Challenges of Moving Towards Sustainable Supply Chain in Manufactury Industry in China

Literature Review

The 21st-century civilization is faced with many challenges. Some of the challenges include the significant increase in population, dwindling of ecosystem services, social inequalities, and climate change. The problems pose a serious threat to humanity if they are not addressed urgently (Lovelock 2006). In addition, the exhaustion of resources that help in fueling economic development and increase in the environmental pollution pose a serious threat to the biosphere. The above factors have affected the operations of organizations. They have increased competition and customers’ increased environmental awareness of the operations and products of organizations. The above-mentioned factors have also led to a significant increase in costs of resources and more stringent regulations. The sustainability challenge is the major issue that is confronting 21st-century organizations.

Roberts (2004) uses a funnel metaphor to demonstrate the problems that 21st-century civilization faces. He claims that there has been a significant reduction in the Earth’s capacity to provide what people need. This decline should be viewed as the upper wall of a funnel when viewed from inside the funnel. On the other hand, there has been an increase in the resources people consume and the waste produced. This increase should be viewed as the lower wall of the funnel. Unsustainable development makes the society and organizations fall deeper into the funnel over time. As the society moves deeper and deeper into the narrower part of the funnel, there is less room to maneuver. In addition, the options continue to decrease. Organizations that continue to engage in their activities ‘normally’ are likely to hit the wall of the funnel, which corresponds to their failure (Roberts 2004).

 

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The realization that the 21st-century civilization is currently living in the funnel should make people from various parties to become more strategic and think about the long-term impact of their activities. Innovation and creativity can help in improving sustainability efforts, which would make civilization move up the wide open part of the funnel. Organizations that foresee these changes have an upper hand in strategically positioning themselves to avoid hitting the walls of the funnel by investing in activities that help in moving them towards the wide open part of the funnel. This would guarantee the organizations future success as sustainable organizations (Carter & Liane 2011). However, the move towards a sustainable chain is faced with various challenges that companies must strive to overcome.

Prior to continuing discussions on challenges of sustainability, it is vital to provide a concise definition of sustainability. The dictionary meaning of sustainability is to maintain, endure, or sustain. However, in the later part of the 20th century, the word sustainability started being used in relation to human sustainability and sustainable development. Jakšić, Rakočević, and Martić, (2014) provide one of the most widely accepted definitions of sustainable development in the contemporary context. Sustainable development is defined as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (Jakšić & Rakočević & Martić, 2014 p. 123). This paper discusses sustainability in relation to activities associated with supply chain management.

The pressures to achieve environmental and sustainability goals have a significant impact on the companies in the manufacturing industry. It may also lead to conflicts between various organizations in the supply chain. Sustainable supply chain practices are some of the major issues in life-cycle based products such as those produced in the manufacturing industry. It strives to create solutions in the business models of the manufacturing companies. Manufacturing companies usually focus on formulating lifecycle solutions, which enable them to attain operational efficiency and reduce lifetime costs of various operations (Aras & Crowther 2009). As such, optimized specification and full-service offering may help in the organization's efforts towards improving its sustainability. However, the acceptance of the above solutions may vary from one market to another. The comparison of different markets may help in determining the challenges that the development of sustainable supply chains faces globally.

Improved efficiency and reduced costs are the major aims of logistics. Nevertheless, in the contemporary world, there has been an increase in demand for sustainability issues, which has put more focus on the environmental impact of transportation. The general perception among most people is that having an environmental supply chain management helps in improving the efficiency and cooperation among different players in the supply chain in addition to improving the environmental performance and reducing the waste within the supply chain. The environmental performance of an organization affects its financial performance in several ways. Reduction in the hazardous and non-hazardous materials in the manufacturing process of an organization helps in reducing operational costs and increasing productivity. This leads to other benefits that improve financial health of the organization. Efficient marketing strategies enable the organization to improve its revenue, increase its market share. This ultimately makes the organization to gain a competitive edge over the other organizations in its industry of operation (Rao & Holt 2005). As such, reducing the environmental impact of transportation should be one of the major aims of logistics. Organizations may achieve this by improving the efficiency of their logistics and transportation systems.

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It is vital for manufacturing companies to ensure that they extend their supply chains to cover the by-products of the supply chain. Organizations should also ensure that they evaluate the life cycle of their products to determine their environmental impact (Aronsson & Brodin 2006). They should ensure that they implement initiatives which help in optimizing the product from both, an existing standpoint and total cost standpoint. The total cost of the product should include the by-products of the product that are not captured or used for other purposes. Ensuring the sustainability of products throughout the supply chain is a critical source of competitive advantage. As such, it is vital for organizations in the manufacturing industry to ensure that there is a close interaction between various sustainability goals and supply chain parts (Seuring & Müller 2008).

