Supply Chain Sustainability: Environmentally Sound Choices

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  • 0:00 Supply Chain Management
  • 2:21 Why Supply Chain…
  • 3:15 Conceptual Framework
  • 4:42 Application
  • 6:00 Lesson Summary
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Lesson Transcript
Instructor: Christian George

Christian has a PhD in Business Management and an MA in Accounting & Financial Management

This lesson introduces supply chain sustainability and provides a conceptual framework for integration of sustainability practices. It also discusses the application of sustainability practices through a three-tier approach.

Supply Chain Management

The supply chain is a critical part of any business, whether they manufacture goods or provide services to customers. Management constantly tries to perfect the customer experience, and more often than not, has to monitor, evaluate, and make changes to the supply chain system to continually provide according to the customer's needs. Supply chain theory states that there are seven goals or rights of fulfillment in supply chain management that companies focus on. They include:

  • The right product
  • The right customer
  • At the right time
  • At the right place
  • In the right condition
  • In the right quantity
  • At the right cost

This list of seven rights has been the focus of supply chain management since the mid-1990s, when the concepts of supply chain management took hold in American business. Companies sacrificed relationships, environmental affect, employee satisfaction, and many other areas of concern to ensure that the seven rights were fulfilled for every customer. It was all about how many how fast. Companies bet the house on the ability to provide the perfect delivery service at the expense of other important factors that would later come back to haunt them. Fast forward to the 21st century.

Customers in today's market are more conscious of the effects of supply chain logistics on the environment. Many of these customers are also concerned about the abuse of suppliers in foreign countries concerning rate of pay and carbon impact in their communities. Eco-friendly products are continually popping up in stores and many companies exclusively manufacture eco-friendly goods. Instead of simply ignoring these changes in consumer demands, companies around the world are looking to change their operations, especially through the supply chain, to provide goods and services in a responsible way to consumers. This has been termed as supply chain sustainability. It is the management of the social, environmental and economic impact, and the concept of good governance practices, throughout the life cycle of goods and services.

The long-term goal of supply chain sustainability is to grow social, environmental and economic value for stakeholders involved in bringing goods and services to market. These stakeholders include the farmer in a small South American village that grows a plant that your company uses in its product all the way up to the stockholder that's looking for increased dividend payout and share price.

Why Supply Chain Sustainability?

Companies are integrating the ideas of supply chain sustainability into their operations for many reasons. One of the reasons is that legislators in various regions and areas have listened to their constituents and have passed legislation requiring companies to reduce their carbon footprint through eco-sustainability practices. Adherence to these laws ensures that the companies are not fined and increases the public perception of the company and its practices.

Another reason that companies are integrating supply chain sustainability into their operations is because the public expects this of them. The proliferation of information in this digital age allows consumers to have instant knowledge of practices and incidents relating to companies whose products they buy. This is good business for companies because the benefits outweigh the costs and risks. Sustainability practices positively affect the businesses themselves, the consumers they serve, stakeholders, and communities in general.

Conceptual Framework

Let's introduce a conceptual framework that companies can use as they implement changes to integrate supply chain sustainability into their operations. We'll illustrate the framework through a linear progression.

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