Sustainable Value Chain Management Analyzed
Management, and its many distant and close relatives, have gone through drastic recent changes, mainly due to research and a rising interest in the codification and theorization of core topics and funding theories. These changes are attributable to many factors such as globalization, great technological advancements, and, most of all, the ever-growing focus on sustainability and Corporate Social Responsibility (CSR). These last two concepts are the most talked about, researched, and studied topics in the managerial and business-related sphere, not only because of their modernity or interesting nature, but because they are of the utmost importance to us as a community in order to reduce our emissions, waste, and improve the ways in which we procure our materials. These steps are crucial in the reaching of a sustainable society and a reduction in pollution, that nowadays is becoming something that is needed and must be achieved to ensure society’s survival.
On this note, we should start by defining sustainability, which can be described as the use of natural products and energy in a way that does not harm the environment, or the ways in which we can meet our own needs utilizing present resources without compromising the ability of future generations to do the same. This said, from a value chain perspective many improvements can be made at various steps of the process. I have identified four main areas of interest: Reverse Logistics (RL), Product Recovery Management (PRM), Vehicle Routing Problem (VRP) & Collection/Delivery Points (CDP), and Lifetime Cycle Assessment (LCA).
Reverse Logistics (RL) applies at the beginning of the process, precisely at the designing stage of the product. Here the focus should be on designing the product in such a way to reduce the input needed to produce it in the first place and to make it easier to recycle or disassemble once it has been used. Also, RL’s focus on the reduction of input material, and possibly future input via recycled products, simultaneously tackles both the sustainability and economical aspect of a firm, thus incentivizing the firm to implement and maintain it.
Product Recovery Management (PRM) is the next step, as in fact deals with the recovery of End-Of-Life (EOL) products. However, apart from the sustainability aspect this would also benefit the firm’s economy, as it would be able to capitalize twice, or even more, on its products. An example would be printer’s ink cartridges, which many third parties collect, refill, and resell for their own benefit. Focus should also be put on by-products that result from the manufacturing of the main product, which most often hold value, if not to the company to third parties, which would be happy to buy them, given their usual lower price, thus avoiding waste.
The Vehicle Routing Problem (VRP) instead deals with how these products are collected, or delivered, to customers. As more time passes this becomes more important, given the rise of e-commerce purchases and door delivery systems. The problem here arises from the emissions that conventional delivery vehicles produce. The implementation of Alternative Fuel Vehicles (AFV) would cut these emissions in the short term, but in the long-run different measures have to be taken. In fact, an emission, and cost saving, feasible option are Collection/Delivery Points (CDPs). CDPs, if implemented correctly, would enable shippers to avoid individual small package deliveries and enable customers to collect their packages without detours from their usual routes. This could be done by placing CDPs in supermarkets or workplaces, or by devising “drive throughs”, where package collection could happen without the customers having to leave their cars.
Lastly, the Life Cycle Assessment (LCA) can be defined as a technique to analyze and assess the general environmental impacts associated with a product, at all its stages, from the extraction of the materials needed to manufacture it to their processing, distribution, use, and disposal (see Figure 1). It was left for last for obvious reasons, as it is clear that all the previous factors play a large role in it.
Figure 1 - Life Cycle Assessment.
The order in which these ideas were presented wasn’t random either, in fact RL has been presented first given its chronological place in the value chain process. RL focuses on the design of products, with the aim to recover as much of their profitability as possible once used. Then, PRM explores the different possibilities of EOL products instead of disposing of them, helping companies recover economic value while at the same time reducing pollution. CDPs aim at changing the status quo of package delivery practices, reducing companies fuel costs and emissions by helping reduce door-to-door deliveries; lastly LCA, which holistically comprises all of the above and helps paint a clear picture regarding a certain product, value chain, company or country’s emissions and effect on the environment.
Do you think these theories apply well to current companies and/or industries?
Do you think their implementation in the short-term is doable?
What could be a reason, for companies, to refrain from using these techniques?
What do you think about the three highlights introduced above?
I would love to hear your thoughts.