Sustainable Benchmarking of Supply Chains: Designing indicators with Analy=cal Hierarchy Process

Transcription

1 Sustainable Benchmarking of Supply Chains: Designing indicators with Analy=cal Hierarchy Process Dr Natalia Yakovleva Senior Lecturer in Interna4onal Business Strategy Newcastle University London Workshop: Indicators and Metrics for Socially Inclusive Waste Management and Resource Efficiency in Supply Chains: Measuring and to Embed Sustainability in Policy and Florianopolis, Brazil May 2017

2 Outline 1) Sustainability in the food supply chain 2) Designing indicators for measuring sustainability in the supply chain 3) AHP for benchmarking sustainability in the supply chain Acknowledgment: Professor Joseph Sarkis (Worcester Polytechnic Ins4tute) and Thomas Sloan, (University of MassachuseVs Lowell) Yakovleva N, Sarkis J, Sloan T. Sustainable benchmarking of supply chains: the case of the food industry. Interna'onal Journal of Produc'on Research 2012, 50(5),

3 Sustainability in the food supply chain Examining sustainability impacts of the food produc4on and consump4on system looking at environmental, social and economic impacts. Aims of the sustainability assessment: To evaluate sustainability effects of the food system on using triple bovom line (establishing a baseline) To evaluate effects of technology in the food system upon sustainability (impacts of technology on the baseline) To compare compe4ng or alterna4ve strategies/models of food produc4on and consump4on (compare with the baseline)

4 Mapping the product supply chains (chicken and potatoes in the UK) Breeding Hatching Rearing Equipment Exports Primary Processing Imports Incinerators Feed Further Processing Landfill Packaging Final manufacturing Other waste disposal op4ons Transport Wholesale Regulators Supermarkets Local butcher Other retailers Food service Consumers

5 Inputs Supply chain stage Outputs energy water Breeding air emissions transport fer4lisers Seed produc4on wastewater machinery Agricultural growing waste energy transport water materials Processing Packing air emissions wastewater chemicals equipment Final manufacturing waste transport energy equipment Merchants Wholesalers air emissions wastewater water Retailers Food service Green grocers waste water air emissions energy Consumers wastewater equipment waste

6 Sustainability concerns and food Economy: Food manufacturing is the single largest industrial sector in the UK, contributes 8% to the UK GDP Employment: Food manufacturing employs 12% of the UK workforce; Health and safety; Job security and wages Consump'on: Expenditure on food and drink accounts to 8%-20% of household expenditure Consumers: Food safety, Marke4ng policies, Value for money, Gene4c engineering, Food prices Business partners: Contracts with suppliers, Fair trading, Support of local producers

7 Sustainability concerns and food (con=nued) Community: Charity contribu4ons and community investment, Jobs created/tax paid, Provision of local services Environment: Ogen environmental impacts around agricultural produc4on, e.g. Use of pes4cides, Emissions to water and air, Food contributes to 22% of GHG emissions in the UK, Land use, Biodiversity, Sustainable agriculture, but also other concerns around Transport and energy, Packaging, Waste disposal Animal: Animal welfare, Ethical produc4on methods Public: Human health, Nutri4onal value of food, Obesity

8 Measuring sustainability in the food supply chain Various measures: Food miles Lifecycle sustainability impacts Farm economic cos4ng Energy accoun4ng in product lifecycles Ecological footprint analysis Mass balance Farm sustainability indicators Useful references: Seuring, S. and Muller, M. (2008) From a literature review to a conceptual framework for sustainable supply chain measurement. Journal of Cleaner Produc4on, 16(15): Sonesson, U., Belrin, J. and Ziegler, F. (2010) Environmental Assessment and Management in the Food Industry. Woodhead Publishing. Yakovleva N. Editorial introduc4on: Measuring the sustainability of the food system. Journal of Environmental Policy and Planning 2007, 9(1), 1-3.

