Sustainability Constraints of Supply Chain Management
Posted in Operations & IT Articles, Total Reads: 701
, Published on 14 May 2016
The process by which a company manages the procurement and sourcing of inputs, manufacturing of products and services and the delivery of finished product and services to the customers is known as the supply chain management. The main objective of supply chain management is to meet the demand of consumers by efficiently using the resources which comprises of inventory, labour, and stock. Aim of supply chain management is to synchronize the business process and functions of the companies which will result in high performing and cohesive business model which can act react quickly with the rapidly changing market demands.
Supply Chain have the influence in pollution control, which will involve collaboration and coordination between suppliers, intermediaries, 3PL’s service providers and customers. There is increased visibility of environmental effects which is caused because of sourcing and processing of raw material. Increased demand and consumer awareness ensure that firm achieve sustainability across the entire supply chain.
Figure: Illustration of Supply Chain
Sustainability is now the integral component of supply chain along with the utilization of resources and cost reduction. Sustainability of supply chain has no proper definition but is generally related with green supply chain or corporate social responsibility (CSR). For firm it is not just about profit, they should also gave back to the society and should have the some responsibility on behalf of their suppliers for the issues like child labour, pollution and health and safety. Real difference in supply chain can be made with 80:20. Several sustainability and environmental issues are use of labour, land and water, efficiency of energy, pollution, social impact such as displacement of people, biodiversity and sustainable use of living resources. Lack of sustainability in talent, liquidity and capacity can bring the trouble but can be avoided with proper planning and execution. Lack of talented and experienced can create issues from management to operations. It is easy to cut the capacity which is much easy to bring the capacity online. Liquidity can be gained by asset based lending.
Figure: Environmental Impact on supply chain
Number of ways in which the various effect on the supply chain can be determined are:
1) Carbon footprint analysis of product or service will help in determining the significant issues arising in the supply chain starting from the material sourcing to the manufacturing and finally to the disposal.
2) A risk assessment to be carried out in determining the greatest potential damage.
3) Screening indicator can be used.
4) Stakeholder’s suggestion can be taken to ensure that all the issues are covered.
The following principles which have the impact on the supply chain sustainability are:
1) Elimination of all forms of forced and compulsory labour
2) Abolition of child labour
3) Discrimination on the basis of occupation and employment should be eliminated
4) Business policy should support and protect the human rights
5) Firms should promote development of technologies which are environmentally friendly
6) Initiatives should be taken by the firm to have greater responsibility toward environment
7) The approaches which can cause environmental challenges should be prevented
8) Firms should take strict actions against all corruption forms which will also include bribery and extortion
Supply chain can be made using two approach one is eco-efficiency and following eco systems. Eco-efficiency can be achieved using the following approach:
-Purchasing less material
-Material should cause less damage while producing final products/services.
-Material should require less energy either during processing.
Emulation of eco-system can be achieved by the following process:
- Using biodegradable and natural material from sustainable supplier and purchase recycled or secondary materials
- Using devices which use zero carbon energy and purchasing zero carbon energy
- All toxic material to be phased out.
But there are various internal and external constraints
Fig: Buying decisions internal constraints
In reality, various levels may blur but the main principle is that the greater the change you made in hierarchy the bigger the impact is on your supply chain footprint.
External constraints in the sustainable supply chain are as following:
1) Cultural Differences: From country to country approach towards environmental pressures and environmental legislation varies. Some countries are more-strict toward environmental regulation.
2) Language Difference: Information translated from one language to another language may also introduce uncertainty.
3) Immaturity: The supply chain for the material are in the growth stage due to which there is lack of competition/ choice, raise in prices, reduction in quality and scarcity of supply.
4) Existing Supplier Dominance: Because of the economic strength of some suppliers which force or persuade the customer not to change.
5) Law and Regulation: Greener opportunities are hindered by legislation. In UK it requires a waste licence to handle a product once it is assigned as waste till it becomes a new product or meet the quality standards.
6) Traceability: In long supply chain it is difficult to trace exactly the origin of material.
Certain benefits are measurable at the company level are:
a) Strengthening relationship with the customers
b) Health and safety condition improvement
c) Reduction in development of agricultural land
d) Increase in brand differentiation
e) Demonstration of corporate citizenship and responsiveness
f) Reduction in impact of natural ecosystems and habitat
The best practices in sustainable supply chain are:
a) Increase Forecast Accuracy: This will reduce waste and inventory and will result in visibility of supply chain, enhancing the customer service and responsiveness. The best practices are:
- Involving the technology which can facilitate real time sharing
- Synchronizing the sale and marketing, operations and logistics department
- Collaborative planning with external supply chain partners
b) Consider Supply chain in product lifecycle management: Lifecycle management means that product needs to be managed through production, design maintenance and operation and maintenance and disposal. The best practices incorporated are:
-A lean manufacturing principle that uses product design to the efficiency of logistics.
-Lifecycle cost analysis is to reduce the cost involved in designing the product, production, operation and disposal.
c) Optimization of Supply chain Network Design: Allowing the firm to reduce environmental and social impact while achieving financial objectives.
- Using supply chain optimization software which will support decisions to support to change the number of sites, distribution channels so as to use the capacity more efficiently.
-Assessing the cost and outsourcing benefits will help in enhancing the supply chain agility and transportation activities with the other firms.
d) Environmental management system (EMS) implementation: It is a framework which will manage the environmental performance, reduction in business risk enhancing the customer relationships and reduction in cost through increased efficiencies. The following actions are required to implement are:
-Setting goals for the desired level of environmental management system
- Assessing the challenges, opportunities, benefits and cost by partially or full implementing an EMS.
- Implementing required level of EMS by following the Plan, Do, check and feedback loop of continuous improvement.
This article has been authored by Reena Pal from IIM Kashipur