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Aligning green supply chain management with product types

Authors:
  • Australia Post

Abstract

Purpose of this paper: This study aims to explore how green supply chain management (GSCM) practices can be implemented more efficiently and effectively in the rapidly changing market. We attempt to identify dynamic transformation across a company’s internal and external green supply chain operations with green product development on different product markets. Methodology: This study adopts an exploratory case study, investigated one of the largest multinational ICT companies, an early adopter of GSCM in China that leads the domestic consumer electronics market environmental reform. We examined company’s GSCM transformation across its four key product lines. Eleven in-depth interviews were conducted with numerous onsite visits, online meetings and follow-up phone calls for qualitative data collection. We applied thematic coding analysis with Nvivo software followed by a thorough within-case and cross-case comparison analysis. Findings: The findings of this study propose a strategic taxonomy of GSCM on different products. For generic products, improving volume efficiency and reducing wastage on internal operations and supply chain cost is the priority for GSCM. Among them, durable generic products can improve use life efficiency through building long-term customer relationships and service flexibility while extend (green) product life. For fast-consuming generic products, business can improve close-loop resource efficiency via expansion of operations to include internal volume recycling. For premium niche products, improving eco-design and building dynamic relationships with supply chain stakeholders for value creation is the key for GSCM. Among them, fast fashionable niche products can improve existing value via adapting product design and enhancing process integration and total system responsiveness for underexploited market expansion, e.g., second-hand market. For durable premium products, business can create green value via radically product design innovation and system upgrade for new market development. Key operational and relationship capability elements are further identified for each strategy in findings. Value: The study contributes to knowledge of GSCM and competitive strategies. It enriches the GSCM literature by specifying the linkage between various product supply chains and green approaches, in terms of internal operations, external operations and eco-design management.
The 25th International Symposium on Logistics (ISL 2021) 12th and 13th July, 2021
ALIGNING GREEN SUPPLY CHAIN MANAGMENT WITH PRODUCT TYPES
Ying Ye
School of Management Science, College of Politics and Public Administration, Soochow
University
E-mail: yingye@suda.edu.cn
Kwok Hung Lau
School of Accounting, Information Systems and Supply Chain, College of Business and
Law, RMIT University
E-mail: charles.lau@rmit.edu.au
Leon Teo
Retail Supply & Logistics, Australia Post
E-mail: leon.teo@auspost.com.au
INTRODUCTION
Environmental sustainability has become an essential initiative of firms to create value and
gain competitive advantage rather than a voluntary obligation that might contradict the
traditional corporate economy objectives (Seuring and Muller, 2008; Graham, 2018). There
have been many studies focusing on identifying “what” green supply chain management
(GSCM) practices businesses should implement and “what” impacts these practices can
have on company performance (Graham and Potter, 2015). Nevertheless, “how”
companies can implement green initiatives efficiently and effectively in their supply chains
is not well understood (Lee et al., 2015).
Researchers (Brindley and Oxborrow, 2014; Kumar and Rodrigues, 2017) have proposed
a number of diverse competitive GSCM strategies for businesses to implement based on
their product-market positions and supply chain characteristics. To meet demand from a
less green sensitive market, GSCM could leverage on standardisation and resource
efficiency to comply with environmental requirements while reducing internal cost. On the
other hand, to meet demand from a highly sensitive green market, GSCM could focus on
innovative green product development and new market expansion (Zhu et al., 2020).
Underpinning such GSCM strategies are traditional principles of supply chain management
to aligning downstream market needs with upstream supplies.
With contemporary GSCM concept incorporating close loop management, eco-product
design and total system lifecycle management, it is unclear how GSCM strategies can
effectively cope with new operational and supply chain relationship dynamics. With rapid
development in technology, strong consumers’ desire for the latest products with short
product lifecycle, as well as increased wastages associated with production and packaging,
manufacturers are confronted with ever increasing challenges to integrate green into their
supply chains (Reche et al., 2020). To understand the strategic dynamics between a
company’s internal and external supply chain operations with product development, this
study conducts an exploratory in-depth case study with one of the early GSCM adopters in
China.