9 Sustainability benchmarking using AHP 1) To develop indicators that reflect three dimensions of sustainability environmental, social and economic following a concept of triple bovom line 2) To apply sustainability indicators to various supply chain stages from produc4on to retail 3) To incorporate strategic sustainability target selng through scaling indicators according to desirability of sustainability performance 4) To determe rela4ve importance between indicators across sustainability dimensions and supply chain stages using AHP

10 Developing indicators for measuring sustainability in the food supply chain Cover stages of food supply chain - agricultural produc4on, food manufacturing/processing, food wholesale, food retail, food services and domes4c consump4on Captures three dimensions of sustainability: economic, social and environmental Provide the means for comparing sustainability effects of different strategies in the food supply chain Useful reference Bell,S. and Morse, S. (2008) Sustainability indicators: measuring the immeasurable? Routeldge: London.

11 Sustainable development objec=ve measurement criteria - indicators Sustainable development objec4ve Measurement criteria (Specific indicator) Promo4on of economic growth Contribu4on of the industry to na4onal economy (Contribu4on to GDP,, %, Produc4vity, per year) Improvement of labour standards Occupa4onal health and safety (No. of health and safety incidents) Reduc4on of resource use Energy use (Energy used, tonnes per year; Renewable energy vs. non renewable energy, %) Water use (Water used, tonnes per year; Reusable water vs. fresh water, %)

12 Possible indicators for measuring sustainability in FSC Stage Economic Social Environmental Agriculture Processing Distribution Output Productivity Profitability Market Imported vs. domestic Distribution of imports Output Productivity Profitability Market Imported vs. domestic Distribution of imports Output growth Labour productivity Profitability Market Employment Average wages Hazardous substances Health and safety Fair trade Employment Average wages Hazardous substances Health and safety Fair trade Employment Average wages Hazardous substances Health and safety Fair trade Environmental reporting Animal welfare Energy use Water use Packaging use Waste Harvest loss Variety of breeds Environmental reporting Energy use Water use Packaging use Waste Food loss Environmental reporting Energy use Packaging use Waste Food loss Consumption Access to food Fresh vs. processed foods Fair trade Food wasted Waste

13 Chosen sustainability indicators Final set of 9 indicators is selected for the framework, three per dimension In total 45 indicators Supply chain stage Environmental Social Economic Agriculture Food processing Food wholesale Food retail Food catering Energy consump4on Water consump4on Waste arising Employment Wages Employee gender ra4o Labour produc4vity Market concentra4on Import dependency

14 Data collec=on (data for 2002) Indicators Units of measurement Chicken Potatoes Food & drink manufacturing UK manufacturing industry Number of enterprises , ,366 Total output 000 2,063,000 1,400,000 67,576, ,081,000 GVA , ,000 19,643, ,061,000 GVA per workforce 23,350 53,182 40,252 45,160 Large enterprises, turnover + 5m % 37% 27% 15% 7% Imported vs. domestic % 22% 7% 15% 26% Total employment People 20,000 11, ,000 3,965,000 Average annual wages per person Male vs. female full-time employment Average purchase of energy per year 16,800 19,273 18,193 20,635 % 73% 62% 70% 63% 000 per enterprise 794 1, Data collec4on: Sta4s4cal informa4on from DEFRA on the agricultural sector ONS for the food sector and retail Average purchase of water Average cost of sewage and waste disposal 000 per enterprise 000 per enterprise

15 Scoring the indicators (from 0 to 6) n/a Very poo Poor Fair Average Good Excellent Productivity (GVA per workforce, thousand pounds) Market concentration (% of large enterprises, turnover + 5m) Trade importance (import dependency, %) Employment (Employees per enterprise, number of people) Wages (Average gross wages per employee, thousand pounds) Gender balance (Male vs. female full-time labour) Energy use (Purchase of energy per enterprise, thousand pounds) Water use (Purchase of water per enterprise, thousand pounds) Waste (Cost of sewage and waste disposal per enterprise, thousand pounds) n/a n/a n/a n/a n/a n/a n/a n/a n/a

