Best Practices in Sustainable Supply Chain Management

Read this article. Given the speed with which consumer tastes change, being able to develop new, high quality products on a regular basis is key to sustainable profits for firms. This article covers performance measurements for new product development.

1. Introduction

Supply chain management is the integration of the activities that procure materials, transform them into intermediate goods and final products, and deliver them to customers. New product development (NPD) processes include design and development along with sourcing through the company's development chain. In order to remain competitive, supply chains must continuously develop and deliver new products and services to the marketplace. Carefully matching the product characteristics to the appropriate supply chain strategy is critical to being competitive and to aligning appropriate order winners and order qualifiers with customer requirements.

Sustainability is a new trend in Supply Chain Management and is a conceptual framework for aligning the 'triple bottom line'-environmental, social and economic dimensions. Environmental sustainability is the most recognized dimension as corporations seek to reduce the natural resource consumption below the natural reproduction in both the processes and products its produces. Environmental considerations include global warming, which can be attributed to 6 greenhouse gases (like carbon dioxide, methane, and nitrous oxide), and pollution. In the United States, since industrial activities account for about a third of carbon dioxide emissions and 40% occur due to transportation, supply chain activities are a primary factor in environmental sustainability. Economic sustainability refers to the profitability of the sustainable efforts. Without economic sustainability, businesses will cease to exist, and this aspect becomes an order qualifier for any product. Social sustainability can be divided into both internal and external dimensions. Internal social sustainability refers to the motivation, skills, and loyalty of employees and business partners in the supply chain, while external social sustainability refers to the value that is added to the community that the company operates in. Social sustainability is the least researched and developed dimension in NPD. In fact, the social aspect is the least research and developed dimension in sustainability as a whole, and the social and ethical dimensions have not been given the same attention by businesses since the measurable results are less tangible. Many business theories view these three dimensions as trade-offs and not necessarily 'win-win' situations. For example, environmental regulations provide social benefits; however, private costs for prevention and clean-up increase, which reduces competitiveness. However, proactively, pollution prevention through product and process design is viewed as superior and more economical to pollution control through waste management.

Why sustainability now? Business leaders are confronting resource depletion, recognizing new roles for businesses in economic and social change, and responding to stakeholder demands (e.g. Government, employees, shareholders, environmental groups, nongovernmental organizations (NGOs), and citizens) for information and accountability. Going green can save money and open new revenue streams. Growing pressures exist from government and society to deal with factors contributing to global warming, raw material scarcity, and deterioration of human rights. Other motivations come from consumer's concerns, intrinsic motivations of the companies, or legal requirements. Government policy and regulations as well as Corporate Sustainability policy may be the initial drivers for sustainability.

Sustainable Supply Chain Management (SSCM) can be defined as "the strategic, transparent integration and achievement of an organisation's social, environmental and economic goals in the systemic coordination of key inter-organisational business processes for improving the long term economic performance of the individual company and its supply chains". Sustainable development is grounded in the Brundtland Commission's definition as "a development that meets the needs of the present without compromising the ability of future generations to meet their own needs". SSCM allows companies to maintain control over their supply chain and potentially achieve competitive advantages through enhancing track and traceability from raw materials through to the customer. SSCM can be defined as the management of material, information and capital flows as well as cooperation among companies along the supply chain while addressing goals from all three dimensions of sustainable development (economic, environmental and social) which are derived from customer and stakeholder requirements. Companies can gain competitive advantage through sustainability, which in turn affects the whole supply chain. SSCM includes evaluation of the environmental impact, a multi-disciplinary perspective of the entire product life-cycle, and considerations for all stages across the entire value chain for each product.

SCM research rarely investigates the social aspects of sustainable development, such as labor practices, gender equity, wealth distribution, and fair wage. There are a wide range of issues in sustainability development including public policies, political systems, corporate citizenship, international trade, social equity/justice, and economic growth/development. With respect to supply chain strength and environmental performance, one expects that as supply chain strength increases, manufacturing performance (measured through costs, quality, delivery, and flexibility) are expected to improve. For example, green partnerships are positively associated with quality, delivery, and flexibility performance as well as improving environmental performance. Strong competition among suppliers and more demanding customers promotes fair wages and human rights within the corporation and motivates companies to contribute more to the well-being of society through local community involvement.

Firms are increasingly required to offer high quality, innovative products at competitive prices, and to develop supply chains that are sustainable in the long run. NPD is the overall process through which an idea is transformed into a commercial product and includes the idea generation, market research, product design, and detail engineering phases. In order to remain competitive in today's marketplace, SCM must address sustainability issues in NPD. Sustainable product development is the process of developing an improved sustainable product or service for the market. Sustainability integration into NPD is still evolving and is increasing the product design complexity. External factors that encourage sustainable NPD include competitors, governmental agencies, regulatory bodies, while internal factors include top management vision and strategy, and employees. Product designers can significantly influence the product's sustainability over its entire life. Sustainable products addresses fulfilling the users' needs with the purpose of reducing environmental and social impacts of products while providing economic value to the company during the whole product's life cycle. Green NPD, which focuses on the environment and economic sustainability aspects, is fundamentally the same as traditional NPD; however, green NPD increases the complexity. A 2009 Forrester study indicated that 84% of companies surveyed had green or socially responsible products in NPD or on the market. However, as recently as 2010, there was little knowledge on why and how companies integrate environmental sustainability into NPD.

Therefore, there is a need in today's society to address how to integrate sustainability – all three dimensions of ecological, environmental, and social – into NPD and SCM. We continue by reviewing key managerial recommendations to address this. Then, since managers use metrics and frameworks to evaluate the system, we review some sustainability metrics and frameworks. We conclude with a summarization of our recommendations.

Source: Lynn A. Fish,
Creative Commons License This work is licensed under a Creative Commons Attribution 3.0 License.