Dr. Joseph R. Carter, C.P.M.
Dr. Joseph R. Carter, C.P.M., NAPM Professor, Arizona State University, Tempe, AZ 85287-4706, 602/965-0931, Joseph.Carter@asu.edu
Dr. Ram Narasimhan
Dr. Ram Narasimhan, University Distinguished Professor, Michigan State University, East Lansing, MI 48824, 517/353-6381, Narasimh@pilot.msu.edu
Abstract. Environmental supply chain management consists of the purchasing function's involvement in activities that include reduction, recycling, reuse and the substitution of materials. Despite the potentially important role that the purchasing function can play in a firm's environmental activities, little research has been performed to date that examines the factors that affect environmental supply chain management. The authors examined how intra- and inter-organizational factors both drive and constrain purchasing's involvement in environmental supply chain activities.
Introduction. This study was commissioned as a "theory development" study aimed at examining environmental issues of relevance to supply chain management. Environmental supply chain management (ESCM) is an emerging field. The principal objectives of this project were to identify leading-edge practices and methodologies in ESCM, develop a process framework by which environmental issues are incorporated into supply chain management strategies, and to propose pertinent issues for purchasing executives to consider in the future based on current and projected trends relating to ESCM.
Lessons Learned From Selected Case Studies. In-depth case studies were the preferred method of information collection during this project. The authors spent at least one day at each case-study site discussing environmental supply chain management issues with a variety of senior and middle managers from each firm. The authors learned something of value from each case study; what follows is a brief synopsis of the key lessons learned from a representative selection of the case-study firms. We encourage the reader to examine each of the 14 case studies individually and thoroughly. A wealth of useful information is available.
The case study participants were:
Daimler Benz, AG
Dekra Umwelt GmbH
DENSO Manufacturing Michigan, Inc.
Honda of America Manufacturing
Novartis (formerly, Ciba-Geigy)
Sidler GMBH and Co.
UZIN Georg Utz Gmbh & Co.
The key lessons learned from the case studies are summarized as follows:
The case study results indicate the need for inter-functional coordination and the adoption of a value-chain perspective, including a closer interface between purchasing and other functions. Purchasing must interface with engineering to ensure that materials that are specified can be recycled or reused, or meet resource reduction goals.
The case studies yielded 16 themes relating to environmental supply chain management. The most important themes pursued by firms in this case study included: life-cycle management, environmental performance management, assessing supplier's environmental capability, and environmental auditing.
Projected Trends Relating to Environmentalism. While current trends affecting environmental manufacturing relate to re-manufacturing, reuse, process waste, human resource programs (such as empowerment, waste remediation teams, and employee suggestion programs), and inbound logistics, the future holds new trends that will change the face of environmental manufacturing. These trends are described as propositions:
Proposition 1: The level of consumer awareness of environmental issues will increase rapidly.
The influence of this trend can already be felt; consider the example of products relating to health care. Because of stringent product labeling standards and media exposure, there is considerable awareness among consumers of environmental topics that were heretofore "too technical."
Proposition 2: Firms will place an increasing emphasis on environmentalism in the evaluation of effectiveness of business processes.
Currently, there are several companies that use sophisticated environmental performance measurement schemes. This trend is expected to increase because an orientation toward business processes is common among most firms. Therefore, one can to assume that environmental issues should be considered at each business process level.
Proposition 3: The transfer of knowledge among subsidiaries of large firms will increase rapidly.
Firms will place an increasing emphasis on environmentalism in the evaluation of effectiveness of business processes through knowledge diffusion and uniform environmental standards.
Proposition 4: Four major inter-organizational forces will drive environmental supply chain activities. Those forces are governments, suppliers, customers, and competitors.
While the literature review suggests a set of internal and external drivers of environmental supply chain activities, this case research has provided a multi-variate empirical examination in order to identify which of these factors are the key driver(s) of environmental supply chain management activities.
Proposition 5: Upstream members of a supply chain will increasingly affect environmental supply chain activities, and purchasing managers will need to take action to manage these effects.
It is logical that a firm's customers, suppliers, and competitors, and its supply chain are affecting environmental supply chain management activities.
Proposition 6: As the quality of environmentally friendly inputs increases, greater will be the level of environmental supply chain management.
Increased vertical coordination through the supply chain will affect environmental purchasing activity. The case study data suggest that as vertical coordination increases, so too will the rate of adoption of new technology. While not all environmental supply chain management activities fall under the formal rubric of technologies, it is reasonable to consider the manner in which new environmental programs are adopted and implemented in a similar fashion. For example, the introduction of new environmentally efficient resources into the conversion process will require purchasing managers to act as coordinators of both process engineers and the suppliers of these resources.
Proposition 7: The greater the supply uncertainty, the greater the level of vertical coordination between buyers and suppliers.
The case study data suggest several propositions based upon the concept of environmental uncertainty. This proposition indicates that vertical coordination will in turn be positively correlated with the degree of supply uncertainty.
Summary. This project found that environmental supply chain management strategies appear to be in their infancy stage. Even among the early adopters of environmental management, the majority seems to pursue environmental goals that avoid violations of environmental statutes and regulations. The use of proactive environmental programs as an aid to supplier selection and supplier quality assurance is distinctly lacking in importance. Purchasing also was found to have a major responsibility in implementation of a recycling strategy.
The environmental implications of purchasing activities on operational considerations and strategic considerations such as supply management and supply chain management was examined in this study. Three common purchasing practices that have the potential to undergo widespread change in the future due to environmental issues were identified. These were the identification of capable suppliers, domestic versus global sourcing, and the purchase of systems.
The accumulated evidence suggests that environmental supply chain issues will gain tremendous importance in the future. In Europe, trends toward environmental supply chain management are already visible. Although, an average U.S.-based firm may not be thinking along environmental issues while developing corporate strategy, pressures from global firms, including those based in the United States, are likely to influence other firms to follow the European trend.
Also, the results suggest a need to increase coordination with suppliers of environmentally friendly materials and technology, as well as with downstream channel members, including users and customers. The results also mandate the need for increased coordination and communication throughout the supply chain, as well as within the firm.