IEM 5813

Performance Measurement System

MAKING THE SUPPLY CHAIN GREEN AND

SUSTAINABLE

Using GreenSCOR Model and Balanced Scorecard as

tools to implement sustainability

TEAM:
RAJESH MANTENA
SATISH MUDIGANTI

Oklahoma State University - IEM 5813

 Contents
2

 What is Green Supply Chain Management?

 Green Supply Chain Benefits
 Introducing the SCOR model
 Wow Factor – Adding Environmental Performance indicators to
the supply chain model and identifying measures to use within a
BSC for sustainability
 Green perspective to the SCOR model
 Green SCOR - life cycle analysis
 Balance Scorecard Measures for Sustainability
 Green SCOR benefits and Challenges
 References
 Questions

Oklahoma State University - IEM 5813

Green SCM leverages the role of the environment
in SC value creation
3

Source: Forging New Links, GEMI, 2004

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 Benefits of a Green supply chain
4

 Improves Agility – Green SCM help mitigate risks

and speed innovations
 Increases Adaptability- Green supply chain analysis
often lead to innovative processes and continuous
improvements.
 Promotes Alignment – Green SCM involves
negotiating policies with suppliers and
customers, which results in better alignment of
business processes and principles

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 Different environmental Pressures that lead to a
Green SCM
5
Regulations

•Directives
•Taxes and Fees
•Liability

Consumer & Ethical

Responsibility

•Quality
•Cost

Fig:1 Sources of environmental pressures effecting the supply chain

Julie Paquette (2005), Engineering Systems Division, MIT

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 Environmental operational objectives framework
6

Environmental pressures

Table: 1
Environmental operating

Resources Regulations Markets

Operate beyond Substitute Obviate the need Drive Create
pressure Expand for Exceed
models

Operate at Conserve Secure Comply Meet

pressure Satisfy
Resist pressure - Breach Exit
Relocate Ignore

Gregory J., Atlee J., Isaacs J., Kirchain, R., “Sustainability metrics for materials use at the system and operational level,”
Materials Systems Laboratory discussion paper, 2004

Supply Chain Council, Supply-Chain Operations Reference Model, SCOR Version 7.0, available at
www.supply-chain.org, accessed May 28, 2005
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 Getting closer to the Wow Factor – [SCOR Model]
7

 The SCOR (Supply chain operational reference)

model
Fig: 2

Yildirim Yilmaz, “Performance measurement in the value chain: manufacturing v. tourism”,

International Journal of Productivity and Performance Management, 2006

Oklahoma State University - IEM 5813

How is Performance of a supply chain measured?
8

 Performance Attributes developed by SCC

Delivering the correct product, to the current place, at correct time,
 Reliability in the correct quantity, with the correct documentation, to the correct
customer.

 Responsiveness The velocity at which a supply chain provides to the customer.

The agility of a supply chain in responding to marketplace changes to

 Flexibility gain or maintain competitive advantage

 Costs The costs associated with operating the supply chain

 Asset Management Efficiency

The effectiveness of an organization in managing assets to support
demand satisfaction. This includes the management of all assets:
fixed and working capital.
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Metrics Used to Measure Performance Attributes
of a Supply Chain
9

Performance Attribute Metrics

Reliability 1. Delivery Performance
2. Fill Rates
3. Perfect Order Fulfillment
Responsiveness 1. Order Fulfillment Lead Times
Flexibility 1. Supply Chain Response Time
2. Production Flexibility
Costs 1. Costs of Goods Sold
2. Total Supply Chain Management Costs
3. Value-Added Productivity
4. Warranty / Returns
5. Processing Costs
Asset Management Efficiency 1. Cash-to-Cash Cycle Time
2. Inventory Days of Supply
3. Asset Turns

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 Wow Factor
10

Closing the Gap

by

Adding Environmental Performance indicators to the supply chain

model and identifying measures to use within a BSC for sustainability

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 Green perspective to the SCOR model
11

 PLAN Phase
 Plan to minimize energy consumption and hazardous material
usage
 Plan the handling and storage of hazardous materials

 Plan for the disposal of ordinary and hazardous waste

 Plan compliance of all supply chain activities

Processes used to aid environmental decision-making in this phase:

