Amazon is becoming more important to the UK Economy.

Amazon is becoming more important to the UK Economy.

Amazon announced 1,000 jobs in the UK with around 600 in a Manchester HQ in the former Cooperative Hanover Building in the Northern Quarter, with 90,000 sq ft of space. Amazon already has large warehouse facilities in the North West of England with a large site close to Manchester Airport and a new distribution centre in Warrington among them. A further  280 jobs in Edinburgh and 180 in Cambridge. Doug Gurr, Amazon’s UK country manager, described the new roles as “Silicon Valley jobs in Britain”. These are highly skilled roles working on software, machine learning and AWS, its cloud computing business. Great opportunities for graduate talent in Manchester, Edinburgh and Cambridge.

According to Doug Gurr, Amazon’s UK country manager “Manchester was at the heart of the industrial revolution and has a fantastic history of innovation. The city offers an incredibly talented workforce and a budding tech scene with some of the most exciting, fast-growing tech companies in the UK situated here.”

Amazon is expected to have 27,500 employees in the UK by the end of 2018, with 6,500 people in its corporate, AWS and R&D divisions. This represents about 5 per cent of the company’s total head count. Already 20,000 people work in its 17 “fulfilment centres”, or warehouses, and 40 delivery stations in the UK. Amazon is becoming more important to the UK Economy. Globally Amazon employs around 575,000 people.

Cambridge has a development centre where the company work on next generation developments of products such as Kindle, Echo and Alexa alongside drone delivery development. At the Waverley Gate site in Edinburgh which is the first R&D site outside the USA, employees work on advertising technology and personalised shopping recommendations that arrive in daily inboxes from their 250 million products available on the Amazon Website.

Amazon joined the trillion dollar club (market value) alongside Apple just last month.

 

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Is Brexit Irrational?

Is Brexit Irrational?

Shakespeare put words in Hamlet’s mouth ‘What a piece of work is man! How noble in reason!’ but is reason unreasonable? As I understand it BREXIT appears to be a declaration to leave a club thereby avoiding membership fees but asking the club to give former members all the benefits of membership whilst evading the rules of the club, in particular immigration. Whatever benefits are offered to former members will not be equivalent with membership. This sounds to me like a worsening of current position. Or have I got this wrong? If this situation was applied to any other aspect of our lives we might simply think it ludicrous. It is completely irrational.

Is it reasonable to change your mind?

In most other walks of life it is reasonable to change your mind if you find that circumstances change. For example, if you make a decision on the basis of information that you subsequently discover is false or misleading would you simply stick with it? I am sure that most of you reading this would say, definitely not. For that is the reasoned stance. It is the scientific approach to developing knowledge. If not we would still believe in flat earth, the sun revolving round the earth at the centre of the universe, and that all swans are white. The reason we don’t is because we discovered new information that provided compelling evidence that such beliefs were false. And guess what – we changed our minds.

In the business world all firms develop strategies that offer direction to a better future position. They set about the task gathering evidence to establish their current position and determine possible paths to a future that is better. Knowing where they want to be and how to get there are two critical questions they have to answer. It would appear that politicians have not done this regarding BREXIT. The Cameron government offered the British nation a vote to leave the European Union (EU), that to take a kind view might be said to be unclear in its aim. Yes you can argue that the vote was to leave and that is that. However, I want to know where the evidence is that leaving improves the current position of being a member of the European Union (EU).

What exactly is the strategy? Is there someone in power, perhaps a leader, if we still have any, who could explain the reasons for leaving. When I say reasons I do not mean beliefs, false claims or empty rhetoric but evidence based reasons why we should leave the EU. Explaining how we improve on our current position as members when we leave. If we really do still live in a democracy then surely conformity and obedience to flawed reason need to be challenged and fresh arguments brought forward based on evidence we can trust.

Compelling Evidence

Most data indicators point to a worsening of position post BREXIT. No customs union means that supply chains will get clogged up with bureaucracy that will increase and cost more to administer. Delay and disruption at border crossing is inevitable. Therefore, there is little doubt that not only the administration costs paid for by taxes will be higher but all those goods and services that cross borders will cost more in Britain too.

