Green Supply Chain Management

Oklahoma State University - IEM 5813

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MAKING THE SUPPLY CHAIN GREEN AND SUSTAINABLE

Using GreenSCOR Model and Ba lanced Scorecard as too l s to implement susta inab i l i t y

TEAM:RAJESH MANTENA

SATISH MUDIGANTI

IEM 5813Performance Measurement System


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Contents

What is Green Supply Chain Management?Green Supply Chain Benefits Introducing the SCOR modelWow Factor – Adding Environmental Performance

indicators to the supply chain model and identifying measures to use within a BSC for sustainability

Green perspective to the SCOR modelGreen SCOR - life cycle analysisBalance Scorecard Measures for SustainabilityGreen SCOR benefits and ChallengesReferencesQuestions


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Green SCM leverages the role of the environment in SC value creation

Source: Forging New Links, GEMI, 2004


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Benefits of a Green supply chain

Improves Agility – Green SCM help mitigate risks and speed innovations

Increases Adaptability- Green supply chain analysis often lead to innovative processes and continuous improvements.

Promotes Alignment – Green SCM involves negotiating policies with suppliers and customers, which results in better alignment of business processes and principles


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Different environmental Pressures that lead to a Green SCM

Fig:1 Sources of environmental pressures effecting the supply chain

Regulations

• Directives• Taxes and Fees• Liability

Consumer & Ethical Responsibility

• Quality• Cost

Julie Paquette (2005), Engineering Systems Division, MIT


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Environmental operational objectives framework

Resources Regulations Markets

Operate beyond pressure

Substitute Expand

Obviate the need for Exceed

Drive Create

Operate at pressure

Conserve Secure

Comply MeetSatisfy

Resist pressure

- BreachRelocate

Exit Ignore

En

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Environmental pressures

Gregory J., Atlee J., Isaacs J., Kirchain, R., “Sustainability metrics for materials use at the system and operational level,” Materials Systems Laboratory discussion paper, 2004

Supply Chain Council, Supply-Chain Operations Reference Model, SCOR Version 7.0, available at www.supply-chain.org, accessed May 28, 2005

Table: 1


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Getting closer to the Wow Factor – [SCOR Model]

The SCOR (Supply chain operational reference) model

Fig: 2

Yildirim Yilmaz, “Performance measurement in the value chain: manufacturing v. tourism”, International Journal of Productivity and Performance Management, 2006


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How is Performance of a supply chain measured?

Performance Attributes developed by SCC Reliability

Responsiveness

Flexibility

Costs

Asset Management Efficiency

Delivering the correct product, to the current place, at correct time, in the correct quantity, with the correct documentation, to the correct customer.

The velocity at which a supply chain provides to the customer.

The agility of a supply chain in responding to marketplace changes to gain or maintain competitive advantage

The costs associated with operating the supply chain

The effectiveness of an organization in managing assets to support demand satisfaction. This includes the management of all assets: fixed and working capital.


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Metrics Used to Measure Performance Attributes of a Supply Chain

Performance Attribute Metrics

Reliability 1. Delivery Performance2. Fill Rates3. Perfect Order Fulfillment

Responsiveness 1. Order Fulfillment Lead Times

Flexibility 1. Supply Chain Response Time2. Production Flexibility

Costs 1. Costs of Goods Sold2. Total Supply Chain Management Costs3. Value-Added Productivity4. Warranty / Returns5. Processing Costs

Asset Management Efficiency 1. Cash-to-Cash Cycle Time2. Inventory Days of Supply3. Asset Turns


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Wow Factor

Closing the Gap

by

Adding Environmental Performance indicators to the supply chain model and identifying measures to use within a BSC for sustainability


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Green perspective to the SCOR model

PLAN Phase Plan to minimize energy consumption and hazardous

material usage Plan the handling and storage of hazardous materials Plan for the disposal of ordinary and hazardous waste Plan compliance of all supply chain activities

Processes used to aid environmental decision-making in this phase:

Environmental Cost Accounting Environmental life cycle analysis Design for environmentShapiro, K., Stoughton, M., Graff, R., Feng, L., “Health Hospitals: Environmental Improvements through Environmental Accounting,” A Report from Tellus Institute, July 2000, available at www.epa.gov/opptintr/acctg/pubs/hospitalreport.pdf, accessed June 1, 2005.


