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Sustainability and the Supply Chain

PowerPoint presentation to accompany Chopra and Meindl Supply Chain Management, 5e

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall . 18-1 1-1

Learning Objectives
1. Understand the importance o sustainability in a supply chain 2. !iscuss the challenge to sustainability posed by the tragedy o the commons ". !escribe #ey metrics that can be used to measure sustainability or a supply chain $. %denti y opportunities or improved sustainability in various supply chain drivers

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall .

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&he 'ole o Sustainability in a Supply Chain

( &he health and survival o ( (

every supply chain and every individual depends on the health o the surrounding )orld *+pand the goal o a supply chain to others that may be a ected by supply chain decision ,actors driving ocus on sustainability
1. 'educing ris# and improving the inancial per ormance o the supply chain 2. -ttracting customers )ho value sustainability ". .a#ing the )orld more sustainable

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall .

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&he &ragedy o the Commons

( !ilemma arising )hen the common good ( (

does not align per ectly )ith the good o individual entities /etting any agreement on action is di icult because the optimal joint action is not individually optimal 0eed or intervention but considerable disagreement on the re1uired orm o intervention
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Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall .

3hat -re Some Solutions to &his 4&ragedy56

( 0o solution )ithout ta#ing a)ay some (

o the reedom that participants 0eed to choose rom options that are unli#ely to be supported by all o their o)n ree )ill

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall .

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3hat -re Some Solutions to &his 4&ragedy56

( .utual coercion 8 social arrangements or

mechanisms coerce all participants to behave in a )ay that helps the common good
8 Command-and-control approach 8 .ar#et mechanisms
8 Cap-and-trade 8 9roportional ta+

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall .

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;ey .etrics or Sustainability

1. 2. ". $. *nergy consumption 3ater consumption /reenhouse gas emissions 3aste generation

(.Challenges )ith scope (.-bsolute or relative measures o

per ormance
Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall . 18-:

Sustainability and Supply Chain !rivers

( Opportunities identi ied by matching the (

our categories )ith supply chain drivers ,acilities

8 Signi icant consumers o energy and )ater and emitters o )aste and greenhouse gases 8 Separate the improvement opportunities into those that generate positive cash lo)s and those that do not

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall .

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Sustainability and Supply Chain !rivers

( %nventory

8 'a) materials= )or# in process= inished goods and inventory sitting in typical land ill 8 Li e cycle assessment >LC-? can be used to assess a product@s environmental impacts 8 /oal is to reduce harm ul inventory and unloc# the unused value in products )hen they are discarded

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall .

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Sustainability and Supply Chain !rivers

( &ransportation

8 Lo)er transportation costs also tends to reduce emissions and )aste 8 9roduct design a signi icant role in reducing transportation cost and emissions 8 'educing pac#aging and allo)ing greater density during transportation

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall .

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Sustainability and Supply Chain !rivers

( Sourcing

8 .ajority o energy and )ater use and )aste and emissions occurs in e+tended supply chain outside the enterprise 8 *+tended supply chain and )or# )ith their suppliers to improve per ormance 8 Beri ying and trac#ing supplier per ormance on sustainability is a major challenge

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall .

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Sustainability and Supply Chain !rivers

( %n ormation

8 /ood in ormation is a big challenge 8 -bsence o standards leads to claims o improvement that are not veri iable 8 Leads to company-speci ic standards and an e+plosion o certi ications and certi ying agencies 8 Use o consistent measures )ithin a supply chain
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Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall .

Sustainability and Supply Chain !rivers

( 9ricing
8 Consumption visibility and di erential pricing by load or time o day may ma#e a signi icant di erence in the usage o energy 8 Change customer@s )illingness to pay or a product that is produced and distributed in a more sustainable manner but costs more 8 Sustainability cannot be improved simply by ocusing on reducing costs or the use o incentives

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall .

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Closed-Loop Supply Chains

( Supply chains cause signi icant harm to the ( ( (
environment )hen their output ends up in a land ill %mprove sustainability by designing products that can be reused and recycled .ust be supported by a supply chain that ensures recycling *conomic interests o all the parties must be understood and aligned or the activities to be per ormed
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Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall .

Summary o Learning Objectives

1. Understand the importance o sustainability in a supply chain 2. !iscuss the challenge to sustainability posed by the tragedy o the commons ". !escribe #ey metrics that can be used to measure sustainability or a supply chain $. %denti y opportunities or improved sustainability in various supply chain drivers

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall .

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-ll rights reserved. 0o part o this publication may be reproduced= stored in a retrieval system= or transmitted= in any orm or by any means= electronic= mechanical= photocopying= recording= or other)ise= )ithout the prior )ritten permission o the publisher. 9rinted in the United States o -merica.

Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall .

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