Making supply chain your strongest link
Sustainable supply chain management may sound like something which adds costs or more properly belongs to a company’s corporate social responsibility agenda. But it need not be either of these, according to Prof Mark Pagell of the UCD Michael Smurfit Graduate Business School, who contends that taking a sustainable approach to this area of business can actually reduce costs and deliver significant competitive advantages.
Pagell holds a chair in global leadership and is a professor of sustainable supply chain management (SCM) and teaches on the UCD Smurfit school’s MSc and MBA programmes. “Sustainable supply chain management is a term I have come to hate because it implies that unsustainable supply chain management has somehow come to be acceptable,” he comments.
“From an academic point of view, traditional supply chain management is looked at almost purely in economic and financial terms while the social and environmental impacts are also taken into account in the sustainable type.”
Interestingly, he points out that sustainable SCM is a relatively easy sell to managers when it involves waste reduction. “When you start with the potential economic benefits most managers tend to get it. Most forms of pollution are forms of waste and this means a waste of money and resources. Energy efficiency is a good example of that and saving money on the top line is a very good way to improve the bottom line.”
The other area which managers tend to tune into quite quickly is risk reduction. “People who have a good handle on exactly what’s happening in their supply chain and how the companies within it do business are less likely to wind up with horsemeat in their beef burgers,” Pagell notes.
A benefit often overlooked, however, is the affect on a workforce which enlightened supply chain and business policies can have.
“One of my favourite places to take students when I was lecturing in the United States was to the Harley-Davidson factory in Kansas. They set up the plant in the late 1990s and got 5,000 applications for the 300 jobs there.
“ This allowed them to choose the best people to work there. When you go to the plant you find the workers wearing black sleeveless T-shirts and so on – it’s like a biker convention there. And lots of them have Harley-Davidson tattoos as well. How many workers can you find that tattoo their employer’s logo on their skin?
“This is probably the most committed workforce on the planet. When I visit companies that try to differentiate themselves in terms of not just what they make but how they behave, I see the commitment they get back from the workforce.”
Pagell believes there is a lesson here for small Irish companies. “Most companies I have worked with have not been big organisations,” he points out. “For a lot of small companies sustainable SCM is a way of escaping the trap of being a small company. They can’t compete on price and have to compete on some other quality. So when you look at a lot of companies they have built their brands on their social awareness, being greener, their contribution to their communities or other attributes.”