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Creating a Sustainable Supply Chain

Introduction

Supply chains consist of all the activities aimed toward delivering a service or a good to the customer. It is a complex process since it involves many different activities, from delivering the raw materials to the manufacturer to making sure the buyer receives the finished product. Since so many aspects are involved, supply management is inevitably a compound domain with multiple possible risks and challenges that can affect production and financial transactions. Moreover, since the overall economy is moving towards a more sustainable system, supply chain management has to take into consideration implementations of more ethical yet proficient practices.

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Various aspects can be addressed, including the economic, technological, and organizational ones. Sustainable supply chains, however, are challenging to create for multiple reasons. Applying newer methodologies can be expensive and challenging due to the need for investment in new technologies and data analysis systems. However, such organizational changes lead to positive results. Several methods aimed at improving sustainability can be used to change the company’s policies and engage in a more sustainable, ethical, and effective management plan. This paper examines the topic of sustainability in supply chains and reviews two case studies centered around the automotive and technological industries. Moreover, specific challenges and solutions will be discussed in regards to the possible problems that correlate with engaging in such practices and mitigating them prolifically.

Areas of Sustainability in Supply Chain

As mentioned prior, several areas in supply chain management can be addressed in terms of sustainable practices. For the process to be as effective as possible, it is crucial to make changes on various levels. Since the supply chain is a complex process that includes multiple actors and activities, each of them would benefit from having a more effective strategy when it comes to achieving sustainability. The domains that need in-depth contributions include the economic, social, sourcing of products and transportation.

Economic Sustainability

Sustainability is a concept that is usually perceived as a domain that correlates with environmental and social impact only. However, economic sustainability is another important factor within the supply chain process. This notion illustrates practices that lead to effective monetary transactions and result in a long-term increase in profitability. Moreover, it does not harm other structural levels of the companies involved. Economic transparency is one of the critical aspects of any sustainable business practice. This is why companies that invest in fair, clear, and sustainable economic practices are not only ethical but also sustainable and prone to growth and competitiveness in the market. Since supply chains consist of multiple actors that require financial transactions for the process to be complete, economic sustainability is a crucial measurement.

Ethical Practices

Another important domain of any sustainability-related practice is avoiding engagement in unethical practices. Supply chains include everything from sourcing materials, manufacturing, storing products, and delivering them to customers. Moreover, it is certain that for major industrial corporations to cut down expenses, they often chose to focus on being frugal rather than ethical. This is why many controversies surrounding child labor, unfair work practices, a lack of adequate conditions for laborers, and unethical material sourcing occur. Such choices, while financially productive, cannot be considered sustainable from a social viewpoint. Each actor chooses to apply a different strategy, which is why it can be challenging to create a fully socially responsible supply chain process.

Environmental Impact

Since logistics is the primary factor within supply chain management, there is certainly a level of negative environmental impact due to the transportation and other aspects that lead to the emission of greenhouse gases. Moreover, international supply chains rely on transposing goods over long distances, which is more damaging to the environment. According to researchers, mitigating the adverse environmental impact is one of the essential concepts when creating a sustainable supply chain (Centobelli et al., 2018). Such challenges are hard to address, but effective management can minimize the adverse outcomes and create less harmful environmental damage overall.

Case Studies

Most companies certainly know that sustainable practices are necessary. This is why major corporations and smaller businesses are willing to implement new strategies to maximize the effectiveness of the supply chain, create long-term success, and be responsible on multiple structural levels. This paper examines three different case studies of companies operating in two industrial domains. The automotive industry is represented by General Motors and Volkswagen, and the technological one by Intel. All three corporations have applied different models when it comes to sustainable supply chain practices. As exemplified by all three, effective operational management, social responsibility, and using modular platforms are not only sustainable practices but also decrease costs.

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General Motors

General Motors is an American corporation that is the largest local car manufacturer and one of the most influential worldwide. As a leading company specializing in selling automatizes, General Motors is engaged in complex supply chain processes in terms of material sourcing, transportation, etc. Moreover, the corporation is undoubtedly aiming toward more sustainable ways of conducting business. According to researchers, the organization is preoccupied with reduction and recycling strategies and operates in a way that each year, alternative energy is being used more significantly (Kaur & Sharma, 2018).

