Principles of Sustainable Supply Chain Management

Question: Discuss about the Principles of Sustainable Supply Chain Management. Answer: Introduction Supply chain is one of the indispensable sections of an organisation that needs to be supervised effectively for better result. Supply chain management involves the process of procurement to effective production and then distribution where a number of different entities are involved. In the effective management of supply chain there are number of internal and external partners who are directly involved in proper provision of services to the consumers. Hence it could be said that the supply chain is more about making proper networks and relations apart from developing a strong production and distribution chain (Beske, 2012 p, 12). Relationships play a crucial role in the development of a successful supply chain if organisations could handle them properly and if not possible then it could have definite ramifications. There are number of operations manager of the different multinational organisations who have focused on building up relations among the different levels of the organisatio n and also in the external environment in order to make sure supply chain or global supply chain is performing well. Some of the multinational companies like Nike, Tesco, IKEA, Ford, Apple, DHL et cetera have been able to develop their relationship across the network effectively which has helped them to succeed in different regions all across the world (Christopher, 2016 p, 67). The present study will discuss the key aspects of the supply chain and network relationship effectively. Nike Inc. is one of the biggest American Multinational organisations which has been able to operate all across the world effectively and hence it becomes an effective choice of discussing relationships within the supply chain effectively. Global Supply Chain Management at Nike Inc Management of relations across the supply chain is undoubtedly one of the most important works that an organisation has to do because effective supply chain stands to be one of the key aspects to provide customer satisfaction. Management of relations and coordination within the supply chain of an organisation is important. The main focus of the multinational companies needs to be on the development of relations which needs to effective management of close coordination all across the world and also suitable decision making. As stated by research scholars it could be said that the success of the supply chain relies on the relations that has been developed by the organisation. By placing relationships at the centre of the supply chain it is possible to create greater commitment and better coordination between the different levels of the supply chain. The supply chain is a wide chain of entities bound together and hence close coordination is extremely important for an organisation with a ll the different entities responsible for procurement to entities responsible for distribution (Stadtler, 2015 p, 12). Nike has always been an innovative operator but it is not that the organisation didnt face troubles in its operation. During the early 90s the organisation had faced significant issues with its different factories and outlets. The response to a supply chain has been a strategic shift for the organisation which has helped it to develop a strong bonding between the global supply chains of the organisation effectively. Nike is one of the leading business organisations in the world with its business operation in almost each and every country that asks for a strong supply chain which would help the organisation to communicate and link each and every entity and form a strong communicative bond which is effective for making decisions across the global supply chain. Nikes main focus in the last few years has been to control and bind all the factories and outlets all regional offices and suppliers and the consumers under one marquee. The company focuses on binding its global market under one roof which has given rise to the need of a universal platform through which the organisation is able to communicate and make decisions with the intervention of all the key entities involved in the supply chain of the organisation (Fawcett et al., 2014 p, 23). Since supply chain is a result of a complex and global relationship and network Nike emphasised on developing a strong platform where all the key entities involved in the supply chain would be able to come and put forward their ideas and insights which would help to make sure the decision making is based on completely participative environment. Managing close coordination which means bonding and communication along with any kind of offshore decisions became important for the organisation Supply chain coordination could be stated as the movement made by all the different entities involved in the supply chain to provide better results from the supply chain management. Nike has realised the importance of developing a strong coordination all across the global market which has led to developing a global database which has helped the organisation to involve all it factories and outlets as well as the suppliers which helps the organisation to effectively communicate and develop a strong bonding. The global database developed by the organisation has helped the organisation to communicate effectively and keep a close eye on each other and their actions. Each and every entity involved in the supply chain of Nike is able to understand their actions and this helps them to communicate effectively (Monczka et al., 2015 p, 34). The coordi nation is mainly developed with a single supply chain format where the suppliers and the production units are able to communicate directly and similarly the other entities within the supply chain are in direct contact. The different stages of the supply chain may not be properly coordinated because the different stages of the supply chain are owned by different owners and hence the organisation Nike first of all focuses on developing a strong strategy which would help to get in touch with the outsourcing partners effectively and involve them in the decisions making process which helps to develop a strong bond between the organisation and the different entities of the supply chain. The organisation Nike has focused on understanding the concept of Bullwhip Effect which has helped the organisation to effectively study its global demand and supply and accordingly make decisions. The Bullwhip effect could be defined as the fluctuations and differences between the demand and supply down the line in the supply chain which has been one of the problems for the organisation Nike in the earlier days (Seuring, 2013 p, 45). The organisation has focused on building strategic partnerships between the layers of th e supply chain which has helped to make sure close coordination is intact in the supply chain. Nike emphasises largely on the trust based relationship in order to develop