Newspapers are full of headlines indicating likely problems in food supply chains, automotive supply chains, aerospace supply chains and pharmaceuticals. There are suggestions that hold ups at border crossings could lead to food shortages, disrupt just-in-time manufacturing systems in automotive and aerospace industries and cause shortages of medicines. Industrialists are concerned about their supplies reaching factories in the UK Just-in-Time and of course parts and finished products travelling to the EU are also at risk. The Bank of England has estimated BREXIT will cost every household in the UK £800 per annum. Is this a better position than at present? Is this temporary? Is this likely to last for years? The austerity years may just about to get more austere.

Conclusion

‘To be (in) or not to be (in) that is (still) the question’ !

Six of the best

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When I was at school in the last century ‘six of the best’ had a very particular meaning. Here it refers to six of the best books I have had the pleasure to read. These books were adjacent on my bookshelf and I began to wonder why I read them and what connected them to me and my interest and motivation to read them. In this piece I will share my reasons and make sense of why I chose them justifying their place on my bookshelf.

The Soulful Science a book about what economists do and why it really matters was a book I came across in a bookstore on my travels. Those people I know who have accompanied me on trips will know that I often spend several hours browsing bookstores. A habit I developed in my school days that has not gone away despite the digital age providing many opportunities to acquire information and knowledge instantly. There is always something aesthetically pleasing about holding a book. From the cover to the pages that unfold one at a time as one reads the author’s thoughts placed into the manuscript. Diane Coyle’s writing is crystal clear, concise and convincing. Her arguments are developed through her vast knowledge of her subject. The author’s own curiosity about the subjects she writes about is evident for all to read. My combined interests in economics and philosophy attracted me to the title of this book and when I opened the pages I was not disappointed. This is a thoughtful book tracing developments in economics and its application to what appear to be intractable problems of our everyday lives. The author tackles what she has called ‘The Mysteries of Wealth and Poverty”, notions of free choice and how economists are now more than ever able to consider evidence to establish policies that might just work better than they did in the past. This is not simply a book about economics for economists but is worthy of a wider audience that want to know why organizations, institutions and individuals behave the way they do to influence our quality of life. The author’s enthusiasm and insights into how we are all affected by what economists do is enthralling. Within these 279 pages of text the reader is able to grasp the fundamentals of how and why policies are established for better and worse. Carlyle’s quote alluding to economics being a dismal science because of the bad outcomes is replaced by an understanding of modern economics having a place to become the ‘soulful science’ a discipline that has compassion and hope achieved through better understanding the data and behaviours.

The second book in this sextuplet selection is also by Diane Coyle entitled simply GDP. GDP or to give it the full name “Gross Domestic Product” is something we hear in TV News or read about in the press. It goes up and it goes down. We assume up is good and we can all sleep safely tonight in our beds. If it goes down we exercise ‘fear and trembling’ because the assumption is that our life might just be worse tomorrow. Unless of course we can correct it’s trajectory. Coyle traces the history of this socially constructed measure of economic performance. In this book we learn what GDP is, how it has been defined and how the measure has decided the fate of political leaders. Coyle’s thesis is that GDP was fit for purpose in the twentieth century but may be less so in the twenty-first century when the balance of the economy has moved significantly away from trade in goods towards a dominant service based economy. Recent Brexit plans by the UK Government have made much of how they have squared the circle and yet in doing so it is puzzling to observe the exclusion of the service economy in the Brexit plan. Perhaps politicians and their advisors would do well to read this book if they want to understand how irrelevance can be avoided in design of the plan.

