Can Green really be Lean?
The two biggest misconceptions on Green Supply Chain Management
Misconception 1:
Greening is only driven by Government Legislation
o The lay population tends to be quite cynical of corporate attempts at greening their supply chains, and most people tend to attribute efforts on the part of businesses to demonstrate environmental responsibility as being due to 3 major reasons:
1. To avoid consumer displeasure which could quickly translate into dipping share prices
2. To manage the risk of regulatory non-compliance and thus minimize fines and penalties with respect to environment-related legislation such as the RoHS (each country has their own versions of such industry-specific legislation for environmental conservation)
3. To comply with the requirements of their B2B customers in advanced economies who are forced by legislations in their respective countries to do the necessary due diligence on the supply chain practices of their outsourced vendors in the low cost economies.
o The truth of the matter is that the single most important key to the increasingly widespread acceptance of green practices in corporate supply chains, has been the bottom-line impact! And the reason for this is not difficult to see: For obvious reasons, all efforts at improving the environmental friendliness of the organization, have to be material-centric, as the costs relating to procuring, handling and disposing of material are the single largest component of supply chain costs. And in reducing the wastage of material, organizations are forced to increase the efficiency of their supply chains by improving their processes and by saving energy, which in turn leads to substantial decreases in their overall costs.
Misconception 2:
Green Supply Chains cannot be Lean
o This is probably the most common misconception of not just lay persons, but also many Supply Chain managers! The common assumption seems to be that 'adding' environmentally friendly practices should also - logically speaking - add to the cost overheads. This in turn inevitably leads to the question of whether customers would be willing to pay these additional costs, particularly for products that have cheaper alternatives available.
o This could not be further from the truth. In fact Green SCM looks at minimizing three major factors:
- Wasted Material
- Wasted Energy
- Adverse Environmental impact.
o Elimination of wasted material and wasted energy has the potential to reduce tremendous costs across the extended global supply chains of modern day businesses. Since most global supply chains are already reeling from the impact of rising fuel costs, greening practices have gained wider acceptance as all available case studies on the early adopters of green SCM show a very clear relationship between Green SCM practices and the direct contribution of such practices towards the achievement of the strategic goals of the business and in improved bottom-lines.
More on this aspect in future posts ....
