Operations Management / Supply Chain Management

Module 09.03 Key Concept: Supply Chain Sustainability Considerations and Key Performance Metrics

In today’s world, Supply Chain Management concerns and Responsibilities go well beyond just the planning, and execution processes required for developing, producing and delivering goods and services.  Ethics and Sustainability (like Risk Management) have now become critical strategic concerns.

Ethics can pertain to personal ethics which is critical to the  long term success of an organization and supply chains particularly susceptible.  It also includes ethics within the supply chain and ethical behavior regarding the environment.

The Institute for Supply Chain Management has developed a set of Management Standards related to Ethics.  The intent is to promote and uphold responsibilities to one’s employer; encourage positive supplier and customer relationships; support sustainability and social responsibility; provide protection of confidential and proprietary information.  They are applicable to laws, regulations, and trade agreements; and strive for the development of professional competence.  These standards are further intended to help companies avoid perceived impropriety; conflicts of interest; behaviors that negatively influence supply chain decisions; and framing of improper reciprocal agreements.
These elements are summarized below:
  • Perceived Impropriety:  Prevent the intent and appearance of unethical or compromising conduct in relationships, actions and communications
  • Conflicts of Interest: Ensure that any personal, business or other activity do not conflict with the lawful interests of your employer
  • Issues of Influence:  Avoid behaviors or actions that may negatively influence, or appear to influence, supply management decisions
  • Responsibilities to Employer: Uphold fiduciary and other responsibilities using reasonable care and granted authority to deliver value to your employer
  • Supplier and Customer Relationships: Promote positive supplier and customer relationships
  • Sustainability and Social Responsibility: Champion social responsibility and sustainability practices in supply management
  • Confidential and Proprietary Information: Protect confidential and proprietary information
  • Reciprocity: Avoid improper reciprocal agreements
  • Applicable Laws, Regulations and Trade Agreements: Know and obey the letter and spirit of laws, regulations and trade agreements applicable to supply management
  • Professional Competence: Develop skills, expand knowledge and conduct business that demonstrates competence and promotes the supply management profession

Sustainability elements were covered in the module related to product and service design – remember the discussion about the “Triple Bottom Line?”

 

Sustainability in the supply chain

•Return or reverse logistics can be achieved in many ways, such as by sending returned products back up the supply chain for resale, repair, reuse, re-manufacture, recycling, or disposal; or implementation of closed-loop supply chains.  This is done through proactive design of a supply chain that tries to optimize all forward and reverse flows and prepares for returns prior to product introduction.
Evaluation of Supply Chain Metrics is extremely important as as a Strategic function.  Remember back to our Module on Quality Management when we reviewed the Plan > Do > Check > Act process?  Well, Supply Chain Metrics are used to check all aspects of supply chain performance in order to determine future changes in strategy and / or required actions necessary to keep things on track for the future.  The text provides several relevant metrics for different supply chain elements.  They are useful for tracking progress vs. objectives or internal benchmarks.
The company can also benchmark supply chain performance metrics vs. other companies both inside their own industry and expanding outward to “Best in Class” from all industries.
The Supply Chain Council has developed a benchmarking model referred to as SCOR “Supply Chain Operations Reference” model.  This is a comprehensive approach that allows benchmarking at several different levels from Strategic to Operational in nature.  The SCOR model, along with other similar techniques, offer useful methods for organizations to compare processes and performance vs. others and to gain new insight into how to improve their own operations across multiple functions.
Benchmarking alone however, may not be adequate.  Audits may be necessary to promote continuing communication, understanding, trust, performance,  and awareness of corporate strategy.  If handled effectively, audits can foster a mutual belief that “we are in this together”.