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Transformation into Green Supply Chain: A Case in the Retail Industry Group- Aman Kumar Sharma 1401008 Chittranjan Swain 1401027 Kaviti Keshav Kumar 1401040 By Johanna Habib & Frantz Rowe

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Page 1: Sustainability 2

Transformation into Green Supply Chain: A Case in the

Retail Industry

Group- Aman Kumar Sharma 1401008Chittranjan Swain 1401027Kaviti Keshav Kumar 1401040

By Johanna Habib & Frantz Rowe

Page 2: Sustainability 2

Supply Chain in Retail Industry

Information Flow

Raw Materials

RETAILERFACTORY DISTRIBUTOR WHOLE SELLER

SUPPLIER

Finished Goods

Page 3: Sustainability 2

Traditional Supply chain management

“Supply chain management (SCM) is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer.”

Green supply chain management “Integrating environment thinking into supply chain management, including product design, material sourcing and selection, manufacturing processes, delivery of the final product to the consumers, and end-of-life management of the product after its useful life”

TRADITIONAL Vs GREEN Supply Chain Management

Texas Instruments: saves 8 million dollars every year by reducing its transit packaging budget for its semiconductor

business through source reduction recycling and use of reusable packaging systems.

Pepsi/Coke: Saved $44 million by switching from corrugated to

reusable plastic shipping containers for 1litre and 20

ounce bottles ,conserving 196 million pounds of corrugated

material.

Page 4: Sustainability 2

Product/Process Design

Raw and Virgin

Material

New Components

and Parts

Recycled, Reused

Material and Parts

Vendors

Selection

ExternalTransportation

Storage

Inventory Management

Internal Transportation

Fabrication

Assembly

Closed-Loop Manufacturing,Demanufacturing,Source Reduction

TQEM

Storage

Distribution, Forward Logistics

USE

Purchasing, Materials

Management, Inbound Logistics

ProductionOutbound Logistics

Disposal

Reverse Logistics

Waste Waste Waste

Energy Energy Energy

Energy

Reusable,Remanufacturable,

Recyclable Materials and Components

Location Analysis,Inventory Management,

WarehousingTransportation

Packaging

MarketingEngineering

Customer Relationships Green Marketing Product Stewardship

Waste

Page 5: Sustainability 2

Green Supply Chain practices

Start at the Beginning

Product Design

– Use more environmentally friendly materials

– Design more efficient product

– Plan in recycling of product at end of life

– Consider environmental impact of product

Choice of Suppliers ( Green Purchasing / Procurement/Environmentally Preferable Purchasing)

– Review supplier environmental data

– Consider supplier source of raw materials/components

– Partner with suppliers to improve environmental performance

– Consider energy efficient practices (“green” manufacturing ‐ facilites, hybrid delivery vehicles, etc.)

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Greening the Process

Manufacturing

– Use more efficient processes

– Institute pollution/emission controls

– Plan waste management

– Implement quality control

Packaging/Shipping

– Use environmentally friendly/recyclable packaging

– Plan for reuse of packaging materials

– Ship in hybrid/efficient vehicles

– Ship directly to customers

Page 7: Sustainability 2

End Product

End Product

– Deliver efficiently to end user

• Use recyclable/reusable packaging

• Deliver in hybrid/efficient delivery vehicles

• Consolidate shipments

– Plan for recycling/reuse of product/components at end of life

– Educate customer on recycle/reuse policy

Cost savings

– Efficient design saves waste

– Environmentally friendly sourcing saves disposal costs

– Pollution/emissions control saves cleanup costs

– Compliance with environmental regulations

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Green Retail strategies• Recycling = Revenue: Three FMI Members made close to

$50 million in revenue in 2006 from recycling plastics and cardboard.

• Being Green = Making Green: Several major retailers are focusing on “green” as the driving strategy behind new store development.

