Issues, Challenges, And Changes...
Dr. M. Theodore Farris II, Ph.D.
Dr. M. Theodore Farris II, Ph.D., Professor, University of South Alabama, Mobile, AL 36688, (334) 460-7911
81st Annual International Conference Proceedings - 1996 - Chicago, IL
Issues, Challenges, And Changes Faced By Purchasing Professionals During The Implementation Of Packaging Solid Waste Reduction Efforts
Since the early 1960s, the modern environmental movement has gained the advantage of a global perspective and technological advancements to further address how environmental concerns impact corporate policy. Actions by private enterprise suggest increasing corporate environmental awareness and effort to reduce consumer and industrial solid waste. The largest component of solid waste, both consumer and industrial, is packaging material. Corporate options to reduce the amount of packaging material entering the solid waste stream may include:
- Reducing the amount of packaging material on purchased products coming into the corporation from suppliers;
- Reducing the amount of finished goods [packaging on products shipped to customers;
- Reducing the amount of other materials deposited into the waste stream.
Corporate purchasing activities are likely to be affected by corporate solid waste reduction efforts. The purchasing function is responsible for working with suppliers to provide for the needs of the company. Packaging material is used by suppliers to protect, store, and facilitate handling of their products. Unless a reverse channel exists between the customer and the supplier to facilitate the return of packaging material, the material will enter the waste stream of the receiving company. The purchasing organization may support the corporate solid waste reduction effort by acting as a gatekeeper, working to reduce or avoid receiving packaging material that will ultimately enter the company's solid waste stream, and providing insight into the reduction of outbound packaging material. This paper will identify and analyze how the corporate purchasing function has changed as a result of corporate actions to reduce the solid waste stream.
The maturation of corporate environmental awareness may change the day-to-day activities of the corporate purchasing function by:
- Heightening the awareness or exposure to upper management;
- Changing skill requirements for buyers;
- Modifying sourcing or buy decisions;
- Modifying supplier-customer relationships.
Increases in industrial and commercial recycling and the number of green marketing campaigns suggest an increase in environmental awareness by corporations which has permeated the corporate plan. Little has been written about how this increasing awareness has affected purchasing operations. This study investigated the affects from the perspective of internal and external environmental influences and segments the affects into past influences and projected influences as shown in Table One.
These may include formal or informal solid waste management policy guiding the purchasing actions or performance measurements. Purchasing plays a key role as the gatekeeper of the corporation in avoiding or reducing the amount of packaging material that ultimately enters the solid waste stream of a company. Supporting corporate reduction efforts may result in modifications to how purchasing operates; perhaps requiring additional or unique purchasing skills, a modified organizational structure, or additions to the functional relationships between purchasing and other functional groups in the corporation. Research questions #1 and #2 addressed how corporate purchasing practices have changed and will change, in response to efforts to reduce solid waste generation within the company.
Primary Research Questions
Research Question #1:
How have corporate purchasing practices with respect to packaging materials changed in response to efforts to reduce solid waste generation within the company?
Research Question #2:
How will corporate purchasing practices with respect to packaging materials change in the next three years to respond to efforts to reduce solid waste generation within the company?
Research Question #3:
How have corporate purchasing practices with respect to packaging materials changed in response to efforts to reduce solid waste generation throughout the entire supply chain?
Research Question #4:
How will corporate purchasing practices with respect to packaging materials change in the next three years to respond to efforts to reduce solid waste generation throughout the entire supply chain?
These may include green marketing techniques or environmental policies of suppliers directed toward the purchasing organization., One of the roles of purchasing is to operate as the interface between company requester and the supplier. Corporate solid waste management efforts may modify relationships between the customer and supplier, as new requirements arise or current requirements are modified to incorporate solid waste reduction efforts. Changes may include requirements for reduced use of secondary and tertiary packaging material or the use of reusable containers. Research questions #3 and #4 addressed how corporate purchasing practices have changed and will change, in response to efforts to reduce solid waste generation throughout the supply chain.
The review of the literature provided an overview of the evolution of solid waste management in the United States and internationally, identified key components and issues, explored governmental and industrial efforts to manage the solid waste stream, and provided a framework explaining why a corporation should manage their solid waste stream. It provided a framework explaining the evolution of purchasing operations, identified the role of purchasing in solid waste management activities, provided current information regarding how corporate environmental activities affect purchasing operations, and identified the gaps in the literature which were addressed by the research. The conclusion? Little is known about how purchasing organizations approach the integration of solid waste reduction efforts into daily operations, thus supporting the need for this research.
