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What potential challengesrisks should be considered in order to achieve a sustainable and stable supply chain?What recommendations would you propose to companies if they want to develop a not only stable but sustainable supply chain?
BUSI 1150 E-Logistics and International Supply Chain Management Task: questions: What potential challenges/risks should be considered in order to achieve a sustainable and stable supply chain? What recommendations would you propose to companies if they want to develop a not only stable but sustainable supply chain? _ Table of Content Introduction: The overview of a sustainable & stable supply chain (S&SSC)? 2.1 S&SSC definition 2.2 The advantages of S&SSC Risks and challenges of fostering S&SSC: 3.1 Internal risks: 3.1.1 Ineffective Transportation & Reverse Logistics 3.1.2 Lack of Ecoliteracy among Suppliers 3.1.3 Refusal to Change and for Adopting Innovation 3.1.4 Lack of Competent Integrated IT System 3.1.5 No Sufficient Environment Performance Metrics 3.1.6 Labor risks 3.2 External risks: 3.2.1 Natural disaster 3.2.2 Cybercrime Recommendations for a stable and sustainable supply chain system: 4.1 Internal risks: 4.1.1 Ineffective Transportation & Reverse Logistics 4.1.2 Lack of Ecoliteracy among Suppliers 4.1.3 Refusal to Change and for Adopting Innovation 4.1.4 Lack of Competent Integrated IT System 4.1.5 No Sufficient Environment Performance Metrics 4.1.6 Labor risks 4.2 External risks: 4.2.1 Natural disaster 4.2.2 Cybercrime 5.Conclusion: Answer: Introduction: According to “The Deloitte Global CPO Survey 2014’’, 79% of enterprises with well-performed supply chain system yielded turnover prosperity superior to the average just manufacturing within their companies And just about 8% of businesses with insufficient or even no supply chain was observed to reach aboveaverage growth That figure indicates a critical interrelation between the success of an enterprise and its supply network Poor supply chain system is commonly the main root of business failure, while productive logistics network will flourish the businesses by securing a cost reduction in budget and maximizing greater in-house operational productivity as a result (Kundu, 2015) The result promoted the concept of responsible sourcing and encouraged supply chain competitors to develop and share best practices for “greener” operation movement to adapt the global business practice It has encouraged organisations to demonstrate compliance within industry by best standards for working safety, environmental security and business ethics to benefit People, Planet & Profit (Fontaine, 2013) Katiyar and Barua (2013) also identified green supply chain management (GSCM) as the optimum way to minimize an organization’s bad impacts on ecology system, while enhancing production performance The advantages of S&SSC is obviously proven by both statistics and reality with a large number of businesses’ triumph and failure Nevertheless, to manipulate and strengthen a S&SSC, risks are inevitable These problems will be figured out in this report, accompanied by some feasible solutions from successful S&SSC of firms around the world The overview of a sustainable & stable supply chain (S&SSC)? 2.1 S&SSC definition: In 2015, the UN Global Compact defines S&SSC as “the control of environmental, social as well as economic effects, and the governance encouragement via the life cycles of products and services.” Another economic expert, Gilbert (2000) believed that GSCM is the harmony of both ecology management and supply network executives A lot of different approaches, but going green with environmentally friendly products and services is the leading way of the future (Pierce, 2011) No bad impacts on the environment, no natural resources depletion, no greenhouse effects or emission for climate change, higher innovation for working efficiency and greater social responsibility are done in the right way 2.2 The advantages of S&SSC and GSCM: There are some researches such as (Szajda, 2017) and O’Byrne (2011), which clarified some benefits of SSSC including: advancing customer service, curtailing manufacturing costs and acknowledging the business ethnic practice of a corporation When climate change has been more alarming, environmental-friendly products will be favorable It is captured from the research of P Strong and Anderson in 2011, customers are increasingly in favor of eco-friendly goods, when your products can meet their fast-changing demands and customer’s satisfaction will be improved Complaint is imminent in businesses, a company with highly effective S&SSC will fix issues immediately and ease all irate customers Once customers feel their problems are scrutinized, they will be less angry and more patient to solve the problems, instead of leaving (Lagat, et al 2016) Secondly, it is about the cost reduction O’Byrne (2011) stated that S&SSC will enable retailers to quickly distribute costly products to avoid landing on expensive inventories Sufficient delivery of materials and products avoids any excessive delays in manufacturing Finally, it is also vital once your company is identified as a good business ethnic pratice by providing eco-friendly products with lean supply chain and manufacturing process, your brand awareness will be enhanced significantly (Freeman, 2017) Risks and challenges of fostering S&SSC Enormous benefits of S&SSC are undeniable, challenges and risks are inherent (Kroll, 2013) Different kinds of supply chain risks can be very easily exposed due to the power of social media and detrimentally destroy your company Once problems arise, bad impacts on financial markets and interest rates will affect business decision-making negatively such as reducing variable costs, stopping borrowing for investment, and working on utilising existing resources as best as possible (Floyd, 2018) 3.1 Internal issues: 3.1.1 Ineffective Transportation & Reverse Logistics It is indicated by Hicks et al., (2005) that Transportation and Reverse Logistics are two pillars in the ecological operation system Emissions from cargo transportation is the main factor contributing to the global climate change as it is reported that “75 percent of an organisation’s carbon footprint is from transportation and logistics alone” (Eyesfortransport, 2017), so clean transportation in supply network represents a critical part of the ecology An effective reverse logistics system will maximize the profits by cost reduction (Kannan et al., 2009) The lack of knowledge discourages organisations to accomplish the reverse logistics sufficiently (Hicks et al., 2005) A typical automobile example is Boeing Dreamliner The production of the twin-engined 787 in 2007 made Boeing vow to break the record production time However, the mission was in tatters in several months Small glitches delayed the first phase of construction and as a result affected the whole process Some were truly minuscule Boeing enforced to buy more at Home Depot All setbacks intensified the revised timeline amounting to numerous years (Jones, 2017) 3.1.2 Lack of Ecoliteracy among Suppliers When the demand increases significantly and to boosts profits, it is time for companies to expand its supply chains (O’Byrne, 2011) However, the lack of ecoliteracy among suppliers is an important barrier for S&SSC as manufacturers have to work effectively together with all suppliers to produce final green products It can be seen that ecoliteracy is also regarded as one of the main indicators leading to consumers’ eagerness to pay more for ecological products (Firgure 1) Figure 1: Ecoliteracy and Customers’s eagerness to pay more for ecological products (Source: researchgate.net) If any stages are not eco-friendly, they can affect the whole process and final products (O’Byrne, 2011) 3.1.3 Refusal to Change and for Adopting Innovation The challenge in the S&SSC operation is the lack of determination to change (Szajda, 2017) As a result, the refusal to change on the part of the community and the shareholders will discourage technologies to be carried out effectively or exploited well (Lagat et al., 2016) From an organisational perspective, the “going green” is beneficial to all the company, its partners and even community opportunities The challenge is to determine the appropriate approach to involve all members from guiding, persuading, discussing, supporting, and promoting positive participation in the green movement 3.1.4 Lack of Competent Integrated IT System Technology advancement and the Industry 4.0 Revolution make data and information more important for making business decisions and especially investigating and capturing the market fast-changing demands for greener products (Freeman, 2017) Madrid-Guijarra et al., (2009) mentioned that the inadequate availability of market signal and information on ecological products and lean manufacturing processes will discourage companies from process innovations due to uncertainty about their product and its market demand 3.1.5 No Sufficient Environment Performance Metrics When climate change has been an increasingly alarming issue, the lack of environment performance metrics is also the main barrier to the S&SSC implementation (Freeman, 2017) No available environment performance metrics discourage the company’s focus from the green products development, costeffective products disposal, biodegradable product procurement, lean logistics to performance analysis systems offering the data to identify if the program was implemented properly (Walker et al., 2007) 3.1.6 Labor risks Labor risk is also regarded as the key problem in S&SSC as it is a concrete pillar of S&SSC’s structure, and “labor is the backbone of any supply chain operator.” (Maciel, 2017) Supply chain is an enlargement of a firm, and a failure to acknowledge the standard working conditions, the child labor exploitation, or any discriminations by suppliers may destroy to the brand’ reputation (Frenlei, et al., 2016) Together with the rise of automation is also the need for skilled members to form a decent team Especially, well-qualified labor supporting green initiatives is much more important as they will be inspirers, creators, supporters and those directly taking care every of single stage to devise and develop the green operational movement (Walker et al., 2007) Insufficient workers will affect the whole team performance and gradually destroy your prestige 3.3 External risks 3.3.1 Natural disaster Hurricanes, wildfires, floods and earthquakes were reported to make 2017 be one of the costliest year in the history of the property insurance industry (Savitsky, 2018) Natural disasters, especially if they accompany with common and severe with climate change will result in the total system failure For instance, in 2018 Mangkhut typhoon, the third-strongest tropical cyclone worldwide, hit the Philippines on Saturday and China on Sunday and caused Hong Kong’s gross domestic