the green supply chain: integrating suppliers into environmental management processes

Steve V. Walton is Assistant Professor ofDecision and Information Analysis at theGoizueta Business School at Emory University.He earned his Ph.D. degree in OperationsManagement from the University of NorthCarolina at Chapel Hill. His research focuseson supply chain management (SCM),including issues such as the role of electroniccommerce in SCM and environmentalimplications of SCM.

Robert B. Handfield is Associate Professor of Purchasing and Operations Management at Michigan State University. He earned hisPh.D. degree in Operations Management fromthe University of North Carolina at ChapelHill. His research combines qualitative andstructural modeling approaches to the study of time-based competition, quality manage-ment, and strategic sourcing.

Steven A. Melnyk is Professor of OperationsManagement at Michigan State University. Heearned his Ph.D. degree from the University ofWestern Ontario. His research interestsinclude MRP II, tool management and control,shop floor control, Time-Based Competition(TBC), and Environmentally ResponsibleManufacturing (ERM).

2

The Green Supply Chain: IntegratingSuppliers into Environmental

Management ProcessesBY

Steve V. Walton, Robert B. Handfield, and Steven A. Melnyk

IN BRIEFIn business today, companies cannot ignore environmental issues.Increasing government regulation and stronger public mandates forenvironmental accountability have brought these issues into the exec-utive suite, and onto strategic planning agendas. At the same time,companies are integrating their supply chain processes to lower costsand better serve customers. These two trends are not independent;companies must involve suppliers and purchasers to meet and evenexceed the environmental expectations of their customers and theirgovernments. Based on case studies of five companies in the furnitureindustry, a number of supply chain environmentally-friendly prac-tices (EFP) are identified. Using accepted qualitative research methodsfor case-based research, several primary areas for change to increasepurchasing’s impact on environmental results are identified:

1. Materials used in product design for the environment2. Product design processes3. Supplier process improvement4. Supplier evaluation5. Inbound logistics processes

The experiences of these companies illustrate the types of environmentally-friendly practices used in each of these five areas, and “rules of thumb”which purchasing and supply chain managers can apply. Two additionalthemes which emerge from this research are the importance of manage-ment’s commitment to supply chain EFP, and the need to move beyondenvironmental compliance to achieve a proactive environmentally-friendlysupply chain.

INTRODUCTION

T he environment has become a critical issue in business today. In the1960s and 1970s businesses typically considered environmentalcompliance to be a “fringe” issue which elicited little discussion at

executive levels. Since then, several highly visible environmental disasters(e.g., Love Canal, Three Mile Island, Exxon Valdez) have demonstratedthe importance of having a comprehensive environmental strategy inplace. As is true of Total Quality Management (TQM), environmentalstrategies must be conceived and supported by top management, but

International Journal of Purchasing and Materials Management© Copyright April 1998, by the National Association ofPurchasing Management, Inc.

deployed in every functional area of an organiza-tion to be meaningful. Previous research showedhow cross-functional “buy-in” is necessary to inte-grate environmental strategies with supply chainm a n a g e m e n t .1 This study extends the findings ofthat research by focusing on the role of purchasingand supply chain management in improving theenvironmental performance of an organization. Thenext section discusses the growing importance ofenvironmental management to business. Case studies are discussed and a set of generic guidelinesregarding the role of purchasing and supply chainmanagement in environmental management is pre-sented. The final section summarizes the conclu-sions and insights from the study.

APPROACHES TO ENVIRONMENTALMANAGEMENT

The traditional view of environmental manage-ment in business has been either “we need onlycomply to the letter of the law,” or worse yet,“ignore it and it might go away.” These attitudesgrew out of the perception that any actions whichimproved the environment were detrimental tointerests of business. Such perceptions were oftenfueled by the news media (e.g., the ongoing disputeconcerning the logging industry and the spottedowl in the Pacific Northwest). Traditional “anti-business” environmental perceptions also led toinstances where companies decided it was in theirbest interest to pollute and pay a small fine, insteadof finding ways to prevent or eliminate the waste.Penalties associated with polluting escalated withthe passage of the Superfund in the 1970s, SERA inthe 1980s, and other legislation in the 1990s, andbusinesses began to realize that some level of com-pliance would be necessary. The typical response ofcompanies was to comply with the legislation, butto rarely integrate these policies across the com-pany. This type of response to environmentalissues can be termed “resistant adaptation.”2

A slightly more developed environmental man-agement approach accepts the goal of minimizingwaste, without trying to eliminate the source of thewaste. Companies pursuing this approach often tryto find ways to “clean up” or store the waste once itis created. Companies that install smokestackdevices to reduce the level of pollutants emitted into the air, without trying to reduce the level ofpollutants produced, are “embracing without inno-vating.” This reactive approach to environmentalissues is characterized by “end-of-the-pipe” solu-t i o n s .3 While embracing environmental issues without changing current processes provides thecompany with a sense of social legitimacy,4 it usu-ally leads to narrow, incremental solutions.5 A ssuch, companies are not realizing the competitive implications of environmentally-friendly supplychain practices; they merely experience penaltya v o i d a n c e .