The research investigated how corporate solid waste management efforts affect purchasing operations both internally and throughout the supply chain; identified past changes and projected future changes. The independent variable is a solid waste management effort by a company or channel member. The dependent variables, those variables presumed affected by the independent variable include changes to packaging by weight and by volume, types of packaging materials used, changes to the organization, required skills, sourcing lead-time, and sourcing complexity. The research analyzes how each of these have changed as a result of corporate or channel solid waste management efforts. The research design encompassed the theoretical framework that best practice companies adapt to external forces. The design centered on understanding what the current best practice is and sought to determine the projected affect corporate solid waste reduction efforts would have on the purchasing function over the next three years.
The research studied the industries which are the top consumers of packaging material in the United States. The top three industries represent over 60% of the total packaging tonnage purchased each year. The research involved a two-stage methodology. The first stage was a mail survey used to determine how solid waste management efforts have affected purchasing and develops a basis for projecting how the efforts will affect purchasing in the future. The second stage was a field case study used to examine approaches to the implementation and maintenance of solid waste management efforts of packaging material within case study companies and throughout their supply chain. Stage One: Survey. The research data was collected through a mail survey sent to the highest ranking purchasing executive in the company. The survey used multiple questions for testing each research hypothesis. It was pre-tested through faculty review and six personal industry interviews for content validity, ease of understanding, and the ability of the executives to answer the questions. The survey participants were a subset of purchasing executives from the membership list of the National Association of Purchasing Management. The target survey group for the study involved industries that are high tonnage users of packaging material, namely the chemical, electronics, and food and beverage industries. Prospective respondents received a pre-notification letter and were contacted by telephone to request their cooperation. A cover letter from NAPM was included with the survey. A pre-calling campaign was conducted to obtain the executive's commitment to complete the survey netting an overall response rate of 52.7%.
The survey data was compiled and analyzed using t-tests and chi-squared tests. The data analysis compared means for companies with a solid waste management effort against the means of companies without a solid waste management effort. The analysis also compared survey means identifying what had occurred in the past against projected future changes.
Stage Two: Case Study.
The second stage involved the use of seven case studies (two food and beverage companies, two chemical companies, and three electronics companies) to examine approaches to the implementation and maintenance of solid waste management efforts of packaging material within case study companies and throughout the supply chain as shown in Table Two. Participants of the case studies were identified by the surveys from the first stage and screened with preliminary interviews to ensure the case study would offer insights to a unique set of issues or implementation environments. The case studies started with the survey questions and utilized follow-on questions to further probe and understand the influence of corporate solid waste management efforts on the purchasing function. Each case study was summarized and compiled with the other case studies to identify commonalities and differences.
(graphic not available in this text-only version)
Case Study Scenario A - Respondent company works with supplier to reduce incoming primary, secondary, and tertiary packaging material.
Case Study Scenario B - Respondent company reduces primary, secondary, and tertiary packaging material used internally through alternative packaging, reusable containers, and challenging the need for packaging.
Case Study Scenario C - Respondent company reduces the amount of outgoing primary, secondary, and tertiary packaging material used to meet the request of customers.
Research findings from the surveys and the case studies were combined together to derive the following common conclusions:
Packaging solid waste management will become more important as companies become more aware of the issues, costs, and opportunities from internal and external sources.
Packaging solid waste management efforts will continue to grow. On an industry basis, the electronics and chemical industries lag behind the food and beverage industry but will have a higher level of effort in the future.
There are a number of alternatives available for solid waste management. The overriding factor in considering the alternatives is total cost. Companies are most likely to avoid bringing material into the company.
Solid waste management goals are typically set with little hard analysis. Accurate measurement of change is difficult. Inclusion of solid waste management efforts into company business cases is subject to the availability of valid and meaningful data.
Companies that have a formal, documented solid waste management effort and have integrated the effort into their purchasing procedures are more likely to involve suppliers in the solid waste management effort. Purchasing will continue to modify its organizational structure to play a supportive role in corporate solid waste management efforts.
