Supply chain management
Supply chain management (SCM) is the anglicism in companies for " within the company and along the supply chain, also between companies, the strategic coordination between the traditional business functions and the tactical decisions between these business functions, aimed at the overall system, with the aim of improving the long-term performance of the individual Companies and the supply chain as a whole ”.
Due to the tendency to concentrate on core competencies (including through outsourcing ) and to reduce the vertical range of manufacture , supply chains based on the division of labor are increasingly developing . Competition in global markets, short product launch times , short product life cycles and high customer expectations have placed supply chains at the center of business decisions.
As a result, it is not vertically integrated individual manufacturers that compete in the respective target markets , but instead complex supply chains that are made up of connected but independent companies. Such decentralized systems gain competitive advantages through a market-appropriate configuration of their structure as well as through coordination and integration of the autonomously controlled activities in the supply chain. This consideration led to supply chain management (SCM). SCM thus goes beyond the classic orientation of business administration to the "company" system and deals with the "supply chain" system.
The special properties of the overall "supply chain" system result from the dynamic interaction of the supply chain links. These system properties cannot be derived from the sum of the properties of the individual members involved, which are solely related to the individual companies. Rather, as a result of the complex, dynamic interaction of the individual members, new properties of the overall system emerge ( emergence ). The scientific discussion of the SCM is therefore based on the mathematical side, u. a. on the knowledge of systems theory as well as chaos and complexity research . From a business point of view, explanatory approaches of the new institutional economics ( transaction cost theory , theory of rights of disposal , principal-agent theory ) as well as resource orientation are used in the analysis of SCM problems . Another approach to the description of the system supply chain is the relationship orientation ( relational view ), which has evolved from the resource orientation.
The term was first used by consultants Oliver and Webber. Oliver was the responsible partner in London at Booz Allen Hamilton for Operations Management at the time . He had the basic idea and Wolfgang Partsch implemented it as a project manager at Landis & Gyr in Zug (Switzerland) in 1981. This was also the first official supply chain management project in the world. Partsch also developed the analysis methodology used at the time.
There are innumerable definitions of supply chain management, none of which have so far been finally established. An early, flow-oriented definition comes from Cooper and Ellram (1990). Thus, supply chain management is an integrated approach to the total flow of a distribution channel ( English distribution channel to control) from suppliers to consumers. A more network-oriented definition comes from Harland (1996). Accordingly, supply chain management is the management of a network of interconnected companies that are involved in the ultimate provision of the product and service packages requested by the end customer.
The Council of Supply Chain Management Professionals (CSCMP) defines supply chain management as follows (a German translation of this view is also used at the beginning of this article):
- "Supply chain management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies. "
Typical definitions have terms like coordination and integration in common . The definitions emphasize the harmonization of processes between the members of the supply chain and they focus on cross-functional business processes in order to achieve added value for the entire supply chain.
For a long time there have been efforts at national and international level to define a standard for the supply chain. Here that has non-profit organization of the Supply Chain Council excelled, with the SCOR model one
has developed an internationally recognized standard in order to structure the supply chain functions according to uniform criteria and thus also to be able to evaluate them (see also web links).
Differentiation from logistics
SCM and logistics are sometimes used synonymously. In fact, like logistics, SCMs aim at the design of object flows (goods, information, values) along the process stages of the supply chain, with the aim of increasing the (end) customer benefit ( effectiveness ) and a system-wide improvement in the cost-benefit ratio Aim ( efficiency ).
The transition to modern supply chain management makes a qualitative leap, especially when it comes to transport and warehousing in the company . While logistics considers the object flows largely independently of institutional issues, the SCM explicitly includes the structuring and coordination of autonomously acting entrepreneurial units in a value creation system in the analysis. In contrast to logistics, the SCM emphasizes the inter-organizational aspect of the logistical management task. Rather, supply chain management can be viewed as a new approach to business administration that extends beyond the boundaries of the company. It not only includes logistics, but all other fields of business administration, e.g. B. Marketing , Production , Corporate Management , Corporate Accounting and Controlling .
International authors take a “unionist” perspective, according to which logistics is part of both broad and deep SCM (see next subsection). The approach of business-oriented logistics, which is widespread in German-speaking countries, often included holistic management along the entire value chain before the English term supply chain management prevailed.
“Width” and “depth” of supply chain management
SCM is broad in that it meshes different business functions, including logistics , manufacturing , accounting, and research and development . This broad view blurs the lines between traditional business functions and SCM.
SCM is deep as it encompasses the strategic, tactical and operational phases of management:
- The first phase is known as strategic supply chain management. It is characterized by corporate decisions with long-term effects. This includes decisions regarding outsourcing , supplier selection and location planning for warehouses and factories. In this phase, it is essential to select a suitable supply chain strategy in accordance with the product and market requirements. To emphasize this importance and the importance of supply chain engineering in this phase, it is also called the supply chain strategy or design phase.
- The second phase is known as tactical supply chain management. Predetermined by the design determined in the previous phase, decisions are made here with a time horizon of between three months and a year. This shorter time frame allows better predictions as a basis for decisions. This includes decisions regarding inventory policy, production quantities, relationships between the markets to be supplied and locations from which procurement is to be made. This phase is also known as the supply chain planning phase, as this is where manufacturing plans are created.