coordination in the supply chain. Even for the decision making in the supply chain Nike prefers to communicate with the global procurement department, the production department and the distribution segment headed by the third party organisations. The decision making system for the organisation is managed at every level of the supply chain and the coordination is maintained with the help of the global database and communication channels. The organisation takes a deterrence based to develop close coordination between the different levels of the supply chain especially for the distribution part as it is outsourced by the organisation. The deterrence based view shows that the parties in the different levels of the supply chain are bound by different formal contracts to cooperate in the levels of the supply chain. Since Nikes supply chain is a global supply chain it is important for the organisation to have a trust based view especially with departments like procurement, production and administration (Ross, 2014 p, 45). The supply chain of the organisation presently works with communication where the operational roles of each and every segment is divided and since they are interlinked and hence they will have to communicate which is mainly done through the global database and cloud based communication which has helped the organisation to focus on developing the supply chain and communication between the different levels of supply chain. What strengthened the relationship and coordination of the supply chain is the allotment of authority to the different departments to make effective decision for the smooth operation of the supply chain system within the organisation. Hence it could be said that the organisation follows reciprocal interdependence where each party involved in the supply chain system of the organisation Nike come together to exchange inputs in both directions that develops a suitable relationship in the global supply chain (Walker and Jones, 2012 p, 56). The organisation has also desig ned effective conflict resolution mechanism that significantly strengthened the supply chain relationship. Nike has been able to develop a strong communication in its global supply chain where the outsourced parties also take part through direct strategic alliances in order to make sure that the different levels are effectively engaged with the process and are able to make sure the procurement, production, delivery and inventory management are done in the best possible manner by the organisation for the global operations (Waters and Rinsler, 2014 p, 67). Finally the organisation Nike implements a key strategy of Planning, forecasting and replenishment strategy. This strategy is an effective strategy which has helped many companies previously and hence Nike has chosen this effective supply chain management strategy. This is a collaborative planning which is an effective business practice that involves effective intervention of the intelligence of the different external and internal partners in the planning and fulfillment of the consumer demand (Ashby et al., 2012 p, 89). This strategy is suitable for Nike to constantly improve its supply chain communication with the different departments involved in the supply chain. This not only helps the organisation to bind the global supply chain effectively but it also helps the organisation to improve their coordination between the different levels of the organisation that has helped the organisation to keep the close coordination intact all across the globe effectively. The organisation has s trategised the entire supply chain with the help of the above discussed plans (Sarkis, 2012 p, 78). Distinctive RD Investment and increase in revenue for Nike Inc. Nikes investment in the research and development has played a stellar role in its constant global development. This has also helped to increase its revenue which could be seen in its income statement and revenue growth statistics for the last few years. Nikes Research and development department has focused on implementing sustainable innovation. The organisation has developed its supply chain effectively in order to make sure it is able to do sustainable innovation and this has clearly facilitated by the distinctive Research and Development Team of the organisation Nike. According to the new global study Nike has been crowned as the most innovative company in the world. The organisation has radically redefined by the organisation. The Research and Development investment by the company is done very prudently where the RD of the organisation has been able to make its overall thinking flexible and innovative which has been key for the organisation Nike Inc (Wisner et al., 2014 p, 89). I n the year 2013 the organisation Nike has been provided with 540 patents which clearly show that the research and development department of the organisation has been effective in constantly analysing the market and understanding the need and want of the consumers effectively. Nike is considered as one of the companies that spends huge amount of money in research and development and this has definitely helped the organisation to generate significant amount of revenue from the market. Nike has been consistent with its innovation which has reflected on the kind of products it comes up with at regular intervals. The organisation spends on its research and development as the organisation understands that better products will definitely help to make sure better generation of revenue and hence it is inclined towards investing more on revenue generation (Monczka et al., 2015 p, 90). Nike has created a niche market for itself and over the years the organisation has received increased revenue from all over the world which definitely shows the positive impact of innovation and effective research and development. In the last fiscal year Nike Inc has received around 10% increase in its overall turnover every year. The organisation continues to assess the market and understand the needs and wants of the consumers which has helped the organisation to create a wide range of products in the market that has helped the organisation to have a huge amount of revenue in the last few years (Myerson, 2012 p, 98). The Nike Inc Revenue and performance clearly shows the constant improvement in its revenue generation which is shown in the graph below: The present graph shows that the last five years till 2015 the organisations revenue has climbed up significantly. The research and development management at Nike is very upfront about the positive changes that the organisation needs especially to improve business strategies which would help the organisation to generate significant revenue. The research and development of the organisation has been distinctive for the organisation and this has helped the company to develop its products for the diversified needs of the consumers. One of the major factors in Nikes strategic growth has been its ongoing investment in RD (Monczka