Early research and case study examples show that pro-active management of sustainable supply chains allows for companies to better protect themselves from supply chain interruptions that arise due to environmental risk as well as unforeseen governance challenges, particularly in developing markets. Currently, SSCM plays a crucial role in mature markets as well as in emerging economies (Esfahbodi et al. To alleviate that problem, MNCs could invite suppliers’ procurement personnel to their sustainability training sessions (along with environmental, health, and safety personnel) and encourage them to participate in industrywide sustainability training. A responsible supply chain, for example, must also be legal and ethical. Consider the electronics maker Flex, a full member of the RBA and a first-tier supplier for many MNCs. These principles are built upon the realization that socially responsible practices and products are not only good for people and the planet, but are also good for building positive brand awareness, competitiveness, and long-term profitability. Awareness is key. Supply chain and logistics news. The following are illustrative examples of a supply chain. We also interviewed 50 operations and supply chain leaders. Get in touch. To avoid this, MNCs should set convergent sustainability goals and align the incentives for all functions that interact with first- and lower-tier suppliers. There are many case studies about the success story of the Inditex model and they are worth reading. The foam manufacturer has little incentive to conform to the automakers’ sustainability requirements, because the automakers account for only a small fraction of its total business. Thus, green supply chain … Those officials should take a hands-on approach to collecting data about suppliers’ capacity, monitoring indicators of their sustainability performance, and engaging with them in continuous improvement projects. There are major supply chain sustainability and social responsibility elements to the program. (For the specific selection criteria, see the “About the Research” sidebar.) Dr. Madhav Durbha is the Group Vice President of Industry Strategy at LLamasoft, where his team helps customers and prospects solve various supply chain … The MNCs we studied delegate elements of lower-tier-supplier sustainability management to their first-tier suppliers. For example, Cargill has committed to creating a transparent, traceable, and sustainable palm-oil supply chain by 2020. Big Data management, advanced analytics, artificial intelligence (AI), and security tools, such as blockchain and RFID sensors, have brought unprecedented visibility and accountability to modern supply chains. Reward suppliers for cascading sustainability requirements to lower-tier suppliers. Such practices, also called sustainable plans, are the ones that improve not only supply chain economic performance, but also their environmental and social performances. Alternatively, MNCs could engage the top executives at their first-tier suppliers and explain the importance of building a sustainable supply network, with the goal of motivating them to catalyze the dissemination of sustainability requirements to lower-tier suppliers. When we asked a representative at one supplier why his company had violated a 60-hour workweek limit, he gave us a frank explanation: “We didn’t want to tell our customer that we can’t produce its products on time, because otherwise it’s going to try to find someone else that can. Some first-tier suppliers were already meeting that target; others have made substantial changes to do so (for example, by changing performance criteria for their purchasing managers). A supply chain is the end-to-end system that creates products and services and delivers them to the customer. They must then be shared – and agreed to – among all the stakeholders and suppliers across the chain. Work with major first-tier suppliers to map the firm’s supply network. Additionally, the report noted, “as suppliers become more mature in their understanding of sustainability issues and advance their approaches for taking action, there is evidence that they too are improving in their efforts to cascade positive change downwards through their own supply chains.” This is occurring not only because MNCs have asked their suppliers to disclose their carbon emissions but also because that information influences how the MNCs contract with suppliers. Through understanding ways to mitigate ethical supply chain problems, this gives hope to many companies to move towards a greener manufacturing process. Increasingly, multinational corporations (MNCs) are pledging to procure the materials and services they need from companies committed to fair labor practices and environmental protections. Via industry organizations, share resources with competitors and major suppliers to achieve sustainability goals. For instance, all three corporations have joined the United Nations Global Compact, an international effort to promote corporate social responsibility. These managers are responsible for maintaining a good and sustainable relationship with suppliers, focusing on reducing environmental impacts and improving social conditions throughout the supply chain. We know that logistics optimization through technological innovations and data integration can make supply chains more efficient and more financially sound. Supply chain SC activities transform natural resources, raw materials, and components into various finished products that are delivered to end customers. When a customer places an order for a product, the … Typically, sustainability initiatives include identifying the source of raw materials, ensuring good conditions for workers and reducing the carbon footprint. The three MNCs have also created preferred-supplier programs aimed at fostering peer learning about sustainability. As sustainable practices become more prevalent and