- The third phase is known as operational supply chain management. It is characterized by company decisions in a time frame on a daily to weekly basis in which there is hardly any uncertainty about demand information. The supply chain design from the first phase and the plans from the second phase are taken for granted in order to be able to handle incoming customer orders appropriately in this phase. Typical decisions in this phase include those about process planning , pick lists , loading and relationships between order and inventory .
Typical problems in supply chain management
Typical problems with SCM arise, for example, from the whip effect. The second subsection gives a systematic overview.
A well-known observation in the SCM comes from Procter & Gamble : When looking at the orders for diapers, the demand of which by the end consumer is fairly constant due to the daily needs of the babies, the company noticed that the order numbers in retail - and even more so in wholesale - vary. Most of these fluctuations were transmitted to the suppliers of the materials used in the diapers. This phenomenon of fluctuations in orders upstream of the supply chain occurs in many industries and is known as the bullwhip effect . It is so important to SCM that it has also been referred to as the “first law of supply chain dynamics ”. In particular, four causes for the whip effect can be identified:
- Processing of demand signals: The observed demand is interpreted as a signal for future demand, which is often not the case.
- Order bundling: Due to transaction costs, placing an order in every period is often not economical, so that bundling orders is worthwhile. This leads to forecast problems upstream of the supply chain.
- Bottleneck poker: A supplier rations the deliveries proportionally to the orders of his customers due to a delivery bottleneck , whereby the customers order more than they need to increase their ration.
- Price fluctuations: If a buyer suspects rising prices, it is to be expected that the current demand will increase and the buyer will build up stocks that are not matched to the current demand situation.
Numerous countermeasures have been proposed, of which the common access to information about order numbers by all members of the supply chain is an important part.
Overview of problems in supply chain management
- Cooperation and competition between the members of a supply chain (can decentralized supply chains be more competitive than vertically integrated competitors - and why?)
- Allocation of service processes and disposition rights as well as of cost and financing burdens and risks and the distribution of added value shares in the supply chain
- Configuration of the process structures in the supply chain
- Use and design of alternative forms of coordination: e.g. through central planning using appropriately designed incentive systems and coordinated goals, performance management and performance measurement systems, through system-wide information transparency or through cross-company, organizational learning with corresponding behavioral adaptation of the autonomously acting units
- Reduction of sources of error and potential for disruption at the interfaces of the supply chain links ( quality management ); Robustness of the supply chain against disruptions
- Coping with the disadvantages of unevenly distributed knowledge and the distorted distribution of information in the supply chain ( information asymmetries ); exemplified by the so-called whiplash effect (bullwhip effect) expressed
- Holistic inventory management for multi-level warehouse hierarchies (Echelon Inventory Planning)
- Coping with the complexity and variety of variants in the supply chain (especially postponement and decoupling point )
Practical implementation of supply chain management
Just-in-time production (JIT) , which began around 1980, can be seen as an early expression of the industry's turn to SCM concepts . JIT aims at a time-closely coordinated coupling of the production processes of manufacturer and supplier. This concept received particular attention in the automotive industry. In addition to the targeted flexibilization and qualitative stabilization of the performance processes on the delivery side, the prerequisite for a successful implementation of the JIT idea was, in particular, the logistical coupling of the production processes of the supplier and the manufacturer via the determination of consumption , largely dispensing with stocks as a problem buffer, and using standardized load carriers and Processes. In this context, the Kanban control system from Japan has achieved exemplary importance (pull principle in production control).
In retail and the consumer goods industry, supply chain management manifests itself in particular as part of the efficient consumer response concept (ECR). This is an industry-wide initiative to optimize the structure of offers for consumers in trading houses while at the same time streamlining supply chain processes. The concept building is based on a set of specific basic technologies (e.g. barcodes , standards for electronic data exchange), standard logistical processes (e.g. cross-docking , vendor managed inventory or co-managed inventory) and a process of marketing-oriented offer optimization: Category Management that are linked in an overarching common planning process ( Collaborative Planning, Forecasting and Replenishment ).
With the development of the “Supply Chain Operations Reference” model ( SCOR model ), a cross-sector initiative of major corporations created the basis for the model representation, performance measurement and performance comparison as well as for the reengineering of supply chain processes. The SCOR model aims to facilitate communication about supply chain structures and supply chain processes between the companies involved by creating a general conceptual and conceptual framework for this.
Specific software systems aimed at operational planning and control of supply chain activities are increasingly being used. These systems are known, for example, as Advanced Planner and Optimizer (APO), APS (Advanced Planning and Scheduling) systems or also as ERP -II systems. Large electronic marketplaces are particularly suitable as operators of such planning systems.
Supply chain management software has recently tended to display the state of the supply chain in near real time. For this purpose, the goods are recorded along the chain at certain transfer points with the help of BDE systems. This can e.g. B. by scanning an individual barcode or by reading an RFID tag. The possibility of linking this real-time data with target times stored in the system makes it possible to intervene in the logistics system with the help of a Supply Chain Event Management (SCEM).
