GSCM: Enabling Green Ecosystem

A green supply is the key to sustainability
GSCM: Enabling Green Ecosystem

Most retailers are feeling the pressure to turn their retail green and minimize their carbon footprints. They begin by reducing the energy consumption at their stores or sometimes resize their product packaging. Some take a step further and either convert their stores into a green one or come up with a new green store. Those retailers that are done with the quick fixes at hand are exploring other areas to go green and save the environment.

The big retailers and manufacturers have now started focusing on their supply chain and have placed their logistics under the microscope.  They have understood that efficient supply chains can impel significant sustainability. Manufacturers into FMCG are under tremendous pressure to deliver on time, with minimum rejection. The lesser the rejection, the lesser is the wastage as well as the lorries on the road. Fewer lorries on roads means reduced emission of harmful gases and less polluted environment. To minimize rejection the companies are reframing their supply chain management strategies. In doing so they are directly or indirectly contributing to save the environment.

Green supply chain management

In the whole supply chain management, logistics and product returns are the two major areas that can achieve reduced footprints. However the question arises how? The key is to redesign and integrate business processes between the retailers, suppliers and their hauliers. Retail chains, consumer product goods (CPG) manufacturers, and logistics and transportation service providers, can minimise their carbon footprints by reduction in energy consumption and decrease in the wastage during distribution activities. And CPG manufacturers should also focus on decreased packaging in distribution activities. The practice not just produces major improvements in carbon footprint but also increases cash-flow by reducing costs.

To remain competitive retailers in the West, with the support of manufacturers and logistics providers are implementing green supply chain management (GSCM) solutions. These solutions help incorporate environmental thinking in managing the supply chain. The aim is to improve the business environmental impact besides increasing the efficiency and growth. The GSCM practice involves,

  • Minimising the emission of greenhouse gas to the extent possible
  • Enhancing the energy (in all its form) efficiency
  • Reducing wastage
  • Using more of biodegradable packaging and recycling packaging
  • Employing green procurement practices

Retailers in the west prefer those logistics and transportation service providers, who are using route planning software and Internet matching systems in their logistics service processes. Retailers are encouraging logistics provider to use transportation vehicles with hybrid technology hence integrate environmental management into their bottom-line processes.

The Indian picture

The demand for logistics services in India has been largely driven by big retailers and international manufacturers entering India. The Indian logistics market was valued at around USD14 billion in 2004.

Though Indian retailers and manufacturers did not wish to speak much on the green supply chain management, an informal interaction with a couple of Indian logistic provider and suppliers revealed that they are making small scale implementation to minimise wastage and improve efficiency. For instance, they have started sharing delivery requests, load plans and despatch advices in real-time among the stake holders. By doing this suppliers and logistics providers are able to reduce the number of full loads and cut down on the quantity of incorrectly timed deliveries. Hence, save time, cost and energy; and reduce wastage. Also, drivers are equipped with mobile phones thus they can send proof of delivery (POD) messages back to the supplier, as soon as the goods are received. This enables the supplier to invoice in a quick time and dramatically reduce the invoice queries, hence delays.

The environmental issues are so prominent these days that even the authorities are taking steps to encourage green business practices. In some sectors, there are government policies to implement green practices. Though the Indian government has supported the Indian logistics market by formulating helpful plans and policies to drive growth but nothing so far has come to the forefront regarding green supply chain management.  ‘Greenness’ must be imposed by the government on the logistics industry in India; the industry too must be pro-active with respect to the environment-improvement policies.

Rene Bach-Larsen, Managing Director India at Geodis (An international player into logistics, who has presence in India) says, “Geodis has full respect for the environment. In compliance with applicable laws and regulations (in the respective country) as well as with the client’s own policy we offer solutions to manage and optimise the logistics flow and reduce wastage.”

It is noteworthy, where other developing nations spend only 10 per cent of their Gross Domestic Product (GDP) on logistics India spends 13 per cent of its GDP on logistics.

The business advantages of GSCM

A survey conducted in a developed country, confirms that by incorporating GSCM solutions about 75 per cent of big retail chains have recorded an improvement in compliance. It implies their conformity to recycle and regulate packaging and the way they meet and react to corporate objective. About a 40 per cent have witnessed improved customer-retention, decreased distribution cost and enhanced service differentiation.

The report also observed that those retail chains that mandated their suppliers to

implement GSCM solutions achieved 20 per cent higher performance vis-à-vis those without GSCM mandates. Almost 80 per cent of big CPG manufacturers experienced a 1-19 per cent improvement in risk management, product differentiation and distribution cost.

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