REVERSE SUPPLY CHAIN AND

GREEN SUPPLY CHAIN

NIFT Hyderabad By : Prerna Kaushal Singh

REVERSE SUPPLY CHAIN

Reverse Supply Chain (RSC)

• In today’s competitive environment due to various external & internal pressures, companies can not ignore their reverse (or backwards) supply chains.

• Companies are trying to reduce their supply chain costs so that cheaper prices can be offered to the customers.

• Though reuse of products and material is a common phenomenon, companies have long ignored this part of the supply chain known as the reverse or backward supply chain.• e.g soft drink bottles pick-up and delivery system, where bottles are

returned & reused repeatedly.

• Companies were so long under the impression that returns compared to sales generate little or no money.

RSC contd.• The important reason why companies are giving importance to RSC

is that it reduces operating costs by reusing products or components and thus RSCs have become an essential part of business.

• Companies may be motivated by:• Environmental laws that force firms to take back their products and

take care of further treatment, economic benefits of using returned products in the production process instead of paying high disposal costs and the growing environmental consciousness of consumers.

• Consideration to minimize the cost of product handling materials and efficient use of transportation.

• Consideration to maintain the business ethic & service policies.

Eight categories of reverse flows

1. Products that have failed; are unwanted, damaged, or defective; but can be repaired or remanufactured and resold

2. Products that are old, obsolete, or near the end of their shelf life but still have some value for salvage or resale

3. Products that are unsold from retailers, usually referred to as overstocks that have resale value

4. Products being recalled due to a safety or quality defect that may be repaired or salvaged

Eight categories of reverse flows

5. Products needing “pull and replace” repair before being put back in service

6. Products that can be recycled such as pallets, containers, computer inkjet cartridges, etc.

7. Products or parts that can be remanufactured and resold

8. Scrap metal that can be recovered and used as a raw material for further manufacturing

Reverse logisticsReverse logistics includes processing returned merchandise due to damage, seasonal inventory, restock, salvage (reclaim) and excess inventory. 

It also includes recycling programs, hazardous material programs, obsolete equipment disposition, and asset recovery.  While product “take-back programs” have been a part of many companies operations policies for some time, more sophisticated approaches are emerging which involve greater degrees of coordination and planning among multiple suppliers.

It may be done for :•Reconditioning – when a product is cleaned and repaired to return it to a “like new” state•Refurbishing – similar to reconditioning, except with perhaps more work involved in repairing the product.•Remanufacturing – similar to refurbishing, but requiring more extensive work; often requires completely disassembling the product•Resell – when a returned product may be sold again as new•Recycle – when a product is reduced to its basic elements, which are reused – also referred to as asset recovery.

Activities in reverse supply chain process• Deciding• Collection• Inspection and sorting• Reconditioning• Disposition• Distribution

Products, components, materials, equipment and even complete technical systems may go backwards in the supply chain

• Products may be reworked during manufacturing due to unsatisfactory quality.

• Good material or components being returned from the production floor because they were left over after production (manufacturing returns).

• Defective products may be detected after they have entered the supply chain resulting in a pull-back of these products through the chain (product recalls)

• In B2C cases, products may be sent back due to mismatch in supply and demand in terms of product quality & timing.

• During warranty, products may be returned to be replaced by substitutes or may be repaired (warranty or service returns)

• Even after use of product life, products are collected to be remanufactured, recycled or incinerated (end-of-use and end-of-life returns)

Reverse Supply Chain Management• Thus, RSCM encompasses a variety of issues including: source reduction,

conservation, recycling, substitutions and disposal that interface with marketing, production and logistics activities such as purchasing and procurement, manufacturing, maintenance, spare parts inventory, material handling etc.

• The process begins with the use of virgin or secondary materials in processing and manufacturing operations.

• Reverse logistics may be concerned with the disposition of any asset that is no longer suitable to perform its primary functions or is not sufficiently cost effective to suit ever-changing technology.

• Walker (2000) defines RSCM as the automation of business processes and information exchanges to manage the complete path of a product from the customer to its final disposition.

Benefits of RSCM• Customer satisfaction by offering to take defective products/services

back, redressal of complaints etc.

• Economies of scale by judiciously combing forward and RSC

• Effective management of inventory, especially slow moving items, improved inventory turns and reduced store level costs

• Simplified store procedures and reduced administrative costs and improved management information system

• Improved supplier relationships and enhanced supplier satisfaction

• Perceived image of the organization as a “green and clean” manufacturer

GREEN SUPPLY CHAIN

Greening the supply chain• The concepts of recycle, reuse and use of green (organic ) products has

become prominent in response to the changing environmental conditions due to increasing landfills, pollution, water & resource scarcity, carbon emissions.

• Recent times are witnessing stricter government regulations and increasing public awareness of the effects of industrial production on the environment.