The same research shows that General Motors (GM) is selective when it comes to material sourcing and social contributions. However, GM is not yet fully ready to confront the problem with carbon emissions regarding the logistics process. This is an issue that most corporations deal with since, at the moment, cost-effective alternatives of using electric cars for transportation of materials would mean a significant financial burden. GM is a company that makes sure each actor complies with fair labor rules, does not source materials using unethical practices, and has an effective logistical system that minimizes some sustainability-related issues.

Being effective in terms of such operations results in minimal issues in regards to ineffective transportation, unorganized interactions with actors, and a need for repeated logistical processes that, ultimately, create an unfavorable result. Evidence shows that while General Motors aims towards more sustainable practices in terms of sourcing materials and working with reliable suppliers, more effort can be made towards a successful outcome.

Intel

The technological corporation Intel is another American company that specializes in chips and microprocessors used by almost all organizations that manufacture personal computers. Since it collaborates with various partners and requires high-quality materials received from retailers all over the world, Intel’s supply chain is complex. The company is focused on maintaining high sustainability on all levels. Researchers point out that the company is fully emerged into minimizing the risks of sourcing materials unethically. For example, Intel removed any collaborations with mines that are partly responsible for the Democratic Republic of Congo conflict (Castillo et al., 2018).

The company mentions five different levels when it comes to maintaining high supply chain sustainability. They ensure to work with companies that pay fair wages, have environmentally-friendly business strategies, do not engage in child labor, and work with similarly sustainable partners. Intel certainly put a lot of effort and resources into maintaining ethical operational strategies both inside and outside the organization. Such an aim towards sustainable practices is not only beneficial in terms of relationships with governments that always make implementations regarding this topic but for the overall environment of the corporation.

By doing so, Intel reassures companies that collaborate with them that they are reliable partners who care about their reputation, people who contribute to their business, and the planet. Moreover, their customers can safely purchase Intel products since no child labor or unfairly paid workers were involved in the making.

Volkswagen

Volkswagen, unlike General Motors, is a German company, yet it is even more influential worldwide. The car manufacturer builds and sells automobiles all around the world and is highly profitable. Due to the large market share, Volkswagen certainly requires a complex supply chain with multiple actors involved. The corporation has multiple suppliers that provide them with raw materials. For the organization to have more sustainable practices in terms of the whole process, a new model was implemented. According to researchers, the first step towards sustainability is switching to lean production and reducing transportation and inventory waste (Paz & Ruiz Gálvez, 2020).

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Moreover, it is essential to mention that the corporation chose to implement a modular strategy, which significantly decreases the possible issues regarding logistics. Such a method is based on creating different parts of the car that can be replaced or exchanged, reducing waste and transportation issues. The company started using this method in 2012, and a significant step toward sustainability and cost reduction was observed over the years (Paz & Ruiz Gálvez, 2020). By implementing this strategy, Volkswagen managed to drastically reduce the cost yet increase the level of ethical practices within the organization.

Difficulties in Building Sustainable Supply Chains

While focusing on sustainability when building supply chains is necessary, multiple difficulties create an environment in which the top management of corporations and business owners do not engage in such practices. Koberg and Longoni specifically mention the multitude of companies that have been observed in controversies regarding a lack of sustainability in supply chains (2019). There are specific limitations that may occur when implementing such challenges. However, solutions help mitigate risk factors and problems that compromise the utilization of sustainable methods within supply chain processes. Such issues occur on technological, economic, and operational levels.

Technological Issues

Some corporations have not been implementing sustainable supply chain measures due to a seemingly unprepared technological aspect that does not allow them to practice such policies. According to Kumar (2020), the technological domain is one of the critical issues which result in unethical methods of operation. However, evidence shows that this is not a significant challenge. Researchers highlight the fact that most companies already possess the necessary tools to switch to sustainable practices and do not use them because of a lack of knowledge or desire (Centobelli et al., 2018).

Furthermore, such situations occur due to misinformation and a focus on other domains that do not touch upon sustainability. Since most businesses can make changes regarding this particular problem, an in-depth examination of current resources and trends in global supply chain operations can result in major changes. This includes transportation, machinery, storage, and other vital processes within supply chain management.

