CH-9-10 Operations: Responsible Enterprise Excellence – Principles of Responsible Management: Global Sustainability, Responsibility, and Ethics : Book Guide

This Document Contains Chapters 9 to 10 CHAPTER 9 OPERATIONS: RESPONSIBLE ENTERPRISE EXCELLENCE GET IN TOUCH! This instructor’s manual can only cover a small initial selection of relevant advice. Please visit the website of the Center for Responsible Management Education www.responsiblemanagement.net or write to Oliver Laasch through [email protected] to share your ideas for new contents, experiences in teaching with the book, constructive criticism, and, of course, questions. The textbook is a snapshot of a quickly developing field that aims to educate responsible managers, and to create responsible businesses, which requires constant updating. We invite you to become part of a growing community of academics and practitioners taking on this task. THE INSTRUCTOR’S MANUAL This Instructor’s Manual contains a brief chapter introduction, a listing of chapter objectives, an expanded outline, chapter summary, teaching points, answers to end of chapter questions and exercises, and test questions. INTRODUCTION Companies are systems of interconnected processes, and operations management is the management of processes. This is why responsible operations management must be at the core of any responsible business and responsible management effort. Responsible operations management is crucial not only for the triple bottom line, but also for the creation of stakeholder value. Stakeholder value is created through the output of processes. Processes in a responsible business must be designed to optimize stakeholder value and the triple bottom line and to create good ethical decisions and behaviors. In phase 1, we will provide basic insights into how to integrate responsible management into existing processes and how to design specialized responsible management processes. In phase 2, we will take a closer look at efficiency and how to use lean enterprise methods, and to minimize environmental resource use and impacts from processes. In phase 3, we will apply Six Sigma, benchmarking, and continuous improvement methods in order to improve process effectiveness— to improve the process output for key stakeholders. CHAPTER OBJECTIVES After reading this chapter, students should be able to…  …analyze processes in order to understand where to integrate responsible management activities.  …create new processes to manage triple bottom line, stakeholder value, and moral excellence.  …use lean management to create triple bottom line efficiency and the Six Sigma method to optimize stakeholder value. CHAPTER OUTLINE I. Operations and Responsible Management: Operations management is centered on the process level. Processes are well-confined, manageable series of activities. Companies are systems of interconnected processes, and operations management is the management of these processes. This is why responsible operations management must transfer sustainability, responsibility, and ethics to the process level of any responsible business and responsible management effort. Responsible operations management is crucial not only for the triple bottom line, but also for the creation of stakeholder value and moral excellence. II. Goal: Responsible Enterprise Excellence: Responsible enterprise excellence refers to above-average operational performance for the triple bottom line, stakeholder value, and moral excellence. III. Phase I: Describe the Process: In this first section, we will take a close look at business processes in order to understand where responsible management can attach. A. Mapping the Process: A process is any activity or set of activities that uses resources to transform inputs to outputs. To evaluate the quality or performance of a process, one needs to analyze both the effectiveness and the efficiency of the process. Effectiveness is the extent to which planned activities are realized and planned results achieved. Efficiency is the relationship between the result achieved and the resources used. • Mapping Internal Processes: An organization can be viewed on six levels, with greater detail at each level. The broader levels include the organization, its functions and subfunctions, while the more detailed views include process lists, extensive visual descriptions, and supporting details. Describing Detailed Processes: A level 5 process detail map is the right tool to understand in which specific step of the process environmental impacts can be mitigated, stakeholder value can be created, and ethical misconduct can be avoided. Once this understanding is created, managers are able to specifically address those “hot spots” in their management activity. Process detail maps serve to help us understand both mainstream business processes, as well as to understand and improve specialized responsible management processes. B. Describing the Process through Procedure Documents: Written descriptions and instructions on how the process should be implemented in practice are the next steps toward implementing responsible processes in practice. Such process descriptions in practice are named in many different ways, depending on the scope and scale of their contents. We will here focus on the description of procedures, more specifically, standard operating procedures (SOPs). C. Bundling Processes to Management Systems: Responsible business aspects as described through process maps and procedure documents should become a major part of integrated management systems. An integrated management system houses all components of a business in one coherent system in order to enable the achievement of organizational purpose and mission. IV. Phase 2: Be Efficient through Lean Enterprise Methods: Making more with less, increasing efficiency, has long been a mantra of management in theory and practice. It is not surprising that efficiency also plays a major role in responsible business and management. Probably the best-known application of efficiency in responsible management is ecoefficiency, which aims to minimize environmental resource consumption and ecological damage by optimizing the efficiency of the firm’s production processes. We could also think of stakeholder efficiency, that is, aiming to create as little stakeholder cost and as much stakeholder benefit as possible, through processes. Even moral efficiency is a possibility, striving to realize as little ethical misconduct as possible per output unit. A. Lean Enterprise Methods: Lean management and enterprise methods typically target waste reduction and elimination, where waste is often divided into three categories: Muda, Muri, and Mura. Lean enterprise management implementation and realization are based on core principles and processes illustrated in the chapter. • Muda translates as any of the following near synonyms: futility, uselessness, idleness, superfluity, waste, wastage, and wastefulness. • Muri translates in most contexts as being unreasonable, impossible, beyond one’s ability or authority, or too difficult, or as by force, compulsory, excessive, or immoderate. • Mura translates as unevenness, irregularity, nonuniformity, or inequality. B. Toyota Production System: Use of the Japanese terms muda, muri, and mura in connection with lean enterprise implementation is driven by the most familiar lean approach, known as the Toyota Production System, or TPS. Of these the most commonly and easily identified sources of waste are muda, anglicized expressions of which yield an easily recalled acronym: NOW TIME: Non-quality, Over-production, Waiting, Transportation, Inventory, Motion, and Excess processing. V. Phase 3: Be Effective through Quality Management: Quality management is replete with tools, techniques, methodologies, and theory. Perhaps most closely identified with quality management is the enterprise excellence movement epitomized by the models and criteria of, e.g., America’s Malcolm Baldrige National Quality Award and the European Quality Award. Adding responsibility and sustainability to the mix yields Total Responsibility Management, and the previously discussed concept of Sustainable Enterprise Excellence. Total responsibility management (TRM) translates total quality management tools and practices to the field of responsibility management. A brief comparison of criteria associated with the Baldrige Award and Total Responsibility Management is illustrated in Figure 9.9. A. Customer Orientation and Continuous Improvement: Core to quality management are clear customer orientation and emphasis on both continuous and radical improvement. Traditionally it has been considered important to successfully solicit, acquire, assess, and deploy the voice of the customer (VOC) from concept to market. Voice-of-the-customer (VOC) describes the efforts to identify customer needs. Voice-of-the stakeholder (VOS) describes the efforts to identify customer needs for responsible management. There are various methods of obtaining the VOC including surveys, focus groups, interviews, and customer complaints – with each of these possessing advantages and disadvantages. The same tools and several additional stakeholder communication tools as illustrated in the chapter on marketing and communication may serve to hear the voice of the stakeholder(s). 1. Kano Customer Needs Model distinguishes between basic needs, satisfiers, and delighters. 