Week 5 Flashcards
What is a supply chain?
The network of organizations that are involved, through upstream (i.e. supply) and downstream (i.e. distribution) linkages, in the different processes and activities that produce value in the form of products and services delivered to the final consumer”
Global supply chain challenges
- Minimize business disruption from environmental, social and economic impacts
- Protect company’s reputation and brand value; meet investors’ and stakeholders’ expectations
- Maintain social license to operate
- Meet existing and emerging legal and reporting requirements
How to build SSCM?
- Set directions
- Implement expectations
- Improve performance
- Communicate with stakeholders
Work with sticks and carrots
Sticks:
- Developing supplier codes of conduct Conducting audits
- Reduce business activities with the supplier
- Terminate the relationship with the supplier
- Report behavior to the authorities
Carrots (incentives):
- Consistent demand or increased business
- Longer-term contracts
- Sharing costs for improvements
- Recognitions and awards
- Reduction in audit frequency
External assurance
An engagement as one in which a practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users, other than the responsible part, about the outcome of the evaluation or measurement of a subject matter against.
Why external assurance?
- License to operate
- Exceed legal compliance when low lacer enforcement
- Improve stakeholder communication
- Due diligence
- Brand reputation
- Competitive advantage
- Premium pay/costs
- Market demand and acceptance
Levels of assurance
First party:
- Auditee internal
Second party:
- Auditee
- Accredited or non-accredited third party
- Scheme owner
Third party
- Auditee
- Accredited third party independent organization
- Scheme owner
- Accreditation body
2 main type criteria
Farm level
Chain of custody
Farm level claim transferring model
Certified producers sell certified credits to end users so that the purchase of the product in the end will help with the upcomming of more certified products.
Model is there is no chain of custody
Chain of custody mass balance
certified and uncertified are mixed
Chain of custody segregation
certified is only mixed with certified
Chain of custody identity preserved
certified product is seperate from one farm so the source is clear
Business level challenges
Company side:
- Executive orders not matching readiness of the company
- Employers commitment
- Departments segregation
- Leverage on suppliers
Suppliers side:
- Resistance of intermediaries in the supply chain
- Strength of the sustainability commitments within the supply chain
Ground level challenges
Ground level challenges:
- Many different schemes
- Global standards, local conditions
- Changing practices of smallholder farmers
- Impact measurement
- Certification selects best farmers
5 steps of SSCM
Orientation - strategic values
Continuity - structure
Collaboration - structure and processes
Risk management - processes
Pro-activity - processes
Orientation steps
Dedication to the TBL
Dedication to SCM
Continuity steps
SC partner development
Long-term relationships
SC partner selection
Collaboration steps
Enhanced communication
Logistical integration
Technological integration
Joint development
Risk management steps
Standards and certification
Selective monitoring
Pressure groups
Pro-activity steps
Learning
Stakeholder management
Innovation
Life-cycle assessment
Problem suppliers in SSCM
The hoped-for cascade effect along suppliers often does not occur because the sustainable firm place orders that exceed suppliers’ capacity or impose unrealistic deadlines, leading supplier factories to work under unsustainable circumstances
Problems lower tier suppliers
- Lower tier suppliers often have multiple customers with different sustainability strategies. As there is no standard most suppliers do not even bother.
- Most lower tier suppliers are too little to draw attention and even if they get attention they only change when the big firm steps in.
- They are least equipped to handle sustainability requirements.
- They are frequently located in countries where sustainability legislation does not exist.
Problems big firms
- Don’t know their lower tier suppliers
- Don’t know where they are located
- Don’t know their capabilities
Direct approaches
- Evaluate first tier suppliers by using sustainability performance indicators that capture their requirements for lower-tier suppliers.
- Survey suppliers on their environmental, health, safety, and labor practices and on their procurement practices.
- Work with major first-tier suppliers to map the firm’s supply network.
Indirect approaches
- Provide training and foster peer learning among first-tier suppliers to help them Indirect Direct Global Collective improve their procurement practices with lower-tier suppliers.
- Select high performing suppliers to pilot new sustainability initiatives.
- Reward suppliers for cascading sustainability requirements to lower-tier suppliers.
Collective approaches
- Commit to developing and complying with industrywide sustainability standards, and help suppliers become full members of industry organizations.
- Via industry organizations, share resources with competitors and major suppliers to achieve sustainability goals.
- Encourage first- and lower-tier suppliers to take advantage of sustainability training programs offered by industry organizations.
Global approaches
- Work closely with relevant NGOs and international institutions interested in improving supply chain sustainability.
- Use tools and data that those organizations provide for dealing with suppliers (contracts and scorecards).
- Recognize suppliers that excel in programs sponsored by NGOs and international institutions
Best practices in SSCM
- They have established long-term sustainability goals.
- They require first-tier suppliers to set their own long-term sustainability goals.
- They include lower-tier suppliers in the overall sustainability strategy.
- They task a point person on staff with extending the firm’s sustainability program to first- and lower-tier suppliers.
- Awareness is key