Lately, the explicit consideration of financial aspects of SCM in the context of supply chain financing has also been increasingly discussed. The aim here is to finance the fixed and current assets in supply chains in such a way that the capital costs of the companies involved are minimized.
Limits of Supply Chain Management
Transport costs have fallen through liberalization and flagging , so the transport costs per unit of volume or mass often do not play a role in planning. However, JIT systems in particular create two major problems in practice:
- Docks and loading ramps overloaded by CEP services and small-scale deliveries
- Structures that are vulnerable due to long and frequent transport processes (traffic jams, strikes, forces of nature, ...)
Telematics systems can alleviate the symptoms here, but without curing the triggering problems. This is remedied by clear guidelines that exert pressure to cooperate among the suppliers and risk minimization by introducing additional criteria when planning the value chain . Regional acquisitions reduce the latency times, thus increasing the controllability of the system and reducing the risk of long transport routes.
- A lack of agreement between client and supplier, missing and incorrect specifications can lead to major damage in the field / at the customer despite well-thought-out supply chain management.
Contracts to optimize the entire supply chain
The ultimate goal of the SCM is to optimize the efficiency of the supply chain. Several methods are used here to divide the inventory risk between the parties involved and thus increase the profit of the entire supply chain. If z. For example, if the manufacturer of a product that is seasonally dependent and constantly changing in trend (e.g. fashionable items of clothing) supplies a retailer, the retailer bears the entire risk of leftovers (unsold goods). He can offer this commodity in the next season or on a secondary market at a reduced price, but this creates opportunity costs for the reduced profit per unit sold. It can of course also be the case that the discounted sales price is below the retailer's purchase price, which is why the retailer even suffers a real loss for each unsold product unit, which he then later has to offer cheaper. It can be assumed that the manufacturer wants to sell its goods in its own shop and thus focuses on optimizing profits in the supply chain. Now various procedures in the form of contracts between manufacturers and dealers can be used to increase the profit of the supply chain and that of all parties involved.
One of these contracts is the buy-back contract, a repurchase agreement . With a buyback agreement, the manufacturer agrees to buy back all unsold product units from the retailer for a fraction of the purchase price. In this way, the retailer can order a larger order from the manufacturer and still enjoy a lower risk of leftovers. There are several ways the manufacturer might agree to a buy-back contract. For example, the manufacturer might want to buy back the unsold goods in order to protect its brand image. As a manufacturer of designer goods, you want to give customers the feeling that the goods are special and that they are popular in order to justify the high price. However, this goal is difficult to achieve if these customers in particular see these products with the low-price labels in the shop windows at the end of the season. Furthermore, such sales at the end of the season create so-called “strategic buyers” who have the money to buy the goods during the season, but who deliberately wait until the end of the season to buy the products at a reduced price.
Revenue sharing contract
Another type of contract is revenue sharing . In this contract, the manufacturer sells the goods to the dealer at a discounted purchase price, and in return the dealer shares the manufacturer in the profit from the sale of the goods. There has been widespread use of this technique in the video rental industry. In the past, the film studios sold the videos to the video stores for $ 60 to $ 70 each and the video stores were allowed to keep the entire profit. For this reason, the video rental shops had to lend the video around 20 times at a normal rental fee until this investment was amortized. As a result, retailers only bought a small number of videos in the case of films, as the demand for new videos is usually very high at the beginning, but later begins to decline very quickly. This bottleneck between supply and demand meant that customers looked for other options for the quick availability of new films. B. have switched to pay TV channels. Since the costs of producing a video tape are very low, it was obvious to optimize the entire supply chain by making additional video tapes available to the video stores. This led to a reduction in the purchase price to USD 8 , but the dealers now had to give the studios a 50% share of the profit. This reduced the amortization to less than six rentals and it became lucrative for the video rental stores to buy more tapes from the studios. This increase in availability was then used in the USA for the “Guaranteed to be there” and “Go home happy” marketing campaigns.
Quantity flexibility contract
With this contract, the dealer orders a quantity Q from the manufacturer and, after the season has started and he can estimate the seasonal demand from the initial sales, can correct the order quantity from the manufacturer up or down by a certain percentage. He receives the full purchase price for each returned product from the manufacturer.
With this contract, the dealer can buy a certain number of options from the manufacturer before the season, with uncertainty about the demand. The price per option is a fraction of the actual procurement price, e.g. B. only the production costs of the manufacturer are covered by the option price. Later, when the trader can calculate the probable demand, he has the option of activating this purchased number of options with the manufacturer for an additional amount (usually the difference between the actual purchase price and the option price). The dealer then receives the amount of products for his number of activated options from the manufacturer. There are no additional costs for the trader for options that are not activated. With this type of contract, the risk of leftover costs for the retailer is reduced and the manufacturer does not have to worry about being left with the production costs of its products if the retailer cancels the order.
Sustainable supply chain management
Sustainable supply chain management (SSCM) is a cross-enterprise management approach for controlling the goods and information flows in a supply chain with the aim of sustainable development (engl. Sustainable = lasting).
