how green is the supply chain

8/8/2019 How Green is the Supply Chain

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How Green is the Supply Chain?: Practice and Research

Joseph Sarkis

Graduate School of ManagementClark University950 Main Street

Worcester, MA 01610-1477Phone: 508/793-7659

Fax: 508/793-8822Email: [email protected]

August 1999
mailto:[email protected]:[email protected]


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How Green is the Supply Chain?: Practice and Research

INTRODUCTION

The issue of greening supply chains is critical for the successful implementation of

industrial ecosystems and industrial ecology. In fact, Bloemhof-Ruward, et al., (1995) have

argued that waste and emissions caused by the supply chain have become the main sources of

serious environmental problems including global warming and acid rain. Organizations have a

number of reasons for implementing these green supply chain policies, from reactive regulatory

reasons, to proactive strategic and competitive advantage reasons. From an overall

environmental and organizational perspective, it is important to understand the situation and

what issues exist in this field of study.

The presentation of the state of the debate, practice, and research for this topic can be

carried out at many levels and in many fields. The novelty of this topic makes it difficult to truly

determine contradictory and conflicting issues that could be considered true debates.

Alternatively, when little is known, then everything is debatable. We will present some of the

debates that do occur, but much of this paper will focus on a review of research and practice and

some missing and loose links that need to be further investigated, evaluated or tightened. In a

way, the article serves the dual purpose of presenting the state of the art as well as the state of thedebate.

Since systems thinking perpetuates this area of thought, presenting the issues within a

systems perspective seems to be a suitable approach. That is, looking at the supply chain that is

composed of activities or elements that have outputs serving as inputs to other activities and

elements with feed back included. We shall also look at the overall system, abstracting the groupof elements to a higher level analysis.

For the purposes of this discussion, the supply chain system includes Purchasing and

In-bound Logistics, Production, Distribution (Outbound Logistics & Marketing), and Reverse

l h ll h h d f ll h f h


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chain research. Exactly, what is the green supply chain? After a brief discussion concerning the

definition of supply chain management and green supply chains, the discussion and presentation

of issues turns to our four defined areas. Some practices, research, and evolving issues are

discussed for each of them. Then, an integrative look at the whole system and common issues

will be presented. What the future may look like and some possible emerging debates will also

be presented.

DEFINITIONS

Supply Chains and Supply Chain Management

The concept of supply chains and supply chain management is a relatively recent

managerial principle. The topic and field has evolved from a number sources including

purchasing, marketing (distribution channels), logistics, and operations management. The issues

include management of inventory, customer-supplier relationships, delivery time, product

development, and purchasing, just to name a few.

A recent textbook on supply chain management (Handfield and Nichols, 1999) has

provided the following definition for a supply chain:

The supply chain encompasses all activities associated with the flow and transformation of goods from raw materials (extraction), through the end user, as well as associated informationflows. Material and information flow both up and down the supply chain. (pg. 2).

In this description, the supply chain is considered to be a linear process. The circular and

systemic philosophy of ecosystem thinking (Shrivastava, 1995) is not explicitly included.

Thus, from this textbook perspective, the integration of the full cyclical supply chain is not

considered central to its definition. Few textbooks seem to diverge from this definition. This

small example is exemplary of common wisdom among this relatively new field. Developments

in greening supply chains have yet to diffuse through the general literature. Even though this is

relatively anecdotal speculation, integration of greening supply chains into academic or

pedagogical study has yet to be fully realized. Practice in this area seems to be as sporadic and

diverse as the field of study with green supply chains poorly and/or erratically practiced and


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Environmental supply chain management consists of the purchasing functions involvement inactivities that include reduction, recycling, reuse and the substitution of materials. (Narasimhan

& Carter, 1998, 6).

The practice of monitoring and improving environmental performance in the supply chain(Godfrey, 1998, 244).

The term supply chain describes the network of suppliers, distributors and consumers. It alsoincludes transportation between the supplier and the consumer, as well as the finalconsumerthe environmental effects of the researching developing, manufacturing, storing,transporting, and using a product, as well as disposing of the product waste, must be considered.(Messelbeck and Whaley, 1999, 42).

From these four definitions we see that there is a range of author focus and purpose on

green supply chains and their management. Research or practitioner field (i.e. purchasing,

operations, marketing or logistics) also influences the definition. The definition of the purpose

of green supply chains, which range from reactive monitoring of general environmentalmanagement programs to more proactive practices such as the Rs of environmental management

and incorporating innovations, also seem to differ. This lack of consensus in practice and

definition of green supply chain is not surprising, since its foundational elements of corporate

environmental management and supply chain management are both relatively new areas of study

and practice. If the practice of green supply chains is novel, the theory is even more so, if truetheory even exists.

The focus of this paper, as mentioned in the introductory section, will most closely follow

the last of the four definitions, encompassing most of the customer-supplier supply chain. As

Welford et al. (1997) argue, the supply chain has both a supply side and a demand side, and both

these sides need to be managed.

Figure 1 shows a number of environmental issues as well as operations within a typical

supply chain. The primary focus in this figure is the management of materials that flow through

the supply chain and relationships among the various functions. Looking at this chain we see

that vendors (who have their own internal and external supply chains) supply the necessary


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organizations from a variety of industries. The examples also support some of the conceptual

suppositions presented in the discussion.

P URCHASING AND IN-BOUND L OGISTICS

The purchasing function involves the acquisition of materials from suppliers to meet the

needs of producing the organizational product or service. Purchasing includes duties such as

vendor selection, material selection, outsourcing, negotiation, buying, delivery scheduling,

inventory and materials management, and to some extent, involvement in design. We shall

initially take an overall look at some of the issues relevant to general green purchasing. Within

general purchasing practice, we shall expand the discussion on vendor selection. The final

section will present some of the issues relevant to in-bound logistics.

General Green Purchasing Practice

The limited research in this area has focused management is practicing and how they

practice green purchasing. That is, empirical surveys have focused on what the distribution of

practices are and anecdotal articles provided examples of green purchasing practice. One of the

few studies to try to evaluate corporate purchasing practice was completed by Drumwright

(1994). In a field study of ten organizations, categorizations of organizations and purchasing

managers were completed. These categorizations provide a framework that helped explain how

organizational structure (strategy) and purchasing agent characteristics (operations) supportedenvironmental purchasing. One of Drumwrights findings was that policy entrepreneurs were

the drivers of the firms environmental purchasing activities. These entrepreneurs This has been

one of the few studies that has attempted to provide an explanation of why and what

characteristics certain organizations have in practicing green purchasing. Drumwright, has

noticed the lack of research in this area and has presented a call to further develop theory andextend this work to broader empirical analysis.