The third book claims its place because it is relevant to contemporary economic discussions as well as to organizations attempting to develop sustainability as a strategic supply chain option. McCarty, Jordan and Probst combine their practical knowledge of six sigma [1] which provides a set of techniques to reduce variation around a quality standard (e.g. variation around a mean of plus or minus 3 standard deviation measures). This means that the standard moves towards zero defects by ensuring that variation is limited around the arithmetic mean in a normal distribution. This together with the DMAIC frameworks (define, measure, analyze, improve, control) of the Plan, Do, Check, Act cycle that they claim can be developed to tackle environmental concerns and simultaneously create business value. The authors outline how these methods of continuous quality improvement moving towards six sigma or zero defects can be applied to achieve lower carbon emissions, energy conservation, recycling of materials and efficient water usage. In this book they make the business case for investing in sustainability using these operationally tested techniques of six sigma and DMAIC.

The fourth book is something of a hobby horse for me. It is Measurement Madness by Dina Gray, Pietro Micheli and Andrey Pavlov. Increasingly I witness obsession with measurement. Often those doing the measuring appear to be doing so because they can and not because it is something that can do to really improve a situation. Of course measurement is important. I am not arguing against measurement just against the madness of bad measurement. In this book the authors make the argument that well-meaning managers often introduce measures that do not achieve what they set out to do. Worse measures may instil false hope and belief in the objectivity of the measures implemented when they may actually be subjective. Anyone who has worked in finance, production, marketing, management or indeed any business or public service will know how bad the impact of poorly designed measurement systems can be. This book is not a how to guide on what to do but it rather identifies, analyses and discusses how to avoid the pitfalls and seduction of measurement madness. There are many examples and the book is an interesting read for any professional with an interest in measurement systems.

Think is a book everyone should read. For many years in the classroom with aspiring MBAs, PhDs and Executives I encouraged them to step back and think. This is easier said than done as they told me. They asked me what they could do to improve thinking. Simon Blackburn’s concise book simply called Think was my advice. Some would ask why I had recommended a book on philosophy. “It is not practical” came the claim. “That is the very point it is not meant to be” I told them, although in fact it is perhaps more useful than that. In this very readable small book everything you might want to know about human existence is touched upon; knowledge, reason, truth, mind, freedom, destiny, goodness and justice. It is a very clear and interesting read. Most agreed after they gave the book a chance by bracketing their preconceptions. It is a book that I return to because it is so accessible and if you want to make a clear, critical argument within these pages there are many nuggets to help you think.

Last but certainly not least is An Invitation to Social Construction by Kenneth R. Gergen. This was a very interesting and influential book that helped me to clarify my own ideas about the nature of reality and how knowledge is claimed. Gergen, is able to distil his own lifetime experience into a succinct, coherent and clearly focused discussion that challenges the preconceived ideas of knowledge, rationality, truth and beliefs. In explaining traditions in trouble we are given a thesis of intellectual and scientific traditions that have brought us to where we are. Moving from what he refers to as the shaky scaffold of the self; our sense of self, conscious thought, reasoning as decision-making individuals played out through behaviours and dialogues makes us what we are. Overlay this with our cultural heritage and belief systems established over time and our existence from Plato’s pure ideas through metaphysical concerns of soul and religious beliefs, doubt, existence and the complexity of human being is exposed. In the critique that follows alternative visions of knowledge, truth and the self are identified and we are shown new ways to think about how processes may be redefined by paying attention to common discourses. Theory and practice converges as constructionist scholarship and societal practice become one allowing for alternative futures to emerge. This is your invitation to social construction. A means of being able to think differently about the world and our place in it.

[1] Six sigma is a statistical measure + and – 3 standard deviations from the arithmetic mean of a normal distribution i.e. six sigma or 6σ 

Six of the Best in Order of Appearance

Coyle, D. (2007). The Soulful Science: What Economists Really Do and Why it Matters. New Jersey: Princeton University Press.

Coyle, D. (2014). GDP: A Brief But Affectionate History. New Jersey: Princeton Univesrity Press.

McCarty, T., Jordan, M., & Probst, D. (2011). Six Sigma for Sustainability. New York: McGraw Hill.

