The Purpose Of Supply Chain Management Business Essay

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The main purpose of the supply chain is to supply. Sustainable supply refers to the practice of providing goods and services to customers while abiding the ethical code of conduct. The objective of sustainable supply chain management is to consider the total immediate environmental effects of the supply chains, so that the natural environment is protected (Beamon, 2005)

One of the promising areas to achieve sustainability is the Supply Chain Management. Supply Chain Management is an important element for business to lower its environment and social impacts (Wycherley, 1999). Today, companies depend on much complex and fragmented supply chain models to acquire their product components, services which they need to function. Supply chains have therefore become longer and more complex and contractors and subcontractors have become numerous. Supply Chain relationship is therefore critical in todays globalised worls (Welford, 2002).


Blowfield and Murray (2008) ascertained that CSR fits into a taxonomy that is concerned with "laws, ethics, sustainability, philanthropy, investment in the community, environmental stewardship, appropriate corporate governance, adherence to human right and employee welfare across the globe as well as the avoidance of entering into any form of corruption (p.13).

Globalisation means that the world is now a smaller place. Multinationals can no longer get away with setting up shop in far-flung destinations and expecting the rest of the world to be none the wiser. The implications of actions are now far-reaching. This has been facilitated by the communication revolution that has opened up technology and reduced costs dramatically. People are no longer as isolated as they once were and the rest of the world is willing to listen to any wrongdoings that may fall against them: at least when the perpetrator is a multinational from the Western world (Ruggie, 2002; Worthington and Britton, 2006). Therefore, organisations must be sure that their global business transactions are transparent.

CSR is a key driver for business in the 21st century. This is especially the case amongst multinational organisations and is increasingly seen as a fundamental part of business strategy moving forward (Kotler and Lee, 2005). This is a far cry from the 80s and 90s whereby many multinationals were blighted with scandals and controversy. For the most part, these multinationals were able to regain their reputation and bounce back through a series of good PR, promises and public declarations that they would 'do better'. However, the realisation has come that in this day and age that would no longer be acceptable. A recovery from such a scandal is seen as increasingly unlikely. Today, the public has a much heightened sense of awareness and demand socially responsible businesses (Nelgadde, 2010).


The aim of this thesis is better understand how sustainability in the supply chains can be achieved. Also, to identify the motivations, drivers and barriers in delivering such sustainable changes.


The main objective being able to add value to the literature by analysis the wide range of isses and problems that the SCM model might encounter. This thesis stress the growing importance of social issues which the todays supply chains should not ignore. The objective of this research will not review the technological aspects of the supply chain, rather will add value to the supply chain itself.

The research questions include the following:

1. How does sustainable development relate to supply chain management? What are the main motivations, drivers and barriers for this business development?

2. Is the current supply chain model sustainable? If not, what instruments need to be integrated?

3. What alternative tools are needed to achieve sustainable development?

4. Mainly, focus into supplier and buyer relationship and their partnerships.

Literature Review

Ethical Supply Chain Management:

It is no longer acceptable for companies to be unaware of how the workers nvolved in making their products or supplying their services are treated. But the global nature of the business often leads to extraordinary complexity in supply chains and this can make ethical trading seem a daunting task.

Ethical Supply Chain is not simply restricted to activities in developing countries. The recent and tragic death of Chinese cockle pickers in England's Morecambe Bay show that workers in wealthier countries can still be victims of exploitative practices.

The diagrammatic presentation of the overall picture of the core function of SCM includes an array of interdependent activities from sourcing and purchasing, production, distribution and transportation, and sales that operate in the developed and developing world, as is shown in figure. Very often, offices in the developed world deal with research and development, sourcing and purchasing function and sales to the consumers. Products are manufactured and packaged in the developing world and transported to the developed world.

Fig Key activities in the sustainable supply chain management

Many countries have seized the initiative and are making meaningful progress on the ethical management of their supply chains. At the same time, collaborations between business, governments, trade unions and non-governmental organisations are also extending good practice and leading to tangible improvements in the life of workers around the world (Alan Roberts, chair Ethical Trade Initiative)

Responsibility in the supply chain:

This emphasizes the increasing importance of effective supply chain management for corporate social performance (CSP) in the 21st centuary. Although legal obligations for social and environmental issues are increasingly developed to suppliers, as supply networks replace hierarchies and markets, the role of lead firms in the development of Ethical Supply Chain Management (ESCM) has been subject to considerable debate (Andrew Millington, responsibility in the supply chain chapter16).

What determines Successful implementation of ESCM?

