In October 2014, a team of researchers published an article, titled ‘The green bullwhip effect: Transferring environmental requirements along a supply chain”. Their findings suggested that the green bullwhip effect can help spur companies into adopting a circular economy approach to achieve supply chain sustainability.
Fast forward to 2021 and the electronics manufacturing industry is still struggling to move away from linear production models, which often results in excess waste and environmental damage.
As one of the top polluting industries, the electronics sector generates 50 million tonnes of electronic waste every year, according to the UN’s Global E-Waste Monitor. The staggering volume of e-waste is a clear indicator that manufacturers must do more to drive sustainability along the supply chain.
You may be aware of the bullwhip effect, which is a supply chain phenomenon in which big variations in demand along the supply chain can lead to tremendous inefficiencies, such as excess inventory, or even shortages. As a result of the effect, companies have learned to build and maintain a buffer of inventory or "safety stock" to allow for such swings in orders. But, despite knowledge of the effect, the bullwhip still persists in the electronics supply chain.
Meanwhile, the green bullwhip effect emanates, unsurprisingly, from the industry’s efforts to meet new environmental pressures from consumers and government. With 60% of consumers valuing brands that are transparent about their operations, companies face incredible pressure to integrate environmental considerations across their supply chains. For OEMs, new changes in environmental requirements flow back upstream in the supply chain from tier to tier (e.g. OEM, first-tier supplier and second-tier supplier).
But just as the initial information reporting demand spikes takes time to reach upstream suppliers and manufacturers, so too does information about environmental requirements. As a result, the green bullwhip effect takes hold of the supply chain because urgent interventions are required to respond to these environmental pressures. This subsequently creates risks and uncertainties that can trigger instabilities in the supply chain.
So in summary, the green bullwhip effect explains how a dynamic set of responses to environmental issues in supply chains become more rigorous and restrictive as you move upstream in the supply chain. Thus, upstream suppliers and manufacturers see the greatest stringency in response to changing environmental demands.
There are two main reasons cited for this phenomenon. The first one relates to the rigorousness of demands on products and materials in response to environmental requirements which tend to increase as they move upstream in the supply chain. The second contributing factor to the green bullwhip effect is the nature of these responses. The deadline for meeting environmental demands tends to get shorter at each successive upstream level in the supply chain due to lagged feedback and complexity. This often leads to delays in response and creation of time buffers as manufacturers move to improve their environmental performance and ensure compliance with various regulations.
So unlike the classic bullwhip effect, the green bullwhip effect is an event-driven phenomenon that occurs due to changes in environmental requirements (e.g. new regulatory policy) and the delays in response to these environmental pressures.
OEMs usually trigger the green bullwhip effect when they adopt greener supply chain practices such as introducing environmental criteria in their supplier selection process, environmental audit requirements and certification schemes, among others. So how can manufacturers manage the tough balancing act of adopting environmental management practices and controlling the subsequent bullwhip effect?
The solution lies in adopting the circular model of production to ensure sustainability and reduce the risk of the supply chain being whipped by the green bullwhip.
A circular model focuses on designing products for reuse, re-manufacturing, and recycling. Materials are kept in this cycle for as long as possible. The idea is for OEMs and EMS to embrace the circular economy and recycling, as opposed to allowing the incineration or disposal of used components into landfills.
In a circular economy, transparency in the supply chain is elevated to new heights and collaboration is enhanced to facilitate re-use of parts. For example, by enhancing cooperation and information sharing across the supply chain, OEMs can ensure timely response to environmental requirements across multiple tiers, thereby reducing the amplification of environmental pressures.
Nevertheless, the re-use concept of the circular economy can also involve putting systems in place to dispose of obsolete/excess inventory in a sustainable manner. The best way to achieve this is to sell your products through a peer-to-peer platform marketplace that ensures electronic components are kept in the cycle for as long as possible. A peer-to-peer platform marketplace like AIRENC brings together the electronic components community into a common trading network. This not only creates a market for obsolete/surplus components, but also helps reduce the disposal of e-waste by ensuring parts maintain their value longer through reselling, re-use, and recycling.
AIRENC is a peer-to-peer transaction platform for buying and selling electronic components at competitive prices to minimize waste. The platform brings together manufacturers, vendors, and buyers to collaborate, share information and work towards a circular economy by identifying obsolete and surplus components within their supply chain and creating a market for that stock. This not only generates revenue and margins for our members but also open new opportunities for OEMs and EMS to promote the re-use of their parts.
With our platform, you can drive sustainability in your supply chain and guard against the green bullwhip effect by enhancing the visibility and traceability of your components. Many of our customers are walking the talk and have established hard business goals to reduce e-waste and dispose of surplus obsolete parts more responsibly.
By enabling firms with excess components to market them directly to buyers in the secure and controlled environment, AIRENC ensures a safe and reliable stock of inventory and gives buyers the confidence they need to make good decisions sooner.
Try the AIRENC platform today.
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