Gray, D., Micheli, P., & Pavlov, A. (2015). Measurement madness: Recognizing and avoiding pitfalls of performance measurement. Chichester: Wiley

Blackburn, S. (1999). Think. Oxford: Oxford University Press.

Gergen, K. J. (1999). An invitation to social construction. London: Sage.

 

What will your Supply Chain look like after BREXIT?

What will your Supply Chain look like after BREXIT?

 

The first quarter GDP figure for the UK stood at 0.3% growth. This compares to 0.7% growth in the last quarter of 2016. The Bank of England had expected the figure to be 0.6% so the fall is significant. In France growth also stood at 0.3% while Spain stood at 0.8% both above forecast, whereas the US came in below forecast at 0.7%. It is likely that there are stormy waters ahead according to most economic forecasts. Disruption is a reality for modern business in the normal course of operating. However, the UK has added to its own uncertainties and increased risk following the BREXIT vote in June 2016. Here I outline some of the factors that will add to uncertainty in the months ahead and identify some likely supply chain winners and losers.

Higher inflation is expected at 3% or above by the end of 2017 (Bank of England forecast 2% for 2017), the volatility of UK currency and the decline in consumer purchasing will all have an impact on the British Economy in the months ahead. The period of instability is likely to last for the medium term as the trade terms of BREXIT are negotiated between the current EU members, the rest of the world and the United Kingdom. Nevertheless, some sectors are doing better than others so the picture is not necessarily negative. In manufacturing, textiles, machinery, transport, wood and pulp as well as electronics and other manufacturing the UK is doing relatively well. Food and drink shows a very small decline while other categories including rubber and plastics, electrical equipment and metals show larger falls. The biggest fall is in pharmaceuticals approaching -8%. The key for longer term prosperity will be how the mix and balance of exports and imports change the make-up of UK GDP. Sectors selling more than 30% of their output in export markets have seen a 2.6% increase in growth in the first quarter of 2017. These sectors include transport and machinery. This is not all due to a weakening pound since BREXIT. It is also due to an increase in world-wide market activity in the first quarter of 2017.

Between January 2017 and February 2017, export prices decreased by 0.5% and import prices decreased by 0.9%, with the value of sterling increasing by 0.8% in February 2017 compared with the January 2017 average. However, it remains 10.4% lower when compared with February 2016. (Source: ONS data).

In 2015, the UK recorded the largest current account deficit among the G7 economies at 5.4% of GDP. UK exports grew faster than world exports in 2015, for the first time since 2006. Within this the UK has seen increased trade activity in goods with non-EU countries, with their share exceeding that of EU countries in the last four years. Trade with non-EU countries continues to grow as a proportion of the total. The recent fall in the pound has seen some export categories increase trade while import costs have risen. There has been a slight rally in the pound against the dollar and the Euro since the announcement of a General Election on 8th June 2017. Most commentators opine this is due to the removal of some uncertainty regarding BREXIT. Although, the initial meeting between Prime Minister May and EU Commission President Jean-Claude Juncker at Downing Street did not go smoothly according to reports. It is unlikely to be plain sailing. It will be interesting to see what happens if there is a hung Parliament with no overall majority for any single party. Most people think this unlikely but who knows, opinion polls do not have a good track record when it comes to predicting the British electorate and choices they make. Opinion polls for BREXIT were not a good indicator for what actually happened. More indecision by any Government would increase uncertainty and risk for the British economy.

Table 1 shows the monthly change in volumes by category for imports and exports for both EU and Non EU countries. It shows that most export categories moved upwards apart from semi-manufactures and food to the EU. Consumer goods other than cars as well as chemicals were major exports to the rest of the worlds. Basic material imports with the EU fell while they increased by  23.4% with the rest of the world. It is possible that firms are already increasing forward purchasing to offset currency volatility but the data set is too limited to be sure. Other consumer goods from the rest of the world fell by 11.1%. Car imports rose by 14.4% from the rest of the world and by 2.2% with the EU.