2. It is important to have proven methodologies available to improve process performance, whether operationally or in terms of its outputs. Depending on prevailing and future circumstances, the sort of improvement needed may be incremental or “continuous” in nature, or may be more radical or “breakthrough” in nature. We first consider a continuous improvement approach the Plan-Do-Study-Act (PDSA) Cycle that is often attributed to the late quality management theorist, W. Edwards Deming so that the PDSA Cycle is often cited as the “Deming Cycle” or “Deming Wheel.” Improvement, whether incremental or breakthrough, relies on clearly defined improvement goals and objectives, where so-called SMART goals (Specific, Measurable, Attainable, Relevant, and Time-bound) and objectives are favored. B. Breakthrough Improvement through Six Sigma Innovation and Design Breakthrough is ordinarily called for when needed improvement levels are more extreme, for example, 15% or more. Two contemporary approaches to achieving breakthrough improvement are Six Sigma innovation and design methodologies, and benchmarking. We begin with Six Sigma. Six Sigma is a highly structured strategy for acquiring, assessing and activating customer, competitor, and enterprise intelligence leading to superior product, system or enterprise innovations and designs that provide a sustainable competitive advantage. Six Sigma divides into two primary streams with one stream associated with significant innovation of existing products, processes or systems, whereas the second stream emphasizes design of new products, processes or systems where it is important to perform in line with customer expectations and exceptionally so. • Six Sigma innovation is usually associated with the DMAIC (Define-Measure-Analyze-Improve-Control) structured approach to innovation. • Design for Six Sigma ordinarily employs the DMADV (Define-Measure-Analyze-Design-Verify) approach to product, process or system design. Six Sigma’s DMAIC and DMADV approaches to innovation and design are used to deliver products, processes, or systems that are critical to organizational performance across any defined performance domains that may include any or all of the triple bottom line areas and do so nearly perfectly. The term “sigma” is synonymous with process standard deviation and is symbolized by σ, typically representing unintended process variation so that in a process performance context smaller values of σ are more desirable. C. Benchmarking and Breakthrough Improvement: Benchmarking contributes substantially to almost any improvement methodology, whether the need for improvement is of an incremental or breakthrough nature. Best practices benchmarking may be regarded as the process of continually searching for and studying internal and external methods, practices and processes that yield superior performance and either adopting or adapting their good features to become the ”best of the best.” Benchmarking has a distinct measurement focus and it is important to determine where processes create customer value as well as where value is detracted. The benchmarking perspective on measures is that two types of indicators should be combined: • Lagging indicators describe actual results • leading indicators forecast future outcomes Among enablers of improved performance identified in benchmarking studies are the categories of so-called soft, medium and hard enablers. Included among soft enablers are training, communication, and human capital empowerment. Medium enablers of improvement include (SMART) goals and objectives, controls, measures, and policies and procedures. Hard enablers are tangible resources such as manufacturing plants, suppliers, money, technology, and equipment. Principles of OPERATIONS: RESPONSIBLE ENTERPRISE EXCELLENCE (SUMMARY) I. The goal of responsible operations management is responsible enterprise excellence, which refers to above-average operational performance of the triple bottom line, stakeholder value, and moral excellence. II. Operational performance describes the effectiveness and efficiency of processes for the production of goods and services. III. For responsible operational performance, processes must integrate stakeholder value, environmental impacts, and ethical dilemmas in their description and management. IV. Lean enterprise methods aim to increase the efficiency of a process by reducing non-value-adding activities, so-called wastes. Lean thinking is the basis for ecoefficiency, which reduces pollution and resource consumption from existing processes. V. Quality management is a framework that aims at creating products and services that are perfectly aligned with the customer (stakeholder) needs by reducing nonconformities (errors) with customer requirements. Six Sigma is a prominent quality management framework. VI. A continuous improvement cycle is one in which after each pass through the cycle, a new planning phase is initiated and the cycle is repeated in order to continue improving the product, process, or system. A prominent cycle is PDSA, which is the abbreviation of the improvement cycle following the stages: plan, do, study, and act. VII. Best practices benchmarking is the process of continually searching for and studying internal and external methods, practices, and processes that yield superior performance and either adopting or adapting their best features to become the “best of the best.” TEACHING POINTS 1. Relevance and purpose: Often responsible business literature and courses neglect the very operational, factory floor, or office level of what the majority of people really do in business on a day-to-day- basis. This chapter provides students this very perspective of how the myriad of processes constituting what an organization does and is are managed and improved. 2. Down to the process: In order to make students understand what process are in practice and how they can be made more responsible, it is important to analyze, almost dissect, processes and all their elements from a very close perspective. It is recommendable to connect to the students´ reality, maybe even to let a student describe a process she or he knows very well. 3. Let´s get visual: For understanding processes, the use of graphs and figures may be very helpful. For instance, drafting a process map similar to the ones displayed in Figure 9.4 is an excellent exercise to understand where triple-bottom-line impacts are made, and where stakeholders and ethical issues are involved in the different activities that constitute the overall process. 4. Much natural overlap, little explicit integration: Several of the tools and concepts mentioned in this chapter are either very much in the hands-on, “mainstream business corner” (e.g. Six Sigma, Lean Management), or in the other extreme of idealistically reflecting responsible business aspirations (e.g. moral efficiency, stakeholder efficiency). There are several parts in which mainstream business and responsible business overlap naturally, such as “lean and green” approaches and total responsibility management. As there has not yet been much attention paid to explicitly integrating these two spheres in operations management, it is important to develop a shared understanding on how to integrate them in the classroom. We recommend to engage in brainstorming and discussion with students to further elaborate the understanding of the overlaps. 5. Beware of the Acronym(s)! PDSA, DMAIC, DMADV, VOC, VOS, TRM, SMART, SIPOC, COPIS… It seems easy to get lost in the multitude of acronyms used in operations management. Students might feel overwhelmed. We recommend showing students how these acronyms actually help to make things easier. Many of them reflect algorithms, or criteria lists that are easier to remember in the form of an acronym. When understanding that, for instance, PDSA unfolds as Plan, Do, Study, Act, and SMART describes the quality criteria for goals of being Specific, Measurable, Attainable, Relevant, and Time-bound, the acronyms will make sense to most students. 6. Interviews: We highly recommend instructors use the interviews at the end of the chapter in the classroom. In the pioneer interview, Sandra Waddock, one of the most prolific academic authors on corporate social responsibility, elaborates extensively on the similarities of quality management and stakeholder management, and on the concept of total responsibility management created by her together with colleagues. The practitioner interview with Cecilia del Castillo introduces the day-to-day challenges and applications of operations management from the perspective of a factory sustainability manager. ANSWERS TO END-OF-CHAPTER QUESTIONS AND EXERCISES A. Remember and Understand A.1. Explain how mainstream operations management and responsible operations management are different. Operations management (OM) is the area of management concerned with the effectiveness and efficiency of processes for the production of goods and services. Responsible operations management is a process-based framework that aims at creating efficiency, zero resource consumption, and optimum stakeholder value through process effectiveness. From these definitions we can see how responsible operations management builds upon the process effectiveness and efficiency basics of conventional operations management, but broadens the conventional understanding, specifying stakeholder value as the aspired process output and zero resource consumption as an ultimate efficiency goal. A.2. Define the following terms and explain how they are related: performance, efficiency, effectiveness, process, output, input. Operational performance describes the effectiveness