REVERSE SUPPLY CHAIN
AND
GREEN SUPPLY CHAIN
NIFT Hyderabad
By : Prerna Kaushal Singh
REVERSE SUPPLY CHAIN
Reverse Supply Chain (RSC)
In todays competitive environment due to various external & internal
pressures, companies can not ignore their reverse (or backwards)
supply chains.
Companies are trying to reduce their supply chain costs so that
cheaper prices can be offered to the customers.
Though reuse of products and material is a common phenomenon,
companies have long ignored this part of the supply chain known as
the reverse or backward supply chain.
e.g soft drink bottles pick-up and delivery system, where bottles are
returned & reused repeatedly.
Companies were so long under the impression that returns
compared to sales generate little or no money.
RSC contd.
The important reason why companies are giving importance to RSC
is that it reduces operating costs by reusing products or components
and thus RSCs have become an essential part of business.
Companies may be motivated by:
Environmental laws that force firms to take back their products and
take care of further treatment, economic benefits of using returned
products in the production process instead of paying high disposal
costs and the growing environmental consciousness of consumers.
Consideration to minimize the cost of product handling materials
and efficient use of transportation.
Consideration to maintain the business ethic & service policies.
Eight categories of reverse flows
1.
Products that have failed; are unwanted, damaged, or defective;
but can be repaired or remanufactured and resold
2.
Products that are old, obsolete, or near the end of their shelf life
but still have some value for salvage or resale
3.
Products that are unsold from retailers, usually referred to as
overstocks that have resale value
4.
Products being recalled due to a safety or quality defect that may
be repaired or salvaged
Eight categories of reverse flows
5. Products needing pull and replace repair before being put back
in service
6. Products that can be recycled such as pallets, containers,
computer inkjet cartridges, etc.
7. Products or parts that can be remanufactured and resold
8. Scrap metal that can be recovered and used as a raw material for
further manufacturing
Reverse logistics
Reverse logistics includes processing returned merchandise due to
damage, seasonal inventory, restock, salvage (reclaim) and excess
inventory.
It also includes recycling programs, hazardous material programs, obsolete
equipment disposition, and asset recovery. While product take-back
programs have been a part of many companies operations policies for
some time, more sophisticated approaches are emerging which involve
greater degrees of coordination and planning among multiple suppliers.
It may be done for :
Reconditioning when a product is cleaned and repaired to return it to a
like new state
Refurbishing similar to reconditioning, except with perhaps more work
involved in repairing the product.
Remanufacturing similar to refurbishing, but requiring more extensive
work; often requires completely disassembling the product
Resell when a returned product may be sold again as new
Recycle when a product is reduced to its basic elements, which are
reused also referred to as asset recovery.
Activities in reverse supply chain
process
Deciding
Collection
Inspection and sorting
Reconditioning
Disposition
Distribution
Products, components, materials, equipment and
even complete technical systems may go backwards
in the supply chain
Products may be reworked during manufacturing due to unsatisfactory quality.
Good material or components being returned from the production floor
because they were left over after production (manufacturing returns).
Defective products may be detected after they have entered the supply chain
resulting in a pull-back of these products through the chain (product recalls)
In B2C cases, products may be sent back due to mismatch in supply and
demand in terms of product quality & timing.
During warranty, products may be returned to be replaced by substitutes or
may be repaired (warranty or service returns)
Even after use of product life, products are collected to be remanufactured,
recycled or incinerated (end-of-use and end-of-life returns)
Reverse Supply Chain
Management
Thus, RSCM encompasses a variety of issues including: source reduction,
conservation, recycling, substitutions and disposal that interface with
marketing, production and logistics activities such as purchasing and
procurement, manufacturing, maintenance, spare parts inventory, material
handling etc.
The process begins with the use of virgin or secondary materials in
processing and manufacturing operations.
Reverse logistics may be concerned with the disposition of any asset that is
no longer suitable to perform its primary functions or is not sufficiently cost
effective to suit ever-changing technology.
Walker (2000) defines RSCM as the automation of business processes and
information exchanges to manage the complete path of a product from the
customer to its final disposition.
Benefits of RSCM
Customer satisfaction by offering to take defective products/services
back, redressal of complaints etc.
Economies of scale by judiciously combing forward and RSC
Effective management of inventory, especially slow moving items,
improved inventory turns and reduced store level costs
Simplified store procedures and reduced administrative costs and
improved management information system
Improved supplier relationships and enhanced supplier satisfaction
Perceived image of the organization as a green and clean
manufacturer
GREEN SUPPLY CHAIN
Greening the supply chain
The concepts of recycle, reuse and use of green (organic ) products has
become prominent in response to the changing environmental conditions
due to increasing landfills, pollution, water & resource scarcity, carbon
emissions.
Recent times are witnessing stricter government regulations and increasing
public awareness of the effects of industrial production on the environment.