accessible, it is important to continue to explore new ways that we can maintain an ethical supply chain. If American and Japanese automakers rely heavily on a certain seat maker, for example, they can demand that it adhere to their sustainability standards. Several participating suppliers told us that as a result, they are now collecting previously unsolicited information and making investments to try to reduce their carbon footprints. Starbucks is a leading brand that claims to be sustainable; Let’s see if Starbucks could be considered a case study for the success of sustainability in supply chains They include lower-tier suppliers in the overall sustainability strategy. They must give their procurement officers better training and incentives to pursue supplier sustainability. (5) They were members of the Billion Dollar Roundtable (firms spending at least $1 billion with minority- and women-owned suppliers). (For the specific selection criteria, see the “About the Research” sidebar.) Many of the MNCs that have committed to it have faced scandals brought about by suppliers that, despite being aware of sustainability standards, have nevertheless gone on to violate them. https://www.hollingsworthllc.com/best-supply-chains-companies-around-world A high efficient SC would bring … A second problem is lack of sustainability training and incentives for procurement officers. “The Missing Link? They task a point person on staff with extending the firm’s sustainability program to first- and lower-tier suppliers. In addition, sustainability activities can create important efficiencies. Read Item ; Business Sustainability Risk and Performance Index 2020. There is a sustainability course for you. There is a sustainability course for you. To understand the situation and develop ideas for tackling it, we conducted a study of three supply networks. They must emphasize social and environmental responsibility, along with economic considerations, at every level of the supply chain. What we discovered was that many were violating the standards that the MNCs expected them to adhere to. The surveys seem to be having the desired effect: They’ve prompted first-tier suppliers to engage in internal discussions about whether they should and could alter their procurement practices (to adopt industrywide sustainability standards, for example). The authors studied the supply networks of three MNCs considered to be sustainability leaders. For MNCs, there are special challenges in governing lower-tier suppliers. Sustainability Measures: As major companies and countries around the globe move towards sustainable production, all supply chains become impacted. Use tools and data that those organizations provide for dealing with suppliers (contracts and scorecards). For the procurement professionals we interviewed, cost savings were unquestionably the top priority, followed by quality improvement and on-time delivery. In 2018, we’ll continue to see progress in sustainable supply chains. The three MNCs also participate in the Carbon Disclosure Project’s (CDP’s) Supply Chain Program, a global data-collection platform in which suppliers disclose information about their carbon emissions. But cost efficiency and sustainability aren’t mutually exclusive. As ethical supply chain practices become a greater and more immediate priority for businesses, compliance goals and sustainability benchmarks are also becoming more standardized. While sustainability is central to research on supply chains, there has been relatively little research on diversity and impact on supply chain sustainability performance. Supply chains tied to multinational corporations represent over 80% of global trade and engage over one in five workers. However, a responsible supply chain is not necessarily sustainable. The hoped-for cascade effect was seldom occurring. Despite this importance, there is currently no comprehensive, empirically grounded understanding of how companies address sustainability in their supply chains. Supply Chain Sustainability Index. Sustainable Supply Chain Initiative (SSCI) Launches Public Consultation on Primary Production Scope. There are two parts to your message—communicating your overall goals and then outlining the standards that each contractor and supply chain member must meet to contribute to those overall goals. For example, Seuring and Müller [28, pp. Of course, the communication of your goals is essential. Supply-chain sustainability is a business issue affecting an organization’s supply chain or logistics network in terms of environmental, risk, and waste costs. … Product design is the first step before actual birth or existence of the product in the … Photos © Edward Burtynsky, courtesy Howard Greenberg Gallery and Bryce Wolkowitz Gallery, New York / Nicholas Metivier Gallery, Toronto. More often sustainability and procurement functions are merged, resulting in senior sustainability procurement managers, for example. We found problems in every country we studied. But that seat maker may have a hard time getting its suppliers to follow suit. They tend to act only when MNCs intervene. The United Nations Global Compact has laid out 10 criteria for measuring supply chain sustainability. In order to analyze the industry-specific drivers and obstacles, we would recommend to start with above 5 areas and … To understand the situation and develop ideas for tackling it, we conducted a study of three supply networks. They are also frequently located in countries where such regulations are nonexistent, lax, or not enforced at all. In fact, 83% of supply chain … The automotive corporation, for instance, has a strong commitment to supplier diversity. Doing so would be not only prohibitively expensive but also unfair, because in most sectors, the major corporations use many of the same suppliers. For example, PwC calculates that carbon emissions must be reduced by 6.3% per year until 2100. The MNCs we studied are all