Green purchasing has a number of environmentally based initiatives that may be

incorporated into the purchasing function, these are summarized in Table 1 (Lamming et al.,


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product and process, joint teams and problem solving, and a focus on value rather than cost

(Sarkis, 1995). How well, and which, of these factors aid in the greening of the purchasing

function and supply chain need to be evaluated. Some of these more complex relationships may

cause overshadow other criteria and goals to overshadow environmental criteria. Although, an

opportunity does exist to incorporate environmental factors within these new philosophies. A

listing of practices is what has been presented in the current research work, whether these

practices have been effective in actually producing greener products and better environmental

performance, has not been investigated. This theme of linking practice to actual performance,

occurs throughout this paper.

In a comprehensive empirical survey of green practice by U.S. purchasing managers, Min

& Galle (1997) found that corporations were still relatively reactive when integrating

environmental issues into supply chain management practices. Some of these findings included

a focus on reducing liability and meeting regulations rather than environmental partnering when

a buying firm selects suppliers, a focus on recycling, rather than reuse or source reduction

(defined by low-density packaging), and scrapping or dumping as the major waste elimination

strategy. The differentiation of these practices among various organizations and their

characteristics was not completed. That is, explanatory considerations of why and eventually,

what resulted, were not completed.From a strategic organizational perspective, and issue of debate, decentralization versus

centralization of corporate procurement is becoming a concern. One of the considerations here

has to do with whether a strategic environmental policy can be better maintained throughout an

organization with decentralized purchasing decision making. With empowerment, from total

quality management programs, further defusing throughout organizations, and especially thepurchasing function, various philosophies may be less homogeneous. Monitoring green product

procurement becomes more complex in a decentralized environment (Birett, 1998). Yet, a

decentralized decision environment may also present greater opportunity for purchasers to find


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where their medical systems division has separate supplier programs than their semiconductor

division, for example (Philips, 1999). Yet, within this decentralization, not all divisions included

supplier impact programs.

There is also a concern of who should be responsible for environmental issues in

purchasing. Whitaker, 1998, questions whether it is best to make a companys purchasing

department responsible for managing the environmental performance of the supply chain. Since

they are responsible for cost, delivery, and quality issues, is it fair to add another level of

responsibility to this function (especially with the management of environmental surveys of their

suppliers). A solution, according to them, would be to help improve supplier environmental

performance rather than evaluating it.

The issue of managing various criteria for purchasing is one area of research controversy.

Min & Galle (1997) have found that purchasing managers believe that economic reasons form

the largest barrier for implementing green purchasing. Cox et. al (1998) in their survey found

that half of the respondents (they did not include just purchasing managers) felt that recycled

materials were more expensive and could thus provide a barrier to purchasing them. But the

biggest reason given by these companies for continued use of new materials was that customers

required them to use it. A third point of view is that of Cavinato (1991), who believes that public

policy will likely drive environmental and social decisions in organizations. Related to thiscontroversy is whether or not costs of recycled goods are more expensive or cheaper. Some

authors argue that the cost of recycled products may be greater due to the expense of reverse

logistics channels (Stock, 1992, estimates that reverse logistics channels and processes may add

30% more to the cost of a recycled product). Others argue that recycled material is usually less

expensive to purchase than comparable virgin materials (Dassagapa & Maggioni, 1993). Part of the problem is that estimation of costs (and other factors) can not be completed without more

effective LCA type tools for analysis of total costs. Also various products and materials will

have differing cost structures resulting in dissimilar perceptions on cost, probably contingent on


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cycle analysis (LCA) and design for the environment (DFE) have been developed (for example

see Horvath, 1999; Navindchandra & Bansal, 1994). Yet, even LCA is still a very imperfect tool

and model. Subjectivity and judgement play a large role. The issue is here is whether

purchasing managers are motivated and capable of evaluating and selecting environmentally

preferable materials and vendors. This issue also brings us to a major area of investigation

related to green purchasing at a strategic and operational level of analysis, vendor selection.

Vendor Selection

The above mentioned practices on green purchasing have focused on internal operations.

One of the more important functions of green purchasing has to do with the external

relationships of the purchasing function, especially for selection of vendors. Much of the vendor

selection research has focused on whether companies include environmental criteria in their

selection processes, the criteria for selection, and tools for their selection. Much of this research

has focused on anecdotal and prescriptive research. Descriptive, broad, empirical research has

been minimal.

In a focus group, to determine importance of various criteria, Walton et al. (1998) found

that purchasing managers in their study favored relatively reactive measures for evaluation (e.g

hazardous waste management, public disclosures). This finding supports the findings of Min and

Galle (1997) that found organizations still focusing on reactive environmental managementmeasures in purchasing. The reason for reactive measures have to do with liability concerns as

well as making sure that the supplier will be available for the long run. How these vendor

certification criteria evolve will be interesting. Also a linkage between organizational

environmental management philosophy and the criteria emphasis would be an interesting issue to

study. Will more proactive organizations incorporate more proactive criteria?The supplier selection tools have been grouped by Noci (1997) into five sets of tools: 1.

The cateorical method; 2. The weighted point method; 3. The matrix approach; 4. The vendor

profile analysis (VPA) method; and 5. Analytical Hierarchy Process (AHP) based approaches.


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What makes environmental factors different, requiring new methods for vendor selection, is an

issue that does not seem to be addressed.

One of the issues in the selection of suppliers is the risk associated with their selection.

As stated before, liability issues seem to be a major concern for supplier selection. To determine

and integrate risk analysis into vendor selection is one of the goals that need to be pursued for

green supply chains. This goal is not typically covered in more traditional approaches

(Lamming, et al., 1999).

Certification (selection) requirements may be easier to address for organizations by

requiring some form of third party certification, specifically ISO 14001 certification. ISO 14001

certification may be adequate for organizations who do not wish to audit or evaluate suppliers for

selection. Yet, a number of suppliers (primarily small suppliers) are not necessarily supportive

of a ISO 14001 certification requirement (Mortensen, 1998). In a survey of industrial South

Wales showed (Baylis, et al., 1998) that only 22% of small companies believed that an EMS

would help them meet the needs of their customers. Burton & Del Rosario (1997), point out that

imposing a certification standard on a small supplier may actually have negative effects.