• Seismic Shift in Supply Chain: Some of the largest retailers in the world are implementing sustainable practices throughout their supply chains resulting in major positive impacts on the bottom line, and impacts on the price and availability of environmentally and socially preferable goods and services.

• Catch of the Day for Tomorrow: A small retail chain responded to consumer requests for more choice in sustainable seafood. They adopted Fishwise, a sustainable seafood education and marketing program. Results were increased customer loyalty, sales and profits and have transitioned their product offering to almost completely sustainable seafood.

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Issues in Sourcing• Environmental friendly process• Packaging• Certification• Controlling emissions• Vendor evaluation in terms of environmental performance

Issues in Transportation• Infrastructure• Outsourcing to nearest supplier• Better maintenance• Better routing and scheduling• Synergy and save on environment with shared resources

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Issues in Network design

• Co-location• Co-processing• Optimal location• De-centralised locations in non-capital intensive facilities

Issues in Product design

• Design for remanufacturing• Design for recycling and disposal• Design with recycled and waste materials

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Issues in disposal and recycling

• Redesign of network for collection and disposal• Closed-loop supply chain• Handling and storage• Transportation• Location of remanufacturing and recycling facilities• Recovery portion of materials and components• Economical network design• Many reverse networks are Informal networks

Page 13: Sustainability 2

The story

October 2005, Wal-Mart CEO Lee Scott committed the company to three ambitious goals:

•To be supplied 100 percent by renewable energy

•To create zero waste and to sell products that sustain Wal-Mart's resources and the environment.

•To meet those goals, Wal-Mart would seek to transform its supply chain, in cooperation with suppliers and environmental nonprofit organizations.

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Significant Initiatives

Hired Blu Skye Sustainability Consulting to help identify the categories of Wal-Mart's products and processes that had the greatest environmental impact.

Wal-Mart/Blu Skye team multiplied sales data with environmental impact factors from the Union of Concerned Scientists, and identified 14 focal areas, bundled into three broad categories:

•renewable energy•zero waste and •sustainable products.

For each focal area, an executive sponsor and a network captain took charge of building a sustainable value network of Wal-Mart employees and representatives from government, academia, environmental nonprofits, suppliers, and other stakeholders.

The goal was to reduce environmental impacts and derive profit from that positive change.

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Engaged external organizations into the loop,

to create a “sustainable value network”

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Concrete Steps

1. Identify Goals, Metrics and New technologies

-- Beginning in 2008, Wal-Mart formally planned to use a system to "measure and recognize its entire supply chain based upon each company's ability to use less packaging, utilize more effective materials in packaging, and source these materials more efficiently relative to other suppliers."

--The scorecard is an important enabler for Wal-Mart to achieve its public goal of reducing the packaging used by all of its suppliers by 5 percent between 2008 and 2013.

-- If achieved, this five-year program is expected to generate $3.4 billion in savings. In the first month, 2,268 vendors have logged onto the packaging scorecard site and 117 products have been entered into the system.

Based on “The Greening of Walmart's Supply Chain” - SCMR 2007, Dr. Erica Plambeck, Stanford University

Page 17: Sustainability 2

2. Certify Environmentally Sustainable products

-- According to an international study released in 2006, all species of wild seafood are greatly depleted and predicted to collapse within 50 years.

-- Within this ominous business environment, Wal-Mart sourced approximately $750 million in seafood in 2006, and the company's volume of seafood business is growing at roughly 25 percent a year.

-- The Marine Stewardship Council (MSC), established by Unilever and the World Wildlife Fund (WWF) in 1997, has defined standards for certification as a sustainable fishery, based on the United Nations' Code of Conduct for Responsible Fishing and on input from fishermen, retailers, government, nonprofits, and other stakeholders.

-- The MSC certifies third parties to audit and certify fishery and processor compliance throughout the supply chain, from "boat to plate."

-- Walmart sources only MSC certified fish, lately!

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3.Providing Network partner assistance to suppliers

Wal-Mart is able to provide suppliers with valuable knowledge and process

assistance through its strong relationships with the environmental nonprofits in

its networks.