• Many organizations are undertaking massive initiatives to restructure their supply chain processes and products to minimize their environmental impact.

• A number of manufacturing firms such as Hewlett-Packard have already begun to develop environmentally friendly practices.

• Dow Chemical & General Motors have already established functions that are specifically responsible for waste and recycling management.

Approaches to a “green” SCM• In integrating “green” approaches to SCM two generic types of

orientations are adopted: Reactive & Proactive

• Reactive approaches refer to policies aimed at meeting the minimum set of actions required to comply with government regulations or customer requirements regarding environmental concerns. This includes such actions as the proper disposal of toxic waste, meeting emissions requirements, meeting recycling content requirements, and maintaining adequate facilities to meet Environmental Protection Agency inspection criteria.

• Proactive policies are maximization-oriented. They set to reduce costs or maximize profits using waste reduction in a variety of programs designed to benefit both the environment and the firm's financial performance. With regard to the supply chain, four specific areas were identified as potential candidates for such programs:

1. Supplier selection and evaluation,2. Surplus and scrap disposition,3. Carrier selection and transportation of hazardous materials, and4. Product design, packaging, and labeling

Green supplier selection & evaluation• Various criteria are used in supplier selection process. Supplier

performance measurement systems are also used to assess quality, cost, service and delivery.

• Many leading-edge companies are now considering the supplier’s environmental record as a key determinant of performance. The suppliers’ environmental practices relating to their sources of raw materials, disposal methods for scrap & surplus, how they reduce surplus packaging, their action to reduce fuel usage etc. should be addressed.

Surplus & scrap disposition• Companies must also find ways to reduce scrap &

waste and thereby send less material to landfills. This is becoming more important because of the limited number of landfills, which is due to the fact that people are increasingly protecting the opening of new landfills with an attitude of “not in my backyard” (NIMBY).

• In the futuristic industries, many companies are seeking to reduce scrap and hazardous waste disposal through a number of mechanism. Hazardous liquids used in the manufacturing processes are reclaimed and scrap materials such as steel, cardboard, poly-foam and fabric are recycled whenever possible.

• Example: Automotive, Textiles

Carrier selection & transportation of hazardous material

• The transportation of materials in the supply chain is an important factor to monitor. Carrier selection is a critical consideration in the purchase of raw materials. This requires analyzing the suppliers capabilities regarding distribution, safety, timely delivery etc.

Product design, packaging & labeling• Companies that are truly leading-edge in creating a green

supply chain use techniques such as life-cycle analysis, which identifies all of the potential environmental effects of using a given material in a product from “cradle to grave”.

• Many companies are now seeking ways to reuse and recycle products after they have reached the end of their useful life. This requires innovative approaches & closer cooperation with customers in supply chain.

Product design, packaging & labeling contd.

• Packaging is another important element to be managed in greening the supply chain. Corrugated packaging is being used more extensively as it is easier to recycle.

• Standardized, reusable shipping containers are replacing disposable ones

• Companies are requiring its suppliers to label the

chemical composition of plastic items so recycling efforts could be significantly improved.

Benefits of Green Supply Chain ManagementOrganizations can enjoy several benefits by greening their Supply chain, such as-

•Sustainability of Resources - GSCM helps in proper and effective utilization of available productive resources of organizations. Organizations will purchase 'green' input resources for environmental friendly production process to produce desired outputs.

•Lowered Costs/Increased Efficiency - Effective management of suppliers can reduce transaction costs and promote recycling and reuse of raw materials. Also, the production of waste and hazardous substances can be cut, preventing corporations from being fined as a result of violating environmental regulations. Consequently, the relevant handling and operational cost involved can be further reduced and, in the mean time, the efficiency of using resources can be enhanced.

Benefits of Green Supply Chain Management contd.• Product Differentiation And Competitive Advantage - It helps the

organization in positioning its product differently in customer's mind. Besides attracting new profitable customers for organization, it will give competitive edge over competitors in market place. It will strengthen the brand image and reputation in market place.

• Adapting to Regulation and Reducing Risk - Organizations adopting GSCM practices can reduce the chances of being prosecuted for anti-environmental and unethical practices.

• Improved quality and products – organization will produce products which are technologically advanced and environment friendly. This will enhance the brand image and brand reputation in customers' mind.