The SSCM is based on the supply chain management approach. It therefore deals with the management of information, capital and resource flows as well as with the cooperation between the companies in a value chain and develops this further in various ways.
First of all, an SSCM is oriented towards sustainable development, i.e. taking into account ecology, economy and society. These criteria can be derived from the demands of stakeholders such as customers. By adapting its target system, the SSCM strives to make the conventional supply chain sustainable. It is important that all three dimensions of sustainability are considered equally. Furthermore, the SSCM differs from the conventional SCM in its expanded field of vision of the supply chain. For sustainable supply chain management, the origin of products as well as their use and disposal after sale play a role.
In the course of globalization since the middle of the 20th century, the behavior of companies has changed dramatically. Due to the dismantling of trade barriers, the linking of markets and increasing technological innovations, processes for creating products and services have increasingly been redistributed or procured globally.
This development is increasingly taking place in developing and emerging countries. The background to this is that the state legislation that is often missing or poorly enforced there with regard to the social and ecological framework conditions results in a cost advantage for local companies. It not only leads to an increase and more pronounced branching as well as increased complexity of supply chains, but also to an outsourcing of control and knowledge "about individual (pre-) stages of the manufacture of a product" to suppliers. With regard to the SSCM, such a redistribution of knowledge and control therefore requires an "internal and cross-company knowledge exchange" on sustainability in order to compensate for the negative effects of business activities in the supply chain. In order to meet such a requirement, cross-supply chain cooperation is required. For these reasons, a sustainable strategy cannot be pursued in isolation by a company, but needs to be coordinated with the other members of the supply chain.
Need for SSCM
There are several triggers for a company to implement an SSCM. On the one hand, there is increasing pressure from outside, from the stakeholders, who demand sustainable behavior from the company, particularly with regard to ecological and social issues, and from the need to adapt to changed environmental conditions. On the other hand, companies can expect cost advantages and opportunities for competitive advantages. Corresponding corporate strategies are central aspects in order to secure the future development and competitiveness of the respective company. However, companies often take action in response to pressure and incentives rather than taking a proactive approach to sustainability issues.
The most important stakeholder requirements for an SSCM include legal regulations on environmental protection, product quality and working conditions, which can vary worldwide in terms of the severity of the specifications and the monitoring of compliance. Particularly high pressure comes from environmental laws. The customer group is also becoming increasingly important. Due to the growing awareness of consumers, when making purchasing decisions, the company pays attention to transparency and the responsible handling of nature and social aspects throughout the entire product life cycle . Finally, other stakeholders in society, such as non-governmental organizations that are committed to environmentally or socially compatible practices in companies, are also gaining influence.
Rising costs due to polluting practices along the supply chain, such as the disposal of production waste or landfill fees, are forcing the company to look for sustainable alternatives for production processes and transport as well. The threatened exhaustion of important natural resources, especially fossil fuels, and the change in the background conditions for production and transport due to climate change are also putting pressure on companies.
Incentives for the introduction of an SSCM are initially offered to a company in the form of an image improvement through ecologically or socially responsible action. Also of importance are the possible financial advantages that result from a sustainable reorganization of the supply chain. Examples of this are falling packaging costs due to reduced material consumption or lower labor costs due to higher motivation and lower sickness rates due to better working conditions. Finally, a sustainable SCM can represent a strategic competitive advantage over competitors and competing supply chains, for example through the development of common routines, resources, skills and common knowledge associated with SSCM.
These demands and incentives for a company to operate an SSCM particularly affect large focal companies in a supply chain, as they are particularly capable of implementing sustainable strategies by pressure on suppliers and by redesigning the supply relationships (means of transport, locations or route planning) due to their high level of influence. , enforce and are often the focus of public attention.
Obstacles to implementing an SSCM
However, various aspects can be a hindrance to the introduction of an SSCM. Often companies initially lack know-how or relevant resources. The cross-company redesign with the coordination of all companies involved in the entire supply chain also means a high organizational effort, which is all the greater, the longer and more complex the supply chain is. Possible deficiencies in communication between the participants must also be taken into account. These activities often lead to high financial burdens. These high investment and implementation costs have to be expended before using the SSCM, whereas the income only accrues in the medium to long term.
In addition, there is often uncertainty about the possible costs and benefits. For example, there is skepticism about whether resources can actually be saved, or it is unclear to what extent customers would appreciate the company's social commitment and environmental protection. In fact, customers often lack the willingness to pay for environmental protection. So for a company to adopt an SSCM, the pressure or incentives must be significant to compensate for the expected drawbacks.
In general, the smaller the company, the less likely it is that a company will consider environmental and social issues. One reason for this is that smaller companies are not so exposed to the public. The influence and thus also the ability to cause or prevent damage through their actions are rated as low in small and medium-sized companies .
Problems can also arise due to a lack of support in the companies concerned along the supply chain. The commitment of individual managers is not sufficient for the implementation of an SSCM. There must be a broad consensus and support from upper management across companies and within the company. At a lower level, training and incentive systems for employees are helpful for this.