and efficiency of processes for the production of goods and services. A process is any activity or set of activities that uses resources to transform inputs to outputs. Inputs are resources that go into the process, while outputs are products that come out of the process. Effectiveness is the extent to which planned activities are realized and planned results achieved. Efficiency is the relationship between the result achieved and the resources used. Operational performance is created by transforming inputs to outputs through a process. To increase operational performance, the efficiency of the process has to be increased by reducing the necessary inputs per unit of output, and/or the effectiveness has to be increased by a higher degree of achievement of pre-defined process outputs. A.3. Explain the difference between quality management and lean enterprise, and describe how each applies to responsible management. In practice, both lean and quality management have components of both efficiency and effectiveness. But we can say that lean enterprise methods rather focus on efficiency (as little waste as possible) tool and quality management rather focus on effectiveness (outputs as close as possible to specified quality criteria). A.4. Discuss the relationship between triple top line strategy and triple bottom line results in relation to operations management. Students are recommended to review the online dictionary of sustainable management (http://www.sustainabilitydictionary.com/triple-top-line/) and the idea of the triple top line as it was explained by the concept creators in the article “Design for the Triple Top Line: New Tools for Sustainable Commerce” by McDonough and Braungart (2002) in the journal Corporate Environmental Strategy before discussing this question. Chapter 3, sustainability provides a more extensive discussion of the triple bottom line and an interview with the creator of the concept, John Elkington. A. Apply and Experience B.5. Many forms of the Balanced Scorecard exist. Conduct a comprehensive search of Baldrige Award-winning or European Quality Award-winning organizations. As an outcome of your search identify ways in which five of these organizations have benefitted from use of the balanced scorecard in relation to their operations strategies, practices and results. [The balanced scorecard model has been covered in Chapter 6, Strategy] A good first step for students to answer this question is to look at the lists of EFQM (European Quality Award) success stories (http://www.efqm.org/success-stories) and the Baldrige Quality Award recipients profiles (http://www.baldrige.nist.gov/Contacts_Profiles.htm). It is then recommended to look up the Global Reporting Initiative reports of a bigger set of organizations and scan them for score card models. For instance, the EFQM award-winning company BMW uses a circular score card model to describe the company sustainability targets (http://www.bmwgroup.com/bmwgroup_prod/e/0_0_www_bmwgroup_com/verantwortung/svr_2012/nachhaltiges_wirtschaften.html). B.6. Relative to your search in question B.5, identify specific sustainability strategies of each of the five award-winning organizations and ways in which they have successfully deployed these strategies to produce positive sustainability results relative to their operations management strategies, practices, and results. Students will be able to identify a wide variety of sustainability strategies and their results through the company reports analyzed in the before step. We recommend preparing a table covering the five companies for structuring the answer to this question. This is what it might look like as a template: Company Strategy Results B.7. Identify ways in which the five organizations identified in question B.5 have approached socio-ecological innovation and the impact of these approaches in relation to their operations and supply chain management strategies, practices, and results. For instance, we can learn from the BMW 2013 GRI report that the company uses a “targeted stakeholder dialogue to gain various perspectives and input on relevant topics, to identify trends and key topics at an early stage”- one of the outcomes of the dialogue is a cutting edge new line of environmentally friendly vehicles. Students are expected to identify similar innovation activities for all five companies in order to learn about different innovation strategies. B.8. Suggest and discuss at least five possible measures for each of the ten generic benchmarking categories. The goal of this exercise is to practice coming up with a wide variety of benchmarking indicators, related to both mainstream and responsible business. The generic list of benchmarking indicators can be found on page 289. Discussion of the categories is optional. Several of the benchmarking categories are overlapping in their coverage. In the following list we provide examples of measures for three of the benchmarking categories. • Customer [or stakeholder] service performance: 1) customer/stakeholder satisfaction, 2) number of complaints per 100 products, 3) response time after customer contact, 4) number of feedback surveys received, and 5) friendliness of staff. • Core business process performance: 1) number of process errors per month, 2) product or service output, 3) inputs used, 4) input/output ration (efficiency), and 5) average processing time to finished product. • Financial performance: 1) total revenue, 2) revenue per employee, 3) profit per product unit, 4) company value, and 5) value of assets. The seven benchmarking categories that have not been elaborated on are product or service performance, support processes and service performance, employee performance, supplier performance, technology performance, new product or service development and innovation performance, cost performance. B. Analyze and Evaluate C.9. Search online for the IKEA Group People & Planet Positive Sustainability Strategy and, also, its United Nations Global Compact (UNGC) “Communication on Progress,” or COP. Discuss these in relation to the lean enterprise core principles and processes and implications for IKEA’s operations and supply chain management strategies, actions, and results. The goal of this exercise is for students to more deeply analyze the various points highlighted in the chapter introduction case on IKEA and to reflect on and apply the concepts learned in the chapter. C.10. Many organizations that have won the Baldrige or European Quality Award are also members of the United Nations Global Compact and, as such, submit an annual “Communication on Progress” (COP). These COPs and annual sustainability reports are readily available online for most such companies. Search online and synthesize the UNGC COP and annual sustainability reports of three or more leading organizations in relation to the lean enterprise concepts of muda, muri, and mura. Discuss your syntheses and their operations and supply chain management implications. A good first step for students to answer this question is to look at the lists of EFQM (European Quality Award) success stories (http://www.efqm.org/success-stories) and the Baldrige Quality Award recipients profiles (http://www.baldrige.nist.gov/Contacts_Profiles.htm). Students can then visit the UN Global Compact participant search website (http://www.unglobalcompact.org/participants/search) to search for UNGC COP reports of quality award-winning companies. Most likely, students will need several tries before finding matches between Global Compact reports and quality award winners. It will also be necessary to review the definitions of muda, mura, and muri in the section of the chapter on lean enterprise methods. As an example, on the EFQM website we found the success story of the BMW plant in Regensburg (http://www.efqm.org/success-stories/managing-by-processes-0). Through the Global Compact participant search we found BMW´s Profile (http://www.unglobalcompact.org/participant/1372-BMW-AG) and the company´s COP report, which is integrated into BMW´s GRI report (http://www.unglobalcompact.org/system/attachments/13989/original/Sustainable_Value_Report_2010_BMW_Group_en.pdf?1328186577). The report may be synthesized as follows: The BMW Sustainable Value (GRI) Report, published 2011 and reporting about the year 2010, reports the company´s strategies, actions, and results in the areas of sustainable operations, product responsibility, group-wide environmental protection, employees, and society. In the report, the areas highlighting challenges are especially interesting as they discuss what kinds of wastes (muda, muri, and mura) BMW attacks as part of their responsible management efforts. For instance, “Identifying and reducing our environmental impact and closing material cycles across the vehicle life cycle” (p. 20) is a good example of reducing a muda-type waste. Any unnecessary environmental impact is a muda. We can interpret “Preventing corruption and strengthening compliance controls“ as mura (measures against corruption unevenness, irregularity, nonuniformity, or inequality). A deeper analysis of the report text is prone to reveal many more examples. C.11. Search online for at least three Six Sigma case studies from leading Six Sigma enterprises. Among suggested enterprises are GE, Raytheon, Bank of America, Boeing, and Black and Decker. In each case identify real or potential uses of TPS, COPIS, PDSA, SWOT and benchmarking. Can you find examples where those methods have been applied to improve triple bottom line, stakeholder, or