THEORETICAL BACKGROUND
Competitive strategies of GSCM
GSCM is defined as integrating sustainable Environmental Management (EM) measures
into business supply chain (Srivastava, 2007). This can include processes such as product
design, material sourcing and selection, manufacturing and production, operation and end-
of-life management (Sarkis, 2012). When integrating green concepts at corporate level,
strategic resources can be invested in building green processes and developing product
capabilities to create new business competitive advantage (Seuring and Muller, 2008).
Extant literature shows that competitive value is driven via two general ways of green
integration: i) lean and efficient greening for internal compliances and reducing supply
The 25th International Symposium on Logistics (ISL 2021) 12th and 13th July, 2021
chain costs (Corbett and Klassen, 2006; Kurdve et al., 2014; Piercy and Rich, 2015) and
ii) product stewardship and differentiation for green demand and value creation (Ginsberg
and Paul, 2004; Sharma and Iyer, 2012).
Although some may argue that lean is not a cost reduction but a value-adding strategy,
we apply the term in this study referring to the use of only the absolutely necessary
resources to produce and package products so as to reduce waste and hence cost.
Standardisation design is often employed for mass production (Fisher, 1997). A lean and
efficient green strategy can be adopted when market demand is predictable while supply
is stable. In such case, a generic supply chain suffices. This involves the consolidation of
the supply base with accredited wholesale suppliers who are able to meet the sustainability
objectives through their Environmental Management Systems (EMS) (Brindley and
Oxborrow, 2013). This can involve integration of local distribution centres, small but
regular deliveries, management of packaging, and product selection from an array of
upstream suppliers etc. By leveraging on supply-driven supply chain operations, the
objective is to comply with external regulations, standards, and to achieve a measurable
reduction of pollution and wastes on supply chain (Bowen et al., 2001; Hart and Milstein,
2003).
A value-creating green strategy can be adopted when market demand is unpredictable
while supply is unstable. Under such circumstances, an agile or risk-hedging supply chain
is appropriate (Lee, 2002). This involves regular exchange of information to reduce supply
uncertainty, collaborative adaptation of product development, use of postponement
strategies, and intensive management of upstream sourcing activities through ‘buying to
order’ to enhance supply responsiveness. The objective is to stimulate demand and
promote sustainable market diversity by leveraging demand-driven supply chain
operations focusing on close collaboration with local suppliers. Table 1 below presents a
summary of the existing competitive strategies of GSCM and their associated supply chain
characteristics.
GSCM
strategies
Drivers
Objectives
Attributes
References
lean and
efficient
green
Legal
regulations,
pressure of
compliance
Ensure
compliance
Reduce
waste and
cost
Supply-driven and
intra-oriented
Internal and
integrated
environmental
management with
lean practices
Indirect green
performance
Bowen et al., 2001; King and Lenox,
2001; Zhu and Sarkis, 2004;
Srivastava, 2007; Corbett and Klassen,
2006; Kleindorfer et al., 2005; Seuring
and Muller, 2008; Kurdve et al., 2014;
Dubey et al., 2015; Lee et al., 2016;
Kumar and Rodrigues, 2017; Graham,
2018
Sustainable
value
seeking
Customer
demand, new
market
Develop
new market
Create
value
Demand-driven and
inter-oriented
Green marketing
and product
practices
Direct green and
value-added
performance
Hart and Milstein, 2003; Ginsberg and
Paul, 2004; Handfield et al., 2005;
Markley and Davis, 2007, Seuring,
2009; Sharma et al., 2010; Sharma
and Iyer, 2012; Silva et al., 2018;
Ahmad et al., 2018; Liu et al., 2019
Table 1: Major GSCM strategies and associated supply chain characteristics
GSCM operational and design elements
GSCM practices cover a wide range of activities from greening upstream sourcing and
procurement, inbound production and operations management, to outbound logistics,
downstream transportation, packaging, warehousing, close-loop reverse logistics,
remanufacture and recycling (Sarkis, 2012). They are generally discussed in the aspects
of supply chain operations, relationship management and product design (see Table 2).