products loss of over $600 million a day, reported by The Washington Post (2018) This following graph also depicts the negative impacts of natural disasters (flood and drought) on supply chain (Figure 2) Firgure 2: Natural disasters’ impacts on supply chain (Source: bibliotecadigital.fgv.br) Over the years, climate change happens at the faster pace than originally foreseen Rising sea level caused by melting glaciers normally coincides with more severe storms, temperature swings, and volatile precipitation Along with widespread destruction to their physical surroundings and infrastructure, natural disasters destroyed business operations especially GSCM in many cases on a global scale (Benson and Clay, 2003) 3.3.2 Cybercrime: Riabtsev (2017) indicated that as with natural disasters, cyber threats potentially kick off the operation failure like a sort of domino effect whereby ordinary preparation plan fails to compensate for infrastructure, communication and labor breakdowns (Figure 3) Yahoo’s 2013 data breach impact on three billion accounts For S&SSC or “going green” movement, figuring out solutions for waste curtailment and lean transportation and logistics improvement is radical (Press, 2018) According to Riabtsev in 2017, planning engine to build a Multi-Stop, Direct or a Multi-Leg based on the order should be prioritized Additionally, the shipment tracking the warehouse can minimize the idle time to cut down on diffusion (O’Byrne, 2011) It can be infered that companies should invest in lean manufacturing process with a flexible management system to maximize transportation sufficiency in order to only promote the products cycle, but more importantly reduce delays and emmisions or gases released ‘Lean’ concept, replicated worldwide” or lean operational pratice is the executive philosophy by Toyota Production System, which helped make Toyota be the world top three car corporation Moreover, companies should respond to customer wisdom with local products by shifting their supply chains to local suppliers (the UN Global Compact, 2015) This shift can significantly decrease the environmental impacts of transportation creating competitives advanatges with fresher agricultural products 4.1.2 Ecoliteracy among Suppliers The ecoliteracy varies differently from companies to companies, corporations should scrutinize to create a S&SSC with equal prestige and high responsility for the “going green” movement (Benson and Clay, 2003) The system should contemplate all supply sourcing elements from manufacturing, delivery, labor and even the environment matrics before product-facility sourcing strategies This idea is also supported by O’Byrne in 2011 Moreover, business events like mergers and acquisitions promoting positive environmental impacts among the supply chain also contribute to the eco-literacy improvement among suppliers The success of supply chain ecoliteracy will gain your brand’s eco-friendly identity and create higher competitive advantages over rivalries Figure 4: Walmart’s green supply chain (Source: funelinc.com) It can be seen that the key success of Walmart as the largest retailer around the world is securing the green color in every single stage (Figure 4) creating the ecoliteracy among suppliers 4.1.3 For Refusal to Change and for Adopting Innovation Patti and Phillips (2010) featured that there is a misleading point that the clean environment costs everyone and eco-friendly initiatives often pairs with a premium Actually, it is not always true However, to convince big sharks to handle your green projects, it is imperative to ensure your potential continued funding and healthy growth Strong leadership is the key to guarantee green projects and sustainability bringing positive results for stakeholders as below (Figure 5) Figure 5: 12 steps of Green Leadership for Results in 2010 (Source: theguardian.com) 4.1.4 For the Lack of Competent Integrated IT System Adequate Integrated IT improves the production via customer’s demand and supply chain’s capacity synchronization system (Benson and Clay, 2003) The company should take advantages of the Kanban (a lean approach to govern and improve work productivity by human systems) to communicate requirements automatically and to offer visible suggestions between supplying and consuming Moreover, higher supply chain integration system enables companies to well control their operation (Benson and Clay, 2003) Corporations can encourage changing business conditions by supporting what-if scrutiny capabilities Finally, technology advancement encourages a more flexible and responsive supply chain by consolidating information from obtainment processes across the business and automating that cycle from PO creation to settlement (Lagat, et al 2016) It saves a lot of time and labor, thus cost efficiency can be maximized as a result 4.1.5 Sufficient Environment Performance Metrics Measuring the environmental effects is the first step to mitigate them It is time for Sustainability and Environmental "Green" Reporting (O’Byrne, 2011) According to Oracle Transportation Management (OTM) in 2011, the key attributes in the environmental reporting should include: Relevance: the emissions and the decision-making demands for both internal and external stakeholders Completeness: greenhouse gases sources and business operational activities Consistency: methodologies & comparisons of emissions Accuracy: be accurate to assure the integrity of the reported information Scalability: be