Sustainable Supply Chain Management in the chocolate industry


Seminar Paper, 2011
25 Pages, Grade: 1,0

Excerpt

Table of content

Table of figures

List of abbreviations

1 Introduction

2 Theoretical Framework
2.1 Supply Chain Management
2.1.1 Definition of SCM and distinction to Logistics
2.1.2 Origin and development of Supply Chain Management
2.2 Sustainable Development
2.2.1 Characterization
2.2.2 History and growing political importance
2.3 Sustainable Supply Chain Management

3 Chocolate and cocoa industry overview
3.1 The European and German chocolate industry
3.2 The cocoa industry
3.3 Supply Chain Map for cocoa

4 Sustainable Supply Chain Management for cocoa
4.1 Importance of SSCM for the chocolate industry
4.2 Weak points of the supply chain for cocoa
4.3 Challenges of implementing a sustainable supply chain for cocoa

5 Concepts for a Sustainable Supply Chain Management for cocoa

6 Summary and Outlook

Bibliography

Declaration of authenticity

Table of figures

Fig. 1: Mapping of views on sustainable development

Fig. 2: Simplified supply chain map for cocoa

Fig. 3: Supply chain map on the example of Ivory Coast

List of abbreviations

Abbildung in dieser Leseprobe nicht enthalten

1 Introduction

Sustainability has become a significant issue in many companies as it affects their reputation among customers. At the same time, outsourcing and globalization have resulted in the spreading out of supply chains across continents. Therefore, the focus of implementing sustainability has shifted from the single organization to the entire supply chain.[1] This is of particular importance for chocolate manufacturers with their multinational supply chains as they are held responsible by the public for any irregularities which happen in their supply chain.

Chocolate brand owners have been confronted with increasing criticism and pressure from politics and public due to the lack of sustainability in their supply chain. A current example is the TV documentary “Schmutzige Schokolade”, a film about child labor on cocoa farms in Ivory Coast, for which the Danish filmmaker Miki Mistrati blames the chocolate manufacturers.[2] The film, which was broadcasted on ARD on October, 6th, 2010, at 11:30p.m., has been sold altogether to 18 countries and was consequently watched by several million television viewers.[3]

This paper focuses on Sustainable Supply Chain Management in the chocolate industry. The following chapter contains a short theoretical introduction to the topic. It then focuses on giving an overview of the European, and there specifically on the German chocolate industry. Furthermore, it puts focus on the raw material cocoa from Ivory Coast, as cocoa butter and cocoa powder are among the main ingredients of chocolate[4] and Ivory Coast is the world’s largest cocoa producer country. The last two chapters include the description of the importance, weak points, challenges and possible concepts of Sustainable Supply Chain Management for cocoa. The paper finishes with a summary and an outlook.

2 Theoretical Framework

2.1 Supply Chain Management

A successful integration and management of the key business processes along the supply chain can determine the success of a company as it enhances competitiveness and customer service. The concept of Supply Chain Management (SCM) is therefore used by many companies as essential tool for planning, designing and controlling their business networks.[5]

In the following, the term “Supply Chain Management” will be introduced, a distinction to the term “Logistics” will be made and a short outline of the historic development of SCM is provided.

2.1.1 Definition of Supply Chain Management and distinction to Logistics

There are various approaches to define and distinct the terms Logistics and SCM. Mangan et al. define that “Logistics involves getting, in the right way, the right product, in the right quantity and quality, in the right place at the right time, for the right customer at the right cost”.[6] In comparison, Supply Chain Management is defined as “[…] the management across a network of upstream and downstream organizations of material, information and resource flows that lead to the creation of value in the form of products and/or services.”[7] Another, more practical definition approach from the Council of Supply Chain Management Professionals defines that SCM “[…] encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities […]. In essence, supply chain management integrates supply and demand management within and across companies.”[8]

In order to distinguish these two terms, four different perspectives have been identified: the traditionalist, the re-labeling, the unionist and the intersectionist view. In this paper, and in agreement with many academics, the unionist view prevails, which means that logistics is part of the wider, intercompany, boundary-spanning concept which is described as SCM.[9] In this sense, a typical supply chain for a manufacturer may involve the supplier stage on one side and on the other side the distributor, retailer and the customer stage.[10]

The main objectives of the SCM do primarily not differ much from those of logistics, which are for example short cycle times, low inventory levels and high adherence to delivery dates. Those objectives in the end can be summarized in the two goals high delivery service degree and minimal logistics costs.[11] The main difference of SCM is its higher emphasis on an integrative concept within the different stages of the supply chain.

