Decoding Indias Green Supply Chain Trends and Challenges
In recent years, the Indian Logistics and Supply chain have undergone a transformation, thanks to the steady adaptation of smart, technologically empowered operational practices, coupled with accelerated growth opportunities. Additionally, as per the Global Ranking of the World Bank's 2016 Logistics Performance Index in 2016, India jumped to 35th position from its previous 54th position 2014, registering improvement in overall ranking across all the six components of the logistics performance index. However, Indias fast track rise to become a global economy has led to a devastating impact on its environment and ecology. Indias poor Environmental Performance Index, which slipped from 141/180 in 2016 to 177/180 in 2018, is a loud warning sign for the economy to urgently adopt sustainable practices so as to remain globally relevant.
Taking a cue from global trends and the Green revolution that is bringing about the adoption of environmentally responsible business practices worldwide, the next wave of disruption for Indian logistics is in the making, with a steady evolution of Green Supply Chain Management (GSCM) process, that is slowly making its impact. GSCM or Green Logistics is a process of adapting and adopting environmentally responsible processes that are sustainable and effective in minimizing the ecological impact of traditional logistics activities. However, the slow adoption of Green Supply Chain Management (GSCM) practices in India, can mainly be attributed to three basic factors:
- Lack of strong environmentally responsible public policy for businesses
- Lack of economical or cost-effective infrastructure that can encourage GSCM
- Lack of public/ consumer awareness and preference for environmentally positive products/ services
Meanwhile, there are marginal players and a few start-ups that are working towards creating a cost-effective and collaborative solution to make GSCM a more viable and popular practice among modern Logistic players. The rise of third-party logistics (3PL) service providers and the trend of outsourcing vs the traditional in-house logistic operations are small steps in the direction. The recent adoption of digitization in logistics is also driving practices like consolidation, the reduced dependency of physical documents, faster mode of transport, smarter warehousing, and freight management, etc., all of which are also contributing to reducing environmental impact brought about by traditional SCM. However, a massive transformation in mindsets, policies, and business practices are needed for India to be looked upon as a truly eco-friendly and green business economy, with GSCM and Green Logistics being its backbone!
Decoding the negative impact of major sub-sectors of modern Logistics and understanding how they can adapt and adopt Greener processes, can be briefly explained as follows:
- Transportation: As one of the major contributors to environmental degradation, the transport sector alone contributes to about a quarter of global CO2 emissions. In India, the CO2 emission from fossil fuels has also grown at CAGR of 4.5%, as compared to the 1.16% growth in developed countries. Apart from CO2 emission, transportation also contributes to 30% of particulate matter in the air in metros, leading to air pollution, noise pollution, and degradation of green cover and open spaces due to the heavy infrastructure development in building wider roads and expressways. Adoption of Green Transportation can help the replacement of fossil fuel based technology with bio-fuel based one or with alternatives like CNG, hybrid, battery-operated vehicles, and equipment, etc. Additionally, taking into account details like fuel efficiency, payload management, routing, and driving techniques can go a long way in making green transportation more cost-effective and sustainable. Consolidation of shipment and preference to railways or waterways as a preferred mode for transportation can also make a considerable impact on the environment while also saving cost and time.
- Warehousing: Traditional warehouses, as concrete structures, consume a large amount of energy, especially for lighting, and HVAC systems required for managing a temperature controlled storage. They also lack optimum space utilization or planning, contributing to further wastage of energy and other utilities, while generating a lot of heat in the surroundings. Traditional structures, made of concrete, are massive and absorb a lot of heat, demanding extra energy to keep them cool. Further, they are seldom strategically located, thus contributing to additional transport and distribution efforts, which in turn add to the carbon footprint of the Supply Chain. Green Warehousing is adopting technology empowered management systems (WMS) and Warehouse Identification to optimize operations and reduce waste. Further, the use of pre-engineered steel structures and LEED-certified green buildings instead of the traditional concrete buildings helps optimize energy consumption and creates a smarter layout for easy operations. Adopting alternative energy sources like solar panels for lighting or the energy-efficient lighting sources, recycling water and installation of automated systems that check energy utilization, are all helping modern logistic providers to go green and create cost-effective and sustainable warehousing operations.
- Packaging and Recycling of Waste: Although a significant part of Warehousing processes, packaging, in itself, has been a major contributor to environmental hazards, especially with the rise in e-commerce. Traditional packaging material made of synthetic plastic can wreak havoc with the ecology as it takes hundreds of years to breakdown, choking up landfills and oceans in the process. Further, irresponsible waste disposal at warehouse levels is a major contributor to environmental degradation. Green Packaging and Waste Recycling can contribute manifolds in creating a Green Supply Chain. By implementing efficient packaging that is optimal, weighs less and thus is easier to transport, can be the first step. Replacing the plastic packaging with a bio-degradable material like paper and cardboard can be the next vital transition. Further, when discarding waste, it is beneficial to set up a recycling system to effectively process the large amounts of waste, mostly from packaging, before sending it away to landfills.
- Reverse Logistics: This is a process that takes care of recovery/ retrieval of parts, recycling of products and disposal of packaging waste. Although negligible in India, Reverse Logistics plays a key role in the GSCM and has been steadily growing, thanks to a substantial rise in the e-commerce sector, contributing to a massive packaging needs, as well as a rise in doorstep deliveries, and collection of returned goods. In terms of IT components and hardware which form a major chunk of e-commerce, disposal and e-waste management has been a real challenge. Reverse logistics has been playing a key role in facilitating optimum e-waste management by offering a structured process of collecting and re-distributing defective IT hardware to e-waste units. Apart from effective disposal and recycling of products, reverse logistics has also helped optimize costs, reduced packaging waste and helped spread awareness among end consumers about ecological and safe disposal of products, thus promoting a greener and cleaner circular economy.
Although Indian logistics and supply chain has a long way to go before becoming a 100% Green Supply Chain, the process has begun to take shape. Through effective public-private partnerships, effective policies thrust and focus on long term economic development gains, the industry, like other sectors like manufacturing, automobile, etc., will eventually drive the transformation and development of GSCM in India.
(The author is CEO, Robinsons Global Logistics Solutions)