Strategies to Implement Sustainability Programs
Strategic Supply Chain Management: Individual Assignment Table of Contents Content Introduction What is Supply Chain Sustainability? Why is Supply Chain Sustainability important?
Traditional supply chain vs sustainable supply chain Advantages of Supply Chain Sustainability Strategies to implement sustainability in supply chain process Step1: Access the current supply chain Step 2 Access Environment: Current, Potential, and Future Impact Factors Step 3: Evaluation: Identifying Potential Risks and Opportunities Step 4: Extend or Re-design the Supply Chain Strategy Step 5 & step 6: Implementation with the Sustainable Supply Chain Scorecard Conclusion References Page No 2 2 2 2 3 3 5 6 6 6 7 8 9 AHMG Kibria Page 1 Strategic Supply Chain Management:
Individual Assignment Topic: Strategies to implement sustainability programs in the supply chain firms Introduction: Environmental issues are becoming the main concerns of many global supply chain practitioners in today’s world. In order to address these emerging environmental issues, businesses around the globe are looking for a total solution on the reduction of the waste generated from the current supply chain process. Meanwhile, implementation cost that is needed to implement these environmental issues plays a major part in their considerations in selecting an implementation strategy.
Recent studies by Carter and Rogers (2008) emphasised that sustainable supply chain development in terms of social, economic, and environmental benefits should be taken into consideration in a supply chain practice. More specifically, supply chain management can be defined as the integration of the social, economic, and environmental practices within a global supply chain that provide green products, excellent services and accurate information sharing that beneficial to all employees, shareholders, business partners and the wider community.
The intent of this research is to propose strategies to implement sustainability in supply chain firms. There are many different strategies have been used by the supply chain firms. This report analysed six step process approaches to implement sustainability in the supply chain process. What is Supply Chain Sustainability? Supply chain sustainability is the management of environmental, social and economic impacts, and the encouragement of good governance practices, throughout the lifecycles of goods and services.
The objective of supply chain sustainability is to create, protect and grow long-term environmental, social and economic value for all stakeholders (consumers, community, government, society, employees etc). Why is Supply Chain Sustainability important? There are many reasons why companies start a supply chain sustainability journey. Primary among them is to ensure compliance with laws and regulations and to support international principles for sustainable business conduct.
In addition, companies are increasingly taking actions that result in better social, economic and environmental impacts because society expects this and because there are business benefits to doing so. By managing and seeking to improve environmental, social and economic performance and good governance throughout supply chains, companies act in their own interests, the interests of their stakeholders and the interests of society at large.
According to Penfield (2009) Supply chain operations are fundamental to sustainability performance and supplying for sustainability is being touted in management circles as the future of competitive supply chains. Traditional supply chain vs sustainable supply chain Conventional supply chains are more interested in serving the purpose of logistics than optimization. On the other hand a focus on sustainability aims at creating and protecting value with reference to long-term social, environmental and economic components in bringing goods AHMG Kibria Page 2 Strategic Supply Chain Management:
Individual Assignment and services to the market. The primacy of operations is to adequately meet current demands while making reserves for future generations. Linton et al (2007), indicates the focus of sustainable logistics is on optimization of resources along the entire production so that final production is of the highest value at the lowest cost. There is strategic optimization of resources, reduction of wastages, as well as utilization of supply by-products. In addition, it entails a focus beyond delivery to consumers, to other areas beyond the traditional scope of supply chain management.
According to IBM report (2009) supply chain management in contemporary business practice faces five key challenges: cost containment, supply chain visibility, risk management, growing market demand and globalization impacts. Conventional chains only focused on delivering the end-products and, as such, suffered diminished returns owing to the growth in market and volatile consumers. On the other hand, supply chain sustainability seeks to not only deliver the utility, but also seeks to improve social, economic and environmental performance.
As such, companies and supply chain managers deliver their own interests and those of the stakeholders and the society (Misra, et al. 2010). Advantages of Supply Chain Sustainability Social Advantage – Primary benefits are derived from positive environmental and social externalities that are enjoyed by both customers and companies’ stakeholders alike. For example Wal-Mart has implemented a program that successfully minimises the waste allocated to landfill within the USA (19. 1%), and increasingly China and Brazil (52%), which has the potential to prevent 11. million metric tons of CO2 emissions annually (Wal-Mart, 2012). Financial Advantage- Companies are realizing competitive benefits from investing in supply chain efficiency, Wal-Mart generated in excess of $231million in 2011 through a combination of increased recycling revenue and decreased expenses (Wal-Mart, 2012). Enhanced supply chain security – Improvements in labour conditions has the compounded benefit of reducing employee induced work stoppages and can positively impact a company’s ability to continuously manufacture goods and services, increasing customer satisfaction and revenue.