Purchasing personnel supporting efforts to reduce solid waste should receive training that provides awareness of solid waste issues and how they affect the corporate business activities. Solid waste management efforts have added another variable to be considered when making a sourcing decision. The integration of solid waste management throughout the supply chain will increase sourcing complexity. The time required to make a sourcing decision which supports packaging solid waste management efforts will increase in the future and will affect all companies in the supply chain.
The importance of a supplier's solid waste management effort will continue to increase as part of the purchasing "buy" decision.
Companies will utilize the same type of packaging commodities in the future as they did in the recent past. Changes will emphasize reusable containers and packaging redesign for the benefit of overall cost reduction. Concerns of packaging contamination will reduce the likelihood of a company reusing packaging material.
Reduction of primary, secondary, and tertiary packaging weight and volume will continue in the future. The greatest improvement will come from efforts to reduce inbound primary packaging.
Corporate solid waste management efforts have influenced relationships between customers and suppliers in the past and are projected to have a greater influence on relationships in the future. Purchasing executives feel it is the role of both the customer and the supplier to reduce solid waste in the channel. The customer usually initiates the solid waste management effort. Companies with solid waste management efforts typically work with both their customers and suppliers to reduce solid waste.
- Increased legislation will help industry continue their solid waste management efforts and encourage them to do even more. More government legislation is expected in the future.
- Few case study companies indicated they felt it was their responsibility to develop end markets but all companies agreed that an increase in the number of end markets would help their solid waste management efforts.
Characteristics of a Best Practice Company.
The research was used to describe the characteristics of a "best practice" company. It is a combination of corporate solid waste reduction efforts involving the purchasing function and should be used as a normative guide for developing a corporate solid waste reduction effort which draws on the supply chain management abilities of the purchasing function.
- On-going program which is always improving
- All business decisions consider solid waste reduction issues
- Goals are well defined and measured
- Addresses all 4 R's
- Helps to develop the infrastructure
- Active in industry group
- Integrated with contiguous suppliers and customers
- Solid waste education throughout all functions
- Included in the quotation process and in feedback to suppliers
Contributions To Purchasing Theory and Practice.
The research addressed the effect of solid waste management efforts on the purchasing function from an internal and external perspective and offers insight into industrial practice and theory in the following areas:
- Understanding Changes to the "Buy" Decision. The research suggests leverage points within purchasing "buy" decision where solid waste reduction with suppliers can best be implemented. Understanding how the "buy" decision will change may serve as a guide for training personnel.
- Changing Roles and Responsibilities of Purchasing. The research offers insights into the changing roles and responsibilities of the purchasing function, skill requirements and resource requirements in the past and projected for the future, and may help guide the development of the purchasing function in the future.
- Changing Relationships Between Customers and Suppliers. The research examined whether corporate solid waste reduction efforts between customers and suppliers have altered relationships by changing the requirements of expectations of the channel members. The findings may be used to help design a corporate solid waste reduction plan which effectively utilizes the ability of purchasing to manage the supply chain.
- Lessons Learned From the Successful Industrial Practice. The research examined "successful practices" from industry. It examined what went right and what the companies would do differently when implementing corporate solid waste management efforts. The knowledge gathered was used to determine the characteristics of the purchasing function of a "best practice" company addressing solid waste reduction issues. Identification of how a "best practice" company reduces solid waste can be used as a guide for companies which would like to begin or advance their solid waste reduction effort.
Implications To Purchasing Theory and Practice.
The conclusions provide a basis to project the future direction of solid waste management and how it will affect companies and their purchasing organizations.
- Social pressures and corporate awareness of solid waste issues will increase in the future forcing more companies to actively manage solid waste. Solid waste management efforts must be effectively communicated to employees, suppliers, and customers. Increasing costs will economically stimulate the development of reverse logistics channels.
- Third parties supporting packaging solid waste management efforts will continue to grow. Suppliers of packaging material should focus on improving how their commodity can be used more efficiently and effectively.
- The long term life of a company's solid waste management effort is dependent on valid measurement. Life cycle costing will not be utilized until the cost to conduct a study decreases or the ramifications for not conducting a study increases.
- As the awareness of solid waste issues increases, more suppliers and customers will involve contiguous members of the supply chain to reduce packaging solid waste. More companies will initiate solid waste management efforts. The method of company management of solid waste will become another variable in the membership criteria to be a part of a customer's shrinking supplier base.
Companies should proactively identify and track government solid waste reduction legislation that may affect operations throughout the supply chain.