et al., 2015 p, 93). Nikes management seems to have mastered the art of making strategic investments in the key areas of the business and Research and Development has been one such area. The research and development has not only helped to develop the products developed by the organisation but it has also helped to streamline the supply chain management and have al so helped to implement technological improvement for the organisation. The spending done on the research and development of the organisation has been effective as it has helped to develop newer products for instance improvement done on the sports footwear and other sports gears have been embraced happily by the consumers which has helped the organisation to generate significant amount of revenue. Even though the organisation has significant competition from companies like Adidas, Reebok, Puma et cetera it has been able to hold on its market share through distinctive nature of the research and development which has been effective in also developing the generation of revenue and in the last few years (Humphries, 2013 p, 78). Supply chain risks and mitigation strategy In Global business there could be number of risks but supply chain risks are most common for companies like Nike Inc. The main issues it could face are: Inventory management: In global business inventory management is one of the major problems. The different productions units have different issues and in this scenario inventory pile up would definitely affect the organisation as well as the cash flow of the company. It is important for the organisation to have global supply chain management it is important to have proper communication and audits in inventory departments which would help to use inventory in the best possible manner. The organisation has moved on to sustainable business and hence shifted to using sustainable materials and hence storage and efficient utility usage application is important for inventory management (Sodhi et al., 2012 p, 87). Labor issues: The organisation has earlier faced labor issues and it has been criticised as well. Hence labor issues are one of the key issues which the organisation needs to address. Effective and consistent wages and suitable environment provision strategy will have to be developed by the organisation (Beske, 2012 p, 67). Decision Making: Decision making in supply chain could be difficult if communication and coordination is not effective and hence organisation needs to develop a universal cloud based communication channel through which supply chain participants could be constantly in touch. Development of communication channels even for the third party organisations will be effective in making decisions within the supply chain (Gilmour, 2013 p, 90). Quality Management: Within the supply chain quality management could be largely difficult as each and every process might not be supervised properly or they might not have quality gateways and hence having Total Quality Management in place is imperative for the organisation Nike (Janvier-James, 2012 p, 89). Contribution of technology in gaining competitive advantage of Nike Big Data Analytics and Internet of Things have been highly effective in helping Nike to gain competitive advantage in the market. Even though the organisation Nike works in a competitive global environment but its products are unique in nature as its research and development is unique and distinct. The organisation Nike has been one of the major companies in Footwear Industry to integrate internet of things in its footwear to understand the activity level of an individual. The footwear has been designed with sensors and Bluetooth devices which could be connected to iPods and iPhones and other devices for doing number of things which is completely unique in nature (Gereffi and Lee, 2012 p, 77). Apart from that it has also developed gears which could measure heart rate, fitness and ability, video sensors attached to gears, jump height and lateral acceleration sensors with Nike footwear which has become a revolution in the industry and this has given the company a different place in the minds of the consumers. The interested consumers are more focused on seeing the brand and Nike in that cordon have been able to gain competitive advantage with its unique thinking and design. On the other hand Nike is focused on using Big Data Analytics to make sustainable designs for future. The company uses big data to make sustainable designs and develop manufacturing procedures which are sustainable dealing with environmental sustainability. The organisation has been able to develop water free dying technique effective to design gears and have also found a way to manage water through big data (Coyle et al., 2016 34). The company has invested a lot of intellectual property in developing its products which has been possible through big data and this has created a brand image in the minds of consumers which has given them the upper hand in the market and helped them gain competitive advantage that they need to sustain in this highly competitive global market (Qrunfleh and Tarafdar , 2014 p, 40). Conclusion Supply chain is an extremely important section for every business and this could be understood with the approach that Nike has implemented to manage its global supply chain. It could be said that Nike has been able to manage its supply chain with the different strategies that have been suitable for the organisation. There are number of critical risks related to Nike which would have to be eliminated to streamline the operations process of the organisation. Nike is one of the leading organisations in the world and hence the organisation definitely faces significant inventory problems which have to be properly addressed. Apart from inventory management labor issues, quality management and supply chain decision making are some of the key aspects which needs to be addressed by the organisation in order to get better result from the supply chain management. The organisation has been able to implement Total Quality Management in order to involve the entire workforce and every level of the organisation to provide the best quality system which has helped the company to mitigate global competition (Gereffi and Lee, 2012 p, 79). The technologies like Big Data and integration of Internet of Things has been effective to mitigate the increasing competition in the market. Overall to conclude it could be said that Nikes growth in the recent past has been conspicuous due to the constant improvement made in the supply chain which has helped the organisation to emphasise on the improvement of the supply chain allowing the Nike to develop one of the successful supply chain in its market. The present study has discussed the key aspects of supply chain management which has helped to cover up the key objectives laid down by the study. References Ashby, A., Leat, M. and Hudson-Smith, M., 2012. 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