Dimension
Element
Practice
Operation
Greening inbound
production and operations
management, disposal
and treatment operations
Lean production,
environmental
and quality
management
Corbett and Klassen, 2006; Lenox et al.,
2000; Srivastava, 2007; Sarkis, 2003;
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Relationship
management
Greening upstream
material sourcing with
suppliers, greening
downstream packaging
distribution and services
with customers
Build-to-order
lean system and
total quality
management
system
Maxwell, 2001; Ragatz et al., 2002; Pil
and Rothenberg, 2003; Carvalho et al.,
2011; Mollenkopf et al., 2010; Kumar and
Rodrigues, 2017; Dües et al., 2013;
Miguel & da Fonseca, 2015; Colicchia et
Holistic
configuration
Incremental and radical
product eco-design
Design for easy
repair and reuse
via process
redesign; design
for clean
technology
al., 2005; Zhu et al., 2013; Sharma et al.,
2010; Kurdve et al., 2014; Ahmad et al.,
2018; Graham, 2018; Melander and
Pazirandeh, 2019
Table 2: GSCM operation, relationship management and product design
Greening inbound production and operations management is mostly discussed at the early
stage of GSCM adoption for business to comply with environmental regulations and prevent
pollution (Kleindorfer et al., 2005). Boudreau et al. (2003) discuss that early operators
faced heavy fines or even had to cease operations if they exceeded certain regulatory limits
on air- or water-borne emission. EMS were developed to monitor process continuously to
detect and rectify situations before they got out of control and led to costly fines (Corbett
and Klassen, 2006). In modern times, manufacturers are forced to manage end-of-life
product disposal or recycle treatment operations with introductions of new environmental
regulations (Kurvdve et al., 2014).
Greening upstream material sourcing with suppliers and downstream packaging
distribution and services with customers are considered at the subsequent stages of GSCM
to increase supply chain stakeholder value through collaboration by environmental
management (Hart and Milstein, 2003). Kleindorfer et al. (2005) posits that greening of
supplier base is distinct from greening compartment purchasing process in that it involves
changes to the product supplied. Their study suggests that collaboration with suppliers on
product-based green supply chain not only focuses on raw material innovation but also
controls supply by-products, such as packaging and use of recycling materials.
By working closely with customers, demand-oriented supply management can be
implemented at downstream (Carvalho et al., 2011). The use of build-to-order lean
systems changes traditional push operations by on-time ordering, integrated production
and delivery network planning leading to system surplus reduction in input of material,
components and nished goods inventories (Colicchia et al., 2017). Researchers (Melander
and Pazirandeh, 2019) also discuss role of distribution flexibility at the customer side
cooperation for a value-added green impact. Similarly, Lemile (2019) suggests that
greening outbound logistics services via downstream distributor and customer
collaboration helps firms to reduce excessive volume packages and enable effective
product maintenance and takeback that extend product life and augment internal control
of close loop resource flow.
Eco-design instils a higher level of green effort, provided direct green value and
performance, by focusing on supply chain configuration design that incorporates
incremental process and radical product eco-design. Sharma et al. (2010) suggest that
incremental innovation tends to serve mass market which is built on existing supply chain
processes, relationships and capabilities to promote sustainability, and make green product
affordable. The aim is to accommodate economy disruption and fully exploit resource in
existing system while encourage sustainable value increase. Sharma and Iyer (2012)
highlight the impacts of incremental green process innovation on economy efficiency in
which resource constrained product development and volume market fulfilment is stressed.
Process redesign such as modularity is largely utilised by electronics supply chain to enable
high variety of mix assembling and end-of-life easy disassembling (Kumar et al., 2016).
Supply chain mix flexibility is infused at product design stage that preserves and enhances
product value across the whole lifecycle. Comparatively, radical eco-design presenting a
significant break from the conventional resource-intensive product design, supply and
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consumption, is suggested for business to stimulate premium innovation and create a new
competitive model for sustainability, such as renewable energy (Ahmad et al., 2018).
Designing a conceptual framework
Existing studies discuss the strategic relationship between supply and demand. However,
specific operations or processes of GSCM for strategic fulfilment are not fully investigated.
With GSCM concept extending to close loop management, and full product lifecycle
management (including disposal, repair, reuse and recycle), how firms can deliver an
integrated operation and manage relationships with external partners for sustainability is
critical. Based on the discussion in the previous section, a conceptual framework linking
the strategic and the operational levels of GSCM is proposed in Figure 1.