Companies are now starting to recognize thepossible competitive advantages associated withenvironmental awareness.6 However, as environ-mental management makes its way into corporatestrategic planning, it must also be integrated withthe day-to-day processes of the organization. Com-panies which make minimal changes to optimizetheir current processes can be called “receptive” toenvironmental issues. Companies which lookbeyond their current processes to find and elimi-nate sources of waste are more “constructive” intheir response. Constructive responses to environ-mental issues focus on the value embodied in theproduct and process by integrating product plan-ning and changes into environmental planningand response. Constructive responses also rely oncompanies adopting a resource-productivityframework to maxi-mize benefits attainedfrom environmentalinitiatives.7

The weakness withthese modes of envi-ronmental manage-ment response is thateach focuses only onthe internal functions of an organization. One environmental expert suggests that a “proactive”company will “thrive only when it acts as a wholesystem that includes not just executives and workers,but customers, suppliers, and neighbors,” and b yintegrating total quality environmental manage-ment (TQEM) into its planning and operationsp r o c e s s e s .8 This paradigm implies that companieswanting to reap the greatest benefits from theirenvironmental management processes must i n t e-grate other members of the supply chain into theseprocesses. Companies are compelled to include sup-pliers if they want truly environmentally-friendlypractices (EFP) for purchasing and materials man-agement, which is tantamount to “greening the supply chain”.

The notion of a green supply chain is related tothe broader concept of a “sustainable economy.”9

This view extends the idea of TQEM beyond theboundaries of organizations and beyond the cur-rent generation of products and services. Funda-mental to developing a sustainable economy is therecognition that environmental initiatives maystart as operational initiatives to reduce waste andemissions, but these initiatives must grow to apoint where the strategy and the vision of the com-pany incorporates environmental issues.

In this study, the experiences of managers col-lected from case studies in five furniture manufac-tures are applied to illustrate current practices inenvironmentally-friendly supply chain manage-ment. The research examines how these managerswere able to drive environmentally-friendly practiceswithin their own supply base. In the next section, the

International Journal of Purchasing and Materials Management, Spring 1998

The Green Supply Chain: Integrating Suppliers into Environmental Management Processes 3

Companies wanting to reap the greatest benefits from their environ-mental management processes mustintegrate other members of the supply chain into these processes.

nature of the companies included in the study, andthe environmental practices of suppliers in theirsupply chains are described. Based on the practicesdescribed by these managers, a number of sugges-tions are offered for other purchasing and supplymanagers to consider in attempting to integratetheir suppliers into their environmental manage-ment initiatives.

THE COMPANIES STUDIED

Because of the paucity of research on issues con-cerning the role of suppliers in environmentalmanagement, a case-based approach was adoptedto initially identify key trends and practices cur-rently employed in industry. The first step in thiscase-based method involved a review of the litera-ture to identify existing practices and to integratethese practices into an interview protocol prior toconducting the case studies. Because of the cross-functional nature of the questions, a review ofenvironmental issues in a number of areas wasconducted, including general management, pur-chasing, operations, and distribution and logistics.The model of the role of purchasing and suppliersin environmental management, which emergedfrom this portion of the study (see Table I), wasused as the basis for developing a semi-structuredinterview protocol.1 0 The interview protocol isincluded in Appendix II on page 11.

Table I shows how the focus, responsibility foractions, and goals differed in the sample, accordingto the sophistication of each company’s environmentalresponse. Advanced companies moved beyond p r a c-tices emphasizing the avoidance of environmentalfines through end-of-pipe, cleanup-oriented solu-tions. These proactive companies recognized thatprocesses and products must be redesigned toachieve the higher environmental goals associatedwith leveraging environmental management forcompetitive advantage. Companies that achievethese higher levels of environmental response accepttheir responsibility to society as a whole. Based onthese possible responses, an interview protocol wasdeveloped which asked managers to discuss the roleof supplier evaluation, supplier selection, suppliermanagement, new product design, purchasingprocesses, and inbound logistics in supply chain EFP.

When conducting case-based research it isimportant to remember that “[s]ampling involvesnot only decisions about which people to observe orinterview, but also about settings, events, and socialprocesses.”11 With this in mind, a group of organiza-tions was selected that were at different stages ofimplementing EFP in their supply chains. Fivemajor firms in the furniture industry agreed toparticipate in the study. A single industry wasused to control for differences in processes andmaterials which might confound the results of across-industry study. A major challenge in selectingfirms to participate in this type of study is the needto strike a balance between similarities and differ-ences. Companies included in the study had to be similar enough to allow for comparison, but at the same time diverse enough to permit someg e n e r a l i z a b i l i t y .

