Supply Chain Sustainability - Literature review Example

SUРРLY СHАIN SUSTАINАBILITY Name Course Date EXECUTIVE SUMMARY Sustainability is the use of a system in a way that doesn’t compromise the future. To create a sustainable supply chain, firm need to first create meaningful expectation through anticipating new challenging issues through environmental scanning, they then should select the suppliers wisely through supplier consultation and development with clear set up goals. Through collaborative development and mentoring, they can then evaluate the suppliers and analyze their progress and through this the stakeholders can learn and improve for the better. The key indicators of a well managed and promising sustainable supply chain are quality, time, productivity and financial and they determine how efficient and successful the supply chain is implemented. However the key performance indicators should be applied on all the key areas such as production, transportation, location and inventory for the process to be successful. LIST OF FIGURES Fig 2.1 Extended supply chain………………………………………………………7 Fig 2.2 Pie showing pie chart from framework for sustainable supply chain………..8 Fig 2.3 Five major supply chain drivers……………………………………………..10 TABLE OF CONTENT Executive summery…………………………………………………………………..2 List of figures………………………………………………………………………...3 Introduction…………………………………………………………………………..5 Literature review……………………………………………………………………..6 Conclusion…………………………………………………………………………..14 Referencing………………………………………………………………………….16 INTRODUCTION Sustainable supply chain management is a system that combines the environmentally and financially viable practices into a complete supply chain lifecycle that begins from design to disposal. It is a chain of processes that involve: Design, material selection, manufacturing packaging, transportation, warehousing, distribution, consumption, return and disposal. Richard Heinberg defines sustainability as practices that are more environmental accommodating. Therefore it’s a process in which anything that is introduced to the environment from human activities be controlled and rendered harmless to other biosphere functions. Sustainability call for global economic, social and political operation system that meet the need at the present without compromising the future.Therefore sustainable supply chain management incorporate the supply chain management and corporate social responsibility to achieve value from supply, anticipate environmental issues and standard. Performance indicator is a system of performance measurement used to evaluate the various activity and organization or a person is involved in. Therefore the aim of research is to improve learning and understanding capability in the topic performance indicator in the supply chain. Therefore the objective of this research is to try and find out the role of the performance indicator in the supply chain management. Therefore the plan is to use past done work of authors as literature review to come up with a clear understanding of the relationship between sustainably in the supply chain and performances indicator. . LITERATURE REVIEW Supply chain is the dynamic path through which information, products and fund continuously flow (Chopra, Sunil and Meindl, 2004).There the supply chain involve people like the customer, manufacturer, Retailer, Distributer (wholesaler) and the Supplier. However each stage has to be presented in the supply chain with the design depends on the customer need and the role of each stage. According to Bichou,K & Gray R (2004) the logistic system created in the supply chain has the duty of ensuring that the customer receive satisfaction and cost is reduced to a favourable level. In a properly managed the supply chain, the raw materials run from the supplier to the manufacturer who normally assemble them into finished product that are attractive to the consumer and organizes the delivery to accessible place for their clients (Jie F, Parton K & Cox R, 2002).The supply chain is made more efficient by: Improved delivery performance and network, reducing time taken to offload the goods, reduction on inventory, improve flexibility, efficiency and utility, improved capacity management and finally the well managed system of alert system. Supply chain therefore covers the procurement, manufacturing and distribution (Lee & Billington, 1995). It is therefore realistic to say that the objective of the complex chain system is to improve performance and add value as possible cost incurred. The long term efficient performance within the supply chain through strategic co-ordination hence the long term mission of achieve stable and experienced management analysis. According to Chopra and Meindl (2007) more than one person is involved in the decision making than entail managing resources, information and processes especially that doesn’t fall within the company mandate. Supply chain management is therefore defined as the control in charge of supply chain operations, resources control and fund management with an aim of maximizing supply chain profitability and surplus. The profit is therefore the difference between revenue generated from the customer’s order and the cost incurred within the supply chain system while satisfying the need of the customer. Sustainability of the supply chain result to business sustainability which is the ability to manage your business in a way that the economic, environment and society well being is not interfered. Fig 2.3 Extended supply chain Source (Nathan, 2005) Sustainable supply chain management is therefore defined as the management or control of information, funds in order to in order to maximize supply chain profitability and at the same time minimizing the environment impact and rise in social being (Hassini,E, Surti C & Seary Cory,2010). There are six major supply chain drivers according to Chopra and Meindl (2007) namely: Transportation, inventory, facilities, information, pricing and sourcing. It is important to note how the competitive strategy fits with the operation strategies in ensuring each driver is deployed and is success. To ensure sustainable supply chain, transportation and sourcing are critical. In the system where the focal company want to adopt sustainable supply chain, through green procurement practices forces