A keynote address at:
The 10th Cyberspace 2008: Cyber Security, Cyber Crime and Cyber
Law
The 9th International Conference on Information Management and
New Technologies
The future of Supply chain
Management: Interplay between the
Digital and the Green Agenda
Professor SC Lenny Koh
Logistics and Supply Chain Management (LSCM)
Research Group
Supply Chain Management and Information Systems
(SCMIS) Consortium
Digitalisation vs.
Environmentalisation
• Digitalisation
• ERP and ERPII
• RFID
• Technology
• Environmentalisation
•
•
•
•
•
•
•
Paperless
Electricity/energy
Transportation
CO2 emission
Carbon footprint
3Rs
Renewable
Carbon Heat map (IBM)
A wider agenda…
Estimated global mean temperature
over the past 100,000 years
Source: Australian Government, Bureau of Meteorology, 2008
Development of climate models over
the last 25 years
Source: Australian Government, Bureau of Meteorology, 2008
Source: Australian Government, Bureau of Meteorology, 2008
Impact
• The European Union is very active in pursuing its own
climate change policy responses, through regulation and
policy related investment in research and development.
• It is very concerned that its objective of limiting the
maximum increase in global mean temperature to a 2
degree centigrade warming by mid-century will be
breached by the energy growth in the developing world
and in North America.
• It is investing considerable resources, through bilateral
arrangements, to analyse, mitigate and reduce GHG’s in
developing countries.
Source: Feickert, D., Koh, S.C.L., Wright, P.W., 2008
“I am an admirer of the vision and
determination that has been demonstrated in
Sheffield to take this issue on. People from all
walks of life have made this community stand
out in the United Kingdom and among the
communities throughout the world.”
Al Gore discussing climate change at the
University of Sheffield, 7th February 2007
Globalisation…
Forward and reverse SCs
Divergent flows
Raw material
suppliers
Parts or
components
suppliers
Product
manufacturers
Distribution
channels
Recycling
Remanufacturing
Repair
Reuse
End users
End-of-life
products
Forward supply chain
Reverse supply chain
Landfill
Interfaces between downstream flows and upstream material flows
Convergent flows
Source: Koh, S.C.L., Gunasekaran, A., Tseng, C.S., 2008
Top 10 SC leaders
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Apple
Nokia
Dell
P&G
IBM
Wal-Mart
Toyota
Cisco Systems
Samsung Electronics
Anheuser-Busch
Sources: AMR Research Supply Chain Top 25, 2008
1. Apple: Digital SC – Sensing
demand and changing their
SC
2. The end of mass
customisation? – Dell’s model.
Truncating BTO and shifting to
MTS and contract
manufacturing (Back to the
future)
3. Toyota: lean system, waste
minimisation, TPS
4. Wal-Mart turning back from
RFID, instead focusing on
greening their SC
Reality check
• Most companies green supply chain strategies are
rhetoric and outpacing real action.
• Fewer than 25% say their companies always or
frequently take climate change into consideration in
making supply chain decisions.
• Only 21% thought the opportunities for new
product/market far outweighed the risks.
• For consumer goods makers, high-tech players, and
other manufacturers, 40-60% of carbon footprint resides
upstream in the supply chain—from raw materials,
transport, and packaging to the energy consumed in
manufacturing processes. For retailers, the figure can be
80% or more.
Source: McKinsey Study, 2008
Insufficient comparable basis
• Traditional process life cycle assessment and
supply chain analysis have some serious
limitations.
• They suffer from severe truncation error arising from
the need to limit the study system to make process
based studies feasible. Evidence shows that the cutoff criteria used in life cycle studies rarely leads to
comparable systems.
• Process life cycle inventory databases as crucial
sources of secondary data for life cycle assessment
are far from complete.
Source: Stockholm Environment Institute, 2008
Fragmentation
• The deployment of efforts such as clean energy
technology tends to be compartmentalised – focusing on
specific segments of supply chains, e.g. transport.
• Developing a holistic view of the environmental impact of
full supply chains could both improve the effectiveness of
green investment and establish eco-partnerships in trade
across international boundaries.
• The value of such an approach was recently
demonstrated by the Oxford Institute for Energy Studies
with respect to strawberries: although intuitively it might
seem that it is environmentally inappropriate to fly in
strawberries from Kenya, in fact it is not (Muller, 2007).