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Green perspective to the SCOR model (contd.)

SOURCE Phase Select suppliers with positive environmental records Select materials with environmentally friendly content Specify packaging requirements Specify delivery requirements to minimize

transportation and handling requirements


Environmental Auditing Environmental CertificationEnergy Star designates product specifications and eligibility criteria for several categories of products, summarized at www.energystar.gov/index.cfm?c=products.pr_es_home_office, accessed June 1, 2005.


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MAKE Phase Schedule production to minimize energy consumption Manage waste generated during the Make process Manage emissions (air and water) from the Make

process


Pollution prevention techniques like substitution, product modification, improved maintenance, and recycling.

Environmental management systems like guidance for employees in environmental health and safety procedures and facilitation of tools for continual improvement of environmental performance.


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DELIVER Phase Minimize use of packaging materials Schedule shipments to minimize fuel consumption


Green Logistics Approach: Considers the impact of procurement, transport, inventory control, and distribution activities to minimized environmental costs.

Matthews, H. Scott, Hendrickson, Chris T., “Economic and Environmental Implications of Online Retailing in the United States,” Joint OECD/ECMT Seminar on the Impact of E-commerce on Transport, Paris, June 6, 2001.


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RETURN Phase Schedule transportation and aggregate shipments to

minimize fuel consumption; prepare returns to prevent spills of hazardous materials (oils, fuels, etc.) from damaged products


Reverse Logistics Remanufacturing Recycling

Dale Rogers S., Ronald S. “Goin Backwards: Reverse Logistics Trends and Practices,” Reverse Logistics Executive Council, 1999.


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Green SCOR - life cycle analysis

Julie Paquette (2005), Engineering Systems Division, MIT

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Sample Green SCOR Process Table (Release Finished Product of a Pharmaceutical Company )Process Element: Released Finished Product to Deliver Process Element Number: M2.6

Activities associated with post-production documentation, testing, or certification required prior to delivery of finished product to customer. Examples include assembly of batch records for regulatory agencies, laboratory tests for potency or purity, creating certificate of analysis, and sign-off by the quality organization.

Performance Attributes MetricsReliability 1. % Release errors

Responsiveness 1. Quarantine or Hold time2. Release process cycle time

Flexibility None Identified

Cost 1. Release cost per unit

Assets None Identified

Best Practices FeaturesAccurate and low cost batch records forregulatory compliance

Electronic batch records

Review batch records by exception Electronic batch records linked to process plans/recipesand exceptions flagged

Automated notification of laboratoryregarding sample availability

Interface between production system and LIMS


2. % products meeting specified environmentalperformance requirements3. % of products with proper environmental labeling (ifrequired)

Implement EMS ProgramImplement hazardous materials “pharmacy” system


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Balance Scorecard Measures for Sustainability

Financial Perspective

•$ fines/penalties•%proactive vs. reactive expenditures•Increase in relative % of proactive•Energy costs•Disposal costs•Recycling revenues

Customer Perspective

•$ cause related marketing•# green products•Product safety•Customer returns•% products reclaimed after use•Functional product eco-efficiency

Internal Business Perspective

•% materials recycled •%waste of landfill•%facilities certified•# certified suppliers•# accidents/spills•# truck miles

Learning & Growth Perspective

•% of employees trained•# employee complaints•# of employees with incentives linked to environmental goals•#of functions with environmental responsibilities•% of employees using car pools

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Green SCOR Benefits and Challenges

Benefits Improved environmental management performance Improved supply chain management performance Improved green supply chain initiatives

Challenges Data Cultural Training



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References

1. Beamon, B., "Designing the Green Supply Chain," Logistics Information Management, 12/4, (1999): 332-342

2. US Environmental Protection Agency, “Major Environmental Laws,” 2005, www.epa.gov/epahome/laws.htm, accessed May 30, 2005.