In order to make a supply chain sustainable, all activities should be in the area of the intersection between economically, ecologically and socially beneficial results. So there must be no damage to the environment or society, at the same time long-term existence should be secured through financial stability. In practice, this is difficult to enforce because the effects of an action are not always clear. In addition, conflicting goals are to be expected, for example a socially beneficial activity can also result in economic damage for the company. Often there is no optimal solution and compromises are made that mainly represent the economic aspect. Due to possible reservations of individual members of the supply chain about an SSCM, there is a need for monitoring in practice to ensure that products and processes along the supply chain are actually sustainable. This is also associated with a great deal of effort and implies greater transparency between the individual links in the supply chain. Individual companies are often reluctant to release data about their core processes and products, so that such monitoring and thus the implementation of an SSCM could be hindered.
Embedding in the corporate strategy
To integrate sustainability into the SCM approach, three different strategies can be distinguished:
The integrated strategy is in line with traditional SCM, as traditional cost and service considerations are merely supplemented by social and environmental concerns. The focus here continues to be on increasing the added value for the customer. However, customer requirements with regard to social and environmental aspects are now given greater consideration. Methods that are typically used in this approach are e.g. B. reverse logistics, product stewardship or green SCM:
In the alignment strategy, however, economic, social and ecological criteria are weighted equally, which leads to trade-offs between the three dimensions of sustainability. In contrast to the integrated strategy, environmental and social aspects are not considered here simply because they are desired by the customer, but are independent goals of the organization. Typical methods are the three-pillar model or CSR.
In contrast, the exchange strategy replaces the traditional SCM concept with an alternative approach in order to actually do justice to social and environmental aspects. The underlying idea is that the concept of traditional SCM is incompatible with sustainability. The aim of the SCM to increase the added value for the customer as effectively and efficiently as possible has led to a spatial distance between production and consumption, which is associated with negative effects on the environment due to the high transport costs. In the exchange strategy, the purely profit-oriented SCM approach is therefore abandoned and, among other things, more attention is paid to how and where production takes place. Customers should also reconsider their criteria when choosing a product. A possible consequence of this could be that a local-to-local concept is preferred instead of the global-to-local concept currently used in SCM. With the local-to-local concept, both production and consumption take place at the local level. H. production is not shifted to the global level. Typical methods of this strategy are, for example, the CO 2 footprint in order to disclose greenhouse gas emissions over the entire life cycle and similar approaches with regard to water and air pollution or energy and raw material requirements.
Implementation of an SSCM strategy
In order to be able to implement a sustainable supply chain strategy, a large number of considerations are required. Both scientific and practice-oriented sources deal in particular with the aspects of risk management and the evaluation and control of the value chain. These are typically listed as essential steps on the way to the introduction of an SSCM.
In order to be able to assess a possible risk within the supply chain or on the part of the company's environment, a risk analysis of the company, its value chain and its environment is required (see ISO 31000). To this end, the strategy, the practices as well as the resources and skills that are currently being used or can be found in the company are analyzed. Due to the interdependence of focal companies and their partners along the supply chain, the analysis does not only focus on one's own company, but extends to the partners in the supply chain. The aim is to identify potential conflicts within your own organization and between the organizations in the supply chain. This can be promoted, for example, by appointing a supply chain manager. First, however, the problems in your own company should be identified, understood and managed before a sustainable supply chain is worked out with other companies. The creation of a sustainability report can be the basis for this.
Furthermore, the company's environmental factors and their medium to long-term developments are taken into account. This explores potential risks and opportunities. For example, the consideration of key input factors such as fuel or energy of the stakeholders and shareholders supports this analysis. One method for this can be the scenario technique.
As part of a guide to sustainable corporate management, the Spanish Global Compact network suggests u. a. the assessment of risks emanating from countries in which production facilities are located or from highly risky products or economic sectors that are related to the company. It is also necessary to establish that the end consumer is aware of the focal company. Such a risk analysis enables suppliers to be classified into risk groups and a suitable management approach to be developed.
The aim of risk management is to identify gaps in the SCM strategy and to develop approaches to reduce risks. There are two basic approaches to risk minimization: the creation of flexibility and / and the creation of robustness. As a rule, the creation of flexibility for risks with a low probability of occurrence and strong effects is recommended. Robustness should be preferred in the case of frequently recurring risks.
Evaluation and control of the value chain
By determining information about the links in the value chain and about possible risks due to the business cooperation, the focal company can develop and implement a strategy together with its partners in order to identify and improve existing weaknesses and deficiencies.
Similar to the generally applicable supply chain management, the sustainable approach requires pronounced communication and cooperation between the focal company and its supply chain. Financial instruments that are intended to ensure the development of quality improvement programs in production facilities in developing and emerging countries are also relevant. This includes, for example, the payment of minimum wages or the training and further education of employees and the avoidance of dangers in the workplace.
In order to ensure the implementation and success of a sustainable system along the supply chain, this must be continuously and closely monitored with regard to compliance with sustainable agreements. For example, controls of partners can be carried out by the focal company or external institutions. Evaluation reports or other forms of performance monitoring enable assessments of the sustainable performance of the supply chain. These allow a regular assessment or reassessment of the links in the supply chain and their ability to meet the performance criteria of the focal company.