its upstream suppliers to adopt and adapt to recent technology and environmental friendly material sources, engaging in labor practices that are ethical and low in green house gas (GHG) hence very low environmental impact. External and internal forcers normally push companies to adopt sustainable operation. The market forces for such supply chain include customer retailer, QEMs in a situation where the demanding product that are environmental friendly and socially responsible practices. The government will therefore reinforce the system with their own policy and regulation to ensure companies adhere to search environmental standards. Industry Standards such as ISO 14001 will push suppliers to carry frequent audit and certification that enable them transact business with the necessary and reliable businessmen. (Hassini,E, Surti C & Seary Cory,2010).For sustainable supply chain, the following factors have to be competently and efficiently implemented Fig 2.2: Pie showing pie chart from framework for sustainable supply chain Source (Nathan, 2006) KEY ISSUES IN SUPPLY CHAINMANAGEMENTS Supply chain has three main issues namely: 1. Strategic level: This is aimed at having the long -lasting effect on the firm. Such decisions are for example: nature of product design, what to make internally and what to outsource, choice of suppliers, location, capacity of the warehouse and manufacturing unit and finally the flow of materials through well designed logistic network. 2. Tactical level: This is more long term and mostly updated once or twice a year. Examples are: Purchasing and production decisions, inventory policies and transportation stagiest that include frequently visiting friend. 3. Operation levels: This involve every day to decisions such as lead-time, scheduling, quotation and truck loading. The supply chain varies most of the time with the supply and demand being varied over time. Therefore the company should ensure monitoring and control to stabilize the system so that demand is matched. To ensure stability and a maximum profit, continuous measuring and monitoring practices is employed on the key performance indicators (KPI).Such system according to Sayed (2013) make it easier for the top management to point out the root causes and understand the management problem they might be experiencing. Due to globalization and ever increasing competition, the economic managers have been looking for ways of making the supply chain more efficient (Douglas, 2004).The function of supply chain is to support the market and it is critical identifying the performance expected from the supply chain so that different indicators can be can be properly analyzed to better understand the historical mistake and their root causes (Xiaomin ,Rui ,Liu & Li , 2007). Fig 2.3 Five major supply chain drivers Source (SCLOCAL, 2006) KEY PERFORMANCE INDICATORS A good KPI should be: Multidimensional, easy to understand, facilitate trust within the system, should be visible, mutually understood and finally encompasses both input and output. Examples of key indicators are: QUALITY Quality by simple definition is how good or bad something is. The sustainable procurement systems rely a lot on quality at all the stages of the system. For example the raw material used in the production process has to be of good quality to produce high quality competitive product. Quality product increases upsurge in demand hence stabilized delivery which has to use quality transport system which is quick and reliable. The last thing customers expect is late delivery of already ordered for goods. The procurement system has to be efficient to ensure all the products imported are of the right specification. Inventory system which is more complex than I thought TIME People say, “Time is money” to emphasize how important it can be .Quality directly correlate to time in that goods and services have to reach the client at the right time in orders to satisfy customer need. Delivery need to be on time delivery hence the logistics should be highly regarded and efficiently co-ordinate to make sure that the principle of just in time delivery is never respected. Speed and flexibility is crucial in ensuring the goods and a service reaches the client at the right time to satisfy his/her need. For the time in the supply chain to be correct, then lead time for contract, lead time for contract award, on time delivery, warehouse order processing time, custom clearance cycle, order entry time, order turnaround time and order lead time must be correct (USAID, 2010). Some companies employ the use of just in time inventory system where wastage is reduced by reducing idle time and ensure customers get delivery at the time they want to. The principle used in JIT aim at reducing expenditure through warehousing, and also protect clients from goods getting wasted before consumption hence unnecessary loses. FINANCIAL Financial position of the stakeholders involved in the supply is also a major KPI. In this modern world every process involves use of money. The financial position of the raw material farmer determines the quality of the produce and hence the product must have good quality. The management should be aware of the warehouse cost, value of product damaged in the warehouse, inventory holding cost, value of unusable stock, average response quality and total transport cost. PRODUCTIVITY Productivity is the average measure of the production or manufacturing system and is sometimes expressed as a ratio of inputs and outputs. The supply chain is therefore focused on inducing velocity and flexibility in the transfer process. Therefore the management should focus on the storage space utilization, unit moved per hour, percentage of goods dedicated for handling stored goods, inventory velocity, and container capacity and finally number of stages one get stopped. Therefore the above named key performance indicator can be applied on the following key areas of production. Production: The supply chain should have clear information on the type of the product the people want and at what time and place. Therefore the experts should determine the production schedule, quantity, quality and the equipment maintenance. Inventory: Ideal inventory should be stocked at all supply chain levels. How much of the inventory a given firm should