E logistics and international supply chain management: The challenges & merits of Sustainable Supply Chain

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

Table of Content

1 Introduction:

2 The overview of a sustainable & stable supply chain (S&SSC)?

2.1 S&SSC definition

2.2 The advantages of S&SSC

3 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

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:

1 Introduction:

According to “The Deloitte Global CPO Survey 2014’’, 79% of enterprises withwell-performed supply chain system yielded turnover prosperity superior to theaverage just manufacturing within their companies And just about 8% ofbusinesses with insufficient or even no supply chain was observed to reach above-average growth That figure indicates a critical interrelation between the success of

an enterprise and its supply network Poor supply chain system is commonly themain root of business failure, while productive logistics network will flourish thebusinesses by securing a cost reduction in budget and maximizing greater in-houseoperational productivity as a result (Kundu, 2015) The result promoted theconcept of responsible sourcing and encouraged supply chain competitors todevelop and share best practices for “greener” operation movement to adapt theglobal business practice It has encouraged organisations to demonstratecompliance within industry by best standards for working safety, environmentalsecurity 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 obviouslyproven by both statistics and reality with a large number of businesses’ triumphand failure Nevertheless, to manipulate and strengthen a S&SSC, risks areinevitable These problems will be figured out in this report, accompanied by somefeasible solutions from successful S&SSC of firms around the world

2 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 lifecycles of products and services.”

Another economic expert, Gilbert (2000) believed that GSCM is the harmony ofboth ecology management and supply network executives

A lot of different approaches, but going green with environmentally friendlyproducts and services is the leading way of the future (Pierce, 2011) No badimpacts on the environment, no natural resources depletion, no greenhouse effects

or emission for climate change, higher innovation for working efficiency andgreater 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), whichclarified some benefits of SSSC including: advancing customer service, curtailingmanufacturing costs and acknowledging the business ethnic practice of acorporation When climate change has been more alarming, environmental-friendlyproducts will be favorable It is captured from the research of P Strong andAnderson in 2011, customers are increasingly in favor of eco-friendly goods, whenyour products can meet their fast-changing demands and customer’s satisfactionwill be improved Complaint is imminent in businesses, a company with highlyeffective S&SSC will fix issues immediately and ease all irate customers Oncecustomers feel their problems are scrutinized, they will be less angry and morepatient 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 willenable retailers to quickly distribute costly products to avoid landing on expensiveinventories Sufficient delivery of materials and products avoids any excessivedelays in manufacturing

Finally, it is also vital once your company is identified as a good business ethnicpratice by providing eco-friendly products with lean supply chain andmanufacturing process, your brand awareness will be enhanced significantly(Freeman, 2017).

3 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 Onceproblems arise, bad impacts on financial markets and interest rates will affectbusiness decision-making negatively such as reducing variable costs, stoppingborrowing for investment, and working on utilising existing resources as best aspossible (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 aretwo 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 andlogistics alone” (Eyesfortransport, 2017), so clean transportation in supply networkrepresents 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 toaccomplish the reverse logistics sufficiently (Hicks et al., 2005) A typicalautomobile 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 ofconstruction and as a result affected the whole process Some were trulyminuscule Boeing enforced to buy more at Home Depot All setbacks intensifiedthe 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 forcompanies to expand its supply chains (O’Byrne, 2011) However, the lack ofecoliteracy among suppliers is an important barrier for S&SSC as manufacturershave 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 finalproducts (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 andthe shareholders will discourage technologies to be carried out effectively orexploited well (Lagat et al., 2016)

From an organisational perspective, the “going green” is beneficial to all thecompany, its partners and even community opportunities The challenge is todetermine the appropriate approach to involve all members from guiding,persuading, discussing, supporting, and promoting positive participation in thegreen movement

