Reduced Waste Disposal Costs and Production Expenses
Financial resources are always used when trying to deal with waste materials from many organizations that are yet to adopt the GSCM. The first way of addressing this wastage is through the adoption of renewable energy sources. These sources are not only eco-friendly but also cost-effective. In the past, most organizations relied on non-renewable sources of energy for their production activities. These non-renewable sources of energy cause environmental degradation and pollution, which have proved expensive to address. GSCM operates on the principle that a reduction of waste materials in a supply chain results in a corresponding reduction in the cost incurred when managing the wastes. According to Murray (2017), “General Motors reduced disposal costs by $12 million by establishing a reusable container program with their suppliers” (para. 2). After re-assessing a corporation’s logistics network right from procurement, scheduling, and supervision of materials to transport and delivery of the final commodities, it is indeed apparent that many costs are cut, thanks to the adoption of GSCM (Murray, 2017).
It is important to mention that non-renewable sources of energy such as oil, natural gas, coal, and nuclear energy not only cause environmental pollution but also are expensive. Companies that adopt the use of renewable sources of energy such as solar energy, geothermal, and hydroelectric power in their supply chains reduce the cost of production. This reduction of cost through renewable energy sources helps an organization in reducing wastage. Elimination of expensive materials such as oil coupled with reduced waste implies cost saving not only in purchasing such costly items but also in disposing the unwanted elements. Therefore, it is advisable for an organization to adopt the green supply chain management concept using renewable sources of energy. This goal can be achieved by installing plants or technologies that embrace these renewable energy sources. For instance, a company may seek to merge and/or advance material and wrapping usage in a manner that minimal packing items are utilized (Murray, 2017).
According to Chin and Sulaiman (2015), GSCM emphasizes green manufacturing and designing of products, taking into account factors such as fuel efficiency and hence reduced operations expenses. Recent developments in the automobile industry are an example to indicate this shift green designing. The industry has started to manufacture vehicles that use solar energy and other renewable sources, hence reducing carbon emissions into the environment. This eco-friendly designing creates a win-win scenario for both the business and users. Product designing is an easy way of achieving cost reduction. Proper designing allows the use of affordable materials. It can also reduce the quantity and hence the cost of materials used. Today, many companies are spending time and resources to seek better ways of packaging to cut on cost (Chin & Sulaiman, 2015). To achieve this goal, they have adopted the use of materials that can be recycled. This strategy is in line with GSCM model that emphasizes cost-cutting and environmental conservation. The model is shown in Figure 1 below.
Recycling ensures Optimal Use of the Available Raw Materials
Recycling not only lowers the cost of production but also improves efficiency. Moreover, many organizations today are comparing the cost difference between manufacturing and outsourcing to eliminate unnecessary expenses. Companies that outsource ensure that they choose suppliers who produce green policy-compliant materials. According to Koh, Gunasekaran, and Tseng (2012), proper product design embraces quality and a reduction of the wastage of raw materials. Furthermore, high-quality products promote safety, which in turn increases their demand in the market. Consequently, high demand leads to an increase in the sales volume, which results in augmented revenues for an organization (Koh et al., 2012).
As earlier mentioned, one area that consumes substantial financial resources in a supply chain is waste disposal. However, a company that adopts the green chain supply management enjoys reduced waste disposal expenses because the materials used can be recycled, reused, and/or resold to generate further income (Chin & Sulaiman, 2015). Since the materials can be recycled, the GSCM-oriented company eliminates the additional cost of waste management and disposal. The growing interests from various players in the green chain supply have caused many companies to change their processes. Instead, they have adopted, formulated, and implemented green policies to facilitate performance. Most organizations today are using scrap metals to lower costs. Many prefabricating companies collect these scrap metals for sale to companies at an affordable price. The collaboration has made many businesses remain afloat through the availability of raw materials (Chin & Sulaiman, 2015). The recycling and reuse of the waste materials have been made possible through improved technology in the supply chain. The technology has also lowered the cost of recycling scrap metals and other reusable products. Polythene bag is an example of materials that are difficult to manage in terms of waste disposal. Many countries in the world have banned the use of polythene bags because of the witnessed difficulties in waste management. The ban has not only reduced the costs of waste disposal management tremendously but also has kept the environment cleaner. Therefore, it is advisable for a company to adopt the use of eco-friendly materials for packaging its products to cut the costs of disposal. A reduction in waste disposal costs increases the revenue of an organization, hence resulting in huge economic benefits.
The adoption of green policies has made raw materials more affordable because adopting the use of environmentally friendly processes and products increases the supply of raw materials. The availability of raw materials balances the market forces of supply and demand, thus leading to reduced and affordable prices. The main factor that reduces the cost of materials is the use of easily recycled elements in a supply chain. As earlier mentioned, General Motors is an example of a company that has benefited from the adoption of green policies (Murray 2017). The company has implemented reusable schemes for its containers. Once it adopted this container, it cut its waste management expenses by over $12 million. The adoption of this new technology not only helped in cost reduction but also improved customers’ perception of the company, a move that is expected to be accompanied by augmented sales (Emmett & Sood, 2010). This case shows that organizations can make huge financial gains through the adoption of environmentally friendly supply chains. Furthermore, organizations that adopt green policies will benefit from cost reduction in terms of training. In other words, they are able to cut on the budget allocation for training staff on waste management and disposal.