Appropriate methods are required for assessment. These are vital as they provide managers with the information that comes with supply management. This includes, for example, the rules, communication materials, prequalifications of suppliers, purchasing guidelines and supplier partnerships. To this end u. a. the conformity approach ready. This includes the establishment of a monitoring / control chain to systematically determine the origin of raw materials and resources as well as the conditions at the place of origin. Systems such as ISO14001, SA8000, AA1000 or Enviro-Mark are available for this. Alternatively, the process management approach is also available, which is more individualized than the conformity approach, in that own environmental management systems and supplier standards are developed.
Another method are balanced scorecards . Balanced scorecards allow an evaluation with regard to the following aspects: financial perspective ( eco-efficiency , financing, socio-efficiency), sustainability perspective (environment, customers, society), supply chain perspective (products and services, planning and structures, processes), educational and Growth perspective (people, cooperation and communication, information systems, technology, infrastructure and resources).
Based on the evaluations, decisions about future cooperation within the supply chain can be made. Similar to traditional supply chain management, cooperation is based on the option of favoring positively rated partners, such as B. through longer-term contracts, as well as the possibility of giving business partners incentives to meet the sustainability requirements in order to avoid termination of the contract in the event of performance deficits.
The introduction of assessment instruments has the consequence that sustainable development at all organizational levels becomes a performance indicator and is thus ultimately included in the corporate strategy. The integration of sustainable development into the corporate strategy can also include B. can be simplified by appointing a sustainability manager so that responsibility can be clearly assigned.
Methods of the SSCM
Depending on the strategy approach chosen for SSCM, various methods are available to carry out an SSCM.
Reverse logistics and closed-loops supply chain
Two methods of the SSCM are disposal logistics (reverse logistics) and the closed-loop supply chain. Rogers and Tibben-Lembke define disposal logistics as: "the process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, inprocess inventory, finished goods, and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal “The disposal logistics is concerned with the planning, implementation and control processes for material flow, inventory, finished products and related information regarding use, recycling and disposal. It helps to conserve natural resources through recycling, modernization or reusable packaging. Compared to disposal logistics, the closed-loop supply chain also includes the entire product recovery process, including procurement, testing, sorting, distribution and marketing. It consists of two chains, a forward chain that distributes the product and a reverse chain that recovers the product. A reclaimed product is either re-marketed on the primary route or diverted to a secondary market. Reverse logistics and closed-loop supply chains thus start in particular with the added value for the customer and his wishes with regard to social and environmental aspects. They are therefore to be viewed primarily in connection with the integrated strategy.
Product stewardship / product stewardship
Product responsibility refers to the responsibility that manufacturers and dealers of products bear. From the perspective of the SSCM, this relates in particular to the aspects of sustainability of products. Manufacturers and retailers are therefore responsible for keeping the ecological footprint of their products as low as possible in coordination with their partners in the supply chain. With the focus on the product, the approach concentrates on the added value for the customer and is therefore primarily assigned to the integrated strategy approach.
Green SCM means the integration of environmental aspects into the SCM. This includes product design, material procurement and selection, manufacturing processes, delivery to the customer and handling of the product after its end of use. The aim is to reduce the environmental impact associated with these aspects. Green SCM is still based on the basic idea of SCM to increase added value for the customer and is therefore primarily to be located in the integrated strategy.
Three pillar model
The three-pillar model of sustainable development places the economic, ecological and social aspects side by side on an equal footing. It is based on the idea that the aspects are mutually dependent, so that sustainable development is only possible if all three aspects are taken into account. For the SSCM this means that the participants in a supply chain should work together not only with regard to economic, but also ecological and social aspects. It is therefore the central method of the alignment strategy that pursues these three dimensions as equal goals.
Corporate social responsibility
Corporate Social Responsibility (CSR) is based on the basic idea that companies have a responsibility towards a number of stakeholders . Companies pursue CSR for various reasons, for example to position themselves against competitors, for marketing reasons or for innovation. Applied to the supply chain, this means that a company not only has to consider its own responsibility to its stakeholders, but should also pay attention to the extent to which the partners in its own supply chain are fulfilling their responsibility. In addition, the CSR also gives rise to a responsibility towards the partners in the supply chain. CSR can be implemented in the course of the alignment strategy, as economic interests (e.g. those of investors), ecological interests (e.g. those of society, NGOs) and social interests (e.g. those of employees) of the stakeholders be considered equally.
Carbon footprint / CO 2 footprint
The CO 2 footprint is a measure of the total CO 2 emissions that are released over the entire life cycle of a product and is usually measured in tons of CO 2 . The CO 2 footprint makes it clear what damage a product can do to the climate. Since the CO 2 footprint reveals the climate damage associated with a product as comprehensively as possible, it provides an essential information basis within the framework of an exchange strategy, which also requires customers to rethink their approach.