2.1.2 Origin and development of Supply Chain Management

Before the concept of SCM came up in the 1980s, the various functions of logistics were regarded as separate and distinct. Since then, SCM has gained importance due to different developments, for example falling product prices, deregulation of transportation, increased emphasis on inventory reduction and productivity improvements. Furthermore, as this paper focuses on SCM in an international context, it should be mentioned that globalization, outsourcing, offshoring and the growing international trade have been key developments for the growing importance of SCM on an international level. The reduction of trade barriers and the creation of regional trade agreements have allowed for more international trade and also steady exports growth in the last decades. For example, the total value of merchandise exports worldwide rose from $62 billion in 1950 to almost $9,000 billion in 2004.[12]

2.2 Sustainable Development

In the following, the term Sustainable Development with its three pillars concept will be characterized and a short overview of its history and its political importance will be given.

2.2.1 Characterization

One of the prevalent definitions to describe sustainable development is defined in the Brundlandt Report (see chapter 2.2.2), where the term is described as a “[…] development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”[13] A sustainable development is based on three pillars which are interrelated and which have to be considered together: the society, the economy and the environment. In other words, sustainable development means to take into consideration the potential impact of our decisions on society, environment and economy while keeping in mind that these decisions will also have an impact on the future.[14]

However, in real life it is very often challenging for governments, companies or individuals to find the right balance between the competing demands on natural and social resources without sacrificing the economic progress.[15] Often, there is a choice between faster economic growth and better environmental quality.[16] A recent example for this was the failure of an agreement for legally binding targets for carbon emissions in the 2009 United Nations Climate Change Conference in Copenhagen. One might see the behavior of the United Stated, China and other countries as a short-term view position in order to protect their economic growth without considering the above mentioned long-term interrelation between the three pillars.

There is a fundamental gap of concept between different groups regarding the approach to sustainable development. Figure 1 gives an overview over the different positions, which can be categorized into three groups: Firstly, the “Status Quo” supporters, who recognize the need for a change but see neither the environment nor society as facing insuperable problems. This is the dominant view of many governments and businesses. Secondly, the “Reform” group, which accepts that there are growing problems but does not consider that a collapse in ecological or social systems is likely or that a fundamental change is necessary. The third group is the “Transformationists”, which argue that a transformation of society and human relations with the environment is necessary to avoid a growing crisis and even a possible future collapse.[17]

Abbildung in dieser Leseprobe nicht enthalten

Fig. 1: Mapping of views on sustainable development, Hopwood et al. (2005), p.41

2.2.2 History and growing political importance

The origin of the term “sustainability” goes back as far as to the 18th century, when it was used in connection with sustainable forestry. In the 70s of the last century, it came into awareness of politics and public for the first time due to the report of the Club of Rome (1972). Although many of the predictions made in the report did not come true, it can be seen as the starting point to get politics and public to think more about sustainability.[18] The report “Our common future” from the United Nations World Commission on Environment and Development[19] (also known as Brundlandt Commission) in 1987 is regarded as a milestone in the history of sustainable development. The United Nations Conference on Environment and Development (Rio Summit) in 1992 is referred to as such a milestone. At this summit, 172 nations signed a declaration which contains 27 principles to guide future sustainable development around the world. Other important decisions were made in the “Agenda 21” program, the Framework Convention on Climate Change, the Convention on Biological Diversity and the Forest Principles.[20] This summit can also be considered as the foundation for the Kyoto Protocol (1997). Critics of the Rio Summit though point out that important sustainability goals like poverty were not considered in the declarations. However, this was made up for three years later when 192 nations signed the United Nations Millennium Declaration (2000) committing themselves to a series of eight targets with a deadline of 2015. These eight goals are to eradicate extreme poverty and hunger, achieve universal primary education, promote gender equality and empower women, reduce child mortality rate, improve maternal health, combat HIV/AIDS/malaria and other diseases, ensure environmental sustainability, and develop a global partnership for development.[21] Although the Millennium Development Goals are unquestionably one of the most important declarations made regarding sustainable development, the progress which has been made so far towards meeting these goals is described as “unacceptably slow”.[22]

2.3 Sustainable Supply Chain Management

After having defined Supply Chain Management and Sustainable Development in the former chapters, the concept of Sustainable Supply Chain Management (SSCM) can now be introduced. A very narrow definition, more from a logistic point of view, defines that SSCM seeks to reduce the environmental and other disbenefits associated with the movement of freight by redesigning supply chains, exploiting benefits of scale, and by seeking out efficiencies in terms of how to move freight.[23] However, a broader interpretation defines SSCM as “[…] the integration and coordination of economic, environmental and social practices throughout the supply chain to improve firms’ economic, environmental and social performance along the supply chain.”[24] The latter definition seems more helpful as it includes the three dimensions of sustainable development.

