sustainability

Flooding and iPhone - This Week in Supply Chain Management (36+37 / 2012)

Daniel Dumke — Sun, 16 Sep 2012 10:17:37 +0000

Let’s see if this new-biweekly publication pattern pays off. I think at lease the last two weeks produced some very interesting articles.

Articles

Just last week the new iPhone 5 has been announced. If you want to read a little bit more about the supply chain implications of its ultrafast global rollout, have a look at “Apple’s real iPhone 5 ace: Its supply chain” at ZDNet. (ZDNet)
Contemplating the effects of the hottest US summer in memory, The Guardian writes about the necessity to think beyond the supply chain when building a sustainable business. (Guardian)
Swiss Re claims that the losses related to floods now come close to those caused by earthquakes. “The $12 billion insured losses in Thailand really highlighted the potential for flood to cause extreme losses,” he says. “The insured losses corresponded to 1,800 percent of the country’s total annual property premium”. (Insurance Networking)

Already tweeted

René Descartes and supply chain management http://t.co/djF6UdPW
The Evolving Role of the Risk Professional: A Panel Discussion at the 2012 RIMS Canada Conference http://t.co/3M21FTtl
Hans Lessoe Shares LEGO’s Risk Management Strategy at the 2012 RIMS Canada Conference http://t.co/xvopyHO
For those who learn visually: Supply chain management infographics & more http://t.co/CdPwED1E

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Resilient and Sustainable Systems

Daniel Dumke — Mon, 08 Aug 2011 14:01:00 +0000

In today’s post I would like to highlight how the concepts of resilience and sustainability can be aligned.
Resilience is often interpreted as a property of a supply chain most often associated in a risk management sense; sustainability on the other hand, usually refers more to social and environmental goal orientation. So how can these concepts be aligned?

You can download a copy of the full article by Joseph Fiksel Designing Resilient, Sustainable Systems.

Sustainability

Nowadays shareholders show more and more interest in the ecological and social footprint of their company, therefore companies aspire to become more sustainable.

Fiksel defines sustainability as:

A product, process, or service contributes to sustainability if it constrains environmental resource consumption and waste generation to an acceptable level, supports the satisfaction of important human needs, and provides enduring economic value to the business enterprise.

Sustainability therefore is not an objective (which could be put into a mathematical model) but a property of a system.
For a supply chain system the analysis starts at the process level up to the an economy and ecosystem (see figure 1).

Figure 1: Levels of System Design (Fiksel, 2003)

Sustainable companies

The author points out a study which has been conducted by Royal Dutch Shell in the 90s to find properties of long-lived companies. They unveiled the following factors:

sensitivity and adaptability to the business environment
cohesion and sense of identity
tolerance of diversity (decentralization)
conservative use of capital

Interestingly, profitability was seen rather as an outcome of these factors than a good prediction for long life. The study concludes that learning, growing and long term survival should be the goal; and these objectives cannot be reached by simply maximizing profits.

Resilience vs. sustainability

First, resilience can be best described using the diagram in figure 2.

A resistant system returns to its desired / stable state very fast, however if the system state is moved too far of the original state (in the diagram too far left or right) it may collapse and not be able to return.
A resilient system has a broader range of possible states, and therefore can survive larger disruptions.
The last system is an extension of the resilient system, and able to withstand even larger changes in the environment, maybe changing its equilibrium point.

Figure 2: Characterizing System Types (Fiksel, 2003)

Resilience in systems design

Fiksel suggests four system characteristics which can be / are used on different system levels to increase resilience of that system:

Diversity, existence of multiple forms and behaviors;
Efficiency, performance with modest resource consumption;
Adaptability, flexibility to change in response to new pressures;
Cohesion, existence of unifying forces or linkages.

Figure 3 contains supporting examples.

Figure 3: Properties of Resilient Systems (click to enlarge; Fiksel, 2003)

Conclusion

The author introduces a system theory framework, where sustainability and resilience are properties of the system. From the title and introduction I was expecting a more systematic approach in comparing these two concepts and defining their relationship.
There is one direct quote (“Perhaps the essence of sustainability is resilience, the ability to resist disorder.”) indicating that resilience might be the more general term, but it is not confirmed.

There are of course some overlaps mentioned, e.g. efficiency as a mean to improve resilience, which works towards a sustainable system. But there is no direct comparison between the two.

The author also introduces a process to design sustainable systems. If interested please download the paper and have a look at page 5335.

Reference:

Fiksel, J. (2003). Designing Resilient, Sustainable Systems Environmental Science & Technology, 37 (23), 5330-5339 DOI: 10.1021/es0344819

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Managing Supplier Sustainability Risks

Daniel Dumke — Mon, 30 May 2011 12:47:00 +0000

For many years sustainability risks have been largely neglected. Reputational damages caused by incidents like the Brent Spar platform can reach tens of millions of dollars. But in a supply chain context companies are not only held responsible for their own actions but also for the actions of their suppliers.