Increased competitiveness of suppliers – Buyers increasingly interprets suppliers’ good CSR performance as a sign of strong overall management, which affects other elements of supplier development, such as quality and on-time deliveries. In the long run, suppliers that work to continuously improve their environmental and social performance will gain better access to markets and clients (BSR Survey). Strategies to implement sustainability in supply chain process In order to develop strategies supply chain managers need to consider what a supply chain strategy is, link the strategy to the competitive strategy and sustainability.
The following figure shows the three important elements in order to develop a successful sustainable supply chain. AHMG Kibria Page 3 Strategic Supply Chain Management: Individual Assignment Figure: Three areas to integrate sustainable supply chain Cetinkaya (2011) This report analyses an iterative six step process approach to implement sustainability in Supply chain firms. A systematic approach to strategy design and integration can help companies developing a sustainable supply chain to create a value proposition.
This iterative six-step approach has to be seen as a cycle which should be executed regularly in your supply chain, since relevant conditions may change quite quickly and sometimes radically for example, the oil price spike of 2008. AHMG Kibria Page 4 Strategic Supply Chain Management: Individual Assignment Figure: Steps of a sustainable supply chain strategy Cetinkaya (2011) Step1: Access the current supply chain: Step 1 aims to take stock of the current state of company- and supply chain specific characteristics regarding strategy, resources, and current and planned practices.
It is mainly concerned with internal factors and considers elements which are usually within the control of a company. It seeks to discover whether there is a common strategic alignment, and whether the goals of each strategy element are integrated, aligned, and complementary. A company’s own supply chain strategy which is not aligned to the corporate and cross-company supply chain strategy cannot be sustainable. Potential short- and long-term goal conflicts can rapidly become serious barriers to implementing a sustainable supply chain along its members; especially if the supply chain is required to adapt quickly to change.
The analysis also shows if top management commitment is given within the individual companies and the supply chain. In summary the findings from this step are: ? ? ? ? The existing corporate and competitive strategies The sustainability strategies (if sustainability is not already part of the corporate strategy) The company-specific supply chain strategies, and finally The cross-company supply chain and collaboration strategy Cetinkaya (2011). AHMG Kibria Page 5 Strategic Supply Chain Management: Individual Assignment
Step 2 Access Environment: Current, Potential, and Future Impact Factors The second step of this process deals primarily with what is changing in the business environment, what kind of scenarios your company will face in the medium and long term, and finally, what the main driver of change may be. This will lead, together with the analysis from step 1, to the definition of potential risks and opportunities for your supply chain strategy in step 3. Supply chain input resources such as fuel, energy, and natural resources nowadays deserve close attention in supply chain management logistics.
The trend of rising prices and increasing scarcity make input resources major risk management factors in an economic perspective, especially when a company runs cost- and energy-sensitive supply chains. Understanding and forecasting input resource-related information helps in developing a sustainable supply chain strategy Cetinkaya (2011). Step 3: Evaluation: Identifying Potential Risks and Opportunities: After analysing first two steps of this process it is easier to identify potential risks and opportunities to implements sustainability in supply chain process.
Supply chain firms can use framework to access supply chain capabilities in the context of the scenarios identified in the step2. The assessment then serves to determine supply chain specific Threat-OpportunityProfile. Companies need to understand the cause-and-effect relationships between potential success factors to undertake evaluation. For example, companies should be able to estimate that the regionalization of procurement structures in response to an oil price increase would be likely to reduce transport costs Cetinkaya (2011).
Step 4: Extend or Re-design the Supply Chain Strategy Based on the Threat-Opportunity-Profile, now it is possible to define strategic gaps on the route to a sustainable supply chain; gaps between current supply chain strategy and the changing business environment. The greater and more relevant the potential risks and opportunities, the larger will be the gaps, and the greater the need to act and make strategy changes. At this stage the following strategic programs can be distinguished: 1. Compliance- to obtain the benefit and competitive value of reducing and managing risk. 2.
Process-Re-engineering- to obtain the benefit and competitive value of improving productivity and efficiency and in consequence, of reduced supply chain costs, increased resource productivity, and reduced environmental impacts. 3. Restructuring- to obtain the benefit and competitive value of the long term and fundamental improvement of effectiveness and early prevention of risk. 4. Innovation- to obtain the benefit and competitive value of differentiation. 5. Progression- to obtain the benefit of first mover advantage, and establishing market entry barriers Cetinkaya (2011).