Obtaining certification is time-consuming and expensive. They argue that a small supplier may

have better business and environmental payback by putting resources into actual process

improvements, rather than developing an environmental management system with its supportingbureaucracy, and in the some cases a small supplier might be forced out of business because it

lacks the resources needed to meet buyer environmental requirements. A small supplier may

wish to acquire ISO 14001 certification so it does not have to meet varying environmental

vendor certifications from multiple customers. A potential problem with forgoing organizational

vendor certification and evaluation in favor of ISO 14001 certification, is that there is noguarantee that ISO 14001 organizations are compliant, much less environmentally proactive.

In-bound Logistics

One of the issues in delivery (and production) is the use of just-in-time (JIT) practice.


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and produce in small batches. These smaller batches mean more deliveries, thus raising fuel

consumption and traffic congestion (McIntyre et al., 1998; Penman, 1994; Sarkis, 1995b, Wu

and Dunn, 1995). Investigation of these tradeoffs are necessary. But some of these issues are

mitigated with such practices as on-site suppliers or those that are in close proximity for JIT

reasons. Another factor related to JIT and supplier management is that fewer suppliers are

usually used in a JIT environment. This means better forecasting and fuller loads could be

planned. Of course this delivery approach will be dependent on demand levels and

characteristics.

Wu & Dunn (1995) have also identified a number of other tradeoffs and issues facing

in-bound logistics (and out-bound, as well). One is freight consolidation. Waiting for freight to

become a full load may lead to longer lead times but may yield savings and be environmentally

preferable. Another issue is mode selection. Some transport modes like rail and barge use less

energy or use energy more efficiently than other modes like road haulage and air cargo. In this

case, flexibility, timing and speed are tradeoffs to cost and environmental factors. The transport

mode decision determines which transport option to use and often affects traffic congestion and

air pollution both directly and indirectly. Carrier selection, a part of supplier selection, is an

important in-bound logistics decision. Transportation is important to all industries. As an

example, the Chemical Manufacturers Association cited Roadway Express, a major carrier, as aresponsive care partner in hauling chemicals.

The major question in these examples is whether companies are capable and willing to

make the tradeoffs. A issue that arises relates to any major environmental issue: when does the

environment play a large enough role to overcome other performance metrics? As well, the

addition of a third party (third-party carriers and logistics managers are quite popular) into thedecision process makes it more difficult for the vendor-customer relationship. Who makes the

decision on mode and freight consolidation, especially when organizations may have differing

environmental strategies?


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P RODUCTION

The manufacturing and production functions role in corporate environmental has been

well addressed in the literature. The internal supply chains performance can best be managed

within this function. Since a number of reviews on environmentally conscious manufacturing

have been completed (for example, Florida, 1996; Gupta, 1995; Hanna & Newman, 1995;

Klassen, 1993; Sarkis, 1995a; Sarkis, 1999) we shall only focus on a few of the major principles

in this function.

A principle topic that has evolved within this area is total quality environmental

management (TQEM). But, similar to the concept of total quality management, it is hard to get a

concrete definition and practice of TQEM. It is a managerial philosophy, rather than a hard

technology or program, with a number of tenets (some of which are also espoused above in

dealing with suppliers as well). Some of the tenets of TQEM include empowerment of

employees, continuous improvement, team efforts, interfunctional collaboration, and leadershipelements. There are issues in each of these areas, one of the most important of these areas, from

a managerial perspective, is empowerment and employee involvement.

Empowerment means allowing workers to attain responsibility for decision making. An

issue here is whether employees are capable of making environmental decisions. What happens

to liability and corporate risk when such sensitive and sometimes technically complex issues arepart of the environmental decisions? Similar to quality control, which has evolved to include

everyone in an organization, can environmental decisions be allowed to permeate? These

questions are critical since employee involvement is a practice that researchers and practitioners

believe are central to pollution prevention in the production function (Florida, 1996; Kitazawa &

Sarkis, 1999). In a detailed field study of automotive manufacturers by Rothenberg (1999)worker participation in environmental decisions was emphasized. But, even with this emphasis,

her findings showed that the amount of worker participation (and its significance) were much

less than the supposed involvement as mentioned by management. Rothenberg found that


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The principles of demanufacturing are also of importance within production portion of

the green supply chain. Demanufacturing includes disassembly, remanufacturing, and material

recovery principles. The investigations in this area have predominately been on the development

of tools to aid in the management of these processes. The two major categories of tools include

those that aid in designing products for demanufacturing (disassembly) (Dewhurst, 1993;

Navindchandra & Bansal, 1994; Spicer, et. al, 1996), and those used to optimize the

demanufacturing process (Guide et. al, 1997; Johnson & Wang, 1998; Lambert, 1997; Moore, et

al., 1998). The effectiveness of demanufacturing from an environmental and economic

perspective is still in its infancy. Currently, in a number of industries, remanufacturing, and

reverse logistics are relatively novel concepts. Since this operation is not as mature, a number of

inefficiencies still exist. Certainly, to be economically feasible and environmentally benign, the

systems flowing into and within the organizations operations need further development. The

determination of whether the lengthening of the life of these products and materials is worth theadditional efforts of energy use and waste generation have yet to be determined.

Closed-loop manufacturing is one of the internal measures that can be used to improve

the environmental performance of the internal supply chain. The philosophy of zero-emissions

(similar to zero-defects of many TQM programs) is what drives closed-loop manufacturing

practice. Closed-loop manufacturing is a process of producing products with no negativeenvironmental impact (Hasek, 1997). Currently, much of the emphasis on closed-loop

manufacturing is on development of supporting technology. This internal loop helps to lessen

some waste streams that flow from the production function, but may require additional energy

and resources to function and maintain. As part of the source-reduction philosophy closed-loop

manufacturing A related issue to the zero-emissions philosophy is substitutability, which hasbecome much more popular with design for the environment linkages. For example, substitutes

for environmentally toxic materials such as solvents with aqueous solution for processes and

powders paint for liquid paint (Vasilash, 1997) are examples of using substitutes to reduce and


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Exemplary state-of-the-art green practices in the production function are presented in

Table 3.