Many organizations are undertaking massive initiatives to restructure their supply
chain processes and products to minimize their environmental impact.
A number of manufacturing firms such as Hewlett-Packard have already begun
to develop environmentally friendly practices.
Dow Chemical & General Motors have already established functions that are
specifically responsible for waste and recycling management.
Approaches to a green SCM
In integrating green approaches to SCM two generic types of
orientations are adopted: Reactive & Proactive
Reactive approaches refer to policies aimed at meeting the minimum
set of actions required to comply with government regulations or
customer requirements regarding environmental concerns. This includes
such actions as the proper disposal of toxic waste, meeting emissions
requirements, meeting recycling content requirements, and maintaining
adequate facilities to meet Environmental Protection Agency inspection
criteria.
Proactive policies are maximization-oriented. They set to reduce costs
or maximize profits using waste reduction in a variety of programs
designed to benefit both the environment and the firm's financial
performance. With regard to the supply chain, four specific areas were
identified as potential candidates for such programs:
1. Supplier selection and evaluation,
2. Surplus and scrap disposition,
3. Carrier selection and transportation of hazardous materials, and
4. Product design, packaging, and labeling
Green supplier selection &
evaluation
Various criteria are used in supplier selection process. Supplier
performance measurement systems are also used to assess quality,
cost, service and delivery.
Many leading-edge companies are now considering the suppliers
environmental record as a key determinant of performance. The
suppliers environmental practices relating to their sources of raw
materials, disposal methods for scrap & surplus, how they reduce
surplus packaging, their action to reduce fuel usage etc. should be
addressed.
Surplus & scrap disposition
Companies must also find ways to reduce scrap &
waste and thereby send less material to landfills. This is
becoming more important because of the limited
number of landfills, which is due to the fact that people
are increasingly protecting the opening of new landfills
with an attitude of not in my backyard (NIMBY).
In the futuristic industries, many companies are seeking
to reduce scrap and hazardous waste disposal through
a number of mechanism. Hazardous liquids used in the
manufacturing processes are reclaimed and scrap
materials such as steel, cardboard, poly-foam and
fabric are recycled whenever possible.
Example: Automotive, Textiles
Carrier selection & transportation of
hazardous material
The transportation of materials in the supply chain is an
important factor to monitor. Carrier selection is a critical
consideration in the purchase of raw materials. This
requires analyzing the suppliers capabilities regarding
distribution, safety, timely delivery etc.
Product design, packaging &
labeling
Companies that are truly leading-edge in creating a green
supply chain use techniques such as life-cycle analysis,
which identifies all of the potential environmental effects of
using a given material in a product from cradle to
grave.
Many companies are now seeking ways to reuse and
recycle products after they have reached the end of their
useful life. This requires innovative approaches & closer
cooperation with customers in supply chain.
Product design, packaging & labeling contd.
Packaging is another important element to be managed in
greening the supply chain. Corrugated packaging is
being used more extensively as it is easier to recycle.
Standardized, reusable shipping containers are replacing
disposable ones
Companies are requiring its suppliers to label the
chemical composition of plastic items so recycling efforts
could be significantly improved.
Benefits of Green Supply Chain
Management
Organizations can enjoy several benefits by greening their Supply
chain, such asSustainability of Resources - GSCM helps in proper and effective
utilization of available productive resources of organizations.
Organizations will purchase 'green' input resources for environmental
friendly production process to produce desired outputs.
Lowered Costs/Increased Efficiency - Effective management of
suppliers can reduce transaction costs and promote recycling and
reuse of raw materials. Also, the production of waste and hazardous
substances can be cut, preventing corporations from being fined as a
result of violating environmental regulations. Consequently, the relevant
handling and operational cost involved can be further reduced and,
in the mean time, the efficiency of using resources can be enhanced.
Benefits of Green Supply Chain
Management contd.
Product Differentiation And Competitive Advantage - It helps the
organization in positioning its product differently in customer's
mind. Besides attracting new profitable customers for organization, it
will give competitive edge over competitors in market place. It will
strengthen the brand image and reputation in market place.
Adapting to Regulation and Reducing Risk - Organizations
adopting GSCM practices can reduce the chances of being
prosecuted for anti-environmental and unethical practices.
Improved quality and products organization will produce products
which are technologically advanced and environment friendly.
This will enhance the brand image and brand reputation in
customers' mind.
Apparel supply chain has Major environmental and social
impacts
Historically the apparel industry has operated in an unsustainable way. Materials, energy, and other resources are used
inefficiently throughout the apparel supply chain, leading to unsustainable levels of waste generation.
It has been observed that apparel supply chain has a significant environmental and social footprint across its global
periphery with each step of the clothing life cycle generating potential environmental and occupational hazards.