SSCM along the value chain
SSCM in product development
In product development , a company must include all stakeholder requirements for the quality of the product that are relevant to product implementation in terms of quality management (e.g. according to EN ISO 9000ff.). These increasingly include requirements for sustainable production methods. This includes ecological aspects, but also the dialogue with interested parties on social aspects. This results in the need for companies to embed an environmental management system (e.g. according to EN ISO 14001) in an integrated management system , which is derived from a holistic, sustainable company policy. In the ecological sense, a generic distinction can be made between the sustainable optimization of the product (“greening the product”) and the manufacturing process (“greening the process”).
In the product development phase, a. the following problems. From an ecological (e.g. greenhouse gas), but also from a social (e.g. light, noise) point of view, the emissions to be expected must be included. A distinction must be made here as to where, when and which emissions arise, whether these are mainly generated during the production of the good or during use, and to what extent they can be minimized. Linked to this is the choice of materials. For example, the environmental compatibility of raw material extraction and material production must be checked (e.g. crude oil-based plastics). Alternative materials (e.g. biopolymers ) should be considered because they can have a relieving effect within the three dimensions of sustainability.
Furthermore, potential and existing suppliers must be checked for compliance with environmental and social standards. This applies, for example, to working conditions, wages, the prohibition of child labor and ecological factors, e.g. B. environmentally harmful raw material extraction and production processes, type of land use, water quality, etc. In rare cases it can also be important to check the business activities of the customer of your own company for their legal and ethical acceptability. For reasons of their own competitiveness, however, this forward-looking assumption of responsibility is generally not represented.
The design of your own (internal) production conditions as well as those of the (external) suppliers therefore hold a lot of potential for conflicting goals. Depending on the type of product, companies have more or less alternative manufacturing processes at their disposal, although there are no completely environmentally friendly processes for certain products (e.g. aluminum production).
As part of product development, the planned service life of a product and the recycling options must be determined. It seems to be a generally valid principle that the longevity of a product also strengthens its ecological sustainability. Planned obsolescence, on the other hand, usually only leads to securing the profitability of the focal company, since the consumer is forced to make regular replacement investments in the form of a new product.
There is great ecological and economically sustainable potential in the modular product design, so that, for example, defective or obsolete components can be easily replaced without other product components having to be adapted. This leads to an increase in quality for the customer and a recovery of value for the company by recycling the replaced part.
SSCM in the procurement area
The procurement of goods and other preliminary services by external suppliers is an important field of action for SSCM. This involves resources such as raw materials, preliminary products, services, employees and information that are to be controlled in a special way by the company ("resource-based view of the firm "). The company's own corporate policy is important when choosing a supplier insofar as the purchased goods have been manufactured in accordance with their own quality requirements and values. Such guidelines can be found in the Supplier Code of Conduct. A continuous improvement process already includes supplier audits as part of quality management according to EN ISO 9001 point 7.4.1 "Procurement process".
For certain products, the demand and availability of raw materials are of enormous ecological and economic importance. The deposits for some key raw materials (e.g. EU list of critical raw materials) are foreseeably running out and / or are limited to a few countries (e.g. China, Russia, Congo, Brazil etc.). Possible bottlenecks, rising procurement prices and environmental pollution must be taken into account as part of a risk management of the procurement strategy. Critical characteristics of raw materials include: availability, market power, political risk, future relevance, substitutability. From a sustainability point of view, the manufacturing conditions are important insofar as certain raw materials can be processed more energy-efficiently and with lower emissions in some countries, with higher occupational safety standards and possibly even lower costs than in other countries.
For the procurement strategy in the SSCM, with regard to the ecological dimension, there is typically a conflict of goals between cost reduction, time savings and higher greenhouse gas emissions. An internal (vs. external), local (vs. global), single (vs. multiple) and modular (vs. component) as well as a just-in-case (vs. just-in-time) scheduling concept would be ecologically favorable. This means that long transport routes can be prevented, but flexibility may decrease. a. due to fewer procurement alternatives and necessarily higher storage levels.
When it comes to global material procurement, companies are often confronted with different legal standards for commercial, environmental and social law. In the use of chemicals, for example, the REACH regulation has brought about fundamental changes at European level. In general, companies can either profit economically from lower levels of protection, or try to consistently transfer their sustainable corporate policy to the supplier or even to sell the supplier. With a proactive, sustainability-oriented appearance, a company can secure long-term competitiveness and gain in reputation.
SSCM in the production area
For the company's internal value creation, SSCM aspects can be broken down into the ecological, economic and social dimensions. This includes the causal allocation of emissions and the associated internal and external costs. Furthermore, the materials, tools and energies used (electrical power, compressed air, etc.) must be analyzed and a sustainable optimum must be sought. After production, the choice of packaging is equally important in the long term, as unnecessary packaging materials and parts are avoided and lighter or alternative materials are used instead, the products are better bundled in shipping boxes, the packaging is generally smaller or standardized for reusable use becomes. From an economic point of view, the method of production and packaging are indirectly dependent on the ecological and social dimensions, but it is precisely this holistic approach that can be made more economical. The social dimension in the internal production area concerns, for example, occupational safety and fair remuneration.