DISTRIBUTION AND O UT -BOUND L OGISTICS

Whereas, purchasing and in-bound logistics focuses on managing the vendor-

organization relationships of the supply chain, the distribution and out-bound logistics function is

meant to address the organization-customer relationship issues. We shall begin with a discussion

on some of the issues in a general category of customer relationships which includes some

developments in green marketing and product stewardship. A brief discussion on out-bound

logistics completes this section.

Customer Relationships

Customer relationships are greatly influenced by green marketing policies. Some studies

have found that ultimate individual consumer interest in the environment and environmentally

sound products is quite substantial, even though there has been a slight decline (Speer, 1997).This interest along with government regulations, are two external pressures that flow throughout

the supply chain. Studies have shown that many companies are putting pressure on their

suppliers and suppliers are listening to corporate customers, as well as the end-user (Lamming &

Hampson, 1998).

One of the controversies in green marketing and customer relationships is whethercustomer interest in environmentally sound products relates to actual purchase. Various studies

have shown that interest is usually higher than actual purchase. This argument can be made for

either individual consumers or corporate and industrial buyers. Even though this issue has been

shown to be an individual consumer phenomena (Mandese, 1991; Yam-tang & Chang, 1998;

Schlossberg, 1990), the extension to corporate buyers needs a more complete evaluation.Some literature has looked at this issue, but it is still a point of contention. In their work,

Earl & Clift (1999) argue that individual consumers and business-to-business consumers (e.g

purchasing agents) have similar attitudes, actual behavior, and understanding of purchasing


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Another issue related to marketing to customers is to understand what their hierarchy

of criteria for purchasing. Price, quality, and convenience criteria are still at the top of this

hierarchy. An issue faced by green marketers is how to make environmental criteria more

important. Roberts & Bacon (1997) state that marketers have several options to achieve this

goal. These options include: increasing the importance of ecological compatibility (e.g.

explaining the effects of poor environmental products); change beliefs about a particular product

(e.g. disposable diapers may actually be more environmentally conscious than cloth diapers);

explain that the additional environmental benefits in addition to the other criteria. In addition,

Moorthy & Srinivasan (1995) recommend using money-back guarantees to overcome some of

the concerns about quality/price. These are all recommendations that still need to be tested and

evaluated. What type of response various markets (not just individual, but business) have with

each of these strategies. Roberts & Bacon (1997) have also found that individual consumers are

different in their environmental expectations as well as their definition of environmentalconsciousness. This finding needs to be investigated for organizations as well. Differing

definitions and expectations of buying organizations may have some impact on the green

marketing strategy of an organization.

Product stewardship also plays a big role in an organizations relationships with its

customers. Similar to the concepts of design for the environment, life cycle analysis, andTQEM, product stewardship principles affect the whole supply chain. Product stewardship has

been defined as the minimization of the products harmful effects on the environment in every

stage of its product life cycle, from design and development to manufacturing, distribution, use

and disposal (Dutton, 1998; Hart, 1995). The practice and literature seems to focus on the

delivery and take back aspects of product stewardship and customer relationships. This is areason that we have included this issue within this function of the supply chain. This concept is

one of the foundational elements of the Chemical Industrys Responsible Care program (Walsh,

1998). Under Responsible Care principles, chemical producers are required to evaluate the


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and used. CSP seeks to change the chemical marketing transaction from a volume and sales

orientation to a service orientation. As an example, instead of selling solvents to a manufacturer

for cleaning circuit boards, a chemical supplier might manage the manufacturers cleaning. For

managing the cleaning operation, the supplier would be paid on a per-circuit-board-cleaned

basis. This shift in focus from sales to service creates a profit incentive for the supplier to clean

more circuit boards with less chemicals. In a few industrial sectors, especially automobile

manufacturing, this shift from chemical sales to services has begun (White et al., 1997). This

service orientation, similar to leases for product take-back measures, requires significant change

in management and accounting measures used by an organization.

Outbound Logistics

Wu & Dunn (1995) in their review of the literature found a number of areas within

standard practice of outbound logistics that have implications for greening the logistics function.

The design of a logistics network and its planning are two of the more strategic issues facinglogistics managers in this function. Many trade-off decisions need to be made with regard to the

firm's market, customer, product and logistical resources. Examples of typical logistics

decisions include options such as direct shipping or hub-and-spoke, central warehouse or

distributed network, intermodal or single mode, and third party services or private fleet. Some of

the design and management criteria that support environmental planning in this area includefewer shipments, less handling, shorter movements, more direct routes, and better space

utilization. But, each of these issues includes a tradeoffs among delivery time, responsiveness,

quality and cost, as well as environmental performance.

Warehousing and delivery packaging design are two important issues in outbound (and

inbound) logistics and distribution. Wu and Dunn (1995) argue that warehousing, other than

land use requirements, also generates much of the packaging waste in the supply chain.

Standardized reusable containers, good warehouse layouts, easy information access all cut

storage and retrieval movements and save on operating costs and are environmentally more


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the design of their products packaging as well as how to manage the packaging delivery and

logistics, once it is used. One controversy that seems to be growing in the packaging area is

whether single use packaging is more environmentally sound than reusable packaging. For

example, the Association for Beverage Cartons and the Environment has reported no specific

benefit for using either type of packaging, after 15 studies were undertaken (Reeves, 1998). Part

of the difficulty in determining which part of this debate is correct, is the poor development of

LCA.

Another packaging debate focuses on consumer perception and acceptance of green

packaging. Earl & Clift (1999) reference a study by Pegram Walters Associates (1994) which

showed that while most people regarded packaging as bad for the environment, they still chose

packaged over unpackaged alternatives when buying. Yet, anecdotal evidence has shown that

some companies, after instilling more environmentally preferable packaging, had increases in

their market shares (see Dorn (1996) for an example of Nestle Corporations experiences). Thisissue relates to consumer attitudes and behavior. Whether these situations are applicable to

industrial buyers and buying is another issue. A study of environmental packaging and its

influence on industrial buying is an issue that has not received much attention. Although some

issues relevant to purchasing practice after passage of packaging laws, have been presented in

the literature (e.g. see Lamming and Hampson, 1996).Table 4 presents some current and exemplary practices that have impact on the greening

of distribution, out-bound logistics and marketing.

R EVERSE L OGISTICS

Reverse logistics incorporates the return of materials, components and products back into

the forward logistics chain. Carter and Ellram (1998), have further defined reverse logistics as

an environmentally conscious approach by incorporating reverse distribution and resource

reduction. Their complete definition for reverse logistics is the return, upstream movement or a

good or material resulting from reuse, recycling, or disposal with the minimization of waste


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opportunity of future normative, prescriptive modeling research. Noting that a number of

models in this area are adjustments to current models, a question that does arise, similar to the

issue on vendor selection models, on whether new models need to developed.