ethical performance? Exemplarily, we describe the case of Black and Decker (B&D), based on an article on the assignment of the company´s vice president six sigma (http://www.prnewswire.com/news-releases/black--decker-taps-carl-liebert-to-head-corporate-wide-six-sigma-program-increases-share-repurchase-limit-declares-regular-quarterly-cash-dividend-77025542.html), and on B&D´s “Sustainability Guiding principles” (http://www.stanleyblackanddecker.com/company/sustainability/guiding-principles). The B&D sustainability guiding principles make reference to many terms and tools related to operations management, such as management systems, continual improvement, and best practices. A PDSA improvement cycle could, for instance, be applied to the pursuit of the guiding principle “to maximize stakeholders benefit.” Employees could plan how they want to benefit which kinds of stakeholders, do the plan study and reflect about the outcomes, and adjust the initial plan based on what they have learned. Another potential application relates to the guiding principle “Ensure that our suppliers providing goods and services share our same values on health, safety, social, and environmental performance.” Benchmarking might be a good tool for transferring the company performance benchmarks to suppliers, or to identify good practice benchmarks among suppliers that can be applied to the overall group. D. Change and Create D.12. Review and understand the structure of the process maps described in Figure 9.4 and Figure 9.5. Then prepare one map of a specialized responsible management process, integrating stakeholder, environmental, and ethical dilemmas. The goal of this task is for students to deconstruct a specific process and to develop a profound understanding to see where triple bottom line, stakeholder, and ethical issues are or could be part of the specific process. Figure 9.4 is a good template for students to work with. Students should describe a process that they are familiar with. If they do not have work experience yet, this might also be a process taken from their private lives. D.13. Prepare a table in which you brainstorm about the satisfiers, dissatisfiers [basic needs], and delighters of three stakeholder groups of your choice. Based on your analysis, write a half-page “Voice of the Stakeholder” statement for one of the stakeholders, to define the requirements to be fulfilled for this stakeholder. This question is based on the Kano Customer Needs Model illustrated in Figure 9.11. In this question, students are expected to translate customer satisfaction thinking to stakeholder satisfaction thinking. We exemplify this by looking at the local community as a stakeholder of a major mining company in Mexico. • Dissatisfiers (Must-haves): No noise, emissions, spills, or other negative environmental impacts inflict harm on the community; safe and healthy work environment for community members working at the mine; no incurable deterioration of the landscape through mining activities. • Satisfiers (Expected): Provide employment to the local community, provide a socio-economic development plan for after the termination of mining activities. • Delighters (Excitement): Engage into actively developing the community through social and economic development. A brief (it could be elaborated with more detail) resulting VOS statement might be: “We at the xy mining company are aware of the potential negative impacts that a mine might have on its community and we make sure not to negatively affect our community through any aspect of our operations. Furthermore, we aim to maximize employment numbers from xy community village, and to increase the employability of the people at xy community village, in order to leave them in the best position for prosperity after termination of our local operations. We also aim to actively develop the community through a community engagement center, fully staffed and equipped by xy mining company, that will provide basic social services, educational opportunities, and that will include a business incubator to strengthen the economic development of xy community village. TEST QUESTIONS 1. The translation of total quality management tools and practices to the field of responsibility management is called a. total responsibility management. b. total quality management. c. Six Sigma. d. lean enterprise method. Answer: a 2. ________________aims to minimize environmental resource consumption and ecological damage by optimizing the efficiency of the firm’s production processes. a. Lean enterprise method b. Ecoefficiency c. Responsible enterprise excellence d. Eco effectiveness Answer: b 3. Which of the following houses all components of a business in one coherent system in order to enable the achievement of organizational purpose and mission? a. Management system. b. Toyota production system. c. Integrated management system. d. Total responsibility management. Answer: c 4. Any non-stakeholder-value-adding efforts that must be incorporated in the current form of a process are known as a. Nonequality. b. Procedure. c. Resource consumption. d. Waste. Answer: d 5. Which one of the following norms and algorithms describes the basic continuous improvement cycle? a. PDSA. b. Benchmarking. c. ISO 14000. d. ISO 9000. Answer: a 6. Imagine you listen to a production manager talking about reducing the amount of water and energy used for the current output of a plant. What is it he is talking about? a. Eco-efficiency. b. Moral efficiency. c. Stakeholder effectiveness. d. Eco-effectiveness. Answer: a 7. During your induction week to a new job, your supervisor asks you to read through the company´s standard operating procedure about dealing with ethical compliance. Included in the document you find a figure that explains how a whistleblowing incident will lead to a sequence of activities of several involved actors. What is such a diagram called? a. Supporting detail. b. Function process map. c. Process detail map. d. Organization chart. Answer: c 8. Which of the following documents may be parts of a management system? a. Key policies. b. Training records. c. Procedure descriptions. d. All the above. Answer: d 9. Which of the following terms are directly related to lean enterprise methods? a. Waste. b. Muda. c. Toyota production system. d. All the above. Answer: d 10. Which of the following topics is not closely related to quality management? a. Total responsibility management. b. Eco-efficiency. c. Voice of the customer. d. All the above. Answer: b 11. Which of the following statements is correct? a. The main focus of quality management is efficiency. b. Both quality management and lean enterprise methods may serve to improve processes. c. Lean management and quality management cannot be combined due to their competing nature. d. The main focus of lean enterprise methods is effectiveness. Answer: b 12. At a conference you hear a talk by the CEO of a Multinational Company about the company’s management system that includes the topics of quality, environment, health and safety, and social responsibility? What do we call such a management system? a. Total responsibility management system. b. Integrated management system. c. Total quality management system. d. Environmental management system. Answer: b 13. Imagine a chemical company has received repeated complaints from the local community about “bad smells.” The community manager, the environmental manager, and the plant operations manager have jointly found the source of the problem, which is a non-toxic gas emission that occurs periodically, depending on the production schedule. As a result, the company made adjustments to the production schedule in order to minimize such emissions. The plant is now running based on that new schedule. Using the PDSA Cycle, what should be their next steps? a. They should adapt the schedule right away, in order to improve even more. b. They should keep running the new schedule. c. They should make sure the plant keeps running on that new schedule. d. They should study if the new schedule shows the desired effects, and adapt the schedule again in case it does not. Answer: d 14. A sustainability manager of a retail business tells you that he is constantly monitoring internal practices, industry competitors, and companies with a focus on sustainable business to understand how good their activities are compared to what his company is doing. What is this technique called? a. Best practice benchmarking. b. Internal benchmarking. c. Competitive benchmarking. d. Functional benchmarking. Answer: a 15. Which of the following acronyms is explained incorrectly? a. SMART is an acronym for Specific, Measurable, Attainable, Relevant, and Time-bound that refers to setting “good” goals. b. TRM stands for Tangible Resource Metric and refers to eco-efficiency. c. PDSA stands for Plan, Do, Study, Act, and refers to the Deming improvement cycle. d. COPIS stands for Customer, Outputs, Processes, Inputs, Suppliers and refers to an algorithm for quality management. Answer: b 16. In the sustainability report of a major company you see a metric defining corruption incidents per 1million USD of revenue abroad. What does this metric describe? a. Moral efficiency. b. Eco-efficiency. c. Stakeholder effectiveness. d. Triple bottom line effectiveness. Answer: c 17. A framework for process improvement that is centered on the assessment of customer (stakeholder) needs and elimination of process errors is a. VOS. b. Six Sigma. c. Eco-efficiency. d. Lean Enterprise. Answer: b 18. A friend tells you