Based on these criteria and a number of otherconsiderations, companies in the furniture industrywere selected. First, key members of the furnitureindustry were readily accessible to the researchteam. Second, the industry is fairly concentrated,12

and a significant segment of the industry could beincluded using as few as five case studies. Third,several of the key processes in the furniture industry that have significant environmentalimplications are common to many manufacturingindustries (e.g., coating processes using solvent-based paints, solid waste management, zinc plating,paper packaging). Fourth, the furniture industryfaces primarily the same legislative initiatives a smany other manufacturing organizations, such asthe Clear Air Act Amendments of 1990. Theseamendments call for warning labels to be placedon products manufactured using ozone depletingsubstances (ODS) and volatile organic compounds(VOC). In the past these substances were producedin large quantities in furniture manufacturing.Hence, results concerning the role of purchasing inEFP can be generalized to a large number of manu-facturing industries. The furniture industry waschosen also because of its recent high visibility inthe public arena. Specifically, furniture companieshave come under fire for using tropical woods intheir products, which encourages harvestingendangered tropical forests. Focusing only onthese unique environmental issues may limit the


4 The Green Supply Chain: Integrating Suppliers into Environmental Management Processes

STRATEGIES FOR DEALING WITH ENVIRONMENTAL ISSUESTABLE I

Strategy Location of Action Responsible Party Goal of Activity1. Resistant adaptation End-of-pipe External consultants Minimize exposure2. Embracing without innovating End-of-pipe External consultants Minimize exposure

and internal specialists3. Reactive End-of-pipe Internal specialists Minimize exposure4. Receptive Process change Managers Optimize process5. Constructive Product change Industry Quantum leap6. Proactive Needs assessment Society Create a new vision

generalizability of the study to other industries,but doing so may allow for a richer discussion of how public awareness influences corporatebehavior. Finally, several companies in the industryare generally acknowledged as “leading edge” i nterms of their environmental initiatives, with along history of environmental responsibility. Thesecompanies’ environmental activities date back to1969 (before the first Earth Day), when manybegan hiring environmental engineers. Several ofthe furniture companies included in our case studywere also highlighted in the press for their environmentally-responsible practices. Thus, thefurniture industry appeared to have a number ofsuitable cross-industry benchmarking firms as candidates for case studies.

The companies were initially screened in a tele-phone pre-interview with the environmental man-ager at the divisional office. The screening questionsincluded the following:

• Do you have an environmental managementprogram?

• If so, how successful has this program beenand how do you measure its success?

• What are the primary components of yourprogram?

• Are suppliers included in the program?During the initial screening the willingness of the

company to participate in the study was assessed.All the firms contacted were willing to be a part ofthe study, and site visits were scheduled. Table IIpresents an overview of the five companies whichparticipated in the research.

The interviews were conducted with severalmanagers responsible for different components ofthe company’s overall environmental strategy ateach site using the interview protocol. Respondent

job titles included director of facilities, generalmanager of safety and environmental compliance,environmental manager, and waste reduction coordinator. The interviews lasted between two andfour hours and were conducted at the company’ssite. The interview protocol focused the process ofthe interview on the company’s environmental objec-tives and the impact of environmental issues on pro-curement, design, packaging, and logistics activities.1 3

Detailed notes were taken during the interviews.The field notes were transcribed and a “meta-

matrix” display was constructed to assist with datacoding and analysis.1 4 The meta-matrix summarizedeach of the major environmental practices directedat materials management and purchasing processesat each of the sites. Appendix I (see page 10)describes the procedures used to code the data andensure the reliability of the data coding process.

The coded data from the meta-matrix were usedto identify the types of supply-based practices inthe environmental management processes of pur-chasing companies. One of the most importantissues faced by purchasing is whether to integrate aparticular supplier into the internal environmentalmanagement processes of the company. Figure 1(see page 6) depicts the types of processes used bycompanies in the sample for driving environmentalimprovements in the supply base.

To further understand the processes by which pur-chasing managers could drive environmentalimprovements within their supply base, a series ofaverages was calculated from the coded data whichprovided environmental “scores” for each of the fivecompanies. All five companies were involved in sim-ilar types of environmental practices with their sup-pliers, consistent with the supplier evaluation andselection criteria depicted in Figure 1.



OVERVIEW OF COMPANIES INCLUDED IN THE RESEARCHTABLE II

Annual SalesCompany (fiscal 1996) Main Product Line CommentsCompany A $1.3 billion High-end office furniture. Most of the Has implemented a system of evaluating

product is wood construction. suppliers on environmental impact attributed. Has begun ISO 14000 supplier certification.

