Sustainability of Supply Chains

TABLE OF CONTENTS

1. Introduction
(i) Flow of assignment

2. Background on sustainability

3. Literature Review
3.1 Supply chain strategy formulation
3.2 Closed Loop Supply Chain Management
3.3 Sustainable thinking in the operational environment
3.4 Sustainable Supply Chain Management
3.5 Sustainable development
3.6 Drivers of sustainability
3.6.1 Government legislations
3.6.2 Stakeholder pressures
3.6.3 Economic sustainability
3.6.4 Suppliers pressure & willingness
3.6.5 Comparison between Sustainability & Closed loop system

4. Rand Water: Discussion
4.1 Introduction
4.2 Sustainable Supply Chain Strategy
4.3 Rand Water facilities
4.3.1 Sustainability initiatives
4.3.2 Employees Motivation, Health & Safety

5. Supply Chain risks and their drivers at Rand Water
5.1 Contingency planning

6. Recommendations

7. References

1. Introduction

Supply chain management is the integration and management of a complex network of activities involved in delivering a complete product to the end user or customer (Ninlawan & Seksan, 2010). It is a common belief that all stages in a product life cycle will have an impact on supply chain biodiversity burden, from resource extraction , manufacturing , use and reuse, final recycling . This is based on the fact that the environmental agenda has become increasingly important for the Government of South Africa, and is slowly reflected in growing legislation to counter negative impacts on the environment. The government‟s primary targets are the building, construction, and water sector; there is a belief for considerable scope for improvements. There are concerns with regards to the environment and this has led government to also include sustainability, this covers ecology, economic, social and cultural considerations from a South African perspective.

Rand Water as a state owned enterprise have realised the importance of sustainability issues by formulating, evaluating and verifying relevant environmental requirements in its supply chain policy for its development of its current and future products. New tenders before being issued to the market, a list of requirements are stipulated in a way that enables them to be fulfilled by the service providers and verified by Rand Water officials on submission. Rand Water is busy conducting ways to modify its project management practices to be environmental friendly as they continue in its quest for sustainability compliance. The proposed route towards dematerialized and detoxified goods and operations can be summarized by the four R‟s: Reduce, Repair, Reuse, and Recycle.

(i) Flow of assignment

Section 1: Introduction to sustainable supply chain management, Section 2: Background, Section 3: Literature review, Section 4: Rand Water & sustainability systems, Section 5: Risk & drivers, Section 6: Recommendations, Section 7: References

2. Background on sustainability

Sustainability refers to the fulfilment of the triple bottom line (TBL), which consists of environment, society and economics. Water boards like Rand Water are starting to follow global trends with regards to sustainability; this is demonstrated by its realigning of water abstraction, distribution and purification processes at Vereeniging pumping station by going green, this is achieved through re-engineering its business process by establishing formal sustainability programs that focuses (reuse, reduce, recycle, re-design and re-image). Brundtland (1987) defines sustainability as “Developments which meets the needs of the present without compromising the ability of future generations to meet their needs”. Sustainable supply chain entails measures of profit and losses as well as social and environmental dimensions. Triple bottom line (TBL) is the linkage between organisations performance in environment, social and financial perspective in figure1. Rand Water‟s performance on this TBL perspective is audited & reported annual in compliance with the appropriate regulators.

Abbildung in dieser Leseprobe nicht enthalten

Figure1. Source: Adapted from www.greenlogistics .org and DETR, 1999

Rand Water has a formal corporate socially responsibility scheme and this assists to promote its image and the brand in the public of Gauteng and other areas it operates. Sustainability definition from the business context: “creation of resilient organisations through integrated economic, social and environmental systems” (Bansal, 2010).

The definition talks to the importance of the supply chain management, since supply chain entails the continuous flow of equipment, money and information across multiple operational activities within and between chain members of Rand Water board. By adding sustainability element in supply chain confirms Rand Water„s management is seriousness about the environment the business it operates and the social aspects of its water business. Supply chains by its nature have had notable impacts on the global society, its environment and economy. Because resources are fast dwindling, tomorrow‟s businesses will be awarded not only on the grounds of economic benefits but also on the basis of sustainability.

Organisations will be awarded business contracts and improve their market share values not just on how well they perform on profit margins, but on how they are prepared to protect the environment and acquire sustainable production and distribution initiatives (Markley and Davis, 2007). The statement by Markley & Davis 92007) appears to be a contradiction, since Eskom, South Africa‟s power utility was given a loan of $ 1.5 billion by the IMF, while environmentalist were objecting their expansion of Kusile power plant in Witbank. This shows dichotomy between environmental & economic issues.

3. Literature Review

3.1 Supply chain strategy formulation

The starting point in formulating a supply chain strategy should be the consideration of the demand nature for the product supplied (Fisher, 1997). According to Handfield et al., (2005), to manage adequately the objective of improving the environmental performance at the level of supply chain we have to connect the business strategy with supply strategy for classes of materials, components, and products. Therefore alignment between supply chain strategy and environmental uncertainty is positively associated with supply chain management performance (Sun et al., 2009). Chiarin (2015) concludes as follows: strategic formulation needs to lead to the identification, objectives and the general principles that inspire the actions of the organisation that will be pursued in the long term.