Other than quantitative modeling approaches the reverse logistics research is the most

immature of all the functions discussed in this paper. Principles for managing reverse logistics

channels, have yet to be developed, much less investigated. Only a few propositions focusing on

reverse logistics have been put forward by Carter and Ellram (1998), much of these propositions

have been based on anecdotal and trade publications. Even exploratory field research focused on

reverse logistics has been difficult to find.

Table 5 presents some practical examples of issues that have been addressed in the

reverse logistics function.

SYSTEM AND E MERGING ISSUES

A number of issues that encompass the green supply chain or that are common across thesupply chain are now presented. Within these issues are a set of emerging organizational topics

and fields that may have direct impact on the green supply chain.

Small Companies and the Green Supply Chain

One of the more difficult, and probably most important, groups to incorporate into the

supply chain are the small companies. Murphy, et. al (1995, 1996) in an academic survey of 135companies found smaller companies attached less importance to management of environmental

issues when compared to larger firms (greater than $1 billion). Walton et al. (1998) have found

in a study of manufacturers that convincing small companies to become involved in green

purchasing was a major barrier for these manufacturers. Ahmed et al. (1998), in a more general

study of corporate performance and environmental consciousness, found that larger companies

are more inclined to be environmentally conscious. Yet, Cox et al. (1999) in a regional survey of

small manufacturer practices found a large number of them were interested or practicing

environmental practices (especially recycling initiatives) in their organizations. Almost a third


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expensive information flows; decreased incidence and intensity of land-use conflicts; and an

enhanced ability on the part of the public sector to enforce environmental regulations. Thus,

close and inter-firm networks could be a way to help small organizations become more effective

environmental partners. The use of eco-industrial parks and government sponsored waste

exchange programs as techniques to aid the linkage between small and large companies (Lowe,

1997). Another approach is to aid small companies is through mentoring programs from large

companies as evidenced by a study in Guadalajara (Champion, 1998). Knowing that there is a

difference between large and small companies in their involvement and acceptance of green

supply chain principles is one issue for investigation. Another, more important issue is

determining requirements and practices that would help small manufacturers become more

involved in this process.

Governmental Roles in the Green Supply Chain

Do state and federal regulations significantly influence green purchasing efforts? Is aquestion that has been posed by (Min and Galle, 1997). The results from their survey of

purchasing managers is, yes. In this case, superfund and liability issues play the largest role. The

reason for this is that government agencies seeking deep pockets may find potentially

responsible parties throughout the supply chain for superfund based penalties. These issues

have greatly influenced how major organizations select and purchase products, a great variety of factors come into play when considering regulatory compliance: the processes being operated,

the markets the organization sells into, the countries where the organization is based, the

geographical and geological setting of the premises (Rickman, 1994). The reaction to these

regulations are only one example. Other governmental regulations that have influenced supply

chain practices have already been mentioned, including take-back and packaging laws in

European countries.

One regulatory scheme that has been quite controversial are government supported eco-

labeling regulations (EU Ecolabel for the European union, but various countries have their own


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environmental policy setting tools (Loprieno, 1997). Yet, the development of industry or even

product certification for eco-labeling purposes is difficult due to the subjectivity of much of the

criteria. There have been calls on both sides of the environmental fence (industry and NGOs)

for revising and making these eco-label systems more effective, or simply eliminating them

(Anonymous, 1996; Williams, 1995; Williams, 1996).

These command-and-control governmental measures (some may argue that eco-labeling

is less of a comman-and-control regulatory mechanism) have been giving leeway to more

cooperative voluntary measures set up by various government levels. For example, governments

have also used procurement as an instrument of environmental policy. These government green

purchasing initiatives have occurred at all levels of government. The basic idea is that by

purchasing large quantities and selecting preferred suppliers, the government could shift product

markets to favor one product type over another. Thus, by government purchases providing an

earlier and larger market for green products, it allows firms to lower costs through scaleeconomies and learning-by-doing. This concept is a subset of use of procurement as an

industrial policy setting mechanism (Goreski, 1990). This method of policy setting for further

development of green products was evaluated, economically, by Marron, (1997). Marron, found

this policy setting mechanism for green product development to be weak. The issue of whether

explicit regulatory mechanisms work better or are more effective than market developmentthrough purchasing mechanisms to increase green product markets is something that needs to be

further investigated.

Integral and Emerging Issues

As can be seen, much of the research completed on green supply chain management has

been narrowly focused on one functional area or another. A complete and integrative evaluation

and monitoring of performance is required. A systems perspective does not seem to permeate

this type of literature. Industrial ecology, falls into similar problems. Yet, an integrative study

can become complex and difficult to complete. It can be clearly seen that even the


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few of these are now listed with their related concerns and studies. These issues can be grouped

into strategic and operational levels of analysis (with some overlap). The more strategically

oriented issues include: industry differences, evolving organizational forms, linkage to

environmental strategy, and the relationship between organizational performance and green

supply chains. Operationally oriented issues include: performance measurement, third party

certification, product life cycles, and life cycle assessment.

Industry Differences

The investigation of industry differences in green supply chain practices is also an issue

that has been observed in each of the functions. Azzone et al. (1997), have found industrial

differences in how organizations incorporate environmental strategy. Part of the reason is that

they share the same external stakeholders that put pressure on them. One of the difficulties of

extending this type of analysis to green supply chain research is the heterogeneity of suppliers

and customers in the supply chain. That is, it is difficult to only have a supply chain made up of chemical industry companies, for example. The influences of NGOs , professional

organizations and other stakeholders on green supply chain management practice may also be

investigated, when industrial characteristics are to be evaluated.

Evolving Organizational Forms

Part of organizational supply chain formation will be effected by the neworganizational forms defined as networked or virtual organizations (Larson, 1991; Osborn, 1997;

Snow, et al. 1992) have implications for green supply chains. These network organizations have

the goal of forming on an ad-hoc basis to meet a specific market need and dissolving after their

formation after the market need has been met. In a case study of a networked entrepreneurial

company and sustainability (Farrow et al., 1999), the broker, Walden Paddlers Inc. used a

decision guide of environmental responsibility. The network organization (other than the

broker) includes the designer, two manufacturers, two plastics suppliers, a packaging and a

shipping company. The environmental and economic success of this network company was the


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first studies in this area. The issue of responsibility for environmental problems did not come up

in this case.