Company B $2.6 billion High-end office furniture. Most of the Has a long history of strategic sourcing and product is wood construction. cooperative supplier relationships for key

suppliers.Company C $1.2 billion High-end office furniture. Most of the Works with product designers and suppliers

product is wood construction. to reduce and eliminate product off-gassing (i.e., product emitting formaldehyde).

Company D $22.3 million High-end office furniture, particularly Has a long history of developing suppliers executive desks. Most of the product for strategic initiatives, for example sending is wood construction. systems analysts to the supplier to implement

EDI purchasing.Company E $1.7 billion High-end consumer furniture. Most of Has had limited success in supplier develop-

the product is wood construction. ment with the bulk of the success coming from a few large suppliers.

Within the five companies, the responsibilities ofpurchasing and inbound logistics included, tosome extent, facilitating product design, determiningappropriate methods and criteria for supplier evalu-ation and selection, and making changes to purchasing processes and purchased materialsdelivery across the supply chain. This study f o c u s e son these main tasks as areas where purchasing couldinfluence EFP in the supply chain. Hence, the envi-ronmental management activities of the five com-panies were classified into five major supplychain-oriented categories:

1. Materials used in product design for the environment

2. Product design processes3. Supplier process improvement4. Supplier evaluation5. Inbound logistics processes

All of the companies pursued activities aimed atimproving environmental performance in each ofthese supply chain categories, but experienced verydifferent performance outcomes. In understandingthe role of suppliers in environmental management,a number of differences in the implementation of thestrategies in the five companies were identified. Byhighlighting and comparing these differences, anumber of key insights and strategies were derivedwhich were aimed at integrating suppliers into envi-ronmental management initiatives. These insightsare presented as general guidelines that purchasingand supply chain managers can apply in managingenvironmental issues within their own supply base.

The next section discusses these observations andrecommendations based on the company environ-mental scores and the associated practices.

EFP IN PRODUCT DESIGN ANDPURCHASED MATERIALS

“Design for the Environment” (DFE) initiatives inproduct design and development processes includeactivities initiated both by the buying companyalone as well as joint initiatives with suppliers. Thebuying company’s DFE activities are relevant to therole of suppliers in environmental managementprocesses because they set a stage for integratingsuppliers into the DFE process. Primarily, DFEactivities follow one of two directions: productmaterials and design processes.

Company A focused heavily on product materialsin their DFE initiatives. As an example of changemade in a product’s materials in the design stage,Company A has started using materials with lowerformaldehyde off-gas potential. As of 1993, anyproduct which releases ozone-depleting substances(ODS) or which uses ODS in its manufacturingprocess must be labeled. Company A met the Envi-ronmental Protection Agency’s (EPA) deadline forremoving ODS from products sold in the UnitedStates. More importantly, Company A strictlyadheres to or exceeds the formaldehyde standardsset by the EPA. Company A is also attempting toreduce the formaldehyde content of the particleboard it uses because the chemical is released whenthe board is incinerated.



DECIDING TO INTEGRATE SUPPLIERS IN ENVIRONMENTAL MANAGEMENTFIGURE 1

Company A is also working to reduce the numberof different materials used in their products. In thepast, the product might have several componentsmade from different materials. This made the product, as a whole, more difficult to recycle.

Company C is also active in product materialsDFE practices. They encourage their designers toconsider alternative woods in their designs and toconsider the tradeoffs associated with usingveneers rather than solid wood. Company C hasalso reduced the aluminum content of its furnitureto the lowest possible level without sacrificing theproduct’s strength.

None of the other three companies reported anyproduct materials DFE practices. Companies D andE were the most deficient in this area. Company D isa make-to-order company, hence their materialsselections are usually driven by customer prefer-ences. Similarly, Company E views their business asa “fashion industry” and are more concerned withconsumer preferences than with innovating thematerials used in the product to reduce environmentalimpact. In general, the more advanced companies i nthis study were seeking environmental improve-ments in product design by proactively involvingmembers of their supply base in design activities.

Guideline: Product design and purchasing personnel should work together to influence envi-ronmental improvements in their own and theirsupplier’s products. This can be achieved by substi-tuting or changing material specifications for pur-chased products, and avoiding the use of hazardousor EPA-regulated materials where possible, to reflect the environmental agenda of the company.

EFP IN PRODUCT DESIGN PROCESSES

One way to influence material specifications is bypromoting an improved dialogue between pur-chasers and designers. Companies A and B areactive in reengineering their design processes toimplement DFE. Company A uses “product designteams” to discuss the environmental issues andconcerns related to the new product beingdesigned. These design teams use life cycle analysisas a focal point for their discussions. Life cycleanalysis involves studying all of the inflows andoutflows of materials within the product’s bill ofmaterials, the by-products from the processes usedto produce them, and the potential for recycling orre-using the product once it has reached the end ofits useful life. Company B empowers its engineersto employ DFE practices by delegating ownershipof product quality, environmental quality, andmanufacturing process design. Company B alsouses life cycle analysis, as well as Quality FunctionsDeployment (QFD) techniques to support DFEstrategies aimed at producing “greener” productsand services.