In their 2010 paper Foerstl et al. analyze supplier sustainability risk and develop and test a framework for its mitigation.

Research question

Scholars agree that sustainable supplier management (SSM) cannot only rely on a supplier’s compliance declaration. Nonetheless, there has also been consensus, that risk mitigation measures are costly and therefore have to be targeted towards the most risky suppliers. The authors address the following research questions:

How do firms configure sustainable supplier risk management processes in congruence with dynamically changing sustainability requirements?

How can supplier sustainability risk mitigation strategies and processes be a source of competitive advantage to the buying firm?

Research framework and methodology

The authors use the research framework in figure 1 as foundation for their further research. The framework describes the process within a company from the “supplier sustainability risk identification” to the related “performance outcomes”.

Figure 1: Extended Research Framework to Manage Supplier Sustainability Risks (click to enlarge; Foerstl et al., 2010)

Since the research on how firms account for sustainability-related risks are still in an exploratory / early stage the authors decided to use a case study design to build new hypothesis is this field.

The case study participants (5 overall) have been selected to be from the chemical industry, since

first, environmental protection has high strategic relevance in the chemical industry since its costs are among the highest of all industries. Second, the industry’s high profitability and a long history of incidents have led to close scrutiny by its stakeholders, emphasizing the relevance of responsible environmental and social behaviour.

Data analysis

The findings fit into the above mentioned framework and are denoted in figure 2 by P1 to P5.

Figure 2: Summary of Research Findings (click to enlarge; Foerstl et al., 2010)

Proposition 1
The initial development of sustainability risk assessment is based on the perceived stakeholder pressure, but the chosen risk assessment method is independent of the pursued sustainability dimension.

Proposition 2a
Supplier sustainability risk assessment enables an effective sustainability risk mitigation response.

Proposition 2b
The initial configuration and deployment of supplier sustainability risk management capabilities is valuable in building excess capacity, which enables firms to broaden the scope of their sustainability risk management processes.

Proposition 3a
The ability of sustainable supplier selection, development and phase-out strategies to mitigate sustainability risks depends on the rigor with which they are applied.

Proposition 3b
The ability of sustainable supplier assessment and development capabilities to mitigate sustainability risks depends on the astuteness with which they are created and applied.

Proposition 4a
Sustainability risk assessment capabilities allow for effective supplier selection, leading to risk reduction, which constitutes a source of competitive advantage.

Proposition 4b
Beyond the reduction of supplier sustainability risks, sustainable supplier development has a positive effect on operational performance and hence competitive advantage.

Additionally, the author discovered the issue of “external responsiveness”, which has not been part of the original model. It relates to the response time towards new social and environment standards. Two of the interviewed companies also directly approached Non Governmental Organizations (NGOs) to integrate these groups into their sustainability risk management processes.

Proposition 5
Under the presence of dynamic stakeholder stimulus, external responsiveness has a positive effect on sustainability risk identification, assessment and mitigation processes, which in turn affect sustainability risk performance outcomes.

Results

As a summary the authors conclude that

the earlier firms begin to assess their suppliers for sustainability, the greater the accumulation of sustainability-related risk management capabilities relative to their competitors will be.

sustainable supplier assessment and development has positive effects on the buying firm: 1) more profound mitigation of corporate reputational risk and 2) enhanced operational performance.

supplier assessment, selection, and development must be tightly interlocked to effectively manage the sustainability risk exposure caused by individual suppliers or the supply base as a whole

Conclusion

The authors did a great job presenting their results. I was positively surprised to see that they elaborated on three pages about the application of the case study methodology and the sample companies. The sample selection towards companies with great emphasis on sustainability overall (e.g. the companies have all been picked from major sustainability related stock indices) of course leads to a skewed sample which cannot be seen as a representative average, but more as a best practice example.

Reference:

Foerstl, K., Reuter, C., Hartmann, E., & Blome, C. (2010). Managing supplier sustainability risks in a dynamically changing environment—Sustainable supplier management in the chemical industry Journal of Purchasing and Supply Management, 16 (2), 118-130 DOI: 10.1016/j.pursup.2010.03.011

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Supply Chain Risk Webinar

Daniel Dumke — Tue, 23 Nov 2010 13:30:00 +0000

I stumbled upon a Webinar which touches the topic of Supply Chain Risks, in this case: “Removing the Risks and Profiting from a Sustainable Supply Chain“.
It will be conducted by a small consulting firm (SD&S, Main Speaker is Jos Darmanata). Here are the facts:

Date: Thursday, 16th December 2010
Time: 14:15 GMT
Topics include
Key aspects of the Sustainable Supply Chain Triangle, Major SC issues, Structured approach on how to start implementing sustainability
Participation is free of charge

If you are interested, have a look at their registration website. If you took part please let me know in the comment section of this article.

Disclaimer: I am nor have been affiliated with WTG Webinars or SD&S.

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