Figure 1: A conceptual framework for GSCM
METHODOLOGY
This study adopts a qualitative approach. As the research question is largely exploratory
and attempting to investigate a new research context, a qualitative approach provides
researchers with access to deeper levels of understanding of new and complex phenomena
(Yin 2008). GSCM agenda integrating EM into industrial supply chain and product
management is still at a nascent stage of market development in China (Zhu and Lai,
2019). In-depth case study allows us to explore deeper levels of intention and motivations
for the changes and access to richer information to inspire theory building under a new
context (Yin 2008).
This study selects one of the largest multinational ICT companies, an early adopter of
GSCM in China, that led the domestic consumer electronics market environmental reform.
The company is listed as one of the top organisations for industry environmental
transformation and has long earned a reputation for sustainable corporate governance
recognized by the government. We investigated specifically into the company’s four key
product lines: i) premium PC and laptop, ii) tablets and smartphones. iii) generic
workstation and server, and v) fast consuming accessories. The study has drawn on
multiple sources of information including semi-structured interviews, on-site observations,
reviews of business news, reports and databases. Interviews were carried out with the key
personals from the EM team, a cross-functional team responsible for various green aspects
of material sourcing, product design and lifecycle management, in line with other business
units. We also interviewed the ground floor team responsible for assembling production at
factories, one of the key OEM suppliers and product R&D team located in China. In total,
11 in-depth interviews with numerous onsite visits as well as follow-up online meetings
and phone calls were conducted.
We adopted thematic coding analysis (Eisenhardt and Graebner, 2007) using Nvivo
software followed by thorough within-case and cross-case comparison for data analysis.
Initial open coding was conducted by grouping phrases, sentences or paragraphs into codes
and categories in an inductive fashion. Indicative coding categories were derived from
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theoretical background. Cross-case analysis helped to identify common themes and
differences on how different dimensions of GSCM practices could impact on different
product units.
FINDINGS
The following sections present the findings of the in-depth case studies across four unique
product lines. The cross-case comparison results from each GSCM dimension are also
discussed. Table 3 shows the findings of the case studies.
Green internal production and associated operations
Lean and green impact is widely observed in local factories, producing standard generic
products, such as traditional desktops, workstations and servers. Lean has long been
adopted in desktop computer assembling line and also linked to the key suppliers’ material
resource and inventory management system. This includes bulk packaging design, pallet
optimisation in warehouses, and transportation planning with suppliers to improve
upstream volume efficiency. Waste reduction across functional departments, such as
sourcing, assembling, inventory management and packaging activities working under the
assemble-to-stock operation, can be leveraged.
At downstream, we observe that firm has started to offer product internal buyback
programs and recycle operations since 2018. It partners with an external authorized local
recycler for its recycling requirements. This is especially prevalent in general workstations
and servers that are sold to corporates in large quantities. The cost of internal buyback is
rather low; economy of scale in recycling can be achieved despite a thin profit margin. The
company builds close relationships with corporate users by offering on-time maintenance
and direct scale buyback. In contrast, premium fashionable products i.e., tablets and
phones are harder to buyback. Personal users can dispose their products via other means,
such as external commercial collectors, who will pay a price higher than through firm’s own
buyback programs. The cost of operating internal disposal and direct recycle of high-value
units is also rather high at the current stage.
Green sourcing with external suppliers and servicing with customers
The company emphasises on supplier collaboration for green/durable material sourcing for
its high-value product units. According to the interviewees, company sources from green
suppliers for non-hazardous and recyclable materials for high-value laptop and PC
production. It introduces Post-Consumer Recycled Waste (PCW) plastics instead of raw
plastics for component design. The proportion of PCW to new materials can reach 40 to
50% per item. The company also works with suppliers on recyclable material packaging
that are popular with high end global consumers.
Due an emerging ungoverned second-hand market for technological devices, the company
has worked with external commercial collectors and redistribution platforms since 2019 to
enhance control of end-of-life product buyback and resource flow, reduce illegal
disassembling of its components, prevent unauthorized repairs being carried out, and avoid
other commercial entities from remarketing its high-end used products and components.
