Supply chain sustainability
Supply chain sustainability

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Supply chain sustainability

5.2 Best practice when working with stakeholders

We will now look at some approaches that can be used with stakeholders to enhance sustainability. First we will look at some research based on high-performing organisations; we will then apply the ideas to two very different UK businesses.

The book Sustainable Supply Chain Management: Practical Ideas for Moving Towards Best Practice (Cetinkaya et al., 2011) has some practical advice on how to manage sustainability across stakeholders, gathered from interviews with practitioners, industry experts, industry association representatives, academics and politicians:

Think locally, act globally

Gain a thorough understanding of how stakeholders in different countries and different sectors perceive your company’s sustainability performance, and of their expectations. This will allow you to use communication and collaboration strategies customised to suit individual supply chain partners.

Combine stakeholder communication with expertise and innovation

Do not outsource stakeholder relations to lawyers or consultants. Stakeholder relations are best run by experts and colleagues from the relevant business units, who fully understand the operations involved and can focus on innovation and continuous improvement.

Communicate and involve

Communication and involvement entails reporting, providing information, educating and forestalling confrontational behaviour, but also includes efforts to understand the needs, preferences and concerns of local communities and non-governmental organisations. Use a varied selection of platforms and channels for communication and stakeholder involvement, such as focus groups, opinion polls, formal progress review meetings, multi-stakeholder networks, websites with open forums, newsletters, canvassing of local businesses, community information displays, etc.

Collaborate and cooperate

Stakeholder involvement should be reciprocal. Take a proactive role and establish new types of relationships with regulatory stakeholders, including competitors. Aim to influence regulations and standards at the earliest opportunity where they affect their supply chain strategies.

Force a value-added, strategic and holistic approach

Consider the economic and social concerns of stakeholders strategically and accord top management commitment to them. Apply the concept of value-added at both financial and operational levels. This will lead to a different sustainable supply chain philosophy. Consider end-to-end supply chains as value chains, and think about unexplored resource inefficiencies and opportunity costs at the level of suppliers, channels, and customers. This will allow you to see regulatory stakeholders as innovation drivers, and will motivate the organisation to collaborate with regulators to shape incentives and develop sustainable supply chain solutions.

(adapted from Cetinkaya et al., 2011, p. 126)

Activity 5: Identifying best practice in stakeholder relationships

Timing: 30 minutes

Having reviewed the above analysis, you should now put these ideas into practice.

Watch the following videos from Whitbread PLC and Technology Will Save Us (TWSU). Make notes of where you feel that Brodie or Henry are discussing points that link to the best practises that were discussed earlier.

Whitbread

Whitbread PLC is the UK’s largest hospitality company, owning Costa Coffee, Premier Inn, Beefeater Grill, Brewers Fayre, Table Table and Taybarns. Whitbread has outsourced its entire logistics operations for Premier Inn and Costa. Brodie McMillan, Logistic Director at Whitbread, talks us through the very close relationship Whitbread has with its logistics provider, Keuhne + Nagel. Brodie explains some of the technology and digital systems that enable Whitbread to exceed 98% on time and in full deliveries. Brodie makes it clear that this arrangement only works because of the level of trust and openness between the two organisations. Initially, Whitbread asked logistics companies to tender for the work; Keuhne + Nagel were the successful bidders and the partnership has grown ever since, with both organisations investing significant capital into the partnership.

Skip transcript: Whitbread overview: Brodie McMillan

Transcript: Whitbread overview: Brodie McMillan

BRODIE MCMILLAN
We move around 56 million cases a year. We are second to McDonald's in terms of size in the food service sector. So it's a big, big operation. We work with about 125, 130 vehicles plus rented in vehicles that come in to handle the additional volume as we grow. The volume throughput has grown by 70 per cent in the last five years, 35 per cent in the last two. So handling that is complex.
The way that we do that is to run both the Costa and WHR – Whitbread Hotels and Restaurants – operation under the one roof. That allows us to use the larger vehicles, which we use for WHR, which are 18 tonnes or 26 tonners whereas the Costa workhorse is a 14 tonner. Because we deliver to Costa 24 hours a day, we can get more deliveries done at night. So we use the WHR fleet overnight because they can get more drops. And so we get all the benefit of that within the supply chain, being able to use both fleets, if you like – similarly, the labour and the workforce.
So, in terms of how we try and control that, we keep both businesses, albeit separate, through the same supply chain channel. If you take Kuehne + Nagel, for existence, our partner for food and for consumables, that's going on at many different levels. So there is some straightforward transactional stuff that is also an awful lot of day-to-day activity where we are sitting down and talking and meeting with them.
Trade Team delivers our drinks, for instance. Trade Team is operated on a composite model – not a dedicated model, which this one is. So that requires a different level of engagement, although we are talking to Trade Team about a number of quite exciting opportunities for the future in terms of looking what else we can do with them other than just delivering drinks.

[ON SCREEN] Relationship with customers

Well, it depends how you classify ‘customer’. I suppose each of the brands are our customer because we're responsible for making sure they get what they ordered on time and in full. We are operating at about 99.5, 99.6 per cent availability quota, which is exceptional in our industry. It comes with a cost, but the cost of not delivering it is greater in our opinion than the cost of actually achieving that level. So there's that customer.
And then, clearly, there is the businesses' customer, which is the end user, either the person sitting in the restaurant eating the meal or the person going to bed in a Premier room. And we do a lot of surveys, a lot of customer surveys. There's a lot of feedback that comes into Whitbread.