Companies C, D, and E are not involved withintegrating DFE into their design and developmentprocesses. None of these companies considers lifecycle issues in their design processes and none hasintegrated cross-functional efforts into their designprocesses.

Guideline: Product design processes must con-sider the lifecycle of all materials used in the product,including “cradle to grave” considerations. This can beaccomplished by promoting a dialogue betweendesigners and materials experts, and the use of toolssuch as life cycle analysis, QFD, and DFE by cross-functional design teams.

EFP IN SUPPLIER PROCESSIMPROVEMENTS

All five companies have recognized the role thatpurchasing plays in EFP. Actively developing sup-pliers’ focus on environmental process improve-ments within their facilities is one high-leveragearea where purchasing can significantly influenceEFP in the supply chain. Each of the companiesstudied was pursuing some sort of initiative toinfluence or improve their primary supplier’sprocesses. In some instances, the companies pur-sued nearly identical initiatives to achieve EFPpurchasing. For exam-ple, all of the compa-nies purchase woodfrom suppliers thatpractice sustainableforestry, and all of thecompanies either useno or very little tropi-cal wood from endan-gered species (e.g.,mahogany). In addi-tion to wood, other material suppliers were beingasked by purchasing managers to implement dif-ferent types of process improvements to reducewaste, with the added benefit of lowering landfilltonnage. For example, Company B is working witha key fabric supplier to reduce the length of thebolts of cloth they buy, in order to reduce thequantity of remnants from the cutting process. AtCompany C, mangers were centralizing their clothcutting operations and working with key fabricsuppliers to increase the length of the bolts of cloth,again to reduce waste.

All five companies work with their suppliers toreduce waste and emissions in the suppliers’process. A manager at Company A recognized thatboth his company and his suppliers were facing thesame types of regulations. If Company A couldreduce the environmental impact of incomingmaterials to its processes, then the negative envi-ronmental impact of its own products could also bereduced. Company A also views this on-going dia-logue with suppliers regarding the environment as



Actively developing suppliers’ focus on environmental processimprovements within their facilities is one high-leverage area where purchasing can significantly influence EFP in the supply chain.

an opportunity to learn and thereby improve itsown processes. Company B is working with amajor paint supplier to reduce VOCs in theirpaints. Company C works with its suppliers to helpthem meet environmental regulations by helpingthe suppliers identify their waste streams. Company C also monitors their suppliers’ environ-mental processes within their certification system.Company D sends its vice president responsible forenvironmental management to suppliers to “pitch”environmental programs and send the messagethat green products are a priority if the supplierwishes to become a long-term partner with the company. Company D also includes in its oper-ating budget money to send information technology specialists to the suppliers to help them with systems issues, such as EDI implementation and dataintegrity, which results in reductions in paper usage.Company E has worked with several of its largersuppliers to reduce some emissions and solid waste.

Guideline: Purchasing managers must pro-actively influence suppliers’ processes, since liabilityfor non-compliance to environmental regulationsextends to all supply chain members. This can beaccomplished by understanding core supplierprocesses and materials, and the environmentalregulations associated with these processes andmaterials. High-level support of these activities iscritical for success.

EFP IN SUPPLIER EVALUATION METHODS

To truly integrate suppliers into EFP, a close rela-tionship is required between the trading partners.As Figure 1 suggests, the supplier must either bewilling or coerced to work on the EFP initiatives. Ifthe supplier is coerced, the company should beprepared to experience resistance from the sup-plier, and have a backup plan. The five companieshave had limited success in convincing suppliers,particularly smaller suppliers, to take part in EFPinitiatives. Company E has implemented severalEFP projects with its larger suppliers, but the morenumerous small suppliers have expressed littleinterest in working on environmentally-orientedinitiatives. In many cases, this is due to the supp l i e r ’ slack of internal resources. A notable example of theproblem of convincing suppliers of the benefits ofEFP is illustrated by the experience of Company Dwith one of its foam suppliers. Company Daccounted for nearly 80 percent of the supplier’sbusiness and was located less than five miles fromthe supplier. Company D approached the supplierand inquired about the possibility of usingreusable packaging to deliver the foam to Com-pany D. Despite the apparent leverage CompanyD enjoyed with this supplier, they refused. Company D dropped the supplier and began fabri-cating the foam internally (an interesting twist onthe insourcing/outsourcing decision).

