You’re a major retailer and you’ve decided that your supply chain is going to go green.
It’ll be great for CSR, PR, and improving profit margins from reduced waste and improved consumer opinions. There are a good few ways of entering a green supply chain management strategy, and an increasing amount of literature every year is being devoted to discussing green SCM.
Undoubtedly going green is a great move for a consumer facing company. But there are problems that need to be addressed further down a value-chain you go. And these problems can be a plethora of items including a level of uncertainty regarding: market position, stakeholders concerns, and change.
But briefly lets examine firms as far downstream the value chain as we can go.
Manufacturers and suppliers will fear that by operating along green supply chain practices they could become too expensive compared to their competition (Lo, 2014). Consider a market where there are 5 firms producing aluminum, if you choose to implement a closed-loop supply chain to reduce waste and create re-manufactured products, you might out price yourself compared to your competition.
Downstream firms aren’t the only firms that feel uncertainty towards implementing a green supply chain management strategy. Upstream firms such as retailers might fear they can over price their products and consumers will no longer be interested in purchasing.
Although there is definitely a better chance of implementing green supply chain practices with consumer facing firms due to an increasing importance in eco-friendly practices.
Yet out-pricing yourself isn’t the only uncertain aspect consumer-facing firms can face. Supply chain managers also need to consider uncertainty towards change as well as uncertainty towards stakeholder positions.
The likelihood of implementing green supply chains can be diminished when employees running the supply chain are adverse to change. For example, perhaps they’ve been using paper purchasing processes and they’re only comfortable faxing invoices between departments.
Although the firm can easily save money by installing an e-procurement software to reduce paper waste and increase purchase tracking; the firm cannot easily continue with e-procurement software because employees can be intimidated by change.
There are also issues of stakeholder positions. In some cases, stakeholders are only interested in improving profits and that would mean vying away from more expensive green supply chain practices. However this could work in the favor of a supply chain manager if a stakeholder is adamant about eco-friendly practices.
There are tons of issues to discuss regarding implementing a green supply chain management strategy. There are also quite a few benefits of implementing green supply chain management strategy.
The most immediate benefit that should be considered when evaluating the implementation of green practices involves reducing waste. A common example within supply chain literature involves food processing.
Consider bread. Well there are multiple steps that are required towards retailing a loaf of bread. Well with a closed supply chain loop, the wasted grains/bran/damaged bread/etc can be re-manufactured into other products. For example, the bran that results while producing flour is often re-used for bran-based products. Or the damaged bread can be retailed as animal feed.
The steps in a closed loop supply chain add value by increasing possible revenue streams, but it does also add costs.
Green supply chains will continue to grow in importance. The best possible outcome is one where all supply chains can reduce waste, improve profits, and become more eco-friendly. There is evidence that green supply chain practices can create the aforementioned outcomes. However without properly evaluating all possible outcomes, implementing green practices can lead to disaster.