Table 1: Shows Monthly change1 in goods commodity volume, February 2017
EU countries Exports % change Imports % change Non-EU countries Exports % change Imports % change
Food, beverages and tobacco 0.9 0.0 Food, beverages and tobacco 0.9 0.9
Basic materials 1.2 -3.2 Basic materials -7.3 23.4
Semi-manufactured goods; of which -0.9 0.0 Semi-manufactured goods; of which 0.0 -2.0
   Chemicals -4.3 -3.3    Chemicals 5.0 -9.8
Finished manufactured goods; of which 1.6 4.7 Finished manufactured goods; of which 1.0 -2.8
   Cars 2.9 2.4    Cars -7.4 14.4
   Consumer goods other than cars -1.6 4.0    Consumer goods other than cars 12.0 -11.1
   Intermediate goods -0.9 5.5    Intermediate goods 5.8 0.0
   Capital goods 1.7 0.0    Capital goods 1.0 -0.9
Source: Office for National Statistics
Notes:
1. Monthly change is February 2017 compared with January 2017.

There will likely be a turbulent few years as trade terms across categories and countries change as result of the complexity of negotiations. Supply chains will need to readjust to new trade patterns, sourcing trends and shifting economics. This is no time for complacency. If you want to stay ahead of the curve your supply chain will need to be agile.

April is the cruellest month – what about May and June?

Westminster

“April is the cruellest month” said T.S.Eliot. For me it is. As we have a cold snap I engage in that very British concern of talking about the weather with anyone who will listen. In a broader sense all of us are concerned with climate and particularly the impact that human activity has upon our environment. This week as British politicians prepare for a general election ripped untimely from the womb of Westminster, ignoring the procedure established to prevent such a caesarean breach, we witness the devious political trickery of delaying bad news that might contaminate or infect the chances of winning. It is sanitation, redaction, or plain old whitewash removing any damaging ideas to accommodate the vanity of political self-interest. The diesel car scrappage scheme raised its ugly head like Leviathan rising from the sea to create impending disaster for the party of power. It is best now to deviate, to consider the distant problems of rogue states and take the public gaze there. Meanwhile Alchemists gather in party HQs to forge base ideas on the philosopher’s stone in preparation for publication. Key phrases will be needed to text and tweet! “Brexit means …”, what does it mean? New terms imported from former colonies create colour attacking opposition leaders such as ‘Mugwump’ although I would prefer to see ‘Boris and the Wagmump’ as an addition to children’s literature.

We have now reached that time when general elections induce a news freeze for fear of damage to prospective candidates including seasoned veterans like May (note also the month after April and the one before June). Rather like an episode of BBC Radio 4’s “Just a Minute” there must be no hesitation, deviation or repetition. But this is not “Just a Minute”, it is – Wait a minute, repetition is allowed because that provides opportunity for the Prime Minister and Government Ministers to repeat endlessly what we might not have already grasped – “Brexit means Brexit”. Although no one appears to know what this means, least of all those seated around the cauldron of power, or do they know more than they wish to disclose? Is the economy about to implode? Is this why the incumbent ruling party have pulled the election card early? Well, we may not know the answer to that last question for a year or two. However, what you can be sure to observe in the next few weeks, if you can stay awake long enough to listen carefully, to the endless political debates, is devious manoeuvring. There will certainly be silence at times, mostly after difficult questions get asked. The genesis of new but soon to be broken promises will arrive on a daily basis. Political polls will inevitably be wrong as no one really understands just how accurate they are. Statistical forecasting error appears to be a concept too far for most of the political commentators. Indeed fine margins make forecasts look silly mainly because forecasts are simply that, a forecast. It is not an actual result. So even if accurate, they will be wrong. Political candidates and parties would do well to remember this notion of standard error when weighing up their odds. So too, would political commentators after all they are supposed to be providing the public with informed opinion.

Personally, I look forward to summer. Warmer weather, election ended, long-term happiness beckons, in the knowledge that politicians will look after all my future needs, only a forecast, now that they themselves feel secure in their own jobs for another five, or should that be four, or three, or even two years?