ESCM has been placed within the context of relational or obligational contracting (sako, 1992). Such systems are characterised by the long-term cooperative relationships between buyers and suppliers, which are based on trust and the relatively free exchange of information. Earlier studies of the relationship between supply chain management and the implementation of environmentally sound processes in suppliers suggest both that they are most likely to develop within a partnership approach (Green et al., 1996) and that collaborative approaches enable buyers to obtain a clearer understanding of the environmental consequences of production (Lamming and Hampson, 1996). It is important to note however that partnership and obligational contracts rarely extend below tier 1 or immediate suppliers. The dispersion of ESCM is therefore limited by the very nature of supply chain management.

One of the most important lessons is that traditional auditing and monitoring of supply chain activities are necessary, but rarely sufficient, to improve social and environmental conditions on a local level. Auditing compliance with codes of conduct is most effective if accompanied by other methods, such as public sector engagement and capability building, including training and education of managers and employers in the supply chain.

Governments are also realizing that CSR efforts are likely to deliver economic and social benefits that contribute positively to national competitiveness. As a result, they actively support CSR initiatives as a means to attract foreign direct investment and position their exports globally.

Benefits of CSR Improvements:

Following (Figure) are the most frequently-cited benefits that suppliers would like to see upon making CSR improvements.

Tangible External Benefits

Retention of orders

Increase in orders

Tangible Internal Benefits

Improved product quality/ Reduction in errors

Reduced human resource costs (less staff turnover, enhanced retention, reduced training and hiring expenses, reduced medical/insurance costs)

Intangible Benefits

Improved relationship with shareholders, government regulators, media, NGOs.

Enhanced brand reputation

Improved collaboration and communication with customers

Figure : Benefits of CSR improvements

Costs of CSR improvements

Capital Cost

Investment in new equipment (e.g., environmental health and safety (EHS) system, waste-water systems, upgrades such as machine guards )

Infrastructure development for internal management



Human resources

Recurrent Costs

Labor cost (currently estimated at around 5% of total costs) include:

Wage increases

Overtime payments

Figure : Illustrative list of costs of CSR improvements


Sustainability refers to the long term maintainance of systems according to environmental, social considerations (Crane and Matten, 2004:24).

World economies have to cope with the impacts of unsustainable supply chain activities such as deregulation and the adverse impacts of social infrastructure in developing countries (Sethi, 2002). Most multinational companies are socially and environmentally destructive in developing countries in terms of extracting raw materials from developing these third world countries and also paying susstandard wages to overseas labour and at the same time opearating without regard to local communities. This act results in significant damage to the local communities. There could be environmental issues such as over-exploitation of natural resources, the degradation of the habitat and also deforestation, air pollution and chemical emissions.

All such out sourcing practices have led to an increasing concern about environmental. Social and human rights impact on the third world nations from where goods are sourced and manufactured. This has resulted in a growing distrust amongst the general public towards multinational companies such as Shell, Dow Chemicals, Wal-Mart and KPMG International (Daily Times, 2005).

Research Methodology

Stage 1: Primary Research

In this stage the main criteria is to understand the project objectives and the the research problems. Data Collection will be done through various primary sources such as conducting interviews, develop case studies and also developing questionnaires.

Here an effort will be made to better understand to assess the current situation of SCM and its implementation tools, identify and explore major drivers and barriers to improving suppliers' motivations. Also, to better understand the relationship between the suppliers and buyers.

Research helps in exploring the new things in certain area of interest and enhances the knowledge (Jenkowicz, 2003). Questionnaire will be developed to understand the research problems concerning the environmental and social conditions of supply chains.

Stage 2: Secondary Research

Major information for conducting research into this thesis will be collected through the secondary sources, from the journals, online publications etc. Qualitative analysis is the non-numerical examination and interpretation of observations for the purpose of discovering underlying meanings and patterns of relationships (Babbie, 1979; Bernard, 1995; Maxwell, 1996).

This stage of methodology conducts qualitative research techniques to achieve teh research goal and objective. Qualitative methods include conducting questionnaires (Min and Galle, 1997; Carter and Carter, 1998; Carter, et al.1998), and an analysis around the drivers, barriers and motivations of the suppliers.

Stage 3: Implementation

In this stage, data analysis will be conducted through the information collected from the questionnaires and also the case studies. At this stage research extends beyond certain environmental aspects of SCM by providing a broader perspective of SCM within the wider framework of sustainable development and by taking into account social issues, since they have gained momentum in recent years. Since SCM is broad in scope and allows for greater flexibility with respect to both material and nonmaterial aspects of operations.