For years the producers’ responsibilities were finished when the product was on the shelves in the shop or when the guarantee period was over. Supply chain (SC) management was perceived as the planning and control of the flow of goods from the sourcing base to the final consumers, accompanied with the necessary information and money for the independent entities along that chain. Traditional supply chain management focuses on low cost, high quality, reduced lead time and high service level. The introduction of the Extended Producer Responsibility in a number of countries and industries has changed the rules of the market behaviours. Nowadays manufacturers need to take into consideration the post-consumption phase of their products, the so called end-of-life phase (EOL): the environmental burdens incurred during different stages of the product transfer from manufacturer to final user and then to the disposal site. The interest in environmentally friendly supply chain management has risen considerably in recent years. This can be seen by the number of initiatives taken by companies. Brand-owners are very often perceived to be responsible for environmental problems in the entire supply chain from to the sourcing base to end-of-life recovery issues. It is expected that the manufacturers should reduce sources of waste and pollution throughout their entire SCs, across multiple entities, upstream (suppliers) and downstream (distributors and consumers). An environmentally friendly supply chain connects with partners who should make managerial decisions with regard to environmental consequences. It enhances competitiveness and creates better customer service, resilience and increased profitability.
Green SCM can reduce the ecological impact of industrial activity without sacrificing quality, cost, reliability, performance or energy utilization efficiency, meeting environmental regulations to not only minimize ecological damage but also to ensure overall economic profit.
Companies are forced to adopt ecologically responsive practices to meet legislative requirements but they can also benefit from “green” behavior. For example, building the technological and organizational capacity to collect, recycle and reuse waste or returns stream can enhance the availability of materials as well as clear up the supply channels. According to Srivastava (2007),1 green SCM can reduce the ecological impact of industrial activity without sacrificing quality, cost, reliability, performance or energy utilization efficiency, meeting environmental regulations to not only minimize ecological damage but also to ensure overall economic profit. Environmentally friendly behavior can also contribute to the competitive advantage of having a “green image” of products, processes, and technologies.
Environmentally friendly supply chain management requires a continuous course of actions in order to decrease the environmental impact of products and technology used by a manufacturer and its pre-chain (supplies) and post-chain (collection, inspection and reprocessing activities).
There are a number of problems covered within the framework of environmentally friendly supply chain management but in our opinion, the two main issues that need to be addressed by managerial decision-making are:
• greening the supply chain operations by reducing the total carbon footprint of products’ delivery process. From a logistics perspective, the main contributor of carbon footprint and greenhouse emissions besides the manufacturing operations is transport. • closing the materials flow loops: including issues related to the collection of used products, their recovery and reuse.
Greening the supply chain operations by optimization of transport processes and CO2reduction
Trade globalization, offshoring of manufacturing operations to low-cost countries, just-in-time deliveries; all these stimulate growth of the international freight of goods between continents and countries. Frequent and prompt deliveries require more means of transport, whereas the absence of co-operation among companies and processes coordination result in increased congestion on main European roads. In addition, freight transport demand over the last decade has continued to grow by more than GDP (with the exception of 2008 and 2009). The transport industry accounts for about 7% of GDP and for over 5% of total employment in the EU.2 In the process of preparing the 2011 White Paper on Transport, a number of simulations were performed. Results show that in a “no policy change” scenario, total passenger transport activity would increase by 51% between 2005 and 2050 while freight transport activity would go up by 82%. The share of CO2 emissions from transport would increase to 38% of total CO2 emissions by 2030 and almost 50% by 2050. Overall, CO2 emissions from transport would still be 31% higher than their 1990 level by 2030 and 35% higher by 2050.3 Additionally, aviation and maritime would contribute an increasing share of emissions. Environmentally friendly transport operations within the supply chain require an implementation of resource efficient policies, a reduction of energy consumption, an introduction of cleaner energy and a better utilization of the infrastructure. There are still obstacles on the way to the creation of an efficient environmentally friendly transport system within the supply chain. The central obstructions are presented in Figure 1.
Environmentally friendly transport operations within the supply chain require an implementation of resource efficient policies, a reduction of energy consumption, an introduction of cleaner energy and a better utilization of the infrastructure.
In March 2011 the European Commission published a new White Paper on Transport in which sustainability issues played a very important role. Their target was the creation of a de-carbonized transport system.
The first goal of the new transport policy is to keep the transport growing and supporting mobility while achieving the goal of 60% GHG emission reduction by 2050 comparing to the levels of 1990. The next goal – an efficient core network for multimodal intercity travel and transport – requires the consolidation of large volumes for transfers over long distances. It is assumed that in 2050, freight shipments over short and medium distances (below 300 km) will be transported mainly by trucks. New technologies for green vehicles are crucial, regarding the short design-to-market introduction of new engines and cleaner fuels. For long-haul freight de-carbonization, the goal should be achieved by making the multimodal transport economically attractive for shippers.4 The next goal is to achieve the global level-playing field for intercontinental freight, where air transport will continue to dominate. The next challenge is clean urban transport. The new transport policy assumes three steps: 1) to halve the use of conventionally fuelled cars by 2030; 2) to achieve essentially CO2-free movement of goods in major urban centres by 2030; 3) to eliminate traditional vehicles by 2050. These actions might be a real change for cargo deliveries in the cities.
The new challenge might be setting an open standard for the design of new infrastructure, vehicles, and necessary devices. In the EU, there still exists a large divergence in transport infrastructure between Eastern and Western member states. Most of the existing transport infrastructure has been designed to serve a national rather than a European economy.