founding members of industry associations focused on developing sustainability standards, providing assessment tools, and offering training to first- and lower-tier suppliers. Partnering with our logistics service providers on sustainability is critical. The danger of not acting is clear: A supply chain is only as strong as its weakest link. Building a sustainable supply chain isn't easy, but it is possible — and necessary. SAP offers a comprehensive portfolio of software to help businesses maintain agility and move forward even in times of disruption. But our customer didn’t give us enough notice to hire enough skilled people to do the job.”, First-tier suppliers, for their part, rarely concern themselves with their own suppliers’ sustainability practices. To move towards a sustainable supply chain one needs to include considered metrics into the specifications and evolve the procurement process. SSCM encourages governance practices at all levels of lifecycles of goods and services that … If they have poor or dubious sustainability performance, then an MNC that does business with them can endanger its reputation and suffer profound repercussions—losing customers, being forced to find new suppliers, or having its supply chain disrupted. Of course, the main obstacle to implementing these changes is the associated cost. All these concerns mean that lower-tier suppliers are unquestionably the riskiest members of a supply network. The MNCs should also work directly with their suppliers’ procurement units on the best ways to disseminate sustainability requirements throughout their supply networks. Supply Chain Management with Zara as an Example. They can increase efficiencies for suppliers, who can use a standardized self-assessment or audit to satisfy many customers and thus avoid duplication. Twenty years ago, the word sustainability was almost completely synonymous with eco-friendliness. All of the 52 procurement employees we interviewed (at MNCs and at suppliers) said they needed more training to properly pursue supplier sustainability on behalf of their firms. This approach is effective because the MNCs are hands-on: They offer training to suppliers and provide some incentives for implementing sustainability practices. The ethical supply chain: Definition, examples, stats . Supply chain sustainability is a complex issue, and the more people who are working to solve it, the better. Work closely with relevant NGOs and international institutions interested in improving supply chain sustainability. Supply chain sustainability (SCS) is a holistic view of supply chain processes, logistics and technologies that affect the environmental, social, economic and legal aspects of a supply chain's components. Our research suggests that isn’t yet happening in a meaningful way. The noncompliant company we cited above, for example, doesn’t try to enforce a strict 60-hour workweek limit with any of its suppliers. Social and environmental concerns were notably absent. Sustainable Supply Chain Management at Portland State University is a certificate program. To explore this problem—and identify solutions—the authors studied the supply networks of three MNCs deemed to be sustainability leaders. Green supply chain can be defined as a means of recognizing the complex network of activities which are involved in delivering a finished good to the end user or customer. In our research, we identified a few critical shortcomings in their operations when it comes to developing sustainability beyond first-tier suppliers. In this example, the e-commerce company operates a website, and that website sells various products. They frequently place orders that exceed suppliers’ capacity or impose unrealistic deadlines, leading supplier factories to demand heavy overtime from their workers. Part of this will mean decreased reliance on overseas suppliers and manufacturers. Or That’s often because they’re struggling with sustainability issues themselves. Embracing big data is an essential principle of modern SCM, specifically real-time data which has the potential to improve the efficiency of a supply chain and negate potential risks to strategy. Firms such as Microsoft, Johnson & Johnson, and Walmart use this platform to engage their suppliers in being transparent about their environmental impact. The following are illustrative examples of a supply chain. In 2018, we’ll continue to see progress in sustainable supply chains. … For example, the challenges belong to Automotive industry to achieve sustainable supply chain is very different from the food industry. Not surprisingly, that can lead to situations in which preapproved lower-tier suppliers violate the sustainability requirements of the MNCs they work with. They have established long-term sustainability goals. These strategies are hierarchical. Every aspect of supply chain sustainability has a suitable course. It has six, 15-hour modules. In a 2019 survey of over 1,500 U.S. consumers, delivery speed was ahead of all other factors when it came to choosing a retail channel. Each was headed by an MNC considered to be a “sustainability leader”—one in the automotive industry, one in electronics, and one in pharmaceuticals and consumer products. We should add that although companies at every level of the supply network need to provide more training and incentives for their procurement officers, supplier firms are likely to do so only if MNCs lead the way. As one exasperated manager said while describing this conundrum, “I am just using the supplier you asked me to use!”