Developing Sustainable Supply Chains

Mary Margaret RogersAnderson School of Management

University of New Mexico

Sustainability in Supply Chain Management

Definitions:

Supply chain management encompasses all activities associated with the flow and transformation of goods from the raw materials stage through the end user, as well as the associated information flows. (CSCPM)

Sustainable supply chain management requires that sustainability criteria be met while maintaining competitiveness through meeting customer needs. (Seuring and Müller, 2008)

Why Should Supply Chains Try to Be Sustainable?

• Supply chains are boundary spanning

– Coordination across normal boundaries means that many aspects of sustainability may be affected

– From initial processing of RM to consumption by final customer

Why Should Supply Chains Try to Be Sustainable?

• Outsourcing • Watchdog groups• Government requirements

Why Should Supply Chains Try to Be Sustainable?

• Reduce cost and wastes• Manage risks• Create distinguishing (sellable) reputation• Reinforce shareholder value

Issues affecting sustainability

• Product design• Product returns• Length of product life

cycle• Extension of product life

cycle• End of life disposal• Packaging

• Source reduction• Recycling• Material substitution• Waste disposal• Refurbishing• Repair• Remanufacturing

Puma’s Clever Little Bag

Sustainability in Supply Chain Management

• Use of the triple bottom line– Social

• Manage risks to organizational reputation

• Create competitive advantage

– Environmental• Regulatory issues

• Risk of harm from usage, disposal, packaging, shipping

– Economic• Sustainability can be cost efficient

• Sustainability can enhance shareholder value

Adapted from: Carter, CR, and DS Rogers. 2008. A framework of sustainable supply chain management: Moving toward new theory. International Journal of Physical Distribution & Logistics Management 38 (5):360-387.

Environmental Performance

SocialPerformance

EconomicPerformance

Sustainability

Good?

Better

Best

Better

The Triple Bottom Line

Triple Bottom LineSupporting Factors

Transparency and Risk Management

•Anticipate harm from activities

•Stakeholder Engagement

•Supplier Operations

Strategy

•Sustainability as part of an integrated strategy

Organizational Culture

•Deeply Ingrained

•Organizational Citizenship

•Values and Ethics

Sustainable Supply Chains at Walmart

November 1, 2006 Walmart introduced its Sustainable Packaging Scorecard Goal: Reduce packaging in supply chain by 5% by 2013

Predicted Results (Walmart U.S. only):

• 667,000 metric tons of CO2 not emitted

• 213,000 trucks off the road annually

• 66.7 million gallons of diesel fuel saved

Sustainable Supply Chains at Walmart

The 7 R’s of Sustainable Packaging• Remove• Reduce• Reuse• Renew• Recycle• Revenue• Read

Sustainable Supply Chains at Walmart

“When Wal-Mart tells a supplier that it wants a change in packaging, that supplier will change all its packaging…Wal-Mart has the potential to have a tremendous impact on America’s environmental footprint.”

David Willett, spokesman for The Sierra Club

Sustainable Supply Chains at Walmart

July 16, 2009: Walmart announced it would develop a Sustainability Index.

Step 1: Supplier AssessmentStep 2: Life cycle Analysis DatabaseStep 3: Tool for Consumer

Sustainable Supply Chains at Walmart

February 25, 2010: Walmart announced plans to eliminate 20 million metric tons of greenhouse gas emissions from the global supply chain by the end of 2015.

Goal: Reduce energy use and cost for suppliers, Walmart, and customers.

Sustainable Supply Chains at Walmart

Reverse Supply Chains

A reverse supply chain is a means of enhancing sustainability by retrieving products from customers.

• Safe end-of-life disposal• Refurbishing• Reuse for spare parts• Value in recycling

What’s different about reverse supply chains?

Forward Supply Chain Reverse Supply Chain

• Planning:– Forecasts

• Location:– One to many transportation

• Costs:– Well-defined– Focus on product ordering

costs

• Visibility– High priority

• Planning:– Reactive

• Location:– Many to one transportation

• Costs:– Not easily defined

– Additional costs not easily justified

• Visibility– Low priority

Benefits of Reverse Supply Chains

• Economic– Maintain product value—reuse– Continuous improvement

• Ethical– Customer safety– Customer satisfaction

• Environmental– Protect and safeguard sustainability

• Legal– Global rules and regulations (WEEE Act)

Reverse Supply Chain Challenges

• Operational– Information and process flow– Roles– Product

• Financial– Costs

• Technological– Information technology systems