that her company tracks the number of accidents on site in order to know how well their new health and safety training has worked. Of what is this a good example? a. Leading indicator. b. Breakthrough improvement. c. Incremental improvement. d. Lagging indicator. Answer: d 19. In Practice: Which of the following short case descriptions is summarized correctly? a. The company Interface Flor was able to reach its sustainable business goals by picking the “low hanging fruits.” b. The goal of IKEA´s energy strategy is to source 50% of its energy from renewable sources. c. The company Aramex has showcased in one of its facilities in Egypt how facility design may help to improve the environmental footprint of operations. d. The food business Barilla has been known for its failure to meet customer requirements. Answer: c 20. In Practice: Which of the following short case descriptions is summarized incorrectly? a. The logistics company Aramex provides employees with hybrid bikes. b. The founder of the company Teracycle believes that there is no such thing as waste. c. The Toyota production system is a role-model responsible operations program. d. IKEA´s People Planet Positive program aims to positively influence both customers and supply chain and the company´s own operations. Answer: c CHAPTER 10 SUPPLY CHAIN: RESPONSIBLE SUPPLY AND DEMAND GET IN TOUCH! This instructor’s manual can only cover a small initial selection of relevant advice. Please visit the website of the Center for Responsible Management Education www.responsiblemanagement.net or write to Oliver Laasch through [email protected] to share your ideas for new contents, experiences in teaching with the book, constructive criticism, and, of course, questions. The textbook is a snapshot of a quickly developing field that aims to educate responsible managers, and to create responsible businesses, which requires constant updating. We invite you to become part of a growing community of academics and practitioners taking on this task. THE INSTRUCTOR’S MANUAL This Instructor’s Manual contains a brief chapter introduction, a listing of chapter objectives, an expanded outline, chapter summary, teaching points, answers to end of chapter questions and exercises, and test questions. INTRODUCTION This chapter examines responsible supply chains and networks, along with their impact on the environment, employees, shareholders, community members, and other stakeholders—as well as the company's bottom line. Sections one and two look at principles of responsible management and how they apply to the goal of creating responsible supply chains and networks. Section three focuses on supply networks as dynamic systems as well as aspects of network structure and network participants and the roles they play. Section four addresses the tools available for responsible supply chain management and the strategic use of these tools to support sustainability and company goals. CHAPTER OBJECTIVES After reading this chapter, students should be able to…  ...understand the complex systemic nature of supply chains and their potential to contribute greatly to sustainable development.  ...manage a company’s contribution to the responsible supply chain.  ...influence supply chain partners’ responsible supply chain performance.  ...develop closed-loop supply chains. CHAPTER OUTLINE I. Responsible Management and the Supply Chain: This chapter deals with managing the whole system of companies connected through the supply chain, which is critical because, as managers, we must approach sustainability challenges holistically to attain optimal system performance in all the dimensions of the triple bottom line. The Responsible Supply Chain Management Process may be divided into three main phases: • Understanding the Supply Chain: assessing needs, picking partners (suppliers,) setting clear expectations and standards. • Managing from Inside: Dealing with operations to optimize impact and minimize waste, managing employees, suppliers, customers, recyclers, community-at-large to support cooperation, and support. • Closing the Loop: Dealing with inevitable waste, recycling, re-purposing products at end of life cycle (revalorization,) secondary customers, and reverse supply chains. II. The Goal: Responsible Supply and Demand: A responsible supply chain is one that optimizes the triple bottom line, stakeholder value, and ethical performance from the first production activity through use, until the end of useful life and beyond. The responsible supply chain may be divided into three main tasks: • • Inspire, support, and lead supply chain partners • • Optimizes triple bottom line across suppliers, clients, and users • • Minimize the number of ethical issues and misconduct throughout supply network III. Phase I: Understanding the Supply Chain: Whether a company is a top-tier purchaser (e.g., Toyota,) a mid-level supplier and customer (a tire manufacturer, perhaps, with several suppliers and several customers), or a producer (a rubber producer, supplying several tire companies,) the company under consideration is the focal firm of a supply network. Each company in that network will have its own view of the supply network, and each considers itself the focal firm of their network. A. Supply Networks: A supply chain is a series of interconnected value-creating and value-depleting activities, almost always a “supply network” with multiple supplier-buyer tiers and interactions. Each member of a supply network has its own supply network. Supply networks are “complex adaptive systems.” B. Mapping Supply Chain Architectures: For any focal firm, there is an upstream (suppliers) and a downstream (customers) chain. These “chains” are actually loops, where products and services are redirected to become inputs in other supply chains. Consider the second-, third-, and n-order supply chains in which products are re-used or recycled after running through upstream and downstream supply chains. Creating the responsible supply chain requires attention to the three domains of responsible management: • Sustainability: e.g., recyclable products, community involvement, living wages. • Responsibility: extending stakeholder value along a chain of responsibility. • Ethics: reduce misconduct and ethical dilemmas throughout the network. (It is worth noting that much of almost any focal firm's carbon footprint will lie in its supply chain and not in the company's own operations.) C. The Role of Small and Medium-sized Enterprises (SMEs): Definitions of “small businesses” vary by country, and may be determined by revenues or number of employees. In Australia, small business must have fewer than 100 employees. The most common number used in the UK, Brazil, and Russia is 250. The US has a complex array of standards, from $.75 million maximum income/year for potato farmers to $30 million for an electronics store. Employee numbers may range from 50 maximum for an apparel manufacturer to 1,500 for a petroleum refinery. In Germany, 70% of GDP comes from small businesses. Small businesses cannot generally afford to conform to Six Sigma, ISO, or other standards, but can pursue sustainability several ways. Sustainability requires accountability and responsibility at the company and individual level. The six Ts provide the basis for tracking environmental and social responsibility throughout a supply network. • Traceability is the ability to track a product from raw materials to final delivery. • Transparency refers to product and processing information. • Testability addresses product attributes. • Time refers to on-schedule processes. • Trust is a hallmark of a responsible business. • Training covers systematic knowledge, skills, and attitudes. D. Social Sustainability: Environmental sustainability and social sustainability walk hand-in-hand. Environmental improvement benefits workers and the larger community. Social sustainability (employee health and safety, community well-being) carries costs, and decisions about trade-offs between profit and sustainability will involve uncertainty and risk. III. Phase 2: Managing the Responsible Supply Chain: Members of a supply network can be leaders, taking the initiative to become greener or better corporate citizens, or followers, responding to the requirements of their customers. In many cases, firms play both roles A. Engagement Practices: Supply chain engagement refers to collaborative practices among supply chain partners. As a leadership company, it is mandatory to adopt responsible practices in the focal firm before asking suppliers to adopt them. Then encourage suppliers to adopt more responsible practices product-by-product and process-by-process. Extend beyond first-tier suppliers and encourage them to become leaders within their networks. Codify your own efforts, and encourage suppliers to do the same. Finally, transparency and traceability work for companies large and small. C. Standardization and Certification: To manage a wide variety of companies inside the chain, there is a need for standardization and certification. ISO 9000 and ISO 14000 are management standards. ISO 9000 deals with quality management, while ISO 14000 addresses environmental management. ISO 9000 is often required by supply chain leaders as condition for a supply relationship. These are international standards, and compliance can help secure business opportunities. EMAS (the Eco-Management and Audit Scheme,) is a European standard now in use throughout the world. EMAS adds stricter measurement and evaluation of environmental performance