Social Impact
Environmental
Impact
Lifecycle
Stages
Resource
consumption
GHG emissions
Air/water
pollution &
toxicity
Soil
degradation/con
tamination
Biodiversity/
land use
Solid and
hazardous
waste
Worker rights
Worker health
and safety
Poverty
alleviation
Resettlement
Community
health
Animal
Welfare
GHG emissions
Air/water
pollution &
toxicity
Soil
degradation/con
tamination
Biodiversity/
land use
Solid and
hazardous
waste
GHG
emissions
Air/water
pollution &
toxicity
Soil
degradation/c
ontamination
Biodiversity/
land use
Solid and
hazardous
waste
GHG
emissions
Solid and
hazardous
waste
Worker rights
Worker health
and safety
Poverty
alleviation
Community
health
Cultural
impacts
Worker rights
Worker health
and safety
Poverty
alleviation
Community
health
Cultural
impacts
Worker rights
Worker health
and safety
Worker rights
Worker health
and safety
Worker rights
Worker health
and safety
Resource
consumption
GHG
emissions
Source: modified from Defra 2007, Allwood, Laursen, Rodrguez, & Bocken, 2006; Goldbach, Back, & Seuring, 2003
GHG
emissions
Solid and
hazardous
waste
Economic success story with huge environmental & social
footprint
Energy utilization: Energy is vital to the current consumerist system. The sectors contribution to climate change is
dominated by the requirement for burning fossil fuel to create electricity for heating water and air in laundering. Other
major uses arise in providing fuel for agricultural machinery and electricity for production.
Use of toxic chemicals: Toxic chemicals are used widely in cotton agriculture and in many manufacturing stages
such as pre-treatment, dyeing and printing.
Increasing landfills: Waste volumes from the sector are high and growing with the advent of fast fashion. The
clothing and textile per capita to landfills have been increasing very fast.
Water consumption: especially the extensive use of water in cotton crop cultivation can also be a major
environmental issue.
Issues with energy-intensive manufacturing of polyester: The manufacture of polyester and other synthetic
fabrics is an energy-intensive process requiring large amounts of crude oil and releasing emissions including volatile
organic compounds, particulate matter, and acid gases such as hydrogen chloride, all of which can cause or
aggravate respiratory disease.
Issues with extensive usage of non renewable resources: Apparel and textiles account for approximately 10
percent of the total carbon impact. The estimated consumption for an annual global production of 60 billion kilograms
of fabrics : 1 trillion kilowatt hours of electricity and up to 9 trillion litres of water
Economic success story with huge environmental & social
footprint
Living Wages
Most workers monthly earnings around the world average a little higher than the national minimum wage for
the country where they work
In many garment producing countries, the minimum wage actually leaves a family below the national poverty
line, even though this is also set by the government. Minimum wages often remain unchanged for years
while the cost of living rises, which means that the real value of the workers pay falls
Living and Working Conditions
The Indian apparel industry has been largely dominated by incompliant factories and working conditions
Major occupational health issues associated with the sector are prevalent amongst the workers due to
working conditions and related exposure to :
Hazardous chemicals particularly in cotton production, wet pre-treatment, dyeing and finishing
Fibre dust, especially when processing cotton, giving rise to the respiratory disease termed byssinosis
Noise associated with yarn manufacturing, knitting and weaving.
Denim dust: The blue dust from the jeans is a heavy irritant to the lungs. Process like clock scrubbing &
spraying, jeans in order to meet the demand and achieve fashionable distressed denim look causes heavy
respiratory disease and lung problems.
Source: Werner International, 2009
61
Increasing Pressure on & Retailers to be more responsible: Need to
Change
Increasing importance is being given to supply chain management in order to meet the demands of the consumers and be profitable. But this economic success story
has huge environmental and social implications
Post-purchase use and disposal are rarely considered during the design and production of apparel products.
It is estimated that the textile and apparel industry accounts for about 9-10% of the total industrial energy consumed in India and contributes 3% of the
global GHG emissions.
Even as the demand for natural resources outstrips their supply, world resources continue to be exploited unsustainably, leading to crises.
Businesses across the world are recognising the need to be responsible and are investing in technologies, products, processes, systems and procedures
that enable them to adopt responsive practices and improve efficiencies.
Apparel units in India are facing increasing pressure to be responsible towards environment and society and constantly report and monitor their footprints.
Pressure from all sides is forcing corporate leaders and apparel businesses to increase their investments in the communities they serve and redefine their relationships
with stakeholder groups, including employees, suppliers, governing boards, shareholders and press.
22
Brands/Retailers need to take up more Supply Chain
Responsibility
Providing End to End Solutions
Logistics
Consumer
understanding
Key Requirements
Good & consistent quality
Value for Money
Innovative
Warehousing
Designing
Reliable service
Prompt communication
Quality
Control
Product
Development
Manufacturing
Quick and On time delivery
Ethical / Eco-friendly
