Streamlining business processes and balancing costs are 2 key things required to create an efficient supply chain. It may seem odd to try new Initiatives such as Green Supply Chain Management but going a little out of the way could help you not only save the environment but create a healthier bottom line. It is not just the ethical thing to do but also financially rewarding for the business.
What is a Green Supply Chain and How to Create It?
It may help to first explain what we mean by a Green Supply Chain when we talk about creating one. It is the integration of eco-friendly methods into the conventional supply chain so as to minimize waste and carbon footprints and increase efficiency. And a business can transform its traditional supply chain to a green one by including the “environment” factor in each and every stage of the supply chain – from product development to manufacturing to distribution to end customers. This can be done either via digital transformation or by simply creating relevant policies.
For instance, in the process of packaging materials, some of the packaging are done with containers made of plastic. Businesses should work on minimizing the use of plastic and switch to packaging made from sustainable materials. This will help in the reduction of plastic as well as boost eco-friendly materials. Another way of turning your supply chain into a green and sustainable one could be to have a good return policy. You can refurbish and recycle the goods that have been returned which will also help waste reduction.
Benefits of Going Green
Apart from impacting the environment positively, greening their supply chains helps businesses in:
- Cost Reduction– Companies can do cost savings by implementing digital technologies that help in going green. IT Solutions that help in low consumption of power, substituting energy sources and recycling can create a positive impact on the financial sheets of a business. While implementing green initiatives, businesses focus on reducing the greenhouse gas emissions which in turn leads to making shorter trips and reducing shipments. This results in lowers costs as vehicles use less fuel and suffer minimized wear and tear. For instance, Nike changed the way it manufactured its new edition of shoes, reducing labor costs by up to 50% and reducing material usage by 20%, which resulted in 0.25% higher margins
- Sustainability of Resources – If a business has implemented green practices in its supply chain, then, then there will be a process or policy in place in the supply chain wherein the product that is sourced can be re-produced or recycled at the same pace at which it is consumed
- Being Compliant – According to the second annual CDP Supply Chain Report that summarized climate change information from 710 suppliers, 6 percent of leading companies already deselect suppliers who fail to manage carbon, and that is set to rise to 56 percent in the future. Whether to comply with government regulations or meet the expectations of the customers or clients, businesses are finding motivation to go green
- Digital Transformation helps in Reducing Risk – You must have heard stories about how a dangerous product slipped through the cracks and entered the supply chain. This is not just fatal for an employee but the company as a whole. When there are digital security solutions in place that ensure transparency, the chances of such incidents are very rare. Not only such solutions protect businesses from unethical partners, it also documents and tracks all the labor involved and goods from source to destinationRead here: How IoT is revolutionizing Supply Chain Networks
5. Building Brand Reputation and Gaining Competitive Advantage – With information readily available online these days, having a green supply chain will help you in building your brand reputation. Businesses that develop environment-friendly and technologically advanced products would be able to build and sustain their brand image. Customers want to buy from environmentally responsible businesses, and going green is an excellent way to let them know that your company has embraced the green revolution. According to a report, customers are willing to pay more for products that ensure green logistics practices and transparent supply chains
With the above benefits including better efficiency & cost savings, in the long run, green supply chains would become a pre-requisite for business sustainability. Your business can too transform your supply chain into a green one by leveraging modern supply chain management technologies.