How to form such an organization such that environmental liabilities are minimized, is an

issue. These organizations are meant to form and dissolve rapidly. Responsibility for any

environmentally malignant behavior by the company or its members may provide unforeseen

liabilities and consequences, with responsibilities of this behavior difficult to trace. Having an

initial environmental strategy, which drove the formation and operations of this organization, is

not usually one of the concerns of forming these types of organizations. Also, in this case study,

win-win opportunities did seem to exist, but according to Walley and Whitehead (1994), these

opportunities may be fewer and fewer as the organization matures. How to maintain and build

on these practices for environmental and economic sustainability is another issue.

The structure and organizational form of the supply chain is also an issue that Green, et

al. (1998) and Zsidisin & Hendrick (1999) have mentioned as a possible areas of study. Somequestions related to these issues include: Will these network organizations better environmental

performance? What about issues of power relationships, how can this hurt or aid improving

environmental performance of the supply chain? Are long-term relationships espoused by the

latest supply and partner management literature better than the short-term relationships supported

by network organization theory, within the context of green supply chain management? Whatcultural issues support or bind corporate environmental performance? Are there differences in

national and regional cultures that may cause organizations to support green supply chains?

Linkage to Environmental Strategy

It has been argued that corporate environmental programs work best when they are part

of a strategic program and vision (Azzone, et al. 1997; Shrivastava & Hart, 1995; Starik, et al.,

1996). Yet, when dealing with supply chains, with various tiers of suppliers to many possible

levels of customers, the supply chain (in general) and the environmental supply chain (in

particular) are only as good as their weakest links, especially in terms of closing the supply chain


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In a paper by Green et al. (1998), the question raised is do they (green purchasing and

supply policies) improve companies environmental performance. Their finding was a we do

not yet know. This can also be taken to another level to ask, does green supply chain

management improve organizational environmental performance? And to a further level, maybe

more important to managers, do green supply chain management improve corporate financial

and overall performance? There have been investigations of organizational corporate

performance and environmental performance (Klassen & McLaughlin, 1996; Hart and Ahuja,

1995; Cordiero & Sarkis, 1997). But, even these studies have found conflicting evidence (at the

strategic level of analysis) between environmental management and organizational performance

(Cordeiro & Sarkis, 1997). Ample opportunity exists in this area to identify how various

environmental management policies and principles effect corporate performance, as well as why

variations in results have been occurring.

Performance Measurement Related to strategic corporate performance relationships are the consideration of

operational performance measurements for green supply chains. Performance measurements

have been developed for purposes of managing the various elements of the supply chain. Many

of these measures are time and cost based (McIntyre et al. (1998)). The use of performance

measures will be used for managing each of the functions and elements. The short-term focus of these measures will make it difficult from a greening perspective. In fact, there is even a goal to

go beyond simple greening measures to sustainability performance measures, incorporating other

socially oriented factors. One size fits all, in terms of performance measurement, is not plausible

(Green et al., 1996). Investigation into monitoring what works and what doesnt is still missing.

Third Party Certification

As we have mentioned, third party certification, is one approach for enabling green supply

chain development. For example, ISO 14000-like guidelines are one set of guidelines to aid in

this area. Cascio, Woodside and Mitchell (1996), point out that to become ISO 14001 certified, it


25/40

Demand that suppliers and contractors have a registered EMS. (pp. 126-127).

ISO 14000 currently has some limitations in this area. Whereas, IS0 9000 standards (for

quality) mention external relationships with customers and suppliers, these relationship issues are

not explicitly mentioned in the ISO 14001 standards.

Product Life Cycles

Another issue that arises for the overall green supply chain management system, is the

they dynamic nature of the product life cycle and its implications on the various practices and

their emphasis. Sarkis (1995c) has argued that the organizational emphasis on which functions it

develops and supports in the green supply chain is dependent on the products (and industrys)

marketing life cycle. That is, whether the product is in the early innovation stages or later

maturity or decline stages may influence whether the organization is putting more emphasis on

the procurement stage (selecting appropriate vendors) or on reverse logistics (enough products

and material exist for efficient reverse logistics channels). Thus, the issue here is that

organizations planning for long-term green supply chains need to be aware of the necessary

requirements for strengthening the supply chain as it matures.

Life Cycle Assessment

The issue of LCA looms large in each of the functions. The lack of appropriate life cycle

analysis tools makes the appropriate decision on product and material selection, supplierselection, production technology, delivery mechanism, transportation selection, etc. all difficult

to determine. How well decisions perform environmentally, either practically or for research

measurement purposes, all require effective life cycle assessment measurements. Yet, suppliers

and organizations find LCA is one of the most problematic aspects of managing the supply

chain. For example, in a survey of suppliers, Lucent technology (Nagel, 1998), one of the mostdifficult issues was in the definition of LCA. Managing the overall supply chain without agreed

upon LCA measures will require more art than science.

SUMMARY AND C ONCLUSION


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presented. Even in this relatively new field of green supply chain management a number of

debates have emerged, within and between functions. It has been found that most of the literature

on green supply chain management has been descriptive, anecdotal, and/or prescriptive. As, well

much of the literature has investigated small portions of the whole supply chain. Academic

journals have only begun to address issues that have been appearing in the trade journals since

the early 1990s. With only a few empirical studies, which have been exploratory, the amount of

generalizable knowledge and theory development in this area is almost non-existent. To truly

address these emerging debates and issues, effective research agendas and methodologies will be

required. Even then, the debates may never truly be answered. As in all environmentally based

research arenas tools, techniques and theory from a number of disciplines will be required for a

truly complete study of this area. We feel that as the new millennium arrives, this topic and field

and its debates will keep a number of researchers busy.


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Table 1: A listing of environmentally based initiatives for the purchasing function.

Supplier Environmental QuestionnairesSupplier Environmental Audits and AssessmentsEnvironmental Criteria on Approved Supplier ListRequire Suppliers to undertake independent Environmental CertificationJointly Develop Cleaner Technology/Processes with Supplier(s)Engage Suppliers in Design for Environment product/process innovationReduce packaging waste at the customer/supplier interfaceReuse/Recycling of materials requiring co-operation with supplier

Reuse initiatives (including buy-backs and leasing)Conduct LCA with cooperation from suppliersSeek to influence legislation in cooperation with suppliersCreate supply club to collaborate on environmental issuesCoordinate minimization of environmental impact over full supply chainBuild environmental criteria into supplier contract conditionsAudit Supplier Environmental Performance


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Table 2: Exemplary Industrial Practices for the Green Purchasing Function.