3. EU, “Directive on the Eco-Design of Energy Using Products,” europa.eu.int/comm/enterprise/eco_design/, 2005, accessed June 1, 2005.

4. The Material Systems Laboratory at Massachusetts Institute of Technology has studied this area extensively. Researchers include Erica Fuchs, Michael Johnson, Francisco Veloso. US Food and Drug Administration, 2005, www.fda.gov/opacom/hpview.html, accessed June 1, 2005.

5. US Consumer Product Safety Commission, 2005, www.cpsc.gov/, accessed June 1, 2005.

6. EU, “Directive on the Restriction of Hazardous Substances,” 2003, europa.eu.int/eur-lex/pri/en/oj/dat/2003/l_037/l_03720030213en00190023.pdf, accessed June 1, 2005.

7. Walls, Margaret, “The Role of Economics in Extended Producer Responsibility: Making Policy Choices and Setting Policy Goals,” Resources for the Future, Discussion Paper 3/11, 2003, available at www.rff.org/Documents/RFF-DP-03-11.pdf, accessed May 28, 2005.

8. EU, “Directive on Packaging and Packaging Waste,” 1994, europa.eu.int/scadplus/leg/en/lvb/l21207.htm, accessed June 1, 2005.

More information about Germany’s “Green Dot” Dual System for recycling packaging waste may be found at www.gruener-punkt.de, accessed June 1, 2005.

9. Toffel, Michael, “The Growing Strategic Importance of End-of-Life Product Management,” California Management Review, 45/3, (2003): 102-129. Environmental Tax Policy Institute, www.vermontlaw.edu/elc/index.cfm?doc_id=134, accessed May 17, 2005.

10. Resources for the Future provides a sampling of references that address environmental taxes as an introduction to this subject area. www.rff.org


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References (contd.)

1. Boyd, James, “Green Money in the Bank: Firm Responses to Environmental Financial Responsibility,” Magagerial and Decision Economics, 18/6 (1997): 491-506.

2. Snir, Eli, "Liability as a Catalyst for Product Stewardship." Production and Operations Management, 10/2, (2001): 190-207.

3. GreenTech Assets, Inc., greentechassets.com/, accessed May 31, 2005.

4. Ashland, Inc., www.ashchem.com/adc/enviro/, accessed May 31, 2005.

5. Boyer, Marcel and Porrini, Donatella, “The Choice of Instruments for Environmental Policy: Liability or Regulation?” An Introduction to the Law and Economics of Environmental Policy: Issues in Institutional Design, Research in Law and Economics, 20 (2002): 1-41.

6. Roberts, J.A., “Green consumers in the 1990s: profile and implications for advertising,” Journal of Business Research, 36/1, (1996): 217-231.

7. Mohr, Lois A., Eroglu, Dogan, Ellen, Pam E., “The development and testing of a measure of skepticism toward environmental claims in marketers communications,” The Journal of Consumer Affairs, 32/1, (1998): 30-56, referenced in Hoffman, Andrew, “Business Decisions and the Environment: Significance, Challenges, and Momentum of an Emerging Research Field,” in G. Brewer and P. Stern (eds.) National Research Council, Decision Making for the Environment: Social and Behavioral Science Research Priorities, 2005.

8. Hansen, Nannette, “Organic food sales see health growth,” MSNBC News Online, December, 3, 2004, msnbc.msn.com/id/6638417/, accessed May 20, 2005.


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Questions….

Questions ? ?

The more we exploit nature, The more our options are reduced, until we have only one: to fight for survival. ~ Morris K. Udal

Green Supply Chain Management

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