flexible with laws, regulations or audit requirements A lot of corporations made advantages of OTM system to maximize their operation (Firgure 6) Figure 6: Who uses Oracle Transportation Management? (Source: idatalabs.com) Another typical example is Environmental, Social and Governance Metrics (ESG) by Ford Motor Company (Schrank, 2014) ESG performance disclosures also serve as proxies to address the “value gap” by indicating risks and chances related to material environmental, social and governance issues for specific companies (Figure 7) Figure 7: A Snapshot of Ford’s 2013 Environmental Performance (Source: Bloomberg Professional Finance and ESG Platform July 2014) 4.2.3 Labor risks: More time and effort should be invested to make sure that employees are happy (Kaplan & Mikes, 2012) As once they are satisfied with the working environment and career promotions, they can be more productive More importantly, strong labor and health and safety practices contribute to the cost efficiency (Jurčević, 2009) Health promotion activities can enhance workers’ productivity and reduce absenteeism, cut associated costs and generate more turnover HP Inc is one of the most prestigious leading computer incorporation for their printers and other IT products, and serious dedication to the company resilience and the global community through their excellent supply chain Their focus is on human training and development (Figure 5) Figure 5: HP’s human development strategy (Source: www8.hp.com) By 2025, HP aims to double their factory participation in sustainability programs as well as enhance the skills and well-being of 500,000 factory workers Transparency about the operational process with supply chain responsibility efforts based in the sustainability create an important impact beyond HP’s factory floors In addition to HR training and working environment improvement, it is also necessary for companies to foster green initiatives among employees and reward for inspiring and practical approaches Dynamic, creative and radical team will definitely be pioneers capturing and leading the market with eco-friendly products and services 4.3 External risks: 4.3.1 Natural disasters: Ensuring that your business is prepared for the potential disruption seems to be the optimal solution for the intense weather The disaster preparedness plan with detailed outlines must consider all emergencies and natural disasters as well as lessons or experience from the previous failure The plan must also be in alignment with risk management (Althonayan, et al., 2011) At the same time, it is necessary to keep up with potential weather, and run a data analysis, and simulations across your supply chain to identify pressure points where natural disasters would most likely impact the operational system (Dasaklis and Pappis, 2013) Formulating and developing risk management and disaster preparedness plans should always be prioritized as disasters can strike at any moment (Christensen, 2006) For instance, after the 2011 Tohoku earthquake, Toyota built information networks covering over 4000 auto parts It made Toyota better prepare for the 2016 Kumamoto earthquake when it could identify which suppliers were affected in a matter of hours, and then quickly shift parts production to alternative partners making the consecutive operation process 4.3.2 Cybercrime: Supply network is especially at risk of cybercrime due to many moving parts included (APICS, 2014) It is essential to set competency standards for every single stage that a supplier must comply Therefore, when each stage is secured and strictly reported, risks will be significantly curtailed Innovating your old security system to prevent cyber risks is also vital as an outdated security operation is as equally dangerous as having no security system at all (Deloitte, 2014) And the most popular method is setting up a blockchain system via smart contract applications to secure transactions and track goods within its chain According to Manders (2017), blockchain is virtually unhackable, and “the shipping industry and supply chains are looking more seriously at blockchains” It will be more popular as smart contracts make every single legal contract and accounting treatment be automated with a line of code - that is utterly secured 5.Conclusion: These days, when the more severe global climate change together with the higher demands for ecological products encourages companies to move forward with the green movement It is necessary for every firm to foster a stable and sustainable supply chain or “going green” to contribute to the environmental sustainability, to satisfy customer needs or just to comply with government laws and regulations S&SSC reveals today’s most alarming environmental problems and depicts how green approaches can benefit community and companies by cost reduction, efficiency boost and delivery time saving Increasingly, companies enhance their greener shade of brands to promote customerss loyalty via the higher socioecological business’s implications Challenges and risks are unvoidable, but proper strategies, appropriate supplier selection, lean logistics seem to be feasible 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for both internal and external stakeholders Completeness: greenhouse gases... care every of single stage to devise and develop the green operational movement (Walker et al., 2007) Insufficient workers will affect the whole team performance and gradually destroy your prestige