A still existing problem is the lack of comprehensive standards on infrastructure design, power supplies, traffic management and data exchange. The emphasis should be placed on mounting the existing infrastructure’s gaps in the multimodal infrastructure (which allow easy transport of cargo with different means of transport e.g. long distance with ships and last-miles delivery with trucks). The cost of the development of EU infrastructure to meet the demand for transport has been estimated at over €1.5 trillion between 2010-2030.5 The important role to play in the investments process should have not only regional and national governances but also multinational and multimodal logistics operators. (see Figure 2)
Among European companies, over 99% are small and medium size enterprises. This situation leads to the dispersion of demand for transport services and a big number of LTL (less than container load) shipments. According to EU statistics the average use of available capacity of vehicles during the supply or distribution stage is at 54%. For rail transport, this value is 48% (there are differences between EU member states). A challenge is the aggregation of this demand through IT solutions, which will allow companies to perform frequent and small deliveries while minimizing the cost of carriage, increasing load factor and lowering congestion. Examples of such a solution can be found in the book, Sustainable Transport. New Trends and Business Practices.6Another challenge for an environmentally friendly supply chain management is the application of low emission means of transport. European Transport is still 97% dependent on fossil fuels. A binding target of a 10% share of the renewable energy sources in transport by 2020 seems difficult to meet.
Closing of materials flows by improvement of post-sale logistics operations
In the computer industry there is an abundance of examples of efficient practices for product recovery in both environmentally friendly and economical ways. Since 2005, member states of the European Union have begun implementing the WEEE Directive (on electrical equipment waste management), which requires manufacturers to provide the recovery network for used electronic devices. The WEEE is the fastest growing waste group, mainly because of its very short life cycle, growing demand and a decreasing unit cost of products. The analysts estimate that the number of PCs is growing at just about 12 per cent annually. At that pace, it will reach 2 billion units by early 2014. Also, the number of mobiles and household appliances is growing very rapidly. As a result, the volume of e-waste is increasing three times quicker than other waste categories. According to the WEEE Forum, the European Union itself is generating over 8 million tons of e-waste per annum. The manufacturers have created a number of alliances, which help them to collect and reprocess WEEE. According to the WEEE Forum7 in 2010, the leading recovery institutions have collected over 31,000 tonnes of consumer electronics and ICT equipment in EU member states.
The analysts estimate that the number of PCs is growing at just about 12 per cent annually. Also, the number of mobiles and household appliances is growing very rapidly. As a result, the volume of e-waste is increasing three times quicker than other waste categories.
The growing volume of returned products requires proper planning tools for dynamic decision-making. The dynamic configuration of reverse supply chains within a pool of cooperating companies is a challenge. Recovery networks involve the collection of used products from the customers, for reprocessing and future redistribution to the market. The customers become re-suppliers, so the reverse flow of materials is supply-driven not demand-driven. It is difficult to control the timing and the amount of returns that are pumped into the recovery network by products’ users. The manufacturers of personal electronics and ICT equipment try not only to fulfil the legal obligations but also to gain the benefits of a two-way economy. 3R policy (recycle, reduce, reuse) is reflected already in the design phase of products, where manufacturers put pressure on the durability of the products, easy disassembly, the systematic reduction of the quantities of components and elimination of harmful substances, so that at the end of the initial life cycle the largest number of elements/materials can be recovered. They design products, packaging and supplies that make efficient use of resources. Another good practice is the utilization of useful components and materials from recyclable products. Computer companies try to stimulate the reverse flow of products by lease programs where return dates are defined. The lease programs are mainly addressed to institutions; however, individual returns are less coordinated. The return products are refurbished or remanufactured as appropriate, repackaged and resold. Companies offer remarketed products for most product types, and follow strict processes to protect user data and to meet environmental requirements. For example, Hewlett-Packard offers its customers recycling and reuse programs. In 2011, HP reached their target of recycling 2 billion pounds of electronic products and supplies since 1987. In 2011 itself, about 3.44 million units of hardware were recovered for reuse and remarketing (26,700 tonnes). Over 133,9008tonnes of equipment and supplies (mainly toners) were subject to material or energy recycling. HP also uses a network of vendors (service providers) to process, resell and recycle returned products. The company issues Global Reuse and Recycling Standards that define the conditions and requirements for storing, handling and processing returned equipment in ways that prevent the leak of harmful substances. Nowadays, the company has a network of about 500 recycling providers’ locations around the world. HP also owns facilities (one in the USA and two in Europe).
Recovery networks involve the collection of used products from the customers, for reprocessing and future redistribution. The customers become re-suppliers, so the reverse flow of materials is supply-driven not demand-driven.
Another example is IBM. Its Global Assets Recovery Services (GARS) is nowadays one of the world’s largest recovery networks. The company benefits from cooperation with its supply chain partner Geodis, which owns twenty-one remanufacturing facilities worldwide. The products are sold through IBM’s sales network as certified remanufactured equipment, which help to optimize redistribution channels and assets recovery value. In the past years, GARS has recycled more than 55,800 metric tons of product and product waste. Over 37,800 of the recycled metric tons have been ferrous and non-ferrous metals.9
A professional assets recovery program provides a good opportunity to find value in older equipment and to enhance the organization’s reputation as an environmentally friendly institution. However, despite the success stories, there remain challenges for closing the materials loop. The important issues which need to be addressed are as following:
• Recovery network configuration – companies have problems with stimulating the time and quantity of returns. Due to dynamic changes in the recovery network, planning many weeks in advance is difficult because forecasts quickly become out-dated; • Optimizing the recycling process that takes into account technical, economic, legal and environmental issues; • Development of decision support platforms for the strategic and operational planning in reverse logistics applied to the multi-stage collection network; • A holistic approach to reverse logistics, including a hierarchical process of decision-making on the allocation of recourses; • The efficient vehicles routing planning in the recovery networks.