Chapter 18
Copyright © 2013 Dorling Kindersley (India) Pvt. Ltd.
Sustainability and the Supply Chain
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Learning Objectives
Copyright © 2013 Dorling Kindersley (India) Pvt. Ltd.
• Understand the importance of sustainability in a supply chain
• Discuss the challenge to sustainability posed by the tragedy of
the commons
• Describe key metrics that can be used to measure sustainability
for a supply chain
• Identify opportunities for improved sustainability in various
supply chain drivers
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
The Role of Sustainability
in a Supply Chain
Copyright © 2013 Dorling Kindersley (India) Pvt. Ltd.
• The health and survival of every supply chain and every
individual depends on the health of the surrounding world
• Expand the goal of a supply chain to others that may be affected
by supply chain decision
• Factors driving focus on sustainability
Reducing risk and improving the financial performance of the
supply chain
Attracting customers who value sustainability
Making the world more sustainable
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
The Tragedy of the Commons
Copyright © 2013 Dorling Kindersley (India) Pvt. Ltd.
• Dilemma arising when the common good does not align perfectly
with the good of individual entities
• Getting any agreement on action is difficult because the optimal
joint action is not individually optimal
• Need for intervention but considerable disagreement on the
required form of intervention
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
What are Some Solutions
to this “Tragedy”?
Copyright © 2013 Dorling Kindersley (India) Pvt. Ltd.
• No solution without taking away some of the freedom that
participants
• Need to choose from options that are unlikely to be supported by
all of their own free will
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
What are Some Solutions
to this “Tragedy”?
Copyright © 2013 Dorling Kindersley (India) Pvt. Ltd.
• Mutual coercion – social arrangements or mechanisms coerce all
participants to behave in a way that helps the common good
Command-and-control approach
Market mechanisms
Cap-and-trade
Proportional tax
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Key Metrics for Sustainability
Copyright © 2013 Dorling Kindersley (India) Pvt. Ltd.
• Energy consumption
• Water consumption
• Greenhouse gas emissions
• Waste generation
Challenges with scope
Absolute or relative measures of performance
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Sustainability and Supply Chain Drivers
Copyright © 2013 Dorling Kindersley (India) Pvt. Ltd.
• Opportunities identified by matching the four categories with
supply chain drivers
• Facilities
Significant consumers of energy and water and emitters of
waste and greenhouse gases
Separate the improvement opportunities into those that
generate positive cash flows and those that do not
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Sustainability and Supply Chain Drivers
Copyright © 2013 Dorling Kindersley (India) Pvt. Ltd.
• Inventory
Raw materials, work in process, finished goods and inventory
sitting in typical landfill
Life cycle assessment (LCA) can be used to assess a product’s
environmental impacts
Goal is to reduce harmful inventory and unlock the unused
value in products when they are discarded
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Sustainability and Supply Chain Drivers
Copyright © 2013 Dorling Kindersley (India) Pvt. Ltd.
• Transportation
Lower transportation costs also tends to reduce emissions and
waste
Product design a significant role in reducing transportation cost
and emissions
Reducing packaging and allowing greater density during
transportation
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Sustainability and Supply Chain Drivers
Copyright © 2013 Dorling Kindersley (India) Pvt. Ltd.
• Sourcing
Majority of energy and water use and waste and emissions
occurs in extended supply chain outside the enterprise
Extended supply chain and work with their suppliers to improve
performance
Verifying and tracking supplier performance on sustainability is
a major challenge
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Sustainability and Supply Chain Drivers
Copyright © 2013 Dorling Kindersley (India) Pvt. Ltd.
• Information
Good information is a big challenge
Absence of standards leads to claims of improvement that are
not verifiable
Leads to company-specific standards and an explosion of
certifications and certifying agencies
Use of consistent measures within a supply chain
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Sustainability and Supply Chain Drivers
Copyright © 2013 Dorling Kindersley (India) Pvt. Ltd.
• Pricing
Consumption visibility and differential pricing by load or time of
day may make a significant difference in the usage of energy
Change customer’s willingness to pay for a product that is
produced and distributed in a more sustainable manner but
costs more
Sustainability cannot be improved simply by focusing on
reducing costs or the use of incentives
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Closed-Loop Supply Chains
Copyright © 2013 Dorling Kindersley (India) Pvt. Ltd.
• Supply chains cause significant harm to the environment when
their output ends up in a landfill
• Improve sustainability by designing products that can be reused
and recycled
• Must be supported by a supply chain that ensures recycling
• Economic interests of all the parties must be understood and
aligned for the activities to be performed
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Sustainability of Indian Supply Chains
Copyright © 2013 Dorling Kindersley (India) Pvt. Ltd.
• How will Indian supply chains adapt and reshape themselves in an
energy constrained, low-carbon global environment?
• How will the above constraints impact India’s hopes of becoming
the second most preferred manufacturing outsourcing destination?
• Identify some of the service industries in which the strategy of co-
opetition can be gainfully employed in Indian environment.
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
Summary of Learning Objectives
Copyright © 2013 Dorling Kindersley (India) Pvt. Ltd.
• Understand the importance of sustainability in a supply chain
• Discuss the challenge to sustainability posed by the tragedy of
the commons
• Describe key metrics that can be used to measure sustainability
for a supply chain
• Identify opportunities for improved sustainability in various
supply chain drivers
Supply Chain Management: Strategy, Planning, and Operation, 5/e Authors: Sunil Chopra, Peter Meindl and D. V. Kalra