SSCM in the sales area
The potential for ecological improvements lies in the sales area in the use and combination of means of transport, their capacity utilization and optimal route management. As in the procurement and production area, the storage concept can make decisive contributions to the sustainable supply chain.
In the sense of "closed-loop supply chains", i. H. closed or circular supply chains, the sales area has the potential to recycle both packaging (e.g. Duales System Deutschland , “Green Dot”) and products or product components. The latter are mostly unwanted products or products at the end of their life. Basically, in the sense of the closed supply chain, a distinction can be made between the “forward” and “reverse supply chain”, whereby the conventional (“forward”) supply chain is supplemented by the organization of a “reverse supply chain”. As a result, the end of a supply chain is the beginning of a return chain. These “supply loops” include the recycling of written-off products, which are thus saved from landfill or other ecologically harmful recycling processes and, on top of that, generate economic profits, for example, as fewer new primary raw materials or product components have to be procured for production.
For companies with sustainability management, an SSCM is an important element because its flexibility can be used in many areas of sustainable corporate management and, in the context of global competition, sustainable development can be effectively implemented, especially in inter-company systems. In the ecological area, the transparency of the ingredients of the products enables better recycling and further processing, the joint control of the chain enables, as in classic SCM, the reduction of material and energy flows to reduce costs and conserve resources. In addition, it can only be ensured that a product is manufactured in a sustainable and environmentally friendly manner if all elements of the supply chain can be checked for this aspect. This also applies in particular to the social aspect of sustainability. With SCM, it is possible to determine more clearly within the supply chain whether, for example, the supplier companies have minimum wages or child labor.
Traditional textile value chain
Many of the regularities of the SSCM can be represented using the textile industry. A traditionally organized chain there is often burdened with environmental damage and risks to human health. The cultivation of cotton requires large amounts of water and a high use of pesticides and artificial fertilizers. For finishing processes, etc. a. dyeing fabrics, toxic chemicals are used.
The choice of trading partners is mostly limited to their flexibility to meet the demands of the fast-moving fashion world and their ability to produce inexpensively. Such criteria encourage short, less intensive collaboration. The industry-specific supply chain management links companies located around the world, but takes part of the supply chain into account. The company's focus is on its internal processes and not on creating a strategy for the entire chain. For example, a weaving mill uses chemicals that make it financially difficult for the next link in the chain, such as a dye works, to continue production.
The flow of information between the business partners in the chain is weak; this leads to insufficient transparency - a so-called black box .
Embedding a sustainable strategy in the textile value chain
A sustainable business purpose can add value to the supply chain companies and does not have to serve the interests of individual stakeholders. An ecologically designed supply chain, however, requires a considerable redesign of the production system in functional and institutional terms.
The cotton must be grown according to the European standards for organic food. When processing the textiles, toxic agents must be avoided.
Within the supply chain, the contacts between trading partners must be expanded and deepened. Greater transparency can be created through open cooperation. This greater transparency can become a problem for companies in the supply chain, as company knowledge, but also weaknesses and problems come to light.
The Otto Group is familiar with this problem. In the course of the introduction of organic cotton products in the 1990s, deepening cooperation became an obstacle. In addition to its role as a customer of its suppliers, the group also assumed responsibility for managing its supply chain. Although this gave the company a broader view of the manufacture of its goods, it also increased its responsibility towards trading partners. The group was later able to transfer responsibility back to the business partners, according to their competence. However, this in turn jeopardized the transparency that had been created.
The leading company must actively support the links in the supply chain so that common goals can be achieved. Knowledge has to be transferred to supply chain partners who lack skills, such as ecologically compatible dyeing techniques. The selection of trading partners also plays an important role in the institutional change in the supply chain. By choosing them, the risk of failures due to excessive demands can be reduced.
Incidents in the textile industry such as the building collapse in Sabhar in 2013, which claimed more than 1,000 lives, have placed the role of the supply chain as a design object of corporate social responsibility in the foreground. Supply chain management approaches are increasingly used to strengthen social responsibility. Wieland and Handfield (2013) propose three sets of measures to ensure CSR along the supply chain. So must audits take place of products and suppliers. These audits must also include suppliers to suppliers. In addition, transparency must be increased along the entire supply chain. Finally, CSR can be improved through cooperation with local partners, with other companies in the industry and with universities.
The economic potential for supply chains through digitization is often rated as very high. Renowned journals such as the Journal of Business Logistics , the Journal of Operations Management and the International Journal of Physical Distribution & Logistics Management have already published several special issues on various aspects of digitization in SCM. Above all, additive manufacturing and blockchain technology are said to have enormous economic potential. Additive manufacturing promises great advantages v. a. in the production of spare parts, as long-term storage of slowly rotating spare parts is no longer necessary. At the same time, however, there is the risk that the new technology will completely restructure supply chains and that previous production routes will have to be rethought.
Major journals dealing with supply chain management are the Journal of Business Logistics , the Journal of Operations Management , Production and Operations Management , the Journal of Supply Chain Management , the International Journal of Production Research , and the International Journal of Production Economics , Supply Chain Management: An International Journal , the International Journal of Operations & Production Management and the International Journal of Physical Distribution & Logistics Management .
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