Source: Koh, S.C.L. and Wright, P.W, 2008
The emergence of GSCM…
GSCM definitions…1
Green supply chain is referred as the way in which
innovations in supply chain management and
industrial purchasing may be considered in the
context of the environment (Green, et al, 1996).
Environmental supply chain management consists of
the purchasing function’s involvement in
activities that include reduction, recycling, reuse
and the substitution of materials (Narasimhan and
Carter, 1998) .
GSCM definitions…2
GSCM is the inclusion of researching, developing,
manufacturing, storing, transporting, using a
product, and disposing the product waste in supply
chain management (Messelbeck and Whaley, 1999).
GSCM is the formal system that integrates strategic,
functional and operational procedures and
processes for employee training and for monitoring,
summarising and reporting environmental supply
chain management information to stakeholders of
the firm. The documentation of this environmental
information is primarily focused on supplier performance,
audits, design, waste minimisation, training, reporting to
top management and goal setting (Handfield et al,
2005).
Imbalance scenarios…
Imbalance scenarios
• Complexity and conflict
• Uncertainty and investment
• Antecedent and decision
• Attribute and performance
• Partial and discrete
Complexity and conflict
• Matos and Hall (2007) argued that sustainable
development pressures have increased complexities and
presented ambiguous challenges that many current
environmental management techniques cannot
adequately address.
• Zhu and Sarkis (2004) identified that GSCM practices
tended to have win-win relationships in terms of
environmental and economic performance but that JIT
programs with internal environmental management
practices may cause further degradation of
environmental performance and care.
Uncertainty and investment…1
• Webster and Mitra (2007) examined the impacts of takeback laws and introduced the idea of competition within
a manufacturer and remanufacturer framework but their
quantitative model excludes the inter-organisational
relationships and business uncertainty factors in
greening a supply chain.
• Kocabasoglu et al. (2007) explored investment related to
forward and reverse supply chains under the influence of
business uncertainty and found that ongoing investment
in the forward supply chain was significantly related to
investment in recycling and waste management, but not
to investment in reconditioning.
Uncertainty and investment…2
• Risk propensity has been found to mediate the relationship between
the external business uncertainty and investment in the forward and
reverse supply chain, in line with the previous studies which have
observed that uncertainty has knock-on and compound effects on
supply chain performance (Koh, 2004; Koh and Saad, 2006)
• An uncertainty diagnostics model has been developed to evaluate
the impact of material shortages, labour shortages, machine
capacity shortages, quality issues and delivery issues on supply
chains performance (Koh and Saad, 2002), and the model gives a
precursor to the identification of mediating factors such as supply
uncertainty, technology uncertainty and demand uncertainty
affecting energy efficiency in supply chains, and these uncertainties
do appear to be problematic when implementing a green supply
chain (Baldwin et al, 2005).
Antecedent and decision
• Karakayali et al. (2007) modelled the optimal acquisition
price of end-of-life products and the selling price of the
remanufactured parts and found that OEMs would prefer
a remanufacturer-driven channel under certain
conditions. This finding suggests that the OEM must pay
more attention to its outsourcing decision if the
environmental regulations in effect specify target
collection rates for individual quality groups.
• Sarkis (2002) developed a strategic decision framework
for GSCM. The framework highlights the components
and elements for GSCM and how they served as a
foundation for decision framework. These can be
inferred as the range of antecedents, enacting the
importance of understanding the wider constituents for
green supply chains.
Attribute and performance
• Handfield et al. (1997) suggested several attributes for green value
chain practices. These include shareholder value, regulatory
climate, strategic manufacturing initiatives, product design, customer
expectations, and environmental responsibility.
• Angell and Klassen (1999) noted that GSCM research remains in a
pre-paradigmatic state. They suggest that much of the research to
date has adopted a prescriptive tone, based on anecdotal evidence,
which advises managers to consider the impact of environmental
issues within a broad array of operating and performance choices
and little attention has been given to environmental performance as
a competitive dimension of operations.
• Since then, an increased research body has emerged suggesting
various environmental KPIs, for example carbon footprint of a
product, energy conservation of a company, etc.