GSCM Enhances the Public Image
According to Murray (2017), another economic gain entails the improvement of a good public relationship through the green supply chain management. A company that adopts green supply chain management will boost its image through public relations. The major driver of business today is perception. Many multinationals that are dealing in oil exploration are receiving a hostile reception in many countries because of the serious environmental degradation they have caused in the past. A good public relationship creates an excellent platform for marketing and promoting the products of a company (Murray, 2017). Many companies are using their green policies as a marketing point. For instance, some organizations inform their customers about the environmental benefits of using their products. By so doing, they gain a competitive advantage over their competitors, a situation that results in huge economic benefits through increased sales. Such actions are done deliberately to boost and project a good image to the public. Moreover, the adoption of green policies helps an organization to position itself as environmentally friendly. This perception comes with huge benefits since it helps the organization to differentiate itself from its competitors. An organization that maintains good public relations enjoys a peaceful coexistence with the communities. Such coexistence widens the company’s market since the communities act as goodwill ambassadors who advocate for the specific organization’s items. Accordingly, “The more robustly green your supply chain becomes, the more it can become a public relations and marketing boon” (Murray, 2017, para. 3). Hence, the ‘green’ company is bound to attract new and prospective customers. It will also provide a platform for collaboration with profitable organizations. It is important to note that many multinationals are seeking partnerships with businesses that promote green supply chain management (Plambeck, 2012).
On top of training staff, GSCM emphasizes the need to maintain a good working relationship with workers and stakeholders who form part of the supply chain. Close relationships with employees and stakeholders help to identify gaps that can help in reducing costs. For instance, interviews and regular feedback collection from employees can reveal such gaps. Some organizations go an extra mile of doing exit interviews. Exiting employees are believed to be the best in giving the correct feedback concerning a company’s productions and operations. Delayed deliveries following a weakness in the supply chain may attract losses to the company since clients may opt to look for other businesses that supply goods on a timely basis. The concerned employee may be fired for delayed deliveries. According to Dües, Tan, and Lim (2013), every business seeks to ensure that products reach the final user within the shortest time possible. It is also important to get feedback from customers to determine what they want, when they want, and how they want it delivered. The feedback enables supply chain managers to know the operations and production areas that need to be upgraded to realize clients’ expectations. This information can be obtained through employees who are in direct contact with customers, hence helping to understand their (clients) changing preferences and trends. Once organizations understand their customers’ needs, they can best design their products to fit the market, hence attracting more sales. Employees can also assist in monitoring and controlling the inventory to seal any areas where wastage may be occurring. Such monitoring can be done through regular stock checks and keeping inventory management systems updated. The overall outcome is the elimination of unnecessary orders. It is also important to provide good working conditions to employees because they are the major drivers and implementers of the green supply chain management. This strategy will act as a motivating factor and incentive to help in not only waste reduction but also in achieving high yield (Zailani, Jeyaraman, Vengadasan, & Premkumar, 2012).
GSCM Saves Companies in terms of Non-Compliance Fines
An organization that embraces the green supply chain management saves itself from the costs that other companies may incur by failing to comply with the established guidelines on waste disposal and emissions. Hence, the adoption of green policies enhances compliance with laws and regulations on environmental conservation. The topic of green supply chain management has attracted all the major players, including governments, individuals, communities, and organizations that seek to encourage other businesses to adopt the logistics network model (Murray, 2017). Every government has regulations for environmental protection and use. Therefore, it is a legal requirement for many organizations to carry out an ecological impact assessment before commencing their projects. This report may be needed periodically for some organizations. Organizations that fail to comply with these legal requirements most often suffer negative setbacks and fines. Besides, the setbacks may come in the form of dragging court cases or reputational damage. Apparently, these challenges come with economic costs. They may result in loss making or even shutting down of organizations. According to Green, Zelbst, Meacham, and Bhadauria (2012), environmentally friendly organizations escape these challenges since they have internal mechanisms of compliance. As a result, they enjoy good working conditions with the government and any enforcing organizations. Consequently, they experience a smooth performance of their businesses, hence resulting in economic benefit through increased profitability (Green et al., 2012).
Conclusion
In the past, many companies had a misconception that going green was costly. However, organizations have now been emboldened to adopt green policies in their supply chains. This shift follows success stories from companies that have adopted the changes. The issue of environmental conservation has been a trending subject, more so in the 21st century, where governments are keen to eliminate waste and/or minimize harmful emissions. The global attention follows the integral role played by the environment in the creation of raw materials and the production of goods and services. One of the ways of resolving the environmental hazards is through the adoption of green supply chain management. The supply chain model will enable organizations to adopt environmentally friendly ways of operations and production. The embracement of GSCM calls for organizations to keep their bottom line of profit making. Hence, from the above, it is apparent that going green has many benefits. Therefore, it is advisable for organizations to adopt a green chain supply management system.
References
Chin, T., & Sulaiman, Z. (2015). Green supply management, environmental collaboration and sustainability performance. Procedia, 26(1), 695-699.
Dües, C. M., Tan, K. H., & Lim, M. (2013). Green as the new lean: How to use Lean practices as a catalyst to greening your supply chain. Journal of Cleaner Production, 40(1), 93-100.
Emmett, S., & Sood, V. (2010). Green supply chains: An action manifesto. Hoboken, NJ: John Wiley & Sons.
Green, K., Zelbst, P., Meacham, J., & Bhadauria, V. (2012). Green supply chain management practices: Impact on performance. Supply Chain Management: An International Journal, 17(3), 290-305.
Koh, S., Gunasekaran, A., & Tseng, C. (2012). Cross-tier ripple and indirect effects of directives WEEE and RoHS on greening a supply chain. International Journal of Production Economics, 140(1), 305-317.
Murray, M. (2017). Introduction to the green supply chain.
Plambeck, E. (2012). Reducing greenhouse gas emissions through operations and supply chain management. Energy Economics, 34(1), 64-74.
Zailani, S., Jeyaraman, K., Vengadasan, G., & Premkumar, R. (2012). Sustainable supply chain management (SSCM) in Malaysia: A survey. International Journal of Production Economics, 140(1), 330-340.