Financial Issues

The most considerable risk that correlates with adapting sustainable supply chain management is an increase in cost. Furthermore, since corporations and businesses are usually designed to increase profitability for shareholders, extra financial losses do not fit the agenda. Yadav et al. (2020) examined economic problems correlating with the supply chain and came to the conclusion the problem has an effective solution. The researchers found out that a circular economy model which aims to repair, reuse, and repurpose materials significantly decreases costs while being more sustainable. Another way of maintaining financial sustainability is having transparent policies regarding monetary transactions. Specifically, evidence shows that using blockchain technology is a safe and secure way to avoid problems with central banks that are in charge of the global financial system (Kouhizadeh et al., 2021). This is an excellent way to minimize risks and maintain long-term sustainability.

Operational Issues

Since supply chains consist of multiple processes and actors that play critical roles in the ultimate objective, which is delivering the product to the customer, operational issues are major risks. Furthermore, challenges that correlate with logistics are among the essential issues that may occur. Ineffective management may lead to significant problems if the products are not delivered in time or at the correct location. Such problems are not only damaging to the economic domain of the company but also significantly decrease the level of sustainability and customer satisfaction. While such risks exist, they can be mitigated by operating under prolific data operation guidelines.

Researchers point out that skilled human resources and up-to-date data entering and storage systems can significantly improve all the challenges related to operational processes. (Bag et al., 2020). Thus, to avoid a lack of sustainable practices in supply chains, stakeholders have to invest resources into minimizing all the possible misunderstandings between actors. This will be beneficial in terms of ethics and majorly decrease the economic losses that occur due to challenges in operational actions.

Conclusion

Building a sustainable supply chain can be a challenging task. Multiple global corporations and local businesses are interested in applying new strategies that would lead to a decrease in environmental damage, financial losses, social injustices, etc. Such results can be achieved by working with reliable and ethical suppliers, reusing and repurposing existing resources, and investing in effective data storage system. Among the challenges that sometimes correlate with sustainable supply chain practices are economic, technological, and operational problems. However, financial issues can be minimized with a circular model and blockchain technology.

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Moreover, most companies already have the necessary technological measures to change to a more sustainable practice. In terms of operational problems, an investment in skilled professionals and automatization in the domain of data operation will combat the challenge. Sustainable supply chain practices can be cost-effective, profitable, and positive for society and the environment if adequate measures are implemented on all levels.

References

A. Kaur and P. C. Sharma, “Sustainability as a strategy incorporated in decision-making at Supply Chain Management case study of general motors,” International Journal of Sustainable Strategic Management, vol. 6, no. 1, p. 56, 2018.

E. Koberg and A. Longoni, “A systematic review of Sustainable Supply Chain Management in global supply chains,” Journal of Cleaner Production, vol. 207, pp. 1084–1098, 2019.

G. Yadav, S. Luthra, S. K. Jakhar, S. K. Mangla, and D. P. Rai, “A framework to overcome sustainable supply chain challenges through solution measures of Industry 4.0 and circular economy: An automotive case,” Journal of Cleaner Production, vol. 254, p. 120112, 2020.

M. J. Paz and M. E. Ruiz Gálvez, “Effects of modular platforms on suppliers companies: Evidence from Volkswagen Polo Manufacturing in Navarra (Spain),” Journal of Manufacturing Technology Management, vol. 32, no. 2, pp. 337–355, 2020.

M. Kouhizadeh, S. Saberi, and J. Sarkis, “Blockchain technology and the sustainable supply chain: Theoretically exploring adoption barriers,” International Journal of Production Economics, vol. 231, p. 107831, 2021.

P. Centobelli, R. Cerchione, and E. Esposito, “Environmental sustainability and energy-Efficient Supply Chain Management: A review of research trends and proposed guidelines,” Energies, vol. 11, no. 2, p. 275, 2018.

R. Kumar, “Sustainable Supply Chain Management in the era of digitalization,” Advances in Human Resources Management and Organizational Development, pp. 446–460, 2020.

S. Bag, L. C. Wood, L. Xu, P. Dhamija, and Y. Kayikci, “Big Data Analytics as an operational excellence approach to enhance sustainable supply chain performance,” Resources, Conservation and Recycling, vol. 153, p. 104559, 2020.

V. E. Castillo, D. A. Mollenkopf, J. E. Bell, and H. Bozdogan, “Supply Chain Integrity: A key to sustainable supply chain management,” Journal of Business Logistics, vol. 39, no. 1, pp. 38–56, 2018.

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