[ON SCREEN] Delivering on time and in full

The biggest challenge is to make sure that you're delivering the product on time and in full. And that's, I suppose, what drives everything. The consequences of not doing that, clearly, are additional costs. What leads to that going wrong could be as elementary as getting the forecasting wrong, someone making an incorrect entry on to the order level so that the stock hasn't come in.
70 per cent of our stock is what we call ‘over the bank’, which is another expression for just in time. And that's what we call ‘pick to zero’. That's a huge proportion of what's the day's activity. You know, if it's not here, it's not here. If it hasn't come in, it hasn't come in. You're not going to get any more of that whereas the stock items, you can always repick and send out.
But it's not quite the same thing as getting your herbs delivered from Kent into Scotland when the delivery wasn't successful this morning. It's just not going to happen.
We've got people waiting at a hotel or at a restaurant for the delivery to arrive. We work on a one-hour delivery window. So that's how we calculate whether it's on time or not. So the staff is geared to know that, if their delivery's at 10 o'clock, there are sufficient staff there to receive it at 10 o'clock. If you arrive two hours later, the staff won't be there.
End transcript: Whitbread overview: Brodie McMillan
Whitbread overview: Brodie McMillan
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TWSU

TWSU is a small business focused on inspiring kids and empowering parents to become creators of technology. With a range of ‘make it yourself kits’ and hundreds of digital tools and projects to support kids in learning though play, TWSU sells to more than 97 countries around the world. Henry Haslam, the Head of Production and Operations at TWSU, talks to us through the TWSU experience of international supply chain relationships.

Skip transcript: TWSU overview: Henry Haslam

Transcript: TWSU overview: Henry Haslam

HENRY HASLAM
Essentially we have two different types of supply chain currently. We have two types of product, one that's essentially a very low-tech kit product that the consumer actually assembles themselves, which is what we've grown up on. It's what we've sold over the last three, four years. And that involves a lot of procurement from, essentially, UK, European and Chinese manufacturers or distributors.
So about 50 per cent of our products come through distributors, electronics distributors. And they're based in the UK and in continental Europe. And about 50 per cent of our components will come direct from manufacturers, typically in China. And so what we do is we, essentially, source one of the two.
And what allows us to make that decision is the cost, the landed cost of these components in the UK and in our manufacturing site, which is here in London. And so we'll look at things like the cost at the supplier but also the transportation cost, any duties and taxes, and also minimum order quantities. So when you're going out to the Far East, there are large minimum order quantities that we need to address.
And so, once we've made that decision, we will procure those components. And they all come in bulk to our manufacturing facility – our mini factory, as we like to call it – here in London where the kits are actually assembled. So we have local labour coming in and making the kits. And then, from here, they go to one of our two fulfilment centres. So we have one fulfilment centre in the UK – the Heathrow Airport – and one fulfilment centre in New Jersey to serve the US market.
With a new product that we're bringing out, there are actually more advanced manufacturing techniques involved, which we don't have capability of doing internally. And so I've actually appointed an original design provider here in China who are going to help us take our design, do the design for manufacture. So that's looking at the printed circuit boards and making sure they're right for the machinery; looking at the plastics, making sure that, when you're injection moulding them, they will come out correctly and you're not going to get any marks, etc.; and actually help us to bring that product to market. And so that will come directly from China and will go to our fulfilment centres without us touching it from our mini factory here in London.

[ON SCREEN] Relationships with customers & suppliers

From a customer's perspective, our two main channels are direct to retailers. So the retailers will buy from us in bulk. And they, obviously, fulfil from either on their own websites or in their own stores. And also we have our own direct customers on our own e-commerce site.
So, from a customer perspective, we're trying to make sure we have a deeper relationship with them, one, from an e-commerce perspective so that we can understand why they're purchasing from us. And supply chain makes a huge part of the customer journey. So, yes, you can have a great customer journey online. And, like, you can buy the product very well.
But, obviously, you have to fulfil it in the timelines that you're giving them, etc. So we think we have an integral part in the whole customer experience. And so understanding what people want, when they want it – so convenient, speed, etc. – balancing that is interesting for us.
Similarly, from a retail perspective, it's very important, from our own perspective from inventory holding requirements, that we have a view of when orders are going to come in and when orders are going to be required. So we work closely with our retailers to help us understand when they want their orders so that we can plan effectively and we're not short on stock or have too much stock, etc.. So we really push that relationship to try and work out when we need the stock and where we need the stock.
From a supplier perspective, we have two types of supply, really – some that we just place orders with and they'll fulfil the orders and there's no real relationship there. But the distributors, we tend to have a better relationship. And we do a bit of co-planning with them. So we will forecast out 18 months. And we'll say, these are our requirements likely to be over the next six months. And so they can take those requirements into consideration so they can then plan their supply chain, plan their orders, manage their costs a bit more effectively.
But it also helps us to make sure that they have the stock that we need when we need it. So it's very much a collaborative planning exercise to say, OK, this is how much we're going to need and when we're going to need it. And then they can make sure that they have the correct stock and they're not overstocked.
And so, when we have issues with our supply chain, it is typically when we have the transactional relationships where we just order from them. There's no planning. There's no understanding of their stock levels. Generally, the suppliers we have a better relationship with – the better planning relationship with – we tend to have the stock when we need the stock because of the fact that we've planned out a bit further in advance.
End transcript: TWSU overview: Henry Haslam
TWSU overview: Henry Haslam
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Now write down some notes on:

  • the extent to which you feel that these two organisations demonstrate good practice in stakeholder relationships
  • how the different relationships discussed in the videos support the sustainability of each of the organisations.

There is no discussion for this activity.

You can type text here, but this facility requires a free OU account. Sign in or register.
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With Activity 5 we have completed our review of the four perspectives. Now let’s pick up the learning from this course and apply the perspectives to your own context (that of the organisation that you work for or an organisation that you are otherwise familiar with).

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