Apparel supply chain has Major environmental and social impacts

• Resource consumption

• GHG emissions• Air/water

pollution & toxicity

• Soil degradation/contamination

• Biodiversity/ land use

• Solid and hazardous waste

• GHG emissions• Air/water

pollution & toxicity

• Soil degradation/contamination

• Biodiversity/ land use

• Solid and hazardous waste

• GHG emissions

• Air/water pollution & toxicity

• Soil degradation/contamination

• Biodiversity/ land use

• Solid and hazardous waste

• GHG emissions

• Solid and hazardous waste

• Resource consumption

• GHG emissions

• GHG emissions

• Solid and hazardous waste

• Worker rights• Worker health

and safety• Poverty

alleviation• Resettlement• Community

health• Animal

Welfare

• Worker rights• Worker health

and safety• Poverty

alleviation• Community

health• Cultural

impacts

• Worker rights• Worker health

and safety• Poverty

alleviation• Community

health• Cultural

impacts

• Worker rights• Worker health

and safety

• Worker rights• Worker health

and safety

• Worker rights• Worker health

and safety

Source: modified from Defra 2007, Allwood, Laursen, Rodríguez, & Bocken, 2006; Goldbach, Back, & Seuring, 2003

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► Historically the apparel industry has operated in an unsustainable way. Materials, energy, and other resources are used inefficiently throughout the apparel supply chain, leading to unsustainable levels of waste generation.

► It has been observed that apparel supply chain has a significant environmental and social footprint across its global periphery with each step of the clothing life cycle generating potential environmental and occupational hazards.

Economic success story with huge environmental & social footprint

• Energy utilization: Energy is vital to the current consumerist system. The sector’s contribution to climate change is dominated by the requirement for burning fossil fuel to create electricity for heating water and air in laundering. Other major uses arise in providing fuel for agricultural machinery and electricity for production.

• Use of toxic chemicals: Toxic chemicals are used widely in cotton agriculture and in many manufacturing stages such as pre-treatment, dyeing and printing.

• Increasing landfills: Waste volumes from the sector are high and growing with the advent of ‘fast fashion’. The clothing and textile per capita to landfills have been increasing very fast.

• Water consumption: especially the extensive use of water in cotton crop cultivation – can also be a major

environmental issue.

• Issues with energy-intensive manufacturing of polyester: The manufacture of polyester and other synthetic fabrics is an energy-intensive process requiring large amounts of crude oil and releasing emissions including volatile organic compounds, particulate matter, and acid gases such as hydrogen chloride, all of which can cause or aggravate respiratory disease.

• Issues with extensive usage of non renewable resources: Apparel and textiles account for approximately 10 percent of the total carbon impact. The estimated consumption for an annual global production of 60 billion kilograms of fabrics : 1 trillion kilowatt hours of electricity and up to 9 trillion litres of water

► Living Wages► Most workers’ monthly earnings around the world average a little higher than the national minimum wage for

the country where they work

► In many garment producing countries, the minimum wage actually leaves a family below the national poverty line, even though this is also set by the government. Minimum wages often remain unchanged for years while the cost of living rises, which means that the real value of the workers’ pay falls

• Living and Working Conditions• The Indian apparel industry has been largely dominated by incompliant factories and working conditions

Major occupational health issues associated with the sector are prevalent amongst the workers due to working conditions and related exposure to :

• Hazardous chemicals particularly in cotton production, wet pre-treatment, dyeing and finishing

• Fibre dust, especially when processing cotton, giving rise to the respiratory disease termed byssinosis

• Noise associated with yarn manufacturing, knitting and weaving.

• Denim dust: The blue dust from the jeans is a heavy irritant to the lungs. Process like clock scrubbing & spraying, jeans in order to meet the demand and achieve fashionable distressed denim look causes heavy respiratory disease and lung problems.

Source: Werner International, 2009 61

Economic success story with huge environmental & social footprint

Increasing Pressure on & Retailers to be more responsible: Need to Change…• Increasing importance is being given to supply chain management in order to meet the demands of the consumers and be profitable. But this economic success story

has huge environmental and social implications

• Post-purchase use and disposal are rarely considered during the design and production of apparel products.

• It is estimated that the textile and apparel industry accounts for about 9-10% of the total industrial energy consumed in India and contributes 3% of the global GHG emissions.

• Even as the demand for natural resources outstrips their supply, world resources continue to be exploited unsustainably, leading to crises.

• Businesses across the world are recognising the need to be responsible and are investing in technologies, products, processes, systems and procedures that enable them to adopt responsive practices and improve efficiencies.

• Apparel units in India are facing increasing pressure to be responsible towards environment and society and constantly report and monitor their footprints.

• Pressure from all sides is forcing corporate leaders and apparel businesses to increase their investments in the communities they serve and redefine their relationships with stakeholder groups, including employees, suppliers, governing boards, shareholders and press.

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Brands/Retailers need to take up more Supply Chain Responsibility

• Good & consistent quality

• Value for Money

• Innovative

• Reliable service

• Prompt communication

• Quick and On time delivery

• Ethical / Eco-friendly

Consumer understanding

Designing

ProductDevelopment

Manufacturing

Quality Control

Warehousing

Logistics

Providing End to End Solutions Key Requirements