycle papers for packaging and reduce the usage of petroleum power during implement operations.
According to Sheu et al (2005), with increase in environmental concerns during the past decade, a consensus is growing that environmental pollution issues accompanying industrial development should be addressed together with supply chain management thereby contributing to green supply chain management (GSCM).
Green supply chain management it has roots in environment management and supply chain management literature. Adding the “green” component to supply chain management involves addressing the influence and relationships between supply chain management and the natural environment. Besides that, green supply chain management also defines as integrating environmental thinking into supply chain management including material sourcing and selection, product design, manufacturing processes and delivery of the final product to the customers as well as end-of-life management of the product after its useful life.
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In addition, green supply chain management is a concept that is gaining popularity in the South East Asian region. For many organizations in this region it is a way to demonstrate their sincere commitment to sustainability (Bacallan, 2000). Furthermore, many realize that customers and other stakeholders do not always distinguish between a company and its suppliers. If an organization has environmental liabilities, stakeholders may often hold the lead company in a particular supply chain responsible for the adverse environmental impacts of all organizations within a specific supply chain for a particular product.
Rao and Holt (2005), reported that green supply chain management also can promote efficiency and synergy among business partners and their lead corporations and helps to enhance environmental performance such as minimize waste and achieve cost saving. Meanwhile, the most far- reaching approach of environmental management is to create value through greening the supply chain (van Hoek, 1999).
Figure 1: Functional model of an organizational supply chain with environmentally influential
practices ( Sarkis, p.400)
As illustrated by figure 1, the green supply chain model shows the various points where wastes occur and opportunities exist to limit waste by reuse, recycling and remanufacturing. In a green manufacturing environment, the supply chain decisions include the possibility that a process can use certain renewable materials, the ability to utilize reusable or remanufactured materials and the reduction of wastes. This diagram is typical for a single organization. According to Sarkis (p.399) states that environmentally friendly innovations may best be utilized during the manufacturing stage of the supply chain, as this part is the most internally focused and the organization can more directly see the benefits of implementing environmentally friendly process.
On the other hand, green supply chain management also involves conventional supply chain management practices which are integrated manufacturing process wherein raw materials are manufactured into final products then delivered to customers via distribution, retail or both. (Beamon, 1999). However green supply chain management has ranged from green purchasing to integrated supply chains flowing from supplier to manufacturer, customer and reverse logistics which is closing the loop as defined by supply chain management literature. (Zhu and Sarkis, 2004).
Characteristics
Conventional SCM
Green SCM
Objectives and values
Economic
Economic and ecological
Ecological optimization
High ecological impacts
Integrated approach
Low ecological impacts
Supplier selection criteria
Price switching suppliers quickly
Short term relationships
Ecological aspects (and price)
Long term relationships
Cost pressure and prices
High cost pressure
Low prices
High cost pressure
High prices
Speed and flexibility
High
Low
Table 1: Differences between the conventional and green supply chain management
Based on table 1, we can differences between the conventional and green supply chain management. Overview on this table showed that green supply chain management can provide highly innovative and an efficiency environmental management to manufacturing industry whether on supplier selection, prices, speed and other characteristics.
2.2 Activities in green supply chain management
Green supply chain management (GSCM) is defined as “green procurement+ green manufacturing+ green distribution+ reverse logistics”. Green supply chain management is an idea used to minimize waste such as energy, solid and hazardous wastes, natural resource and environment pollution along supply chain.
Inventory Inventory
(Material) Defects (Product)
Manufacturer
Customer
Production
Supplier
End of life products
Plant
Reuse/ Recycle/ Refurbish
Reuse/ Recycle/ Re- Assembly
Materials Products
Reuse/ Recycle Materials
Waste
Figure 2: Activities in green supply chain management
Green Procurement
Green procurement is an environmental purchasing with involve the reduction, reuse and recycling of materials in the process of purchasing. The procurement decision is very important because it will impact the green supply chain during purchase of materials. Besides that, it is also a solution for environmentally concerned and is a concept of selection of products and services that can minimize environmental impact and eliminate waste. As an example during implement of green procurement, manufacturers will purchase materials only from green partners and consider supplier who acquire ISO 14000 and OHSAS 18000.
Green Manufacturing
Green manufacturing is a production processes which use materials with low environmental impacts, highly efficient and minimize waste or pollution. Green manufacturing is a very important area in green operations, because it can lead to minimum energy and resource, provides a lower raw materials costs and reduced environmental impacts. For detects materials, usually manufacturers will reuse, recycle or reassembly it before produce to product. It can help organization to minimize of waste.
Green Distribution
Green distribution also is an important operational that will affect the green supply chain. Green distribution consists of 2 components are green packaging and green logistics. Size, shape and materials of packaging are very vital because it can impact on distribution due to affect on the transport characteristics of the products. Better packaging is along with rearranged loading patterns, can reduce materials usage, reduce the amount of handling required and increase space utilization in the warehouse. When implement of green distribution, manufacturers will use “green” packaging materials, adopt returnable packaging methods, deliver directly to customer site and distribute products together rather than in smaller batches.
Reverse Logistics
Reverse logistics is a last part of activities in green supply chain management. Reverse logistics is the process of returning the end of life product from end user back to the supplier. The supplier can plant, reuse, recycle and refurbish the material. These activities also include collection, selection, re-processing, redistribution and disposal. According to Rogers and Tibben-Lembke (1999), a well managed reverse logistics program can result in savings in inventory carrying transportation and waste disposal costs as well as improving customer service.