3.1.4 Lack of Competent Integrated IT System

Technology advancement and the Industry 4.0 Revolution make data andinformation more important for making business decisions and especiallyinvestigating and capturing the market fast-changing demands for greener products(Freeman, 2017) Madrid-Guijarra et al., (2009) mentioned that the inadequateavailability of market signal and information on ecological products and leanmanufacturing 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 ofenvironment performance metrics is also the main barrier to the S&SSCimplementation (Freeman, 2017) No available environment performance metricsdiscourage the company’s focus from the green products development, cost-effective products disposal, biodegradable product procurement, lean logistics to

performance analysis systems offering the data to identify if the program wasimplemented 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 toacknowledge the standard working conditions, the child labor exploitation, or anydiscriminations 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 adecent team Especially, well-qualified labor supporting green initiatives is muchmore important as they will be inspirers, creators, supporters and those directlytaking care every of single stage to devise and develop the green operationalmovement (Walker et al., 2007) Insufficient workers will affect the whole teamperformance 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 severewith climate change will result in the total system failure For instance, in 2018Mangkhut typhoon, the third-strongest tropical cyclone worldwide, hit thePhilippines on Saturday and China on Sunday and caused Hong Kong’s grossdomestic products loss of over $600 million a day, reported by The Washington

Post (2018) This following graph also depicts the negative impacts of naturaldisasters (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 severestorms, temperature swings, and volatile precipitation Along with widespreaddestruction to their physical surroundings and infrastructure, natural disastersdestroyed 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 potentiallykick off the operation failure like a sort of domino effect whereby ordinarypreparation plan fails to compensate for infrastructure, communication and laborbreakdowns (Figure 3) Yahoo’s 2013 data breach impact on three billion accounts

or Equifax disaster demonstrated how fast the threat of data security problems tocompanies, especially to supply chain leaders requiring strict security

Figure 3: Cyber threats to Supply chain (Source: forbes.com)

Additionally, cyber threats can also cost firms millions of dollars to invest extrainfrastructure to get systems back online, and to upgrade their security operation inorder not to be hacked again (Press, 2018) In 2016, Cyber Ventures also predictedthat cyber threats will cost the global business over $6 trillion by 2021 up from

$325 million in 2015

4 Recommendations for a stable and sustainable supply chain system:

4.1 For Internal Problems

4.1.1 Effective Transportation & Reverse Logistics

For S&SSC or “going green” movement, figuring out solutions for wastecurtailment 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, theshipment tracking the warehouse can minimize the idle time to cut down ondiffusion (O’Byrne, 2011) It can be infered that companies should invest in leanmanufacturing process with a flexible management system to maximizetransportation sufficiency in order to only promote the products cycle, but moreimportantly reduce delays and emmisions or gases released ‘Lean’ concept,replicated worldwide” or lean operational pratice is the executive philosophy byToyota Production System, which helped make Toyota be the world top three carcorporation

Moreover, companies should respond to customer wisdom with local products byshifting their supply chains to local suppliers (the UN Global Compact, 2015) Thisshift can significantly decrease the environmental impacts of transportationcreating competitives advanatges with fresher agricultural products

4.1.2 Ecoliteracy among Suppliers

The ecoliteracy varies differently from companies to companies, corporationsshould scrutinize to create a S&SSC with equal prestige and high responsility forthe “going green” movement (Benson and Clay, 2003) The system shouldcontemplate all supply sourcing elements from manufacturing, delivery, labor andeven the environment matrics before product-facility sourcing strategies This idea

is also supported by O’Byrne in 2011 Moreover, business events like mergers andacquisitions promoting positive environmental impacts among the supply chainalso contribute to the eco-literacy improvement among suppliers The success of

supply chain ecoliteracy will gain your brand’s eco-friendly identity and createhigher 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 cleanenvironment costs everyone and eco-friendly initiatives often pairs with apremium Actually, it is not always true However, to convince big sharks tohandle your green projects, it is imperative to ensure your potential continuedfunding and healthy growth Strong leadership is the key to guarantee greenprojects and sustainability bringing positive results for stakeholders as below(Figure 5)