B&Q, (a British retailer) has a system of auditing and accrediting the environmental correctness of all its suppliers (over 500),guided by its corporate environmental mission statement. Their supplier certification system (QUEST) required the merger of thequality and environmental departments. Its range of concern is global, since products arrive from many international locales. (Greenet. al, 1998).

Boeing Corporation sponsors Supplier Technical Exchange forums every 18 months to collaborate on common environmentalchallenges. During these weeklong events, Boeing brings together 40-50 people from Boeing and representatives from the company'skey suppliers to exchange ideas and work jointly to address environmental issues, such as life cycle assessment. Boeing has alsoprovided its suppliers with technical information on ways to reduce their air emissions to meet the U.S. Environmental ProtectionAgency's National Emissions Standards for Hazardous Air Pollutants (NESHAP) for the aerospace industry. The company has alsoworked one-on-one with suppliers to help them find environmentally preferable substitutes for hazardous materials. (BSR, 1999)

Bristol-Myers Squibb conducts an EHS evaluation of a contractor or supplier. Determining whether an evaluation is warranted

depends on the extent of Bristol-Myers Squibbs involvement in the operations of the contractor or supplier, as well as the nature of such operations. In addition, the Worldwide Medicines Group has developed an EHS questionnaire that is sent to a contractor orsupplier if it falls into one of the following categories: Sole source; Manufacturer of a strategic material; Manufacturer of a material toBristol-Myers Squibbs specifications; Referenced in the New Drug Application submitted to the U.S. Food and Drug Administration.Bristol Myers Squibb recently (November 1998) sent out a letter to suppliers encouraging ISO14001 certification or at least followingthose guidelines. (Company Report, 1999)

Cosmair , has worked with suppliers to recycle or reuse its shipping containers. Cosmair works with key suppliers to ensure that theymake deliveries in reusable containers and ships these containers back to suppliers after they are empty. (BSR, 1999)

Fetzer Vineyards , a winery in Northern California, created an information-sharing forum on organic farming for its growers. Because

the company currently grows less than 10 percent of the grapes it uses for its wines, it developed a training program to help its growersmeet its increased demand for organic grapes. Fetzer hosted a group of its growers, dubbed "Club Bonterra," to discuss organic farmingmethods and exchange strategies and research for combating pests without the use of pesticides. (BSR, 1999)

Fiat Auto A document called "Guidelines for Cooperation," signed in February 1994, requires that partners accept the increasingenvironmental compatibility of their products and manufacturing processes as a priority, while respecting the economic andcompetitive balance. A survey of 360 suppliers was conducted in 1994 to monitor their management of environmental resources(energy, water, air, and so on). A packaging waste control program is under way with 70 suppliers, monitoring incoming and outgoingmaterials. (Company Report, 1998)

General Motors formed a Supplier Environmental Advisory (SEA) Team to explore ways that GM can work effectively with

suppliers to integrate environmental concerns into the design, sourcing, and manufacturing processes. The SEA Team has identifiednear-term and longer-term opportunities for collaboration among GM and its suppliers on environmental management systems (EMS),design for environment, and environmental metrics throughout the supply chain. Working with the SEA Team, GM developed a policystatement on "Environmental Performance Management in GM's Value Chain." (Company Report, 1998, BSR, 1999)

Hewlett-Packard : Environmental performance is one of six criteria HP uses to evaluate suppliers (The others are technology, quality,responsiveness, delivery and cost). They favor, whenever possible, suppliers who demonstrate the best performance in these areas. It isup to their suppliers to make their own commitments and to develop plans for being environmentally responsible. (Ditz &Ranganathan, 1997; Maxie, 1994).

Nokias supplier environmental issues are handled, reviewed and audited within Nokia's comprehensive supplier assessment processes,forming an integral part of the process. The guiding principle is the adoption of the ICC Business Charter for Sustainable Developmentand serves as a platform for Nokia in supply chain management. Nokia has played a role in the European Eureka project fordevelopment of a procurement tool for environmentally compatible electronic products. (1998 Corporate Environmental Report)

Polaroid's Global Sourcing principles include a Principle of Conduct which includes environmental factors. Commitments to specificenvironmental improvements are incorporated into their contracts with Polaroid. Polaroid takes a three-tiered approach to evaluatingsuppliers by gathering information independently, asking direct questions of the supplier and visiting selected suppliers, depending ontheir logistical significance and the nature of their operations. They share technical information on environmental issues, develop less-


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Table 3: Exemplary Industrial Practices for the Green Production Function.Compaq (formerly Digital Equipment Corporation) has a recovery facility for electronics parts where purchasingagents also serve as marketers and salesmen. They have developed relationships with a number of organizations

that send their electronics components and products there for demanufacturing and organizations (such asEnvirocycle Inc.) that use their outputs as inputs for their products. (Sarkis, 1998)

Crown Cork and Seal's Minnesota plant involved production workers as the centerpiece of its efforts to eliminatewaste and reduce toxins. They formed teams of workers to focus on environmental issues, including recyclingteams and quality improvement teams whose objectives focused on an environmental problem and hazardous wastegeneration. From these efforts, the plant achieved reductions in solvents, air emissions, and solid waste disposal(Florida, 1996) .

Disney built an on-site material recovery facility (MRF), which began handling recyclables from the Walt DisneyWorld Resort. The MRF handles more than 45 tons of paper, plastic, glass, steel, aluminum, and cardboard, daily,representing an average recycling rate of more than 30% of these materials. Other used equipment and excess itemsare sold to Cast Members or auctioned to the public. (Corporate Environmental Report, 1999)

Kennedy Die Casting in Worcester, Massachusetts has three separate internal closed loop waste water systems.Each is unique to its manufacturing centers, depending on the level of contamination and the use of the water. Oneprocess includes a simple heat capturing and cooling water closed loop system. In this system the water has nodirect contact with the material or solvents. Another closed loop wastewater treatment process is more complexwith the use of settling tanks, skimmers and centrifuges to help decontaminate the water for reuse. (Sarkis, 1999)

Novartis conducts benefit-risk analysis for its core manufacturing processes. The results are broadly disseminatedas publicly available information. Employees are made responsible for contributing to better environmentalperformance. For auditing purposes the company has developed an objective reporting system called SEEP whichallows the company to obtain real time accurate information on 90 percent of emissions from the company,worldwide. (Narasimhan & Carter. 1998).