The development of supplier evaluation systemsthat place significant weight on objective environ-mental criteria can play a major role in influencingsupplier behavior. This problem becomes espe-cially challenging when companies have a verylarge supply base. Company B’s supply base is sodiverse, for example, that they have not been ableto finalize a set of supplier evaluation and selec-tion criteria. Company A has partly addressed thisproblem by centralizing the evaluation and selec-tion of some suppliers (particularly waste disposal service providers).

Of all the companies studied, only Company Ahas successfully completed a set of guidelines forsupplier evaluation and selection based on environ-mental issues, the first step of which is achievingcompliance to current environmental regulations.Company A wants suppliers to go beyond strictcompliance, but this is a minimum requirement.However, they will not implement such criteria asrigid standards which must be met by their suppliers.Company A’s goal is to develop environmental part-nerships with its suppliers, without having to regulate and audit them.

The results of a recent focus group of ten materialsmanagers (unrelated to this study’s furniture c o m-panies) emphasizes the importance of carefullydeveloped supplier evaluation criteria.1 5 These managers were presented with a list of 30 environ-mental criteria mentioned as important in the litera-ture, and were asked to rate the importance of thecriteria in evaluating suppliers. Table III (see page 9)summarizes the top 10 criteria rated by managers inthe focus group. Note that many of the criteria arestill reactive in nature, (e.g., VOC content of the pur-chased product, recycled content of the purchasedproduct, and whether the supplier has beenassessed a fine by the government for environmen-tal non-compliance). These results lend credence tothe earlier statement regarding the difficulties asso-ciated with improving suppliers’ environmentalprocesses. If a supplier is willing to voluntarilyimprove environmental performance, eitherthrough their own insight or through the exercise oftheir customer’s leverage, the diversity of possibleapproaches can be bewildering. Furthermore, theenvironmental outcomes represented by alternativeprocess technologies are also often unknown. Thefact that a number of proactive environmental mea-sures are conspicuously absent in Table III suggeststhat this area of EFP in supply chain management isindeed in its earliest stages of development.

Guideline: The methods used and the criteriaemphasized for supplier evaluation must reflectthe strategic direction of the buying company’senvironmental initiatives. This is accomplished byfirst selecting criteria which focus on meeting gov-ernment regulations, followed by proactive criteriafocused on process improvements.



EFP IN INBOUND LOGISTICS PROCESS

Changes in inbound logistics processes can signifi-cantly reduce waste and cost. Not surprisingly, thecompanies in this study focused attention onachieving improvements in this area. Company Bhas worked to sensitize its employees concerningthe environmental implications of purchasing, par-ticularly packaging and inbound logistics. Com-pany C trained their buyers in the environmentalimplications of the fallacy of purchasing strictlybased on unit price and the importance of consideringother issues such as disposal and obsolescence.

Companies A, C, and D have begun receivingshipments in reusable packaging from certain sup-pliers. Company A receives caster assemblies inreusable plastic trays, instead of the plastic bagsand cardboard cartons previously used. Not onlydid this change reduce packaging material, it madeit easier for the workers to assemble the productby improving the assembler’s access to the assem-blies. Similarly, Company C’s change to plastictrays made of 100 percent recycled contentreduced the handling time for its chair bases by 40percent. Company D replaced palletized corru-gated packaging with metal trays. This changesaved the company $12,000 in the first three yearsafter the change and dramatically reduced theamount of corrugated cardboard to be disposed.

Guideline: Suppliers must help buying compa-nies change inbound logistics processes to reducewaste (e.g, packaging), which in turn can yield anoperational advantage (e.g., cost and ease ofassembly). This is accomplished by initiatives suchas reusable containers for material delivery.

Not all of the companies were effectively managingsupplier environmental performance. For i n s t a n c e ,Company E focused much of its attention on theemerging laws of environmental compliance, andhas been active at all levels of government, fromlocal to national, in trying to shape the progress ofthe laws. Because Company E’s environmental pro-grams are significantly understaffed (two peoplefor the entire organization), the focus on legislationcomes at the expense of a focus on operational orstrategic implications of environmental issues.Company E has no projects in place to reduce pack-aging of incoming materials through reusable con-tainers. The company has also failed to developguidelines for supplier evaluation and selectionbased on the supplier’s environmental performance,and has made no effort to change the purchasingprocess to include environmental issues.

CONCLUSIONS

Purchasing and supply chain managers are in acritical position to influence the size of the overallenvironmental footprint of a company. Their influ-ence on activities such as supplier selection and

evaluation, supplier development, and purchasingprocesses means they can have a major impact onthe ability of a company to establish and maintaina competitive advantage through EFP. The experi-ences of these five companies in the furnitureindustry demonstrate the need for purchasing andsupply chain managers to integrate suppliers intoenvironmental management initiatives.