3.2 Closed Loop Supply Chain Management

Literature studies states that closed loop supply chain management, among other things includes reverse logistics as a critical component that enhances environmental sustainability. The main function of closed loop supply chain management is to recycle, remanufacture and reuse all of them so that value can be re-generated. According to (Choi & Li, 2015) manufacturing processes appears to be classified under the closed loop supply chain management, since it assists to reduce the environmental damage brought by the manufacturing processes. Closed loop systems by nature focus on outputs of the process and recycling is then put back into the production processes. In simply terms the main function of the closed loop supply chains are those supply chains where care is taken of items once they are no longer needed or desired (Flapper et al., 2005).

A practical example of closed loop manufacturing is Rand Water emhlangeni steel plant, the production process that is generated through waste pickle consisting of ferrous chloride, water and hydrochloric acid. Rand Water uses the closed loop system; this is done through the application of hydrochloric acid from the waste regeneration plant which recovers the raw hydrochloric acid from the waste liquor in a recoverable form that is reused again in the production process of pipes. This process is able to assist Rand Water to eliminate the discharge of hazardous waste into the environment.

Legislation compliance and enforcement by government on producer responsibility, take back obligations and setting up collection and recycling systems has led to strong focus on closed loop supply chain (CLSC) management at Rand Water. In Johannesburg, legislation concerning the waste of hazardous substances, scrap metals and electronic equipment has had a profound impact on contractors and other service provider‟s collection and recycling objectives since 2009. Closed loop supply chain involves costs of resources, governmental policies, regulations and customer markets since they are important drivers of geographic positioning of facilities and resources that support the process (Vervest & Heck, 2005). Gupta & Pochampally (2004) suggest a four-level hierarchy as per table 2 below to facilitate solving the problem of identification of efficient production facilities in a geographic region where the closed-loop supply chain is to be designed.

3.3 Sustainable thinking in the operational environment

Seuring & Muller (2008 defines Sustainable Supply Chain Management as the management of material, information and capital flows as well as collaboration between companies along the supply chain while integrating goals from all three dimensions of sustainable development, i.e., economic, environmental and social, which are derived from customer and stakeholder requirements. Klassen and Whybark (1999) earlier studies states: environmental management has a positive effect on a company‟s competitive advantage and operational performance.

We are told in literature, green supply chain performance measurement on the environmental management can significantly lead to cost advantage (Christmann, 2000). Supply chains by its nature have notable impacts on global society, and its environment and economy. Sharma & Henrique‟s (2005) states suppliers in various industries are feeling the pressures from various groups of stakeholders and from different organisations. This has led to suppliers recognising the importance to develop responsibilities that talk to the environmental and social agenda. Ahi & Searcy (2013) conducted a study in comparing of 22 definitions for green supply chain management (SCM) and 12 definitions for sustainable supply chain management (SSCM). Based on their studies, the two scholars conclude as follows: SSCM amalgamated important elements of business sustainability and SCM features, in particular the integration of flows and relationships that focus on efficiency, effectiveness and performance.

This led Seuring & Muller (2008) to develop SSCM sequence elements by supply chain activities, stakeholder groups, SSCM practices and sustainability performance outcomes. The logical of these constructs is depicted in figure 2 and explained in greater detail with reference to Rand Water analysis.

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Figure 2, Source: (Brandenburg & Rebs, 2015)

Issues pertaining to sustainable products, the environment footprint of manufactured goods is of particular interest of SSCM (Gaussin et al., 2013). As noted by Seuring & Muller (2008), stakeholder groups comprise customers, staff, governments, regulators and other internal and external stakeholders such as non-governmental organisations (NGO‟s). By constantly persuading and incentivising these stakeholders groups can escalate the implementation of SSCM practices, which entail sustainable supplier management and the management of sustainable risks (Carter & Rogers, 2008; Seuring & Muller, 2008). The authors conclude by emphasising that sustainability practices‟ main objectives are related to economic, environmental and social performance.

3.4 Sustainable Supply Chain Management

Sustainable supply chain management defined, as a strategic homogenous system that reaches its social, habitat and economic objectives explicit business coordination systems and inter-organisational processes, for the improvement of the long term economic performance of focal company and its supply chain (Carter & Rogers, 2008). A number of scholars , academics and the general public at large have held debates around the issues pertaining to but not limited to (organisational behaviour, technological innovation, politics and government, strategic management and international business) on how best to communicate and implement the most important needs for the enterprise/s or an entire supply chain to coordinate the economic, social and environmental dimensions of sustainability (Anand and Sen 2000; Torras, 2003; Banerjee, 2003; Aguilera et al., 2007; Linton et al., 2007; Sharma and Henrique‟s, 2005; Barin-Cruz et al., 2006; Cruz and Boehe, 2008).

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