. The Center for Sustainable Organizations has listed examples of key areas of emphasis. Like it or not, they have to work with preapproved suppliers—but they are held accountable if those companies mistreat workers or harm the environment. These companies engage in behaviors that are worth emulating; for example, they have established long-term sustainability goals, and they try to cascade good practices all the way down to lower-tier suppliers, using a combination of direct, indirect, industrywide, and global strategies. More logistics providers that are asset-based, for example, are taking sustainability into consideration when … Furthermore, most lower-tier suppliers are not well known, so they receive relatively little attention and pressure from the media, NGOs, and other stakeholders. One notable association is the Responsible Business Alliance (RBA), whose members include Intel, HP, IBM, Dell, Philips, and Apple. In this article we describe various ways that MNCs can defuse the ticking time bomb those risks represent. Examples include fundamentally redesigning the supply chain network by decentralizing production using 3D printing or developing innovative business models that include both the public and private sectors. The aim is to create a cascade of sustainable practices that flows smoothly throughout the supply chain, or, as we prefer to call it, the supply network. • How is the role of the supply chain management affected? What’s more, all those scandals involved first-tier suppliers. They require first-tier suppliers to set their own long-term sustainability goals. MNCs, too, are handicapped by ignorance. Recognize suppliers that excel in programs sponsored by NGOs and international institutions. Sustainability concept and its relationship with supply chain management The concept of sustainability is designed around there elements, environmental, social and economic development. Industry associations have a unique power over both first- and lower-tier suppliers, as most of their members are major players in their sectors. … Countless reasons to adopt a more sustainable supply chain exist, from taking advantage of government benefits to committing to a mission that speaks to your customers. The raw materials are then taken by a logistics provider to a supplier, which acts as the wholesaler. What is Sustainable Supply Chain Management (SSCM)? Goods can also flow in a reverse direction in a supply chain from the customer back to producers for purposes such as returns, reuse and recycling. Countless reasons to adopt a more sustainable supply chain exist, from taking advantage of government benefits to committing to a mission that speaks to your customers. Our Coalitions . Our work is moving the entire industry forward together, strengthening its reputation and fostering growth. About the art: Edward Burtynsky’s photographs explore the manufacturing landscapes of China and their central role in the global supply chain. Several of these suppliers have started to set their own sustainability requirements for the suppliers they use. 29th September 2020. Today, it is a much more holistic term. Arguably, they need more incentives as well: Companies must reward them for hitting all three Ps—that is, not just cost, quality, and delivery goals but also social and environmental ones. And collaboration can make sustainability initiatives more feasible, because industrywide training is subsidized by members. Remember, all those suppliers were connected to model firms that were working proactively to encourage sustainability. “Sustainability in the Supply Chain” is based on a holistic approach that comprises the steps “Prevent – Detect – Respond” and concentrates on minimizing risks. The three MNCs in our study have taken a number of steps to promote suppliers’ social and environmental responsibility: These are all beneficial measures that other companies should consider adopting. A good way to start is by adopting the sustainability strategies used by the three MNCs in our study. It has six, 15-hour modules. For example, one can require carbon footprint for a product or service, one can also require a product and service with the litigation history (or lack of one), one can require disposal instructions for particular products etc. And on two occasions, firms have made changes to comply with MNC requirements (such as using key performance indicators to monitor supplier sustainability). Typically, sustainability … Different functional units of an MNC (engineering, procurement, sustainability) may pursue different agendas in interacting with first- and lower-tier suppliers—with results that do systemic damage to the corporation’s overall sustainability effort and undermine its credibility. More logistics providers that are asset-based, for example, are taking sustainability into consideration when purchasing transportation. Consider the embarrassing scrutiny that Apple, Dell, and HP endured not long ago for sourcing electronics from overseas companies that required employees to work in hazardous conditions, and the fallout that Nike and Adidas suffered for using suppliers that were dumping toxins into rivers in China. They frequently don’t even know who their lower-tier suppliers are, let alone where they’re located or what capabilities they have (or don’t have). If exemplary MNCs are having trouble ensuring good practices among their lower-tier suppliers, then “regular” firms, in all likelihood, are faring even worse at this. Such predicaments are not uncommon. One such change has been the huge rise in demand for next-day shipping. Figure 1. Evaluate first-tier suppliers by using sustainability performance indicators that capture their requirements for lower-tier suppliers. Additionally, when MNCs help their first-tier suppliers become full members of an industry association, those suppliers must then comply with industry standards, which means they have to assess their own suppliers’ sustainability. The generic supply chain begins with the major suppliers to help businesses maintain agility and move forward in. The specifications and evolve the procurement people at their first-tier suppliers and foster peer learning among suppliers. Social responsibility hard to realize in practice – and agreed to – all... 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