 Environmental Cost Accounting

 Environmental life cycle analysis

 Design for environment

Shapiro, K., Stoughton, M., Graff, R., Feng, L., “Health Hospitals: Environmental Improvements through Environmental
Accounting,” A Report from Tellus Institute, July 2000, available at www.epa.gov/opptintr/acctg/pubs/hospitalreport.pdf,
accessed June 1, 2005.
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Green perspective to the SCOR model (contd.)
12

 SOURCE Phase
 Select suppliers with positive environmental records

 Select materials with environmentally friendly content

 Specify packaging requirements

 Specify delivery requirements to minimize transportation and

handling requirements

Processes used to aid environmental decision-making in this phase:

 Environmental Auditing

 Environmental Certification

Energy Star designates product specifications and eligibility criteria for several categories of
products, summarized at www.energystar.gov/index.cfm?c=products.pr_es_home_office, accessed June 1, 2005.

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Green perspective to the SCOR model (contd.)
13

 MAKE Phase
 Schedule production to minimize energy consumption

 Manage waste generated during the Make process

 Manage emissions (air and water) from the Make process

Processes used to aid environmental decision-making in this phase:

 Pollution prevention techniques like substitution, product modification,
improved maintenance, and recycling.
 Environmental management systems like guidance for employees in
environmental health and safety procedures and facilitation of tools for
continual improvement of environmental performance.

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Green perspective to the SCOR model (contd.)
14

 DELIVER Phase
 Minimize use of packaging materials

 Schedule shipments to minimize fuel consumption

Processes used to aid environmental decision-making in this phase:

 Green Logistics Approach: Considers the impact of
procurement, transport, inventory control, and distribution
activities to minimized environmental costs.

Matthews, H. Scott, Hendrickson, Chris T., “Economic and Environmental Implications of Online Retailing in the
United States,” Joint OECD/ECMT Seminar on the Impact of E-commerce on Transport, Paris, June 6, 2001.

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Green perspective to the SCOR model (contd.)
15

 RETURN Phase
 Schedule transportation and aggregate shipments to minimize
fuel consumption; prepare returns to prevent spills of
hazardous materials (oils, fuels, etc.) from damaged products

Processes used to aid environmental decision-making in this phase:

 Reverse Logistics
 Remanufacturing
 Recycling

Dale Rogers S., Ronald S. “Goin Backwards: Reverse Logistics Trends and Practices,” Reverse Logistics
Executive Council, 1999.

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 Green SCOR - life cycle analysis
16

Julie Paquette (2005), Engineering Systems Division, MIT

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Sample Green SCOR Process Table (Release Finished Product of a Pharmaceutical Company )
Process Element: Released Finished Product to Deliver Process Element Number: M2.6
Activities associated with post-production documentation, testing, or certification required prior to delivery of
finished product to customer. Examples include assembly of batch records for regulatory agencies, laboratory tests
for potency or purity, creating certificate of analysis, and17
sign-off by the quality organization.

Performance Attributes Metrics

Reliability 1. % Release errors
2. % products meeting specified environmental
performance requirements
3. % of products with proper environmental labeling (if
required)
Responsiveness 1. Quarantine or Hold time
2. Release process cycle time
Flexibility None Identified
Cost 1. Release cost per unit
Assets None Identified

Best Practices Features

Accurate and low cost batch records for Electronic batch records
regulatory compliance
Review batch records by exception Electronic batch records linked to process plans/recipes
and exceptions flagged
Automated notification of laboratory Interface between production system and LIMS
regarding sample availability
Implement EMS Program
Implement hazardous materials “pharmacy” system
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 Balance Scorecard Measures for Sustainability
18
Financial Perspective Customer Perspective
•$ fines/penalties •$ cause related marketing
•%proactive vs. reactive expenditures •# green products
•Increase in relative % of proactive •Product safety
•Energy costs •Customer returns
•Disposal costs •% products reclaimed after use
•Recycling revenues •Functional product eco-efficiency

Internal Business Perspective Learning & Growth Perspective

•% materials recycled •% of employees trained
•%waste of landfill •# employee complaints
•%facilities certified •# of employees with incentives
•# certified suppliers linked to environmental goals
•# accidents/spills •#of functions with environmental
•# truck miles responsibilities
•% of employees using car pools

