Additional Insight into the Green Supply Chain

In the past two editions of this Green Procurement blog, the tactical issues of Green Purchasing and the strategic issues of Green Procurement have been highlighted and interrelated.  Not discussed at length is the concept of the Green Supply Chain.  As a purchasing professional you already are aware of the term ‘supply chain.’  The problem is that there are, too often times, different interpretations of the term.

From experience, I have seen many intelligent, educated, articulate and otherwise knowledgeable people use the term supply chain to basically mean the company’s supply base.  That is, to mean the company’s suppliers.  No chain.  No interlinking of different organizations adding value in different ways.  Just the plain rote concept of your organization’s direct suppliers.  By know, you are aware that the author does not define a supply chain to be the same as your base of suppliers.  It is much more and is something that, in some ways, may not be definable.

My first real introduction to the concept of a supply chain came from workshop at the Santa F Institute in the mid-1990s.  The Santa Fe Institute is a non-profit research and education center whose efforts focus on complex adaptive systems.  The workshop included people from the Institute as well as professionals from various multi-national corporations.  In this workshop, I was introduced to such terms as ‘bullwhip’ and ‘demand signals.’  The idea of looking past your immediate supply base into the cascading count of suppliers and how the demand signal was managed from interaction-to-interaction was discussed and theorized as to how to improve.  It was a fascinating discussion and it truly jaded my opinion of what is meant by the term: supply chain.  For the purposes of this blog, we will go with the above concept.  A supply chain is the interlinked network of organizations that buy and sell value-added good or services to each other to provide final products to an end user [e.g., the consumer].

Given this definition of supply chain.  What makes it Green?  More so, what make one supply chain green and another not when the two supply chains may have many of the same organizations involved.  Does it matter?

In the very next edition of this blog, the concept of ‘Green’ is explored.  What does it mean to be green?  Who sets the standard?  At this time of this writing, the answer is a variable.  To be ‘green’ is just not well defined.  Then, how, can there be this concept of a Green Supply Chain?  For the purposes of this blog edition, the concept of green will be limited to an organization acting, in some manner, to be an environmental steward.  In other words, each organization gets an “A” for effort and not necessarily for results.

The supply chain of interest is your organization’s supply chain.  For now, supply chain is limited to those that supply your organization and not your organization’s role in the greater supply chain.  In fact, in may be best, for example purposes, just to assume that the supply chain, your sample company, is a consumer-facing company making some product with many inputs such as a battery and solar-powered AM/FM radio.  To further the example, the Bill of Materials for your radio is comprised of:

• Speaker [sourced from Mexico];
• Solar cell [sourced from China];
• Wiring [sourced in the USA];
• Antenna [sourced in the USA];
• Analog read out [sourced from India];
• Plastic knobs [sourced from the EU];
• Plastic shells [sourced from South Korea];
• Printed circuit board [sourced from China];
• Internal Dial Sub-Assembly [sourced from Russia].

There are other various parts that are all sourced in-country at your sub-assembly plant in Mexico.  At that site, the pieces are all brought together and made into three final sub-assemblies: 

• Power sub-assembly;
• Tuning sub-assembly;
• Electronics sub-assembly.

The final assembly of your company’s radio is done at a small plant in south Texas near Houston.  There the three sub-assemblies are brought together and encased in the plastic shells. 

Your company’s market are outdoor enthusiasts including hunters and campers.  Over 60% of you company sales are from the United States and Canada.  Another 30% comes from European countries and the remaining 10% come from various other countries including Australia.  Your company does not sell directly to the consumer.  Instead it sells to retailers but you support your retailers with some customer assistance via an Internet site and a telephone help line. 

See the Second Part of the Blog Next Week

Green Procurement at www.recyclechain.com

This entry was posted on 6. January 2010 at 04:55 and is filed under Green Procurement. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.

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