Uzin Georg Utz Gmbh & Co. (a cement and tile manufacturer) focuses its effort on investment in advancedproduction technology. They view technology as a strategy to improve environmental effectiveness of its

production function. Uzins major processes are physical and mechanical in nature (not chemical), thus the cleaningand maintenance of these products is of environmental concern to the organization. (Narasimhan & Carter. 1998).


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Table 4: Exemplary Industrial Practices for the Green Outbound Logistics andDistribution Function.

Bethlehem Steel , is a member of General Motors (GMs) Supplier Environmental Advisory Team in 1997. TheSEA Team discusses opportunities for collaboration with other GM suppliers to help GM meet its economic andenvironmental goals. Bethlehems representatives on the team have met several times with GM and other suppliersto exchange ideas and support GMs efforts to promote sustainability and improved environmental performance inits supply chain. (Corporate Environmental Report, 1998).

Bristol Myers Squibb has a customer related environmental program that educates customers, typically health caremanagement institutions to aid in environmental practices (Corporate Environmental Report, 1998).

British Telecom and Nortel are currently developing two pioneering product takeback schemes. Under the firstscheme, Nortel will remanufacture spare parts such as telephones and printed circuit boards for private switchingsystems which BT leases out to customers. BT will then be able to re-lease the repaired or upgraded equipmentinstead of throwing it away. Under the second scheme, though it is still early days, BT and Nortel are working tooffer third parties a jointly run remanufacture and reuse service for telecommunications spare parts. (Internet sitehttp://www.bt.com/World/society/reports/html/matter/procurement/ 1999).

DuPont has developed a partnership with Ford Motor in which DuPonts payments are based on the number of cars that are painted. This creates an incentive for the two companies to use paint as efficiently as possible (Denton,1998).

Noranda Company visits the premises of all Canadian customers buying sulphuric acid to evaluate theirequipment, employee training, handling procedures, and intended uses. Their stated policy is to only sell acid tocompanies that handle it and intend to use it in a safe and environmentally responsible way. (CorporateEnvironmental Report, 1998)

3M, within its life cycle management system identifies conditions under which use its products. In this analysisthey focus on assessing customer needs for training and education regarding safe and effective use and disposal of the product. They may also restrict the sale of products to customers and markets based on the ability andmotivation to use 3Ms products safely. (Narasimhan & Carter. 1998).

Toyota Motor Manufacturing in Kentucky, uses returnable plastic containers to ship over 90 per cent of itsmaterials and parts from over 170 suppliers. These plastic containers and pallets meet Automotive Industry ActionGroup (AIAG) specifications for maximum cube space utilization within truck trailers and minimize environmentalimpact on local landfills. The container system works harmoniously with the JIT operation that is used in the plant.(Wu & Dunn, 1995)

W.R. Grace, set up a distribution code for the Grace Certified Program Carrier initiative to qualify, select and

monitor the performance of U.S. transportation vendors. Grace rates its carriers on regulatory compliance, safetyperformance, employee training and safety management systems. Monthly carrier performance ratings including on-time delivery, claims handling, hazardous material incidences and billing accuracy, are used to score each carrier.(Corporate Environmental Report, 1999).


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Table 5: Exemplary Industrial Practices for the Reverse Logistics Function.

Chesebrough-Pond centralized a decentralized program for returns. Previous practices had returns of personal careproducts sent to their distribution centers or handled in the field. Many products were just discarded or destroyed.Through centralization the process and having all items come into one place equipped with a good reverse logisticssoftware program, information became available as to what was being returned and what condition it was in. Thisenabled product to be either put back into active inventory or sold on the secondary market. The amount of productdestroyed was reduced significantly (Andel, 1997).

Rank Xerox , with a history of leasing copier equipment, has implemented programs to increase the leasing optionto help in recovery of parts and equipment. These programs have increased the rate of return for purposes of assetrecovery. Decreasing the costs of fully warranted equipment at reduced prices. Marketing programs have beendeveloped strictly for promoting these green products. (Ayres, et al. 1997).

Service Merchandise (a retailer) and Redwood Systems (a third-party logistics company) have an unusual gain-sharing agreement that encourages the third party to manage the reverse-logistics process aggressively. Resultsshow that transportation costs are down, merchandise is more closely tracked, and the returns process has becomemuch easier for store personnel. (Gooley, 1998).

Siemens Nixdorf Informationssysteme AG, has a recovery plant located in Paderborn, Germany. The recoveryplant reconditions and recycles used computers. The customer bears the burden of some of the disposal costs. Itcharges customers on a sliding scale based on the product type and disassembly and recycling costs. (Ayres, et al.

1997).

Whirlpool Corporations environmental concerns focus on the return and management of their products after use.This is especially true in countries with take-back legislation. Instead of their organization becoming responsiblefor the recycling of their products, they have outsourced the recycling function to outside companies. In the U.S. theoutsourcing is to Appliance Recycling Centers of America (ARCA). ARCA recycles, reconditions, resells andreplaces older refrigerators with more energy-efficient models in early retirement programs. . (Narasimhan & Carter.1998).

EnergyEnergyE g


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gy

Product/Process Design

Raw andVirgin

Material

NewComponents

and Parts

Recycled,Reused

Material andParts

Vendors

Selection

ExternalTransportation

Storage

Inventory Management

InternalTransportation

Fabrication

Assembly

Closed-Loop Manufacturing, Demanufacturing,Source Reduction

TQEM

Storage Distribution,ForwardLogistics

USE

P URCHASING , M ATERIALS

M ANAGEMENT , INBOUND

L OGISTICS

P RODUCTION

Location Analysis, Inventory Management,

WarehousingTransportation

Packaging

O UTBOUNDL OGISTICS

Reusable,Remanufacturable,

RecyclableMaterials andComponents

R EVERSEL OGISTICS

Customer RelationshipsGreen Marketing

Product Stewardship

Waste Waste Waste

MarketingEngineering

Disposal

EnergyEnergy

Energy

WasteFigure 1: Operational functions and environmental practices within the supply green supply chain.

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how green is the supply chain

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