Oliver Laasch, Roger N. Conaway, by Center for Responsible Management Education (CRME) and Roger N. Conaway, Tecnológico de Monterrey (ITESM)

After reading this chapter…

TETRA PAK: Supply Chain Excellence in China Tetra Pak is the world’s leading food processing and packaging company. Since its entry into China in 1972, Tetra Pak has been an influential player in the emerging Chinese dairy industry. The company has leveraged its packaging technology to shape the supply chains of dairy producers and the overall development of the dairy industry in China. Responsible Management Actions Create infrastructure and systems Engage with suppliers Procure sustainable raw materials Engage with clients Manage the end of life cycle

Figure 10.1 The Responsible Supply Chain Management Process

THE GOAL: RESPONSIBLE SUPPLY AND DEMAND A responsible supply chain is one that optimizes the triple bottom line, stakeholder value, and ethical performance from the first production activity, through the use, until the end of useful life and beyond.

Three Tasks for Responsible Supply Chain Management Create value for and with supply chain partners and stakeholders Optimizes triple bottom line across suppliers, clients, and users Minimize the number of ethical issues and misconduct throughout supply network

Understanding the Supply Chain Phase 1 Understanding the Supply Chain

Food for Thought

Supply Chain Structures and Elements A supply chain is a series of interconnected valuecreating and value-depleting activities from the first raw material to the final consumer. A supply chain architecture is a description of the elements and interconnections of a supply system. Complex adaptive system refers to the dynamic networks of suppliers and buyers. A second-order supply chain is based on products or services left over from a first-order supply chain, which, after a revalorization process, are given a “second life” as a different type of product. The focal company is the organization from which perspective of the supply chain is analyzed and managed.

Supply Chain Characteristics • A series of interconnected value-creating and value-depleting activities • Almost always a “supply network” with multiple supplier-buyer tiers and levels of interaction • Each member of a supply network has its own supply network • Supply networks are “complex adaptive systems”

Figure 10.2 Mapping the Supply-and-Demand System

Table 10.1 Prominent Types of Sustainability-Related Economic Sub-Systems

Figure 10.3 Mapping an Industrial Ecosystem (1)

Figure 10.3 Mapping an Industrial Ecosystem (2)

Managing inside the Supply Chain Phase 2 Managing inside the Supply Chain

Food for Thought

How Position Matters The first step in supply chain management is to be clear about the position of your company in the supply chain. You have to find out where your company, the focal company, is located inside the supply system. Your companies’ position might be defined by its location. The company might, for instance, be a lower-tier supplier, or an end-product producer. Your position might also be defined by the type of function the company fulfills in the supply chain—manufacturer, distributor, retailer, or revalorizer.

SMEs and The Six T's Small and mediumsized enterprises (SMEs) are companies different from large ones, mainly through small employee numbers, less revenue, and ownermanagers. SMEs, due to their different (from large businesses) structural elements and societal embeddedness, must implement responsible business differently. One fitting approach might be to use the “six Ts” approach. The six Ts are a framework of quality management that can be used to track social and environmental performance. Traceability Transparency Testability Time Trust Training

Four principles for greening a small business Understand business principles: Concrete values and principles applied to day-to-day management Champions and low-hanging fruit Engage a responsible individual to lead responsible business activities. Start with small, isolated, high-impact activities. Integration and challenge Overcome resource scarcity and employee resistance with responsible conduct as part of jobs descriptions. Business benefits long-term sustainability depends on both creating social value and strengthening company finances.

Five “Rules” for Leaders in Responsible Supply Chain Management Be a role model Multiply through the chain Extend your sphere of engagement Establish a responsible sourcing program Establish chain transparency and traceability

Figure 10.4 Engagement Practices That Can Improve Responsible Supply Chain Performance

Table 10.3 Salient Standards and Certifications for Supply Chain Companies

The Roles of Efficiency, Effectiveness and Logistics Eco-efficiency: improve ratio between resource use and output for existing products and processes. Eco-effectiveness: create positive environmental impacts through innovation. Logistics: management of resource flows between point of departure and final delivery.

Logistics Inbound: Outbound: Delivering inputs to the production process (Upstream Supply Chain) Outbound: Delivering finished products and services to the customer (Downstream Sup[ply Chain)

Efficient Logistics vs. Sustainable Development Potential Areas of Conflicting Interests Minimizing costs Speed, flexibility, reliability Hub and spoke Warehousing and just-in-time logistics E-commerce

Mitigating the Impact of Logistics Transportation impact transparency Eco-efficient logistics Reverse logistics E-commerce (retailing) logistics Servitization logistics Local production and consumption networks

Phase 3 Closing the Loop

Food for Thought

Closed Loop Frameworks Closing the loop refers to methods to create circular structures that help to, similarly to an ecosystem, reintegrate products at the end of their useful lifetime into earlier supply chain stages. Closed-loop supply chain recovers materials post-consumer for reuse by the same company chain. A reverse supply chain is a structure that channels resources back from their end of life to be reintegrated into the supply chain. Industrial ecology studies material and energy flows in industrial systems and compares them to ecological systems. A circular economy is a production-consumption system that creates a circular flow of materials and energy where the by-product of one process is to be used as the raw material for the next. End-of-life (EOL) design focuses on creating products that minimize negative impacts at the end of the product’s useful life span.

Figure 10.5 Closed Loops and Circular Economies in Industrial Ecology

Circular Economy Methodologies Resource cascading Resources can be reused if the use is ordered by quality requirements in subsequent stages. Shared infrastructure Companies can share facilities and infrastructure to increase resource efficiency. Exchange by-products By-products of value to one company can later be used by another. Waste recycling Waste can be reintegrated into the production and consumption process.

Exending the Useful Life through Revalorization adds value to a product or service, usually at the end of life-cycle, to reintegrate in earlier stages of the supply chain or to extend its useful lifetime. practices include among others recycling, upcycling, downcycling, repairing, refurbishing

Figure 10.6 Closed-Loop Supply Chain

End-of-Life (EOL) Design Designs that minimize negative impacts at the end of product life span. Life-cycle assessment: process of mapping social, environmental, and economic impacts through production, use, and end of product life. Ecodesign: products and processes to minimize pollution and harm to humans and environment. Industrial co-location (symbiosis): venture in which businesses cooperate to share resources and reduce waste and pollution.

Table 10.4 Comparison of Natural and Technological Systems

Principles of Supply Chain: Responsible Supply and Demand A responsible supply chain is one that optimizes the triple bottom line, stakeholder value, and ethical performance from the first production activity, through the use, until the end of useful life and beyond. A progressive view of the supply chain sees a complex system of interdependent organizations supplying and demanding that includes loops where products and services at later stages are rechanneled to newly becoming inputs at earlier stages, and which includes n-order supply chains in which products are involved after they have run through the first-order supply chain. A large share of supply chain businesses consist of small and medium-sized enterprises (SMEs) that, due to their unique characteristics, must be managed differently from large enterprises.

Principles of Supply Chain: Responsible Supply and Demand Managing the supply chain includes engagement techniques, certifications and norms, quality management, ecoefficiency, and effectiveness. Closing the loop refers to methods to create circular structures that, like an ecosystem, help to reintegrate products at the end of their useful lifetime into earlier supply chain stages. Frameworks that help to close the loop are, among others, circular economy, the closed-loop supply chain, industrial ecosystems, and end-of-life design.

Responsible Supply Chain Checklist

People in Supply Chain, Responsible Supply and Demand