However, meeting this need will not be easy.Companies will face many challenges when tryingto make suppliers an integral part of their environ-mental programs, including supplier resistance andconstantly changing government regulations.Despite the difficulties, companies must committhemselves to improving the environmental perfor-mance of their supply chains. Only through a com-mitment of resources to environmental concernscan a company hope to achieve a competitiveadvantage through EFP. More important, as business is further pressed by customers and gov-ernments to achieve sustainability, minimal envi-ronmental compliance will not effectively positionthe company to maintain its market position. There-fore, a final guideline is:

Guideline: Companies must proactively managesupply chain environmental initiatives and seekhigher benchmarks rather than simple compliancewith government regulations. Proactive strategiesmust be supported with adequate resources andcannot just be given “lip service”. A number ofcross-functional and inter-organizational processesmust be addressed, including product design, suppliers’ processes, supplier evaluation systems,and inbound logistics. Proactive environmentalstrategies also have another benefit: cost and waste-reduction objectives can frequently be achieved.

REFERENCES1. R.B. Handfield, S.V. Walton, S.A. Melnyk, and L.

Seegers, “Green Supply Chain Practices in the Furniture Industry,” Journal of Operations Management, f o r t h-coming, 1997.

2. Handfield, et. al., op. cit., 1997; P. Winsemius and U.Guntram, “Responding to the Environmental Chal-lenge,” Business Horizons, vol. 35, no. 2 (1992), pp. 12-20.

3. Winsemius and Guntram, op. cit., 1992; M. Porter and C.van der Linde, “Green and Competitive,” Harvard Busi -ness Review, vol. 73, no. 5 (1995), pp. 120-134.



TOP TEN ENVIRONMENTAL SUPPLIER EVALUATION CRITERIATABLE III

1. Public disclosure of environmentalr e c o r d

2. Second-tier supplier EFP evaluation3. Hazardous waste management4. Toxic waste pollution management5. On EPA 17 hazardous material list

for product labeling

6. ISO 14000 certified7. Reverse logistics program8. EFP in product packaging9. ODS management10. Hazardous air emission

m a n a g e m e n t

4 . C.J. Corbett and L.N. Van Wassenhove, “The Green Fee:Internalizing and Operationalizing EnvironmentalIssues,” California Management Review, vol. 36, no. 1 (1993),pp. 116-135; D.J. Wood, “Corporate Social PerformanceRevisited,” Academy of Management Review, vol. 16, no. 4(1991), pp. 691-718.

5. Porter and van der Linde, op. cit., 1995.6. See B.C. Bonifant, M.B. Arnold, and F.J. Long, “Gaining

Competitive Advantage through Environmental Invest-ments,” Business Horizons, vol. 38, no. 4 (1995), pp. 37-47;M.C. Gupta “Environmental Management and ItsImpact on the Operations Function,” International Journalof Operations and Production Management, vol. 15, no. 8(1995), pp. 34-51; Porter and van der Linde, op. cit., 1995;J. Sarkis and A. Rasheed, “Greening the ManufacturingFunction,” Business Horizons, vol. 38, no. 5 (1995), pp. 17-27, for a more detailed description of how companiesmight leverage environmental policy for competitiveadvantage.

7. Porter and van der Linde, op. cit., 1995; N. Walley and B.Whitehead, “It’s Not Easy Being Green,” Harvard Busi -ness Review, vol. 72, no. 3 (1994), pp. 46-52. Briefly stated,a resource-productivity framework labels anything t h a tdoes not add value as a waste to be eliminated. In thisframework, pollutants are simply another example ofwaste to be eliminated; they do not represent a specialclass of problem.

8. J. Makower, Beyond the Bottom Line (New York: Simon &Schuster, 1994).

9. S.L. Hart “Beyond Greening: Strategies for a SustainableWorld,” Harvard Business Review, vol. 75, no. 1 (1997),pp. 66-76.

10. The stages presented in Table I draw on the works of P.Winsemius and U. Guntram, 1992; R.B. Handfield, S.V.Walton, S.A. Melnyk, and L. Seegers, 1997; and the expe-rience of the authors.

1 1 . M.B. Miles and A.M. Huberman, Qualitative Data Analy -sis: A Sourcebook of New Methods (Newbury Park, CA:Sage Publications, 1994, p. 37).

12. R.D. Klassen and C.P. McLaughlin, “The Impact of Envi-ronmental Management on Firm Performance,” Manage -ment Science, vol. 42, no. 8 (1996), pp. 1199-1214.

13. The interview protocol is available from Steve Waltonupon request, preferably by e-mail, to [email protected].

14. Miles and Huberman, 1994, p. 178, define a meta-matrixas a “master chart assembling descriptive data fromeach of several cases in a standard format.” A meta-matrix is one first step for analyzing and displayingqualitative data.