Partial and discrete
• Full range of environmental and external impacts of the
use of freight transport have been studied, feeding into
transport policy formulation and implementation, for
example Department for Transport (DfT), London.
• Challenges in capturing full green supply chain mapping
and analysis. Without a holistic understanding of the true
impact of CO2 or green initiatives on the full supply
chain, recommendations tend to be drawn based on
limited analysis, thus resulting in non-systemic view and
increasing the associated risk.
Full supply chains perspective
• The rising interests on embedding environmental
practices in operations management over the last few
years have reshaped supply chain management
research and practice onto a new landscape.
• Local optimisation of environmental factors is no longer
adequate in addressing the enlarging issues.
• Considerations of the entire supply chain from energy
production, sourcing, transport, production, consumption,
customer service and post-disposal disposition of
products should also be made.
The 5ecos PDSL model
Eco-logistics
Eco-resources
Policy
Leadership
Green Supply
Directive
Chain
Eco-design
Eco-production
Standard
Eco-procurement
Greening a SC
E1: Ecoresources
E2: Eco-design
E3: Ecoprocurement
E4: Ecoproduction
E5: Eco-logistics
Policy
E1
E1
E1
E2
E2
E2
E3
E3
E3
E4
E4
E4
E5
E5
E5
PDSL
PDSL
PDSL
E1
E1
E3
E3
E5
E5
PDL
PL
Divergent flows
Raw material
suppliers
Parts or
components
suppliers
Product
manufacturers
Distribution
channels
Recycling
Remanufacturing
Repair
Reuse
Directive
End-of-life
products
Standard
Leadership
End users
Forward supply chain
Reverse supply chain
Landfill
Interfaces between downstream flows and upstream material flows
Convergent flows
Driving forces for research
• Current understanding of the environmental impact of supply chains is
limited, as is the availability of tools to develop and stimulate evidencebased practice and policy.
• The need for such understanding is widely recognised at company-level
(e.g. Wal-Mart recently called a major conference of its suppliers in
China in order to begin to address greening its supply chains), and at
government and intergovernmental level (e.g. the European Union and
China agreed at their 2005 Summit to establish a Partnership on
Climate Change with a specific focus on the development and
deployment of clean energy technology).
• It is also evident in the move towards branding products in terms of their
carbon footprint or air miles travelled to market.
Driving forces for knowledge
transfer
• SMEs are not technologically equipped with the latest knowledge
and innovation on how to reduce carbon footprint and improve
energy efficiency (Shell Springboard and vivideconomics report,
2006).
• More companies view environmental performance as part of their
basic corporate social responsibilities (Gray, 1996; Post et al, 1999;
Zhu and Sarkis, 2004).
• According to Peattie and Ring (1993), more than 78% of Chief
Executive Officers of the top 50 British companies considered green
initiatives important for their businesses, and more than 82%
thought green themes would play more active roles in the future.
• Melnyk et al (2003) found that firms having gone through
environmental management standards (EMS) certification
experience a greater impact on performance than do firms that have
not.
Business benefits
• By going green, best-in-class companies have managed
to reduce*:
•
•
•
•
Transportation and logistics costs by 2%
Energy costs by 6%
Operation and facilities costs by 2%
Supply costs by 2%
• However, many practitioners leap into the green agenda
without a clear understanding of the impact of the green
initiatives from a full supply chain perspective.
*Source: Aberdeen Group – A Harte-Hanks Company (2008) Building a green supply chain, March, pp. 1-29
Government and company initiatives
• The European Union current and future legislation aims to integrate
sustainability into business activities (European Commissions, 2007)
• Examples are Directive 2002/95/EC on Restriction of the use of
certain Hazardous Substances (RoHS) in electrical and electronic
equipment and Directive 2002/96/EC on Waste Electrical and
Electronic Equipment (WEEE). These Directives are not simply to
limit the use of harmful substances but also to have firms recycle at
70-80% of waste material.