For generic fast consuming or perishable products, e.g., accessories, green material
sourcing is less considered due to the high cost of green materials on the current market.
It was noted that recycled/green materials are costly to obtain in China compared with raw
materials. This could be attributed to the lack of suppliers that specialized in such green
materials as well as the lack of demand from end-consumers for green (or recycled)
products in the fast consuming or perishable categories.
The extension of product shelf-life, via offering repair programs and maintenance services
for its corporate users, has allowed the company to green (or lessen) its consumer
demands for newly manufactured products. Desktop computers are mostly purchased by
corporates that are more likely to purchase in bulk volume and use the products longer.
The company focuses on building long-term relationships with these users offering them
free repair of key parts (including processor, memory, cards and drives and regular
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software upgrades and service supports) and encouraging end-of-life scale returns. In this
way, volume order efficiency can be leveraged while preserving value through upgraded
services.
Supply chain and product eco-design
The company leverages on eco-design for its most high-end product lines. Among them,
radical innovation is further leveraged in premium long-term products, such as PC/laptops,
whereas incremental innovation is leveraged in short-term products, such as mobiles.
Radical innovation includes introduction of clean material and energy programme and
lifecycle analysis. For example, at material level, 97% of laptop products have introduced
recyclable and higher durable materials that have zero impact on environment. From an
energy innovation perspective, eco-design includes improving power energy efficiency,
portable design and smart charging, LED lights and ergonomics design. For instance, its
most popular products are high-end laptops that are light and thin, multi-functional, and
have a battery life that is 30% longer than the previous generation. The entire series of
products have exceeded 15%-25% of the energy efficiency standards defined by the US
Energy Star. This series of products have been well received in the global high-end PC
market. The company works with global suppliers and original equipment manufacturers
for competitive clean innovation.
For phones and tablets with shorter life, eco-design focuses on easy repair or reusable
product structure to maximise existing value. For instance, through modifying component
to high modularity, green value across the lifecycle supply chain can be better utilised and
sustained for longer term rather than conducting high-risk disruptive structural innovation.
By working closely with consumers and repair service points, the company can enhance
green consumer awareness on product take-back, repair and reuse and promote upgraded
durable consumption. For generic and low value products, structural eco-design is less
considered. Incremental process upgrade for system efficiency and waste reduction while
not compromise product basic functionality is observed in limited areas.
GSCM strategic
alignment
Internal operation
External operation
Eco-design
Key elements
Green
production
operations
Green
disposal/direct
recycling
Green
supplier
relationship
Green
customer
relationship
Collaborative product
repair or remarketing
with distributor
Incremental
process
innovation
Radical
product
innovation
PC and laptop
(high value/long
lifecycle)
+
+
++
+
+
+
++
Tablet and phone
(high value/fast
fashionable)
+
++
+
++
++
+
Workstation and
server (high
volume/long
lifecycle)
++
++
+
++
+
+
Accessories (high
volume, fast-
moving)
++
++
++ means this practice is being highly considered, + means this practice is being considered to a limited degree,
means this practice is not being considered.
Table 3: Cross-case comparison in four product lines
DISCUSSION
The cross-case comparison findings show that differentiated supply chains can follow
different paths to GSCM adoption as shown in Table 3. We find that for high-volume/low-
value products, volume efficiency and waste reduction to cut cost is the key priority for
business GSCM. In such case, lean production operations and green for baseline
operational control are prioritised. This finding aligns with that of previous studies (Brindley
and Oxborrow, 2012; Piercy and Rich, 2015; Kumar and Rodrigue, 2017), and enriches
the existing GSCM literature by specifying linkage between volume product and lifecycle
GSCM. For long lasting generic products, business can also add extra service and build
long-term relationships with consumers whereas for fast consuming generic products,
The 25th International Symposium on Logistics (ISL 2021) 12th and 13th July, 2021
volume-based recycling can be considered for total resource efficiency. Despite a thin
margin is obtained per product, firm can still leverage economy of scale to increase profit
through mass production and recycling.