In this paper, challenges refer to demanding situations in relation to sustainable supply chain management. On the other hand, conflicts refer to tensions between two or more parties due to incompatibility of the real and desired responses. This necessitates the parties to have a trade-off to diffuse the conflicts. The challenges that manufacturing companies face during the implementation of the sustainable supply chain may be divided into five categories. These categories include cost increase, changing behaviors and mindsets, operationalization of sustainable development, and antagonistic effects and paradoxical conflicts (Abbasi & Nilsson 2012). These challenges are applicable to the manufactory industry in China.

Cost and revenue are the major factors that influence the development of sustainable supply chain management. Therefore, it is vital for the sustainability efforts of an organization to be profitable. Development of sustainable supply chains is initially very expensive to an organization. This is due to the fact that it requires organizations to undertake research on how to develop sustainable supply chains and develop infrastructures necessary for the creation of the sustainable supply chains. It also necessitates organizations to acquire cleaner technologies. In addition, it is very expensive for the organization to redesign its supply chains to make them sustainable. Development of sustainable supply chains also necessitates organizations to educate stakeholders and look for alternative resources that are sustainable. The above make the organization incur additional costs (Johnsen, Howard & Miemczyk 2014). This is one of the major challenges that manufactory companies in China are faced with.

The implementation of a sustainable supply chain would increase the total costs of delivering goods. Environmental goals might make it difficult for companies to provide goods at the price the customers desire. Various studies show that cost concerns are the major hindrance to the consideration of environmental factors in the supply chain. They make organizations to be faced with the dilemma of ecology versus economic trade-off (Lebreton 2007). Therefore, it is vital for the companies to formulate methods of incorporating social issues into economies. However, most companies have very little social experience. The reaction of the companies to the social issues is usually dependent on the industry of operation (Palevich 2012).

Cost is the major challenge that the Chinese manufactory industry faces in its quest to move towards sustainable supply chain. This is so due to the fact that cost is the major factor that the companies in the industry use to improve the competitiveness of their products. Availability of cheap labor and other factors reduce the production costs of Chinese manufactory companies. Therefore, increase in costs due to the development of sustainable supply chains would reduce the competitiveness of the products. Chinese manufactory companies are unwilling to initiate sustainability efforts since this would ultimately cause other companies in the entire industry to follow suit, which would ultimately reduce the competitiveness and profitability of companies in the industry. Both, consumers and producers are unwilling to meet the additional costs of developing sustainable supply chains. In addition, there is the issue of which organization is willing to initiate the sustainability efforts. However, development of sustainable supply chains is only expensive during the initial stages of the implementation process. In the long-term it is very beneficial to both, the organization and the customer (McIntyre, Ivanaj & Ivanaj 2009). As such, lack of financial gains in the short-term is one of the major challenges that manufactory companies in China face in the quest to make their supply chains sustainable.

Changing the behavior of the stakeholders is also a major challenge in the development of sustainable supply chains. It is the first challenge that organizations which would like to develop sustainable supply chains face. For stakeholders to change their behavior, they should have high awareness of what sustainable development entails and what are its principles. Increasing the sustainability of supply chain stakeholders globally is also one of the challenges that organizations face (Cetinkaya 2010). This is so due to the fact that global supply chains are evolving both, horizontally and vertically. Increased awareness does not guarantee that the supply chain stakeholders would change their behavior. They may have resisting mindsets in the deployment of initiatives aimed at moving towards a sustainable supply chain. Resisting mindsets inhibit the changing of the existing logistic and supply chain activities to improve their sustainability. Instead, organization would like to have short-term financial sustainability. Politicians also have political inertia against the shift towards sustainable supply chains. The politicians have short-term objectives. They aspire for short-term economic sustainability, which improves their popularity (MacLean 2010).

Antagonistic effects and paradoxical conflicts also pose a significant challenge to the shift towards sustainable supply chain. Some paradoxical conflicts include rebound effects and carbon leakages/spillovers. Carbon leakage/spillover refers to the shift of emissions that pollute the environment from one sector of the economy to another or from one region to another. Carbon leakage/spillover has a significant impact on the ability of companies in the Chinese manufactory industry to shift towards supply chains as sustainability efforts by a company in a certain part of the supply chain may be negated by increased pollution in another part of the supply chain. This is highlighted by the American multinational corporations that strive to ensure that factories where they outsource various components needed in the manufacture of their product engage in sustainable activities. Despite the efforts of the American multinational corporations, the companies still engage in unsustainable activities (Swaine MD 2011).

