Friday, 12 August 2016

A green supply chain is the key to surviving the competition

The time is 15:00 hours. The production in the factory is going on, business as usual. The assembly line is churning out piece after piece. The QC team is inspecting each piece and separating the good ones from the bad ones. The shop floor supervisor is on his rounds. But for a change, he is accompanied by the top members of the HR and Compliance departments. They are scouting the place for potential NCs (non-compliances) in order to fix them. This is NOT a usual activity. The HR head doesn’t come to the shop floor unless it is something very important.
Outside the building, there is a team of workers cleaning up and organizing the huge front lawn, the waste segregation area is being sorted and labelled too and the hazardous waste area is being improved upon and so on.
Is this usual practice? Perhaps not. Most likely the MD or a major customer is showing up for a visit (read: audit) the next day. Does this sound familiar?

Industries in India, particularly the MSMEs and the OEM ancillaries are known to adopt such last minute corrective measures when it comes to compliance and sustainability. Many of them look at environmental compliance (EHS) as a hurdle that affects their day-to-day production targets. Such industries often look at the corrective measures as something that is painful to do as a result of which, the steps taken are often half-hearted and are temporary fixes (till the so called audit gets over)
Times are changing. With the advent of our Hon’ble PM’s Make in India campaign, more and more international companies are looking to setup shop in India. These international players and many Indian OEMs understand the importance of monitoring the impact on the environment by their production processes. Natural resources are limited and big companies realize that they are going to survive the competition only if the resources being put into their activities are used judiciously with minimum environmental impact along with substantial efforts to give something back to the nature. The Government policies have evolved to ensure large corporations indulge in socially and environmentally benefiting activities. While Corporate Social Responsibility (CSR) initiatives take care of the latter i.e. giving back to the nature/community, the former requires an effort not just from the company but also from its entire supply chain.

In the case of large companies or brands, the task of production is outsourced to the MSMEs entirely or in parts. This is where the major chunk of resources are being used. Once the piece is checked, packed and shipped to the Brand, there is hardly any natural resource used. Perhaps just the fuel for transportation. Major international brands, who don’t have a retail presence in India, have their supply chain here. This is particularly true in the garments and accessories sector. This essentially means that products being made in this country are going around all across the world. They have to meet international standards not just in terms of product quality but also in terms of process responsibility. Therefore, the big companies target their supply chain. They enforce the international standards on these MSMEs. Those who comply, stay in the business while those who can’t, lose out. These MSMEs may in turn push their vendors to go green in their processes or change their vendors altogether. Indian OEMs who export their products need to meet international standards and have been known to conduct elaborate green vendor development campaigns encouraging their suppliers to adopt energy and water efficient technology along with a strong check on pollution and waste management.

Another point of view is at a national level. The factories in India or the ones that will get setup thanks to the Make in India campaign will be exploiting the resource within this country. They will be impacting the local environment here. By using the limited and critical resources in an irresponsible way, one is paving way for a day in future when most or all of the resources and raw materials will have to be bought from more expensive sources. This will shoot up production costs which is how one loses out in competition to start with. From a national perspective, all the Indian industries contribute to the GDP or in other words, in some way they are the supply chain of India. Just like they step up their efforts towards greener production for business with international brands, they have to step up their efforts for the future of the country and nature.

It’s an Investment, not an Expenditure
All these efforts will certainly lead to some expenditure on the supplier’s part. They might have to retrofit their boiler or tie up with an agency for handling their waste. But it is more of an investment because not only such measures make the factory resource efficient and lead to financial savings in operations, but they also ensure that the factory stays in competition by continued, if not more, business from the OEM.

A factory adopting green and sustainable production practices has a huge marketing instrument in its kitty. International brands coming into the country from setting up a supply chain will look for vendors who are better adhered to international standards. This makes their job easy and gives the factory an edge over others who might not be that compliant. One must look at these efforts as investment put into business development.

Some common steps for resource efficiency
When it comes to sustainable practices, it is important to understand that not all efforts require money. Most factories need simple steps to improve efficiency and reduce environmental impact. These are the low-hanging fruits which require little to no investment. Simple steps can lead to huge impacts, such as
-          Encouraging shop floor workers to switch off the lights of the floor during lunch, or
-          Asking the maintenance team to do regular checks on leaking water and steam fixtures.
-          Periodic maintenance of machines is a simple but very powerful step towards efficiency.
Preventive maintenance is always better than corrective maintenance. Large OEMs are known to take a week of shut down just to do thorough maintenance of their equipment.

Once the low –hanging fruits are harvested, one may look at upgrades requiring investment. Some steps are:
-          LED lighting in the factory
-          Energy efficient drives for pumps, motors and compressors
-          Heat recovery and Thermal storage and so on.

 Health and Safety
While resource efficiency is one part of the entire process, health of the workers and safe practices form the other components.
-    Ensure the workers are trained to work in a prescribed safe manner and the necessary paraphernalia is available (protective equipment, first aid kits etc.)
-          Form a small team with representatives from all departments and conduct internal audits monthly. Identify NCs and correct them and review them regularly.
-          Conducting regular third party trainings on Environment, Health and Safety gives a different perspective on the status of things within the factory.
-          Conduct regular fire safety and disaster management drills
-          Benchmark best practices from competitors and develop unique practices drawing inspiration across various sectors.

In conclusion, it is easy to make a product but not so easy to make the same thing in an environmentally responsible way. Those who can do it, survive.

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