The applicability of sustainability in the area of Supply Chain Management has been pointed out by various studies but its actual application in business practice is still low.[25] Nevertheless, pressures from legal, customer or competitor side to operate sustainably are steadily increasing. This holds especially true for global market products, as will be shown later taking the example of the chocolate industry.

3 Chocolate and cocoa industry overview

The following chapter includes an overview of the European and German chocolate industry and of the world cocoa sector. This is followed by a description of the complex structure of a typical supply chain in this sector.

3.1 The European and German chocolate industry

The European chocolate market accounts for approximately 46% of the world´s total chocolate sales and is largely consolidated, with companies like Nestlé, Ferrero and Kraft as the market leader. It is an industry with a long tradition that reaches back to the 17th century, when cocoa was primarily consumed in form of cocoa powder used for hot beverages. Chocolate started to become a consumer good with the beginning industrialization in the late 19th century.[26] Nowadays, the market can be described as saturated with slow, but steady compound annual growth rates (CAGR) between 1.6% and 3.0% regarding the market volume.[27] The total market value in Europe is 20.9 billion € or 3.04 billion Kg. The United Kingdom with 29% holds the largest share of the European chocolate market.[28]

Germany is the second largest market in Europe and generates approximately 15% or 2.9 billion €, respectively.[29] Ferrero oHG (Kinder, Duplo and Ferrero Rocher) has a leading position in the German chocolate market. Mars holds the second largest market share with brands like Snickers, Milky Way, Galaxy, M & M’s and Maltesers. Kraft Foods (Milka, Côte d’Or, Toblerone) also plays a major role in the German market. Discounters and traditional grocers are the most significant channels of distribution.[30]

[...]


[1] Cp. Mann et al. (2010), p.1, [status 20.01.2011]

[2] Cp. Bayerischer Rundfunk (2010), [status 25.01.2011]

[3] Cp. Teevs (2010), [status 30.01.2011]

[4] Other main ingredients are sugar, milk and lauric acids (for example palm oil or coconut oil). The description and the supply chain for these ingredients, however, is not part of this paper due to space limitations.

[5] Cp. Reefke et al. (2010), pp. 309-311.

[6] Mangan et al. (2008), p.9.

[7] Mangan et al. (2008), pp.8-11.

[8] Council of Supply Chain Management Professionals (2010), [status 20.01.2011]

[9] Cp. Mangan et al. (2008), pp. 11-12.

[10] Cp. Chopra; Meindl (2004), p.5.

[11] Cp. Corsten; Gössinger (2008), pp.107-108.

[12] Cp. Mangan et al. (2008), pp.4-30.

[13] Grunwald; Kopfmüller (2006), p.21.

[14] Cp. Strange; Bayley (2008), pp.24-27.

[15] Cp. Strange; Bayley (2008), p.25.

[16] Cp. Tol (2009), p.9.

[17] Cp. Hopwood et al. (2005), pp.38-48, [status 22.01.2011]

[18] Cp. Grunwald; Kopfmüller (2006), pp.15-20.

[19] NGO Committee on Education (2011), [status 28.01.2011]

[20] Cp. Grunwald; Kopfmüller (2006), p.23.

[21] Cp. United Nations (2011), [status 28.01.2011]

[22] Matthew; Hammill (2009), p.1118, [status 20.01.2011]

[23] Cp. Mangan et al. (2008), pp.268-278.

[24] Cp. Kaynak; Montiel (2009), p. 2, [status 29.01.2011]

[25] Cp. Reefke et al. (2010), pp. 309-310.

[26] Cp. Fold (2001), pp.407-408, [status 24.01.2011]

[27] Observation period 2000-2008.

[28] Cp. Datamonitor (2004a), [status 22.01.2011]

[29] All figures represent forecasts for the year 2008.

[30] Cp. Datamonitor (2004b), [status 22.01.2011]

Excerpt out of 25 pages

Details

Title
Sustainable Supply Chain Management in the chocolate industry
College
Leipzig Graduate School of Management
Course
Logistik
Grade
1,0
Author
Year
2011
Pages
25
Catalog Number
V171088
ISBN (eBook)
9783640901609
ISBN (Book)
9783640901883
File size
977 KB
Language
English
Notes
Diese Seminararbeit beinhaltet folgende Themengebiete: - Supply Chain Management - Nachhaltige Entwicklung (Sustainable Development) - Einführung in die Schokoladen- und Kakaoindustrie - Identifizierung von Konzepten zur Einführung eines nachhaltigen SCM in diesen Industrien
Tags
Supply Chain Management, Sustainable Development, cocoa industry, chocolate industry, ivory coast, sustainable supply chain management
Quote paper
Oliver Thomas (Author), 2011, Sustainable Supply Chain Management in the chocolate industry, Munich, GRIN Verlag, https://www.grin.com/document/171088

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