to the ISO 14000 standard. ISO 26000 (also called ISO SR, for social responsibility) is a non-certifiable set of social guidelines. C. Application of QM Principles in Environmental Management in OM and SCM: Many companies feeling pressure from emerging industry standards: Greenhouse Gas Protocol, the Electronic Product Assessment Tool, the Forest Stewardship Council code, and others. Early adopters may have competitive edge when new standards become law. Benefits may include spreading the expense of retooling over many years and gaining market share if other companies lag behind regulatory requirements. D. Ecoefficiency and Eco effectiveness: Ecoefficiency aims to improve the proportion between environmental resource usage and output for existing products and processes. The credo is “use less.” Eco effectiveness aims to create positive environmental impacts through innovation. The credo is “do more good.” Example: One company saves time, money and resources by maintaining old manufacturing plants, refining automotive design, and improving gas mileage from 30 mpg to 32 mpg (12.75 kpl to 14.9 kpl.) Another company spends hundreds of millions of dollars to build a new plant to manufacture a hybrid that gets 60 mpg. (25.5 kpl.) Which is more eco-efficient? Which is more eco-effective? E. Logistics: Logistics deals with transport of goods and services throughout upstream (inbound materials from suppliers) and downstream (outbound products to customers) supply chains. Transportation has negative environmental and social impacts (fuel consumption, noise, pollution, highway congestion, packaging, and accidents to name a few.) The business impact is cost. The relationship between logistics and sustainability is a balance. Logistics strives to provide fast, reliable, flexible transportation at the lowest cost possible. The fastest, most flexible transportation (planes, trucks) is already expensive and fuel-intensive, but more environmentally-friendly modes (ships and trains) are too slow for many purposes. Just-in-time purchasing has environmental costs. And evolving markets continually impose new demands. There are two basic approaches: directly reduce the impact of logistics while maintaining or increasing volume, or reduce the volume. Transparency lets buyers see the impact of second- and even third-tier supply chains. Logistical eco-efficiency may increase volume, but may not mitigate any of the environmental or social impact of logistics. Reverse logistics may reduce downstream waste in product production and consumption, but may carry the costs of transporting recyclable parts. E-commerce affects mostly end-user products, but may introduce the additional impact of delivery service. Local production and consumption may provide the best solution, when available. IV. Phase 3: Closing the Loop: This is “cradle to cradle” supply chain management. It refers to creating circular structures to reintegrate products at the end of their life cycles back into a supply chain. Methods include industrial ecology, circular economy, closed-loop supply chains, and end-of-life design. These methods are highly interrelated and often overlap. A. Industrial Ecology: Industrial ecology incorporates closed loops and circular economies and assumes end-of-life product design. Analogous to a natural ecosystem in many ways, most waste products become inputs for other products and processes, and there is little end waste. It fits the re-use, reduce, re-purpose, recycle paradigm. It focuses on eco-design; extended “product stewardship”; co-location of industrial facilities (“industrial symbiosis”); and eco-effectiveness. B. Circular Economy: This originated in China, building on industrial ecology and loop-closing, and is now seen as a potential strategy to deal with environmental and economic problems. As with industrial symbiosis, the by-product of one process becomes raw material for the next, with the goal of efficiency. Efficacy can follow once efficiency is established. Adoption of circular economy methodologies has given rise to the eco-city, an environmentally-sound industrial park that is integrated into the infrastructure that houses workers, customers, and support services. Such a setting showcases ideas like strength in diversity, and the idea that multiple connections and scales are more resilient than systems designed solely for efficiency. It allows for “systems thinking,” including analysis of how systems fit and work together, as well as non-linear dynamics. C. Closed-loop Supply Chains: To close a supply loop or employ a secondary supply chain, the product, its parts, or its materials must be “revalorized,” or made useful to another process via repair, refurbishment, remanufacturing, or recycling, upcycling, or downcycling. When repair, refurbishment, or remanufacturing is not possible, products are recycled. Disassembly before recycling allows components to be returned to the forward supply chain and reused, closing the loop. Figure 10.6 provides examples of interconnected closed-loop supply chains. The most efficient approach is the smallest loop, service and refurbishment (middle left.) The least efficient starts with raw materials (upper right), traces an open loop around the perimeter, and ends with incineration or landfill (bottom right corner.) D. End-of-life design: EOL product management can provide a competitive advantage. Strategies include modular design (easy-to-dismantle components), snap- or push-fit parts (instead of glued or screwed assemblies,) use of easy-to-recycle materials, nontoxic components, and use of common materials. E. Further Closed-Loop Tools: This paragraph briefly describes tools related to closing the loop that have not been covered in depth in this chapter, or that have been covered extensively in other chapters: • Life-cycle assessment • Eco-design (Design for Environment) • Industrial co-location Principles of Supply Chain: Responsible Supply and Demand (SUMMARY) I. A responsible supply chain is one that optimizes the triple bottom line, stakeholder value, and ethical performance from the first production activity, through the use, until the end of useful life and beyond. II. A progressive view of the supply chain sees a complex system of interdependent organizations supplying and demanding that includes loops where products and services at later stages are rechanneled to newly becoming inputs at earlier stages, and which includes n-order supply chains in which products are involved after they have run through the first-order supply chain. III. A large share of supply chain businesses consist of small and medium-sized enterprises (SMEs) that, due to their unique characteristics, must be managed differently from large enterprises. IV. Managing the supply chain includes engagement techniques, certifications and norms, quality management, ecoefficiency, and effectiveness. V. Closing the loop refers to methods to create circular structures that, like an ecosystem, help to reintegrate products at the end of their useful lifetime into earlier supply chain stages. VI. Frameworks that help to close the loop are, among others, circular economy, the closed-loop supply chain, industrial ecosystems, and end-of-life design. TEACHING POINTS 1. Take-home message(s): The principles of responsible management apply to supply chain management (SCM). Since supply chains are complex dynamic systems, it is necessary to approach sustainability holistically to optimize system performance across the dimensions of the triple bottom line. Each company in a company's supply chain will, in turn, have its own supply chain. 2. Underlying chapter structure: This chapter is deals with three “phases” of SCM: 1) Understanding the supply chain deals with the nature of supply chains as complex systems, and the challenges of managing sustainability in small and medium-sized enterprises (SMEs); 2) Managing inside the supply chain covers principles for members of a supply chain and lists tools to engage upstream and downstream partners: and 3) Closing the loop focuses create circular structures to integrate waste and end-of-life products back into a supply chain. 3. Extending responsibility: Most supply chains are multi-tiered, that is, suppliers rely on their own suppliers. Any firm in the supply chain can lead or follow a responsible path through contractual obligations or by influencing other members of its supply chain. For large firms, certifications and contractual stipulations can accomplish that purpose. For SMEs, sustainability goals can be supported through such principles as accountability, transparency and traceability. 4. Conflicting ideals: The financial bottom line can harmonize or conflict with social or environmental concerns. A large portion of most companies' carbon footprint lies in its supply chain, and logistical requirements more often represent such conflicting goals. These conflicts can be mitigated or reconciled by creating and closing loops in supply chains. 5. ...and Demand: The chapter purposely includes the demand side into the goal of responsible supply chain management. Demand here is understood as the demand from supply chain leaders for more responsible inputs and behavior from supply chain followers, but it would be legitimate to ask if we should include the demand of the final consumer as another driving force. It might make sense for instructors to complement the chapter with a “demand-chain perspective” that connects well with operations topics, such as voice of the customer in the preceding Chapter 9, Operations.” A good initial reading about demand-network thinking is the following source: Heikkilä, J. (2002). “From supply to demand chain management: efficiency and customer satisfaction.” Journal of Operations Management, 20(6), 747-767. 