2.3 The barriers of implementation of green supply chain management
With increasing pressures of environmental impacts, manufacturing industry faced many barriers or problem to implement of their product or services. So those, organization need to find out the barriers which impede organization to implementation of green supply chain management.
According to Perron (2005), there are 3 barriers of organization to implementation of green supply chain management.
Attitude and perceptions barriers
Attitude and perceptions is one of the barriers for organization to implementation of green supply chain management. To implementation of green supply chain management, top management plays an important role in organization because it can affect the development in organization. For example, for top management who have bad attitude it can influence the relationships organization with supplier or customer during they make decision making.
Information related barriers
The second barriers that faced by manufacturing industry is information related. There have some organization are often lack of awareness and information about how to implement green supply chain management. Besides that, they may not be aware of what is going wrong and not understand the environmental impacts of activities in organization. Other than that, lack of exposure also is another barrier that faced by manufacturing industry because they dun have any information related with green supply chain management had been taken by other organization.
Technical barriers
Technical also is a barriers that impede organization to adopt green supply chain management. Some organization is usually cannot get a state of the art information about new technology, materials, operations and processes. Besides this, lack of technical expertise of employees also is a major barrier because they unable to fulfill the design for environment requirements.
2.4 The factors influence of the operation of green supply chain management
Green supply chain management is an effective motivated to improve the efficiency and effectively of environmental management, but there have some factors that influence of the operation of green supply chain management.
The main factors that influence of the operation of green supply chain management are market and competitor. Nowadays, the competitive among organization is very high because have so many organization was develop in Malaysia. So that, organization needs to make them standing out with other organization and to give a good impress for customers. Being environmental friendly also is one of the ways to differences them from the competitors.
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Besides that, the role of the government involves in green supply chain management has been getting increasing attention. In the United States, there have a large number of government agency controlling guide line, regulation and law. These agency and organization are responsible for either similar or different issues such as pollution, chemical waste and product material. For an example, one of the government agencies is Environmental Protection Agency (EPA). Environmental Protection Agency is a government organization established to protect human health and the environment. The focus on EPA is developing the best practices of green supply chain management and bringing awareness of those practices through guidebooks and manuals. (US EPA, 2000).
Last factor that can influence of operation of green supply chain is decision making. Decision making involves a wide range of knowledge because it includes many factors such as environment, commercial performance, the benefits of a lot of behavior subjects and others. According to Nagurne (2003), the members decision behaviors of green supply chain are utilized the network model to set up the corresponding multiple goals decision model and provided the corresponding algorithm on the problems that asked. Manufacturer also needs to make decision when choosing supplier because collaborative relationships between manufacturers and supplier is very important to organization to implementation of green supply chain management.
2.5 The benefits of green supply chain management
The benefits of green supply chain management are can provide a lower environmental load, achieve cost savings and reduce pollution to manufacturing industry. The principle of green supply chain can be applied to all departments in the organization and the effects of green supply chain management are can be develop to all area, both tangibly and intangibly.
According to Stevels (2002), the benefits of green supply chain to different roles of supply chain including environment and society in terms of different categories such as material, immaterial and emotion.
Benefit for
Benefit
category
Environment
Supplier
Producer
Customer
Society
Material
Lower environmental load
Lower cost price
Lower cost
Lower cost of ownership
Less consumption of resources
Immaterial
Overcoming prejudice and cynicism
Less rejects
Easier to manufacture
Convenience, fun
Better compliance
Emotion
Motivation of stockholders
Better image
Better image
Feel good,
Quality of life
Industry in on the right (green) track
Table 2: The benefit matrix for green supply chain cooperation
Based on table 2, it showed that for material, green supply chain management helps lower environment load for environment, lower cost price for supplier, lower cost for producer, lower cost of ownership for customer and less consumption of resources for society. On the other hand for immaterial, green supply chain management helps overcoming prejudice and cynicism for environment, less rejects for supplier, easier to manufacture for producer, convenience and fun for customer and can provide a better compliance for society. The last one is for emotion, green supply chain management helps motivation of stockholder to environment, better image for supplier and producer, feel good and quality of life for customer and makes industry in on the right track. As a result of this table show that different categories of material, immaterial and emotion can provide a benefit for environment, supplier, producer, customer and society.
2.6 Environmental Management Systems
Environmental management systems is a strategic management approaches that define how an organization will address the impacts on the natural environment and how the organization using environmental management system to challenge their supplier networks to become more environmentally sustainable. (Bansal and Hunter, 2003; Darnall, 2006). Besides that Sarkis (2001) reported that the operational capabilities necessary to adopt an environmental management system may also assist an organization’s efforts to reduce its environmental impacts throughout its supply chain.
2.61 Relationship between environmental management system (EMS) and green supply chain management (GSCM)
Relationship between environmental management system and green supply chain management has potentially complementary and it is important for an organization’s environmental sustainability because they will provide the definition and establish sustainability among network of organization together. As a result, relationship of e environmental management system and green supply chain management can to minimize impact to the natural environment, reduce waste, increase profits and achieve environmental sustainability goals for all manufacturing industry in Malaysia.
2.62 ISO 14001
ISO 14001 is an international standard requirement for an environmental management system which can be employed by an organization to measure, reduce the environment impact of activities, products and service and its can improve the environmental performance continually. To implement this certification requirement, company can demonstrate their commitment to environment and profit from the guidance the standard provides on more effective environmental management.
Below are some benefits to an organization in adopting of ISO 14001:
Enhanced image
Reduced risk of environmental incidents
Improved relationships with customers, government and the general public
Better use of energy and resources
Achieve cost savings
Compliance with environmental rules and regulations
Enhanced workplace health and safety
Access to markets or company that demand ISO 14001 certification
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