Balancing Supply Chain Green with Balance Sheet Green
Posted 03-02-2010 at 12:00 PM by Albert Fong
Developing a greener supply chain has been discussed for years, but it really didn’t gain much traction until the fuel crisis that started about 20 months ago. When fuel prices were through the roof, everyone from the supply chain to the soccer mom was in an uproar about the adverse effects on one’s well being. Rants focusing on the need for alternative fuel sources were common, and the overuse of the word “green” would’ve made any leprechaun happy.
Alas, we have short memories as the chaos gave way to a mild roar with the decline of fuel prices. Of course, we’ve used the recession as an excuse for not adopting green policies, which is why it’s noteworthy when a company such as Wal-Mart continues to expand its greenness. According to a recent article, Wal-Mart instituted a new program that would pressure its suppliers to adopt green measures within their manufacturing and packaging processes.
Is this a good thing? Long term, the benefits can be significant due to reduced energy and fuel usage, less waste, and more efficient transit times among others. Ultimately, this can be a boon to Wal-Mart customers as savings as passed along, making items more affordable.
Having said all that, managing manufacturing and inventory via green initiatives can have some repercussions. In the short term, some in Wal-Mart’s supply chain will suffer growing pains as they reevaluate and redo processes. Changing existing processes such as product design for example can be costly, made only more difficult with the shaky economy. While Wal-Mart is already known for providing low-cost items, this means that many within its supply chain already suffer from low margins. Forcing green initiatives on partners who barely make a profit may push some into further cutting corners, thus lowering product quality.
Wal-Mart’s green initiatives are admirable and necessary, but the company would also be wise to balance those initiatives and collaborate closely with suppliers to lessen the immediate impact. We’ve seen what cutting corners in the name of cost savings can do, and the last thing you want is to force suppliers into that situation. Who ultimately suffers? Once again, the consumer does with lower quality products that have shorter life spans.
Alas, we have short memories as the chaos gave way to a mild roar with the decline of fuel prices. Of course, we’ve used the recession as an excuse for not adopting green policies, which is why it’s noteworthy when a company such as Wal-Mart continues to expand its greenness. According to a recent article, Wal-Mart instituted a new program that would pressure its suppliers to adopt green measures within their manufacturing and packaging processes.
Is this a good thing? Long term, the benefits can be significant due to reduced energy and fuel usage, less waste, and more efficient transit times among others. Ultimately, this can be a boon to Wal-Mart customers as savings as passed along, making items more affordable.
Having said all that, managing manufacturing and inventory via green initiatives can have some repercussions. In the short term, some in Wal-Mart’s supply chain will suffer growing pains as they reevaluate and redo processes. Changing existing processes such as product design for example can be costly, made only more difficult with the shaky economy. While Wal-Mart is already known for providing low-cost items, this means that many within its supply chain already suffer from low margins. Forcing green initiatives on partners who barely make a profit may push some into further cutting corners, thus lowering product quality.
Wal-Mart’s green initiatives are admirable and necessary, but the company would also be wise to balance those initiatives and collaborate closely with suppliers to lessen the immediate impact. We’ve seen what cutting corners in the name of cost savings can do, and the last thing you want is to force suppliers into that situation. Who ultimately suffers? Once again, the consumer does with lower quality products that have shorter life spans.
Total Comments 0
Comments
Total Trackbacks 0