6. Case study and interviews: This chapter contains a study of an exemplar of responsible SCM practices, Tetra Pak. Rent-A-Carpet demonstrates an innovative approach to life cycle management. End-of-chapter interviews include Michael Braungart, one of the creators of the cradle-to-cradle (C2C) concept, a principle of sustainable SCM, and Mariné Rodriguez Azuara, a manager at AES, a global power company with electricity generation and distribution businesses to provide reliable, affordable energy. ANSWERS TO END-OF-CHAPTER QUESTIONS AND EXERCISES A. Remember and Understand A.1. Define the sustainability, responsibility, and ethics components of responsible supply chain management. A responsible supply chain optimizes the triple bottom line and stakeholder value. Supply and demand are equally important. Therefore, a focal firm seeking a responsible supply chain must account for all three aspects of sustainability (economic, environmental and social) both upstream and downstream. This requires engaging suppliers, clients, and users to be more responsible and create value for stakeholders, as well. The ethical component reaches beyond a company's own actions; its responsibility includes minimizing ethical issues and opportunities for misconduct throughout its supply network. A.2. What are the differences between a closed-loop supply chain, a circular economy, and an industrial ecosystem? In a closed-loop supply chain, a company recovers end-of-life-cycle materials for its own reuse. Such chains exemplify the cradle-to-cradle approach to manufacturing and product responsibility. This approach requires a reverse supply chain wherein used products are taken back by the company of origination. Circular economies operate similarly, but involve one company's used or waste products being incorporated into other companies' products as well as its own. They can involve reverse supply chains or a separate post-consumer downstream flow becoming the upstream supply flow for another product. Industrial ecology analyzes material and energy flow in industrial systems the way ecology looks at living communities and environments. The largest lesson is that materials are recycled, with one company's waste becoming the raw material for another. Industrial ecologies may involve multiple closed-loop supply chains and overlapping circular economies A.3. Define and compare ecoefficiency and Eco effectiveness. Ecoefficiency deals with a company's environmental impact: the efficiency of its manufacturing process, the amount of energy consumed, the measure of wasted energy and resources, etc. Eco effectiveness (or Eco efficacy) deals more with product design and product efficiency. An improvement in ecoefficiency may have a large or small overall impact. An improvement in Eco effectiveness can profoundly affect the environment by multiplying that improved efficiency by thousands of mass-produced units. A.4. What are the main differences between biosphere and technosphere? The differences between bio- and techno spheres lie mainly in the realm in which each operates. Biospheres deal with the natural world of plants, animals, and populations. Technosphere’s operate primarily in the man-made world of companies, markets, and products. Both, however, share and rely on the natural environment. Whereas industrial co-location may exemplify a technosphere, the most complex interplay between the two spheres may take place in a technology community, with consideration given to the intertwined economies of several companies, their employees and the services they require, and the environment. Such planned communities are largely experimental, and can become “organic” entities unto themselves. B. Apply and Experience B.5. Look up the tool “source map” (www.sourcemap.com) and scrutinize the global transport footprint of a product of your choice. Example: McDonald's & Indian Entrepreneurship https://sourcemap.com/view/5593 “McDonald’s team in India did many years of extensive research in India before launching their product in the Indian market and they found many critical issues to look after. Some of the major issues were like lack of proper cold storage, standardized suppliers, price sensitivity of Indian customers, underdeveloped logistics.” Note that the maps on this site are zoomable. B.6. Think of a local business in your environment. How could this business start building an industrial ecosystem? To which other businesses could it sell its waste? What wastes of which other businesses could it use as inputs? Precision Castparts, of Portland Oregon, is a supplier of metal parts for aerospace and automotive industries. In August 2013, it was identified as “the worst polluter in the United States,” due to its urban location and its carcinogenic emissions. While cleanup will likely be mandated, it could mitigate some of its other impacts by sourcing its raw materials directly from local scrapyards. It could clean, re-use and recycle some of the acids and other chemicals used in its etching processes. Oil, used as a lubricant in milling and lathe operations, could be treated the same way. Because the company sometimes uses alloys of exotic metals, the shavings from its mill and lathe operations could be sold as raw material to Schnitzer Steel, a processor and recycler of ferrous and nonferrous metals. B.7. Conduct an Internet research for practical examples of the revalorization methods mentioned in this chapter. Make sure you find at least one example for repairing, refurbishment, remanufacturing, downcycling, recycling, and upcycling. • Most manufacturers of consumer mechanical goods from automobiles to air conditioners to washing machines repair their equipment or have factory-authorized repair shops where their products are sold. Search for “factory-authorized repairs” under any product name. (Ford, Trane, Westinghouse....) • Apple, an innovator in sleek design, also sells used hardware. Its line of refurbished computers includes essentially its entire line, available through its website. They carry the same guarantee as a new computer. http://store.apple.com/us/browse/home/specialdeals/mac • While not all sellers of remanufactured goods do the actual processing themselves (it may be outsourced, or they may have supply chains for different brands or products), many expensive replacement parts may be available as remanufactured substitutes. While computer printers are inexpensive, toner cartridges are notoriously expensive. http://www.colortonerexpert.com/aboutus.asp • The Rebuilding Center, a not-for-profit organization in Portland, Oregon, accepts used building materials from demolition sites and re-modeling projects and sells them for use in other building projects. Used window frames and kitchen and bathroom fixtures may be slightly “scratched or dented,” thus suiting them for downcycling. Other materials such as aged wood panels, antique doors and used brick may be more valuable and harder to source than new materials, so these are upcycled. http://rebuildingcenter.org/ • Waste Management, a North American “garbage” processing company runs landfills across the globe. They are also leaders in recycling materials such as glass, paper, metals and plastic, as well as light bulbs and electronics. Students should be encouraged to seek out other examples. C. Analyze and Evaluate C.8. Look up online the different supply chain standards described in the chapter. Evaluate their similarities and differences in a table that you design. Standards and Certifications Coverage ISO 9000 A globally applied norm for quality management, can be used to establish integrated business, environmental, and health and safety management. ISO 14000 Certifies environmental management systems. EMAS (Eco-Management and Audit Scheme) Environmental management norm that extends ISO 14000. SA 8000 (Social Accountability 8000) A certifiable norm for labor rights in global supply chains. ISO 26000 (Also called ISO SR, for Social Responsibility) Non-certifiable; provides guidance and language for implementation of responsible business inside supply chains. FSC (Forest Stewardship Council) Certifies sustainable forestry practices. MSC (Marine Stewardship Council) Certifies responsible fishery practices. C.9. Conduct an online search for a company whose sustainability report extensively covers supply chain topics. Check if the company complies with the five rules for successfully managing the responsible supply chain. The rules: 1. Be a role model; 2. Multiply through the chain; 3. Extend your sphere of engagement; 4. Establish a responsible sourcing program; 5. Establish chain transparency and traceability. The supply chain sustainability report for Chrysler USA deals solely with eliminating slavery and human trafficking from product supply chains. “Contracts state that Chrysler may request suppliers to certify in writing its compliance (and that of its subcontractors) that they are not utilizing slave, prisoner, child, or any other form of forced or involuntary labor....” Yet later it states “...we do not currently require explicit certification of suppliers that the materials they provide comply with local laws...” The fact that this deals with only one portion of social responsibility, and not environmental factors detracts from Chrysler's overall