Also, the findings corroborate with the results of previous studies (Graham, 2018; Kurdve
et al., 2014; Melander and Pazirandeh, 2019) and demonstrates that for high-value/low-
volume product, sustainable value creation across the supply chain is the key. Thus, eco-
design and dynamic supply chain sustainable relationship development are highlighted by
the company to enhance green market expansion and creation. It further contributes to
knowledge by revealing the linkage between high-value product and lifecycle GSCM. For
high-end fashionable products, the company can focus on quick production reconfiguration
with modular design, demand and supply system responsiveness by stakeholder
integration to expand market, and easy repair functionality to exploit second-hand market
value (Sharma et al., 2010). These emphases on the gradual enhancement of variety and
delivery efficiency, sustainment of value of product across system, and improve design for
higher durability. For premium products with sustainable character, the company can focus
on new innovation each as energy and material programme/supply chain restructure to
leverage niche benefit since these products are regarded as the driving forces of profits
(De Bakker and Nijhof, 2002). Such capability is developed through close collaboration
with component suppliers, original equipment manufacturers and external global partners.
Based on the findings, a taxonomy of GSCM strategy with some practical guidelines for
business producing different types of products highlighting the foci and the key elements
are proposed (see Figure 2):
Figure 2: A taxonomy of GSCM strategic alignment on product types
For value-pulled and long-life product range, the GSCM focus can be on new-market
leverage strategy in which elements of eco-design for clean technology, green
suppliers and dynamic partners for collaborative design can be promoted.
For value-pulled and short-life product range, the GSCM focus can be on market
expansion strategy in which elements of incremental eco-design for process redesign,
green stakeholders for collaborative management can be promoted.
For volume-pushed and long-life product range, the GSCM focus can be on lean and
effective strategy in which elements of lean internal operations and green customers
for extended green service can be promoted.
For volume-pushed and short-life product range, the GSCM focus can be on lean and
efficient strategy in which elements of lean internal production and recycle to push
scale economy efficiency can be promoted.
The 25th International Symposium on Logistics (ISL 2021) 12th and 13th July, 2021
CONCLUSION
The contribution of this study is through an in-depth case study it confirms that the major
GSCM strategies identified in previous research are actually adopted by the industry in
practice. The findings enable the establishment of linkages between volume and value
products and close-loop GSCM. The taxonomy developed based on these findings enables
practitioners to develop appropriate strategies to align lifecycle green supply chain
management with product types. Despite its significant contributions, this study also
suffers from a few limitations. Firstly, the case study findings are generated based on data
from one industry, despite electronics sector represents one of the key market contexts
for GSCM and SCM researches. Future research can further examine the results with wider
range of cross-industry analysis to improve theoretical generalisability. Secondly, research
robustness can also be improved by examining wider range of case companies including
all different sizes of firm and niches in future studies.
ACKNOWLEDGMENT
This project is supported by China Academic Global Exchange Program of Postdoctoral
International Conference Program, No. (2020)165.
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Extant studies identify different strategic approaches for businesses to integrate environment management (EM) into corporate supply chain management (SCM) to create different competitive market advantages. With increasing market uncertainties, stakeholder complexities, constraints of resources, companies nowadays are required to develop more context-specific solutions for mitigating sustainability risk and improving market performance in supply chain sustainability practices. To address the challenges faced by businesses, this study aims to explore how a company adapts green supply chain strategies for a competitive transformation. Specifically, we aim to identify different green supply chain capabilities that form hybrid choices of green solutions for a company to leverage an adaptive green shift. Through an extensive literature review, this study proposes a conceptual framework for exploration which is based on a qualitative in-depth case study in the electronics industry—one of the most polluting manufacturing sectors in China. The findings show that supply chain characteristics play a significant role in the selection of different green SCM solutions by businesses. We find different hybrid choices of strategic decisions are being made by the case company operating with high-volume and high-value supply chains respectively. High-volume supply chains adopt both operational pollution and waste control strategies and incremental green product strategies to balance cost of operational change and develop a competitive eco-efficient market expansion. In contrast, high-value supply chains adopt radical green product innovation strategies and operational waste prevention strategies to balance cost of product innovation and build operational efficiency to expand in a competitive eco-differentiation market. A mix of dynamic capabilities involved in different supply chain green transformations are also identified.
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