maintain and balance out the raw materials, semi finished and finished products. Inventory is normally just used as a buffer to solve uncertainty in the supply chain and the related system. Analysis need to be done to reduce the inventory help you reduce inventory which result to unnecessary expenses. Location: It needs a wise businessman to determine a perfect inventory and production location. Does the project require a new facility or the old one is comfortable? Which area is more accessible to the market and more ideal to access the raw material? Location determines how hard the logistics will be and poor choice of location might result to project failure. Transportation: How will the goods move from supply chain location to another? Which mode of transport will give as a reliable but very expensive? Rail and shipping are less expensive a and normally require great deal of time to reach the decision. Uncertainty is cancelled by stocking higher rate of inventory. Information: information is power. Without information the products will not have high turnover and selling will be a nightmare. The stakeholder in the supply chain should share the vital information at the right time and as accurate as possible. Good information helps management make decision on what to produce and how much to produce. According to Brammer, Hoejmose, & Millington, (2010) in order for a firm to improve the effectiveness of its supply chain management, it need to first identify its motivators before evaluating and assessing the levers which the company can still exploit to increase its sustainability and finally the company identifies the areas it has not performed so well and put an effort to raise or improve its performance. The firm should ensure that right code of conduct is practiced; suppliers are properly selected and certified and are continuously monitored and audited. However best practices search as environmental scanning, development of key performance indicators through consultation, supplier development and data evaluation and learning should be practiced to maintain good performance and increase stable relationship. CONCLUSION Supply chain is a connection of activities carried out by different people along the supply channel hence a great deal of co-ordination and passage of information is important in ensuring reliable system. The process is normally efficiently implement has a aim of reducing the cost of living by ensuring they deal with quality production at a favorable cost. The goal and mission of supply chain management is to stabilize the output at the same time reducing the inventory and the cost incurred during the process follow up. During the process follow-up, the key decision made by the management on areas such as production, inventory, location, transportation and information will determine the success of the supply chain and its capability to meet its aim and objective. Fortunately globalization is forcefully causing major changes in the supply chain technology due to the advancement in technology and the increasing market competition. This companies though at different stages of the supply chain process work together by division of role where each company concentrate on what it does best. Key performance indicators such as quality, time, productivity and financial are used to make the supply chain more efficient by ensuring that the customer need is met at the right cost, time and quality hence the customer is always in demand of that specific good or service. At the same time suppliers have reduce inventory needs since the demand is high hence higher rate of turnover. Therefore for firms to benefit from properly executed supply chain management system, they have to develop their own action plan action plan and make recommendation with a supportive roadmap on how to implement the proposed action plan. The firm needs a documented long time plan linked to their deliverables, performance indicators, project time frame and return on investment (SCLOCAL, 2006). The supply chain management system is readjusted using feedback reports which give the management the market picture of demand and supply. Such feedback channel informs management on issues like stock out, overstock, quantities of losses and demand variation (USAID, 2010). The key stakeholders in the supply chain like producers and retailers need to share quality information that should be accurate, well timed, adequate and credible (Monezka.., et al.1998). Adopting a lean management system help firs move toward waste elimination or therefore operation become faster, more dependable, production of high quality products and low operation cost. Lean system eliminates all kind of activities which are not value producing for the business (Finch, 2006).Performance indicator is about efficiency and effectiveness which is , “doing thing s right” and , “ Doing the right thing”. At the same time it can be said that supply chain management give a firm an edge referred to as , “competitive advantage” which is achieved by accelerating the sourcing, good and services delivery process and the logistics functions across all the supply chain stakeholders (Nathan ,2005). In few optimistic cases, the supply chain management collaborates to synchronize all the processes enabling customers or suppliers to respond to the requirement of the end customer. Such collaborative approach in SCM is meant to increase the quality created for the customer and increase the economic potential of the companies involved. Finally it is good to note that an effective supply chain improves cost effectiveness in the whole channel and it has been used before to stretch limited resources. Therefore it is necessary for firms to strengthen and maintain a good supply chain management system as an investment to gain benefits such as: reduced losses sue to waste and damages, to protect major project investment and to maximize the potential for cost recovery. REFERENCE Brammer, S, Hoejmose, S & Millington, A, 2010. Managing sustainable global supply chain.Supply chain disruptions can be devastating for operation and share price. Network for business sustainability.Nbs.net Bichou,K & Gray R,2004. A logistic and supply chain management approach to port performance measurement. 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