After the 2010 general election, the Cameron coalition government enacted the Fixed-term Parliaments Act 2011 which set fixed term parliaments every five years. The last general election was held on 7 May 2015, and the next due on the first Thursday in May 2020.” Of course we now have one on 8th June 2017 as 2/3rds of Members of Parliament voted to support the call by Prime Minister May on 18th April 2017 (no April fool!).

The Business of UK Fashion – Reshoring?

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Westfield photo under CC license http://www.boymeetsfashion.com 

 

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Retail Price Index: Clothing & Footwear: Source: ONS Data

 

One reason why it may look more attractive to bring back some on shore manufacturing is the recent increase in the retail price index for clothing and footwear. Back in January 2010 after more than ten years of flat and falling retail prices the RPI was equivalent to 82 per cent of that in 1987.Five years on in May 1992 the RPI stood at 97% of what it was in 1987. Effectively meaning average prices were moving towards but had not reached what they were five years earlier. In December 2016 average retail prices stood at 1.52 times what they were in 1987.

In the late 1980’s as average retail prices fell, retail clothing and footwear buyers began to search for ways to lower their costs to remain competitive and in order to compete in a market where prices were falling. These price falls caused by changing economic circumstances, coincided with shifts in consumer tastes and fierce retail competition led them to source and produce much more of their offering offshore. The percentage of goods imported rose steadily. In the UK this initially meant moving to lower cost supplies in Portugal and North Africa. As the RPI continued to fall the search intensified for global suppliers located in lower labour cost countries able to manufacture and ship goods at cost prices that would enable retailers to maintain or improve their profit margin despite the fall in average retail prices. The graph shows a turning point in January 2010 where the RPI has steadily increased from 87.2 to 152.8 in December 2016. There has been a slight downturn in January 2017 but there is a continuing upward trend. Put this alongside the 17-20% fall in sterling exchange rates against the dollar since July 2016 making the price of imported goods and services higher it means there is scope for re-evaluating sourcing and manufacturing commitments for some clothing and footwear lines.

The economic benefits of the shifting cost base make it more attractive to develop and retain some skilled manufacturing in the UK close to market demand. This gives retailers more flexibility in terms of response times to catch fashion trends. It also creates jobs, reduces imports and benefits the balance of payments deficit in clothing and footwear.This does not mean on-shoring will replace off-shoring which has grown rapidly since the 1980s, but it does mean there is scope to change the balance of sourcing costs now that variables in the equation are shifting.

© 2017 Tony Hines

If you want to cite this article please acknowledge the author and the work as follows:
Hines,T (2017), The Business of UK Fashion, tonyhinesblog.wordpress.com

 

 

Doing the right thing for a sustainable future – 2020 vision is the new supply chain imperitive

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Poster courtesy Penn State 

Doing the Right Thing, Doing Things Right: Sustainability and Supply Chains

Effective organization requires a focus on doing the right thing. Supply chains are at the center of global trade. Efficiency has been a key focus to improve profitability across the supply chain. This requires organizations to do things right with a focus on lowering supply chain cost. This is of paramount concern to ensure that operations are as efficient as they can be. However, it is only one side of the coin. There is a corollary to this which is that organizations have to do the right things to manage their supply chain effectively. As I say in my Supply Chain Strategies book “Organizations need policies, procedures, and systems to deliver effectively. These three factors need to be sufficiently flexible to respond to the customer if they are to be effective.”[1] It is incumbent that organizations have 20:20 vision and not myopic vision when it comes to both doing things right and doing the right thing.

Those managing end to end global supply chains have an enormous responsibility to preserve and sustain natural resources for future generations. The scientific evidence informing global warming due to human intervention is convincing.

scm-book-cover“The concept of sustainable development has been debated since publication of the Brundtland Report (1987) and the Rio Declaration (1992) following on from the Earth Summit in the same city in 1989. The Brundtland Report noted that ‘critical global environmental problems were primarily the result of the enormous poverty of the South and the non- sustainable patterns of consumption and production in the North’ thus, making the distinction between the developed and developing world. It called for a strategy that united development and the environment, which is now described by the common term sustainable development (World Commission on Environment and Development, 1987).” Hines (2014:323)

Policy Measures

The Rio Declaration (1992) and the Kyoto Protocol (1998) called for action on production patterns that showed increasing toxic waste emphasising the need for renewable energy sources, recognising a growing shortage of water and calling for more sustainable public transport systems.