• Chinese government policy-makers such as Premier Wen have
indicated that all levels of government must fully realise the
seriousness and urgency of achieving energy saving and emission
reduction targets (Chatham House Report, 2007)
• Wal-Mart accounts for 30% of foreign buying in China and about a
1,000 Chinese companies are expected to attend its October
conference on improving the environmental performance of its
supply chains (Birchall, 2008)
WEEE and RoHS Directives
Direct and reverse influences of WEEE
and RoHS on greening a SC
Reuse/
Product Recycle
life cycle
Service
Use
Sale
Production
Product design
Supply chain
Directive WEEE
Tier 2 supplier
Brand company
Brand company
Brand company
ODM/OEM
company
(Tier 1)
Brand company
Brand company
the reverse influence of SCM
Component supplier
(Tier 2)
Brand company
ODM/OEM
RoH
RoHS
S
Material supplier
(Tier 3)
Brand company
ODM/OEM
Tier 2 supplier
S
direct influences
ODM/OEM
H
Ro
Pressure of
RoHS
S ugge
gest
stion
ioODM/OEM
n
RoHS
WEEE
n
tio
es
End
users
S ug
gg
SCM
Su
Pressure of
WEEE
Directive RoHS
From local to global supply chains
• A typical supply chain for a branded company includes
Asian-based companies that serve as Original
Equipment Manufacturers (OEMs) or Original Design
Manufacturers (ODMs) for the branded company.
• In order to deliver quality products to the branded
companies, the OEMs/ODMs cannot ignore the impact
caused by environmental directives and standards
(Karakavali et al, 2007)
• This applies to companies in a whole range of industry
sectors.
• This provides a framework to link domestic
manufacturers to the international supply chains.
Conclusion
• GSC = lean SC + innovation (5ecos PDSL
+ balanced scenarios)
Logistics and Supply Chain
Management (LSCM)
Research Group
www.sheffield.ac.uk/lscm
lscm@sheffield.ac.uk
International
Network
Expertise
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Supply chain modelling
Reverse logistics
Supply chain accounting
Uncertainty diagnostics
Enterprise Resource Planning (ERP) implementation
and operation
• Operations management
• Knowledge management
• Sustainable development in supply chains
Industrial Collaboration (examples)
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Advanced Manufacturing Research Centre (AMRC)
Boeing
Rolls-Royce
Raytheon
Tunewell Transformer Limited
Beko, Turkey
Rent-IT-systems
CDC, Taiwan
Halfords
Entertainment UK
UK Supermarkets
National Health Service (NHS)
Stradia
SEAMS
Supply Chain Management and
Information Systems (SCMIS)
Consortium
www.scmis.com
International Annual SCMIS
Conference Series
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The 6th International Conference on Supply Chain Management and Information
Systems (SCMIS2008) will be held in Tiruchirappalli, India, 8-10 December 2008.
The SCMIS 2008 Website: http://www.scmis2008.org
The 5th International Conference on Supply Chain Management and Information
Systems (SCMIS2007), Melbourne, Australia, 9-12 December 2007.
The SCMIS website: http://www.scmis2007.org
The 4th International Conference on Supply Chain Management and Information
Systems (SCMIS2006), 5-7 July 2006, in Taiwan.
http://www.nchu.edu.tw/scmis2006
The 3rd International Workshop on Supply Chain Management and Information
Systems (SCMIS2005), 6-8 July 2005, in Thessaloniki, Greece. More than 150
participants from over 25 different countries participated and over 80 papers were
presented and published in the proceedings.
http://www.seerc.info/scmis2005
The 2nd International Workshop on Supply Chain Management and Information
Systems (SCMOS2004), 7-9 July 2004, in Hong Kong, PROC.
http://www.ise.polyu.edu.hk/scmis2004
The 1st SCMIS2001, Hong Kong.
Research and KT agenda
• LSCM Research Group and SCMIS Consortium
• Regional studies
• International comparison
• Joint research projects and proposals
• Joint publications
• Editorships
• Special Interest Groups
• Joint PhD supervision and examination
• Collaborative research/work and links: universityindustry-government
• Training and consultancy
Contact
Professor SC Lenny Koh
Chair in Operations Management
Director of Logistics and Supply Chain Management (LSCM) Research Group
The University of Sheffield
Management School
9 Mappin Street
Sheffield S1 4 DT
UK
Tel: +44 (0)114 222 3395
Fax: +44 (0)114 222 3348
E-mail: S.C.L.Koh@sheffield.ac.uk
www.sheffield.ac.uk/lscm
www.scmis.com
www.sheffield.ac.uk/emba
Thank You.