Learning Center
Plans & pricing Sign in
Sign Out

The future of Supply chain Management


									                  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.
• Digitalisation    • Environmentalisatio
  • ERP and ERPII     n
  • RFID              •   Paperless
  • Technology        •   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
        • 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.,
      “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
        Forward and reverse SCs
                                                                                          Divergent flows

                                       Parts or
          Raw material                                             Product           Distribution
                                     components                                                        End users
           suppliers                                             manufacturers        channels

           Recycling               Remanufacturing                   Repair            Reuse


                   Forward supply chain
                   Reverse supply chain
                   Interfaces between downstream flows and upstream material flows
                                                                                         Convergent flows

Source: Koh, S.C.L., Gunasekaran, A., Tseng, C.S.,
       Top 10 SC leaders
       1.      Apple                              1. Apple: Digital SC – Sensing
       2.      Nokia                                 demand and changing their
       3.      Dell
                                                  2. The end of mass
       4.      P&G                                   customisation? – Dell’s
       5.      IBM                                   model. Truncating BTO and
       6.      Wal-Mart                              shifting to MTS and
                                                     contract manufacturing
       7.      Toyota                                (Back to the future)
       8.      Cisco Systems                      3. Toyota: lean system, waste
       9.      Samsung Electronics                   minimisation, TPS
       10.     Anheuser-Busch                     4. Wal-Mart turning back from
                                                     RFID, instead focusing on
                                                     greening their SC

Sources: AMR Research Supply Chain Top 25, 2008
       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
             • 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 cut-off 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
        • The deployment of efforts such as clean energy
             technology tends to be compartmentalised –
             focusing on specific segments of supply chains, e.g.
        • 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
        • 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
             S.C.L. it is not (Muller, 2007).
Source: Koh, factand 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,

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 examined the impacts of
• Webster and Mitra (2007)
  take-back 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
Uncertainty and
investment…2 uncertainty and relationship in
• Risk propensity has been found to mediate the
  between the external business                 investment
  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
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
• 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 on embedding environmental
• The rising interests
  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


                                   Green Supply
                      Leadership                Directive


    Greening a SC
                 E1                      E1                            E1
E1: Eco-                                                                                   E1               E1
                 E2                      E2                            E2
resources                                                                                  E3               E3
                 E3                      E3                            E3
E2: Eco-design                                                                             E5               E5
                 E4                      E4                            E4
E3: Eco-                                                                                   PDL              PL
procurement      E5                      E5                            E5
                                                                                                Divergent flows
E4: Eco-         PDSL                    PDSL                          PDSL
production                                   Parts or
                 Raw material                                            Product           Distribution
                                           components                                                        End users
                  suppliers                                            manufacturers        channels
E5: Eco-                                    suppliers
Policy            Recycling              Remanufacturing                   Repair            Reuse

Directive                                                                                                    End-of-life
                         Forward supply chain
Leadership               Reverse supply chain

                         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 evidence-based 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
• 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
• 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

*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
  Product Recycle     Service       Use          Sale      Production        Product design                    Supply chain
 life cycle

                                Directive WEEE
Pressure of
  WEEE                                                                    S ug            S ugge
                                                                                                               Tier 2 supplier

                                                                                       ODM/OEM                  ODM/OEM
                                                    Brand company                   Brand company              Brand company

              End                                                                              Component supplier            Material supplier
  SCM                            Brand company                       company
              users                                                                                (Tier 2)                      (Tier 3)
                                                                      (Tier 1)
                                                    Brand company                   Brand company              Brand company

                                                                                      ODM/OEM                   ODM/OEM
                                                                                   RoHS       RoH

Pressure of                                                                                       S            Tier 2 supplier

                                direct influences


                            the reverse influence of SCM                                                                     Directive RoHS
From local to global supply
• 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.
• GSC = lean SC + innovation (5ecos
  PDSL + balanced scenarios)
Logistics and Supply Chain
Management (LSCM)
Research Group
• 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
  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
Supply Chain Management
and Information Systems
(SCMIS) Consortium
International Annual SCMIS
Conference Series
•   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:
•   The 5th International Conference on Supply Chain Management and
    Information Systems (SCMIS2007), Melbourne, Australia, 9-12 December
    The SCMIS website:
•   The 4th International Conference on Supply Chain Management and
    Information Systems (SCMIS2006), 5-7 July 2006, in Taiwan.
•   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.
•   The 2nd International Workshop on Supply Chain Management and Information
    Systems (SCMOS2004), 7-9 July 2004, in Hong Kong, PROC.
•   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: university-
  • Training and consultancy
Professor SC Lenny Koh
Chair in Operations Management
Director of Logistics and Supply Chain Management (LSCM) Research
The University of Sheffield
Management School
9 Mappin Street
Sheffield S1 4 DT
Tel: +44 (0)114 222 3395
Fax: +44 (0)114 222 3348
Thank You.

To top