AHMG Kibria Page 6 Strategic Supply Chain Management: Individual Assignment Step 5 & step 6: Implementation with the Sustainable Supply Chain Scorecard: After completing step1 to step4 companies must be able to develop appropriate scope of strategic vision and determine the right actions to align supply chain strategy to the changing business environment. These findings have been incorporated into the reformulation or redesign of existing supply chain strategy and the associated objectives. Now, the following step will show how to implement them.
This research analyses “Balanced Scorecard” developed by Kaplan and Norton from 1990 in order to show implementation of findings from stage1 to stage4. Figure: The Kaplan/Norton Balanced Scorecard Cetinkaya (2011) The Balanced Scorecard is a (performance) management system providing a framework to translate a strategy into balanced operational terms via objectives and measures, organised into four different perspectives: financial, customer, internal business process, and learning and growth. The measures represent a balance ?
Between external measures for shareholders and customers, and internal measures of critical business processes, innovation , and learning and growth. ? Between the outcome measures – the result from past efforts- and the measures that drive future performance, and ? Between objectives, easily quantified outcome measures and subjective, somewhat judgmental, performance drivers of the outcome measures. Scorecard: the financial perspective: Assess social and ecologic activities accurately from the economic point of view.
Scorecard: the sustainability perspective: Link financial figures with customer needs. Extend this link by the environmental and social perspective. AHMG Kibria Page 7 Strategic Supply Chain Management: Individual Assignment Scorecard: the supply chain perspective: Incorporate tactical and strategic decisions along the end-to-end supply chain. Collaborate with your sales and product development departments and partners Cetinkaya (2011). Scorecard: The learning and growth perspective: Drive supply chain wide learning.
So, after analysing Balance Scorecard it has seen that supply chain companies will be able to implement their strategy and also evaluate their strategy. Conclusion This research paper described the importance of sustainability in supply chain process. It also showed the differences between traditional supply chain and sustainable supply chain, the advantages of having sustainability in supply chain process. Most importantly this research analysed the strategy to implement sustainability.
In order to do that it showed a six step process which is: step1: access the current supply chain, step2: access environment: current, potential, and future impact factors, step3: evaluation: identifying potential risks and opportunities, step4: extend or re-design the supply chain Strategy, step 5 & step 6: how to implement strategies with the sustainable supply chain scorecard which shows the financial, sustainable, supply chain and learning & growth perspective. Supply chain companies will be able to implement sustainability in their process by following these six step-by-step processes. AHMG Kibria Page 8
Strategic Supply Chain Management: Individual Assignment References: ? BSR20, Maximizing Benefits From a Sustainable Supply Chain, BSR, March, 2011, viewed 28 September 2012, http://www. bsr. org/reports/BSR_Maximizing_Benefits_From_A_Sustainable_Supply_Chain. p df Carter, C. R. and Rogers, D. S. “A framework of sustainable supply chain management: moving towards new theory,” International Journal of Physical Distribution and Logistics Management, vol. 38, pp. 360-387, 2008. Cetinkaya, B. , 2011, 1st edn, Developing a Sustainable Supply Chain Strategy’, Sustainable Supply Chain Management, viewed at 13/11/12. http://www. pringer. com/business+%26+management/production/book/978-3-642-12022-0 IBM, 2009. The smarter supply chain of the future: Global chief supply chain officer study, New York: IBM Global Services. Linton, J. , Klassen, R. & Jayaraman, V. , 2006. ‘Sustainable supply chains: An introduction’, Journal of operations management, Kaplan RS, Norton DP (1996): The balanced scorecard: translating strategy into action. Boston, Mass: Harvard Business School Press Misra, V. , Khan, M. & Singh, U. , 2010, ‘Supply chain management systems: Architecture, design and vision’, Journal of strategic innovation and sustainability, vol. , no. 4, pp. 102108. Penfield, P. 2009, Seven Steps to Implementing a Sustainable Supply Chain, Syracuse University, Charlotte. Sisco, C. , Chorn, B. , Jorgensen, P. , 2010, Supply Chain Sustainability- A Practical Guide for Continuous Improvement, UN Global Compact Office and Business for Social Responsibility, viewed at 12/11/12 http://www. unglobalcompact. org/docs/issues_doc/supply_chain/SupplyChainRep_spread. pdf Walmart Boyend 50 years: Building a sustainable future, Walmart, viewed 27/09/12 http://www. walmartstores. com/sites/responsibility-report/2012/ ? ? ? ? ? ? ? ? ? AHMG Kibria Page 9