standing with regard to sustainability. Still, by applying these standards to its suppliers and their subcontractors, Chrysler has complied with rules 2 and 3. In this exercise, students will have to look beyond the language of the sustainability report and analyze which of the rules applies in each case, as well as which part of the triple-bottom line it supports. C.10. How do you think companies can involve clients in downstream supply chain engagement? Give an example of a company successfully engaging with clients to create responsible supply chain activities. In years past, bottling companies offered deposits on soft drink bottles. They would take back the empties, clean and refill them. This directly engaged the retailer (who sold soft drinks and collected the bottles) as well as consumers (who actively participated by returning the empties to stores.) Nowadays, automobile manufacturers and their retailers take trade-ins for credit in purchasing a new vehicle. United Technologies makes brakes for passenger jets (among other products). These brakes are made from a highly-refined ceramic carbon material and the manufacturing process creates waste carbon. In addition, when the brakes had been refurbished and eventually reached the end of their life cycle, they used to be taken to the landfill. The company found a customer for its waste carbon. In addition, it began to reclaim the used brakes and process them for use in the manufacture of high-carbon steel. This not only engaged their customers (in the reclamation process), but another manufacturer (the serendipitously near-by steel manufacturer). Students are encouraged to use previous research in their examples, as well as undertake Internet searches for companies with innovative approaches to downstream product responsibility. D.11. Interview an employee of a small or medium-sized business about their responsible management activities. Use Table 10.2 to provide recommendations to the business. In this exercise, students should emphasize supply chain operations as well as general management sustainability practices. They should ask about both upstream and downstream supply chains and recycling efforts on the company's part. D.12. Think of an EOL design for a product of your choice, and write an e-mail to a producer of such a product, describing your idea and asking for advice regarding its feasibility. Here, students are encouraged to think of products they use and dispose or products they see being wasted rather than reused or recycled. In the phone call, they should adopt an avocatory role. TEST QUESTIONS 1. The organization from which perspective of the supply chain is analyzed and managed. a. Focal company. b. Traceability. c. SME. d. Responsible business. Answer: a 2. A structure that channels resources back from their end of life to be reintegrated into the supply chain. a. Revalorization. . b. Reverse supply chain. c. EOL design. d. Industrial co-location. Answer: b 3. The process of mapping social, environmental, and economic impacts along the stages of production, use, and end of useful life of a product. a. Eco-design. b. Circular economy. c. Life-cycle assessment. d. Closed-loop supply chain. Answer: c 4. Methods to create circular structures that help to reintegrate products at the end of their useful lifetime into earlier supply chain stages, in a manner similar to an ecosystem. a. Industrial ecology. b. Revalorization. c. Industrial co-location. d. Closing the Loop. Answer: d 5. The improvement of the proportion between environmental resource usage and output for existing products and processes. The credo is “use less.” a. Ecoefficiency. b. Eco effectiveness. c. Revalorization. d. Traceability. Answer: a 6. A series of interconnected value-creating and value-depleting activities from the first raw material to the final consumer. a. Supply chain. b. Secondary supply chain. c. Synergy map. d. Complex adaptive system. Answer: a 7. A norm for organizational responsibility. a. ISO 9000. b. MSC. c. ISO 26000. d. ISO 14000. Answer: c 8. Which of the following statements is correct about the implementation of responsible business practices in SMEs and big corporations? a. The basic conditions for implementing responsible business practices in SMEs and big corporations are largely equal. b. One of the typical differences between SMEs and big corporations is that the latter is typically family-owned, while the first one typically displays external ownership models. c. SMEs are more advanced in their responsible business practices. d. Employees in SMEs are more immediately involved in the good or bad the company is doing, which might translate into a personal motivation to do good. Answer: d 9. Which of the following statements on industrial ecology is untrue? Industrial ecology a. is the same as a closed-loop supply chain. b. is one method of “closing the loop.” c. learns from ecosystems for industrial systems. d. looks centrally at material and energy flows. Answer: a 10. A friend tells you about the company Interface Flor that redesigned their carpet products so that they could be recycled more easily. You realize that this is an example of a. life-cycle assessment. b. EOL design. c. industrial co-location. d. revalorization. Answer: b 11. Which of the following statements is wrong? Responsible supply chain a. among others, aims to optimize the triple bottom line. b. is a synonym for sustainable supply chain. c. considers stakeholder issues and ethical issues along the chain. d. includes activities from the first production stage, through the use, until the end of useful life and beyond. Answer: b 12. A friend of yours is excited about a website where people show how they took “useless junk” and made something beautiful and useful out of it and then sold it to people around the world - furniture, decoration, even clothing. On the website this was called “upcycling.” To which of the following terms is upcycling not related? a. Revalorization. b. End-of-life design. c. Secondary supply chain. d. Upcycling. Answer: b 13. Which of the following statements is wrong? Supply chain engagement a. might involve customers. b. might involve suppliers. c. refers to collaborative practices among supply chain partners. d. refers to linking two different supply chains to improve their shared impact. Answer: d 14. Suppose that a company maps all main stakeholders of its suppliers, the suppliers´ suppliers, and of its customers, and aims to optimize the value created for all of them instead of only caring for the value created for direct stakeholders of the company? For which domain of responsible supply chain is this an example? a. Responsibility domain. b. Sustainability domain. c. Network domain. d. Ethics domain. Answer: a 15. In the German city of Berlin, Daimler-Chrysler´s “Car2Go” short-term car rental scheme has become a success. Many people, instead of owning a car, use Car2Go for transportation. To which phenomenon is this case most related? a. Eco-efficient logistics. b. Sterilization. c. Reverse logistics. d. Local production and consumption networks. Answer: b 16. Which of the following norms is not related to environmental impacts of economic activity? a. ISO 14 000 b. EMAS c. SA 8000 d. FSC Answer: c 17. Walmart uses a supplier sustainability index in order for its suppliers to report to Walmart regarding the suppliers’ triple bottom line activities and performance, and to collaborate for improvement. Which of the following statements is correct? a. This is a typical example of a supply-chain follower nudging a supply chain leader toward more sustainable practices. b. The focal company in this supply chain management activity is Walmart. c. This is not an example for supply chain engagement. d. In this example Walmart engages with its second order supply chain. Answer: b 18. Which of the following statements about social sustainability and the supply chain is wrong? a. Environmental impacts often have social and societal consequences. b. Sustainable supply chain management refers only to environmental impacts. c. The social dimension of the supply chain may be related to supply chain stakeholders. d. The social and environmental bottom lines of the supply chain mutually influence each other. Answer: b 19. In practice: Which of the following short case descriptions is summarized incorrectly? a. The company Tetrapak actively promoted sustainable supply chain practices in China. b. The pasta company Barilla focuses on food safety in its supply chain. c. The cosmetics company Natura implemented a product development program in which it conducts animal testing in the Brazilian rainforest. d. The Sustainable Apparel Coalition rates clothing sustainability using the “Higg Index.” Answer: c 20. In practice: Which of the following short case descriptions is summarized correctly? a. The Fleet management system of the Middle-Eastern logistics company Aramex uses hydrogen vehicles 100% of the time. b. The insurance company Policen Direkt is involved in “unusual recycling,” asking all their customers to return insurance policy documents to be recycled into new policies for new customers. c. The carpet company Interface changed its carpet design from squares to rolls in order to reduce the environmental impact. d. The “Kalundborg example” illustrates the development of an industrial ecosystem in practice. Answer: d Solution Manual for Principles of Responsible Management: Global Sustainability, Responsibility, and Ethics Roger N. Conaway, Oliver Laasch 9781285080260, 9789387994904