Rebound effects refer to the increase in environmental degradation in certain sector due to the decrease in the environmental degradation in another sector. Rebound effects would affect the Chinese manufactory industry. Sustainable supply chain management would enable companies in the manufactory industry to be more fuel efficient. As such, they may increase their production capabilities, which would increase their environmental degradation and the environmental impact of their products (Edvardsson & Enquist 2009).

Operational of sustainable development is also one of the challenges that organizations face in their quest to shift towards sustainable supply chains. Implementation of sustainable supply chains may expose an organization to various uncertainties. For example, it is unclear as to what is the impact of the location of production, which may be one of the strategies that companies may use in their shift towards sustainable supply chains. The impact of logistics structures on the environment is also unknown (Asefeso 2015). In addition, organizations face uncertainties regarding the consumer behaviors and demands, nature of fuels that would be available in the future, competitive strategies of rivals and sources of competitive advantage, and future logistic infrastructure (Lieb & Lieb 2010).

Apart from that, companies in the Chinese manufactory industry face various challenges associated with product-level life cycle assessment. Some of the problems include defining boundaries and allocating the energy and emissions of various parts in the supply chain. Different regulations on carbon labeling also pose the companies with various challenges. Also, there is no single method of determining the environmental impact of various logistical operations of companies in different regions. The level of independent audit of the environmental impact of companies in the manufactory industry is also unknown (McKinnon 2010).

Lack of political will by the Chinese government to implement measures that would necessitate companies to have a sustainable supply chain is also one of the challenges that companies in the manufactory industry face. If government regulation and other relevant stakeholders strive to compel companies in the manufacturing industry to ensure that they are sustainable there would be an urgency to improve sustainability among companies in the manufactory industry (Zhu & Sarskis 2006). The government and industry may play a critical role in the support and development of sustainability standardization initiatives in transport and logistics. The government may improve the ability of the industries to reach their sustainability goals through structural means processes (Jeffers 2010). The government may also use education to improve knowledge of the link between decision-making and logistics and the environmental impact of the two factors. In this instance, the government creates possibilities for the development and support of sustainability goals. However, organizations are the ones that would have to realize these goals. Organizations may also use several techniques to minimize the environmental impact of various products during the useable life span and thereafter (Rogers 2003). Lifecycle assessment is one of the techniques that organizations may use to reduce the environmental impact of the products. Use of cleaner process technologies and improvement in the quality of product designs may also help in reducing the environmental impact of products. Organizations that use this approach increase the value of their products. However, the major challenge that organizations face is ensuring that the strategies help in capturing more product value (Carter & Rogers 2008).

Other challenges that companies in the manufactory industry face include the lack of a clear method of determining the risk and opportunity costs of breaking ties with key partners due to the shift towards sustainable supply chains, lack of knowledge on sustainability issues when making decisions. To get a clear view of the challenges of moving towards sustainable supply chain the manufactory industry in China it is vital to undertake a research with a focus on manufactory industry in China as the industry has unique features that make it face unique challenges.

Contemporary organizations strive to address environmental issues by looking for solutions that would help in reducing wastes in the contemporary supply chain. Nonetheless, implementation costs play a significant role in the options that would be selected for implementation. The environmental focus of global supply chains has made the old definition of supply chain management outdated as it does not reflect the current practices in supply chain management. Lambert and Cooper (2000) defined supply chain management as “the integration of key business processes from end user through original suppliers that provides products, services and information that add value for customers and other stakeholders” (p. 66). It is vital for contemporary definitions of supply chain to focus on the development of a sustainable supply chain, which usually incorporates issues related to social, environmental and economic benefits of supply chain management (Sharma et al. 2010).

In the recent past, there has been an increase in the awareness of sustainable supply chain management. Various parties strive to determine methods in which manufacturers, retailers and carriers can develop sustainable goals. As such, sustainability is one of the major yardsticks with which the performance of various organizations and industries is measured. Environmental standards play a vital role in the analysis of the suppliers that an organization should choose. Having sustainable products, which usually require the description of their life-cycle that can be implemented in the entire supply chain, is one of the major approaches that organizations use to create a sustainable supply chain (Seuring & Müller 2008).