15. Industry Executive Advisory Team, December 3-4, 1996,Michigan State University Environmentally-ResponsibleManufacturing Research Team, NSF Study #DMI-9528759. These managers represented firms in the auto-motive, computer, electronic, and consumer goodsindustries.

16. Miles and Huberman, op. cit., 1994, p. 56.17. Miles and Huberman, op. cit., 1994.



DATA CODING AND RELIABILITY ANALYSISAPPENDIX I

Unlike large sample size statistical analysis, qualitative data analysis is iterative; refining, reconstructing, and refocusing successive

displays drawn from the meta-matrix at each iteration until the final display incorporates as much of the qualitative data as is appropriate.

For this reason, data reduction is an integral part of the data analysis process. In the areas of product design, supplier evaluation, p u r-

chasing process and logistics, the objective was to determine the best environmental supply chain practices. Using the processes

described in this appendix, the events and responses from each site were classified into the conceptual structure presented in Table I,

which could then be used to describe a taxonomy of EFP best practices in purchasing and materials management.

The data were coded by applying abbreviations or symbols to sentences and/or paragraphs in the transcribed field notes to classify

the sentences/paragraphs.1 6 The transcribed field notes were reviewed several times to code the activities into the appropriate envi-

ronmental response categories presented in Table I and to compare field notes taken during the interviews. In so doing, the activities

and processes observed at each site could be further classified as design and development, purchasing process, and inbound logistics.

Four coders — the authors and another expert in supply chain management — independently coded the data. The classification and

coding was refined iteratively between the four codes until all activities were classified to the satisfaction of all coders.

Each activity was coded independently and assigned a position on the relative scale suggested in Table I (i.e., scores ranging from

1 to 6, with 1 = resistant, 2 = embracing, 3 = reactive, 4 = receptive, 5 = constructive, and 6 = proactive). The scores assigned to

each of the practices were then averaged, resulting in an environmental “score” for each activity for each company. All of the scores

were rounded to the nearest integer. This method enabled a check on the reliability of the coding using the following formula:17

Number of agreements

Total number of items

Miles and Huberman advocate a 70 percent intercoder reliability as appropriate when using multiple raters to code field notes.

Using the method described above, each rounded average score for each activity was used to calculate the intercoder reliability.

Each reliability was found to be 0.70 or higher.

Reliability =



INTERVIEW PROTOCOL FOR EFP IN THE FURNITURE INDUSTRYAPPENDIX II

Objectives1. To understand which environmental issues concern furniture companies.2 . To understand how concern for environmental issues translates into action within materials and logistics management responsibilities.3. To share best practices regarding waste prevention, reduction, and management within the furniture industry.

General issues1. What is your role in environmental issues?2. How long has your company been concerned about environmental issues? What has been the primary driver for action?3. Why is your company involved in environmental issues? Overall, what are the tangible and intangible benefits?4. What departments in the company are concerned/involved with environmental issues?5 . How does handling of environmental issues fit within the organization (i.e., who is responsible for these issues)? If you are responsible,

where do you fit in the organization chart?6. What is your impact on materials and logistics management issues?7. Are the environmental efforts publicized/marketed? In what way?8. What are the company’s overall objectives in environmental affairs?9. How do you and your firm identify and prioritize environmental issues? Does the consumer affect priority and resolution of

issues? How do you guard against short-term decisions?

1 0 . What is (are) your source(s) of environmental information? Consultants, internal experts, local action groups, regulatory agencies?11. Which community action groups do you have relationships with?Manufacturing

1. What is the impact of environmental issues on manufacturing?2. What waste streams are generated that your firm tries to control/regulate?3. Have any processes been redesigned to reduce waste?4. How is the product designed? Is the life cycle of the product considered?5. Discuss the remanufacturing trend in the furniture industry. What part of your business is this? Why does the customer want

remanufactured furniture?6. How is solid waste handled? Who has primary responsibility for disposition of scrap and waste?

Purchasing1. How do environmental issues impact purchasing?

2. Are environmental criteria used to evaluate potential suppliers (e.g., supplier’s manufacturing process, use of materials, sourceof materials)?

3. What is the interest level of your suppliers? Have any suppliers actively participated in environmental efforts?4. Do you have any specific projects in this area? Examples include dyes, “good wood,” and supplier qualification.

Marketing1. Do your customers request environmentally-responsible products?2. What is the potential for growth in this area?

Packaging1. How are your products packaged?2. What are your company’s environmental efforts in this area?

Logistics1. Does your company manage any reverse logistics flows? Describe.

2. How do environmental issues impact transportation selection and/or distribution methods?General environmental initiatives

1. Describe any other major environmental initiatives.2. How do you measure the benefits of environmental initiatives in terms of cost?

Future trends1. What are future environmental trends in the furniture industry?2. Do you see your environmental initiatives fitting in with your long-term business strategy?

the green supply chain: integrating suppliers into environmental management processes

Documents