Supply Chain Management

1. Sustainability and
Supply Chain

2. Group Members
– Freeha Rana Roll # 25
– Sherbaz Roll # 23
– Ahmad Abdul Aziz Roll # 26
– Mohad Roll # 16
– Sohail Roll # 41

3. Topics
1. Understand the importance of sustainability in supply chain
2. Challenges to sustainability posed by tragedy of the commons
3. Key dimensions of sustainability for supply chain
4. Role of incentives for successful sustainability efforts

4. Definition
– Sustainable supply chain can be viewed as management of raw material and
services from supplier to manufacturers/services provider to customer with
improvement of social and environmental impacts explicitly considered.
( Amer, 2013 )

5. The Role of Sustainability in a
Supply Chain
– The health and survival of every supply chain and every individual depends on
the health of the surrounding world.
– Expand the goal of a supply chain to others that may be affected by supply
chain decision.

6. Factors dividing focus on
sustainability
1. Reducing risk and improving the financial performance of the supply chain.
2. Attracting customers who value sustainability.
3. Making the world more sustainable.

7. Walmart is an example, who
focus on sustainability as a
defensive move, given the
criticism it was receiving
from environmental activists.

9. The Tragedy of Commons
– Dilemma arising when the common good does not align perfectly with the good
of individual entities.
– Getting any agreement on action is difficult because the optional joint action is
not individually optimal
– Need for intervention but considerable disagreement on the required form of
intervention

10. What are Some Solution to
this Tragedy?
– No solution without
taking away some of
the freedom that
participants.
– Need to choose from
options that are
unlikely to be
supported by all of
their own free will.

11. What are Some Solution to this
Tragedy?
– Mutual coercion – social arrangements or mechanism coerce all participants to
behave in a way that helps the common good
 Command and control approach
 Market Mechanism
• Cap and trade
• Proportional tax

12. Key Pillars of Sustainability
Sustainability in a supply chain can be viewed along three pillars.
1. Social Pillar
2. Environmental Pillar
3. Economics Pillar

14. Social Pillar
– Social pillar measures a firm’s ability to address issues that are important for its
workforce, customers and society.
– Workforce - It includes employment quality, health and safety, training and
development, and diversity and opportunity.
– Customer - It includes accurate product information and labelling, along with
the impact of the product in the customer’s health and safety.
– Society – It includes human rights and impact on local communities.

15. Environmental Pillar
– The environmental pillar measures a firm’s impact on the environment,
including air, land, water and ecosystem.
– Firm activities that improve environmental pillar can be categories as
1. Resources Reduction
2. Emission Reduction
3. Product Reduction

16. Environmental Pillar
– Resources Reduction – This activities result in a more efficient use of natural
resources in a supply chain.
– Emission Reduction –This activities reduce hazardous air emissions
( greenhouse gases ), waste, water discharge or environmental impact of the
company in a community.
– Product Innovation – It reflects the company availability to reduce the
environmental costs and burden for its customers through the development of
eco-efficient products and services.

17. Sustainability and Supply Chain
Driver
– Opportunities identifies by matching
the following categories with supply
chain drivers.

18. – Significant consumers of energy and water and emitters of waste and
greenhouse gases.
– Separate the improvement opportunities into those that generate positive cash
flows and those that do not.
– Example: Walmart, Coca cola (Posco)

19. – Raw material work in process finished goods and inventory sitting in typical
landfill.
– Life cycle assessment can be used to assess a product’s environmental impacts.
– Goal is to reduce harmful inventory and unlock the unused vale in products
when they discarded.
– Example: Pak Arab, Cyber Pac.

20. – Lower transportation costs also tends to reduce emissions and waste.
– Product design a significant role in reducing transportation cost and emission.
– Reducing packing and allowing greater density during transportation.
– Example: IKEA and Walmart

21. – Majority of the energy, wastes and emissions occurs in extended supply chain
outside the enterprise
– Extended supply chain and work with their suppliers to improve performance.
– Verifying and tracking supplier performance on sustainability is a major
challenge.
– Example: C.A.F.E, IKEA, Walmart

22. – Good information is a big challenge.
– Absence of standards leads to claims
to improvement that are not
verifiable.
– Leads to company specific standards
and an explosion of certifications and
certifying agencies.
– Use of consistent measure within a
supply chain. Example Café.

23. – Consumption visibility and differential pricing by load or time of day may make
a significant difference in the usage of energy.
– Change customer’s willingness to pay for a product that is produced and
distributed in a more sustainable manner but cost more.
– Sustainability cannot be improved simple by focusing on reducing cost or use of
incentives.
– Example: Mintel Survey.

24. Closed-Loop Supply Chain
– Supply chains cause significant harm to the environment when their output
ends up in a landfill.
– Improve sustainability by designing products that can be reused and recycled
– Must be supported by supply chain that ensures recycling.
– Economics interests of all the parties must be understood and aligned for the
activities to be performed.

25. The Pricing of Sustainability
– Sustainability focuses on firms and individual.
– They internalize the ”monetary value” of the social or environmental cost of
their action.
– To improve sustainability in supply chain it is important to incorporate suitable
prices for social and environmental impacts.
– Some of challenges in the context of emission pricing.

26. Pricing of Emissions
– A price on emissions is the most cost effective way of reducing emission.
– Emission can be priced trough either a carbon tax or hybrid cap and trade
mechanism.
– Goulder and Schein discussed the following dimensions along which any
emissions pricing mechanism should be evaluated:
1. Cost of administration 5. Industry competitiveness
2. Price volatility 6. Wealth transfer to energy-exporting countries
3. Emission uncertainty 7. Revenue neutrality
4. New information uncertainty