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 Green SCOR Benefits and Challenges
19

 Benefits
 Improved environmental management performance

 Improved supply chain management performance

 Improved green supply chain initiatives

 Challenges
 Data

 Cultural

 Training

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 References
20
1. Beamon, B., "Designing the Green Supply Chain," Logistics Information Management, 12/4, (1999): 332-342
2. US Environmental Protection Agency, “Major Environmental Laws,” 2005, www.epa.gov/epahome/laws.htm, accessed May 30,
2005.
3. EU, “Directive on the Eco-Design of Energy Using Products,” europa.eu.int/comm/enterprise/eco_design/, 2005, accessed June 1,
2005.
4. The Material Systems Laboratory at Massachusetts Institute of Technology has studied this area extensively. Researchers include
Erica Fuchs, Michael Johnson, Francisco Veloso. US Food and Drug Administration, 2005, www.fda.gov/opacom/hpview.html,
accessed June 1, 2005.
5. US Consumer Product Safety Commission, 2005, www.cpsc.gov/, accessed June 1, 2005.
6. EU, “Directive on the Restriction of Hazardous Substances,” 2003, europa.eu.int/eur-
lex/pri/en/oj/dat/2003/l_037/l_03720030213en00190023.pdf, accessed June 1, 2005.
7. Walls, Margaret, “The Role of Economics in Extended Producer Responsibility: Making Policy Choices and Setting Policy Goals,”
Resources for the Future, Discussion Paper 3/11, 2003, available at www.rff.org/Documents/RFF-DP-03-11.pdf, accessed May 28,
2005.
8. EU, “Directive on Packaging and Packaging Waste,” 1994, europa.eu.int/scadplus/leg/en/lvb/l21207.htm, accessed June 1, 2005.
More information about Germany’s “Green Dot” Dual System for recycling packaging waste may be found at www.gruener-
punkt.de, accessed June 1, 2005.
9. Toffel, Michael, “The Growing Strategic Importance of End-of-Life Product Management,” California Management Review, 45/3,
(2003): 102-129. Environmental Tax Policy Institute, www.vermontlaw.edu/elc/index.cfm?doc_id=134, accessed May 17, 2005.
10. Resources for the Future provides a sampling of references that address environmental taxes as an introduction to this subject area.
www.rff.org

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 References (contd.)
21
1. Boyd, James, “Green Money in the Bank: Firm Responses to Environmental Financial Responsibility,”
Magagerial and Decision Economics, 18/6 (1997): 491-506.
2. Snir, Eli, "Liability as a Catalyst for Product Stewardship." Production and Operations Management,
10/2, (2001): 190-207.
3. GreenTech Assets, Inc., greentechassets.com/, accessed May 31, 2005.
4. Ashland, Inc., www.ashchem.com/adc/enviro/, accessed May 31, 2005.
5. Boyer, Marcel and Porrini, Donatella, “The Choice of Instruments for Environmental Policy: Liability or
Regulation?” An Introduction to the Law and Economics of Environmental Policy: Issues in Institutional
Design, Research in Law and Economics, 20 (2002): 1-41.
6. Roberts, J.A., “Green consumers in the 1990s: profile and implications for advertising,” Journal of
Business Research, 36/1, (1996): 217-231.
7. Mohr, Lois A., Eroglu, Dogan, Ellen, Pam E., “The development and testing of a measure of skepticism
toward environmental claims in marketers communications,” The Journal of Consumer Affairs, 32/1,
(1998): 30-56, referenced in Hoffman, Andrew, “Business Decisions and the Environment: Significance,
Challenges, and Momentum of an Emerging Research Field,” in G. Brewer and P. Stern (eds.) National
Research Council, Decision Making for the Environment: Social and Behavioral Science Research
Priorities, 2005.
8. Hansen, Nannette, “Organic food sales see health growth,” MSNBC News Online, December, 3, 2004,
msnbc.msn.com/id/6638417/, accessed May 20, 2005.

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 Questions….
22

The more we exploit nature, The more our options are reduced, until
we have only one: to fight for survival. ~ Morris K. Udal

Questions ? ?

Oklahoma State University - IEM 5813