Eg: when the Chinese government threatened to shut down a number of textile

dye houses, including one of Wal-Mart's suppliers, in order to reduce pollution in

Beijing ahead of the 2008 Olympics, Wal-Mart immediately took action

- put the dye house in touch with one of the NGOs in their network,

which helped it formulate a more environmentally friendly process that

reduced its toxic output very quickly.

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-- However, to meet organic standards, a farm needed to remain free of non-

organic pesticides or similar materials for a period of three years prior to the

harvest of any organic crop. To increase and secure its supply of organic

cotton,

-- Wal-Mart made a five-year verbal commitment to buy organic cotton from

farmers. "It gives them confidence and stability

-- Wal-Mart (which became the world's largest purchaser of organic cotton

in 2006) also agreed to purchase the organic cotton farmers' alternate

crops.

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4. Committing to larger volumes of environmentally sustainable products

-- By making a commitment to buy a specified quantity of each product certified as

environmentally friendly, Wal-Mart gives its suppliers an incentive to develop and

produce that product.

-- In its textiles network, Walmart learned that, along with the cost of certification,

farmers faced a near-term reduction in yields with organic cotton farming, as well as

the need to diversify crops. This forced farmers to alternate the planting of cotton

with legumes, vegetables, or other cover crops to rejuvenate the soil.

5.Cutting out middlemen

An immediate but unanticipated benefit of MSC certification in the seafood network

—and of organic cotton certification in the textile network—was full visibility of the

chain of custody, and hence the opportunity to eliminate intermediaries.

By simplifying its supply chain, Wal-Mart reduced the frequency of seafood stock-

outs, improved the quality of the fish it was receiving, reduced paperwork and

transaction costs, and reduced the costs and environmental impacts of

transportation.

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6. Consolidating direct suppliers

Over the short term, Wal-Mart has had many diverse relationships with many factories, often working with a supplier one purchase order at a time or one season at a time.

Says sustainability vice president Ruben: "Right now we account for two percent of a lot of people's business, especially overseas. We know that needs to be a lot larger—maybe 50 or 60 percent."

7. Restructuring the buyer role

To better manage relationships with suppliers, the textiles network implemented a major organizational change: It redesigned the role of its buyers.

In the past, textiles buyers had been generalists, handling a wide variety of responsibilities (as buyers did in other product categories).

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8. Licensing environmental innovations

If one factory is significantly more energy-efficient than others, it's got an advantage. If it shares that information, the competition might gain a much better understanding of its production costs and therefore its profit margins." "Information about how much energy a product consumes is not particularly sensitive."

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Conclusion from the Case study

•Buying diesel-electric and refrigerated trucks with a power unit that could keep cargo cold without the engine running saving nearly $75 million in fuel costs and eliminating an estimated 400,000 tons of CO2 pollution in one year alone.

• Making a five-year verbal commitment to buy only organically grown cotton from farmers, and to buy alternate crops those farmers need to grow between cotton harvests. Last year, the company became the world's largest buyer of organic cotton.

• Promising by 2011 to only carry seafood certified wild by the Marine Stewardship Council, a group dedicated to preventing the depletion of ocean life from overfishing.

• Buying (and selling) 12 weeks' worth of Restrictions on Hazardous Substances (RoHS)-compliant computers from Toshiba.

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Reference

• François de Corbière & Johanna Habib “Information Quality for the Transformation into Green Supply Chain: A Case in the Retail Industry” European Journal of Purchasing & Supply Management

• Walmart’s Sustainability Strategy (A),” Stanford University, GSB No. OIT-71A, April 2007, http://cb.hbsp.harvard.edu/cb/web/product_detail.seam?R=OIT71-PDF-ENG (March 39, 2011).

• Carbone, V., and Moatti, V. 2008. "Greening the Supply Chain: Preliminary Results of a Global Survey," Supply Chain Forum: An International Journal