The largest emissions of greenhouse gasses (carbon dioxide, methane, nitrous oxide, sulphur hexafluoride) and two gases arising from these, hydrofuorocarbons and perfluorocarbons, come from emissions in the industrialised countries of the USA, EU, Russia, China, Japan and India.

The Stern Report (2007) noted that irreversible damage was being caused to the natural world and the ecosystem. It was estimated that there were 30,000 major dams preventing flooding of fertile land to sustain food production for an ever growing global population; in 1750 there were none of any consequence.  As indicated in my book:

 “Water usage has increased from around 1,000 km 3 per year in 1900 to nearly six times that quantity by 2000; fertilizer consumption has increased from a zero base to 300 million tonnes in the same time- period. There are now over 700 million motor vehicles where there were virtually none at the start of the twentieth century and CO 2 emissions have risen by 22 per cent between 1980 and 2000. Furthermore, since 2000 they have tripled over the average from 1990–99.” Hines (2014).

While governments can do much by setting a policy agenda the practice is part of everyone’s responsibility to do as much as we can by doing the right things. We do so in small ways in our domestic lives by recycling waste materials. However, if we manage organizations and especially large organizations we are able to do much more.

Practice

Interventions at every stage of the supply chain can contribute to a better world, one that is sustainable in the sense it is defined in this paper. Establishing and maintaining governance throughout each of the supply chains managed is the starting point. This ensures that partners in the network have a responsibility to be compliant in order to maintain their place in the organization supply chain. This has a dual function to educate and to raise supply chain standards that will achieve a sustainable future. The critical role of first tier suppliers has been identified as an agent of change to achieve this.[2] This may be limited by the resource availability of the lead organization, their abilities and commitment to the ‘triple bottom line’, the power they have to exert on the lower level suppliers and their alignment of the procurement and purchasing activities with sustainability.   Some have argued that it needs to go further than compliance to commitment. [3]

Sourcing strategies need to balance the twin aim of being efficient by lowering cost to ensure profitability but not at the expense of sacrificing sustainable futures if it requires doing the wrong thing. In our changing world customers and consumers are becoming more aware of the need to manage end to end supply chains effectively to be clean, green and sustainable.

Recent research has identified a supply chain position paradox [4]which effectively means that those organizations further down the supply chain that is those closer to the consumer are more likely to invest in supply chain sustainability. One important reason for this is that these organizations are more visible to consumers and are more likely to receive a backlash from them.

Sourcing and procurement strategies have a central role to play in establishing criteria for sustainability. These strategies are closely linked to ethical trading arrangements. If supplies are to be procured from countries where their governments are less concerned with environmental standards and working conditions it cannot be right for global firms to exploit this situation in pursuit of profit alone.  There is a moral obligation to do the right thing. A point made over 250 years ago by Adam Smith. [5]

  1. Hines, T., Supply Chain Strategies: Demand Driven and Customer Focused2014, New York: Routledge.
  2. Wilhelm, M.M., et al., Sustainability in multi-tier supply chains: Understanding the double agency role of the first tier supplier. Journal of Operations Management, 2016. 41: p. 42-60.
  3. Foerstl, K., et al., Drivers of supplier sustainability: Moving beyond compliance to commitment. Journal of Supply Chain Management, 2015. 51(1): p. 67-92.
  4. Schmidt, C., G., K. Foerstl, and B. Schaltenbrand, The supply chain position paradox: green practices and firm performance. Journal of Supply Chain Management, 2017. 53(1): p. 3-25.
  5. Smith, A., The theory of moral sentiments2007 [1759], New York: Cosimo.