16 Spider diagrams (earlier itera=ons) Purchase of sew age and w aste services Purchase of w ater Processing GVA per employee Proportion of large enterprises Import dependency Purchase of sew age and w aste services Purchase of w ater Total supply chain GVA per employee Proportion of large enterprises Import dependency Purchase of energy Employee per enterprise Purchase of energy Employee per enterprise Male vs. f emale employment Average annual gross w ages Male vs. f emale employment Average annual gross w ages chicken potato food and drink chicken potato food and drink

17 Benchmarking in the supply chain Benchmarking is a process of evalua4on of organisa4onal products, services, and processes in rela4on to the best prac4ce. The term is ogen associated with efforts undertaken by individual firms to iden4fy and imitate best prac4ces within their own industry. Benchmarking is an important tool used for con4nuous improvement of organisa4onal performance, total quality management and compe44ve advantage. Challenge of comparing supply chains of different food products

18 Analy=cal Hierarchy Process (AHP) for sustainability benchmarking AHP considers mul4ple avributes and factors, which is a key characteris4c of sustainability measurement by u4lisa4on of both qualita4ve and quan4ta4ve data, which is highly beneficial when considering sustainability issues To further this methodology we introduce a weigh4ng scheme based on expert opinion to more accurately represent the performance of these actual supply chains. We complete this por4on of the methodology by introducing a mul4-avribute ra4ng scheme, AHP. AHP allows for a set of complex issues, factors and rela4onships, which have an impact on an overall objec4ve, to be compared with the importance of each issue rela4ve to its impact on the solu4on of the problem

19 AHP AHP u4lises a decision-making framework that assumes a unidirec4onal hierarchical rela4onship among decision levels. Thus, the first major step in the AHP process is to define the decision hierarchy, which would include overall objec4ve, factors, subfactors (if necessary) and alterna4ves.

20 Pairwise comparisons for AHP We surveyed a small group of food supply chain experts (4) to determine rela4ve importance weights of chosen indicators in the supply chain. How significant are environmental factors when compared to economic factors? How significant are environmental factors when compared to social factors?. How significant are social factors when compared to economic factors?

21 Calcula=ons of rela=ve weights Evalua4on of rela4ve importance weights by determining a local priority vector and conduc4ng the sensi4vity analysis. Aw = λ max w AHP is used to compute final adjustment ra4ngs of each indicator The sum of global importance ra4ngs equals to 1.

22 Expert scores First we calculated the scores for each product expert (1 for potato and 1 for chicken) Then we computed an average global importance ra4ngs for each product with retail experts (2 people) using weighted geometric mean as it usual when combining separate ra4ngs of individual experts. Since the potato supply chain expert has more detailed knowledge of this chain, we placed a weight of 0.5 on his/her ra4ngs and placed a weight of 0.25 on the ra4ngs of each of the retail experts (for a total weight of 1.0). Sensi4vity analyses can be performed to evaluate how robust the specific numbers are with respect to varia4ons in different inputs, giving decisionmakers confidence in the final results.

23 Adjustment ra=ngs (weigh=ngs) Once responses for all ques4ons have been collected, AHP is used to compute the rela4ve adjustment ra4ngs. The final output is a set of importance ra4ngs for each expert for all the indicators. The global importance ra4ng is determined by taking the products of each of the local scores for a sustainability dimension Global importance ra4ngs is a products of GIR ijk = SD i * SCS j * Si k GIR ijk global rela4ve importance ra4ng for Sustainability Indicator k of Supply Chain Stage j, Sustainability Indicator I, SD i = local rela4ve importance ra4ng for the Sustainability Dimension I, SCS j = local rela4ve importance ra4ng for the Supply Chain Stage j and SI k = local rela4ve importance ra4ng for the ssustainability indicator k

24 Sustainability index (potato) An overall sustainability index is computed by weigh4ng the indicator scores (from 0 to 6) by the global ra4ngs. The index is simply the sum of the indicator scores mul4plied by the global ra4ngs.

25 Sustainability index (chicken) Although data collected for calcula4on of indicators (especially at the stage of agriculture) are not complete, this result would mean that in comparison with the potato supply chain, the chicken supply chain is closer to achieving sustainability objec4ves within three dimensions: economic, social and environmental.

26 Benefits of sustainability index An advantage of the scoring and the weigh4ng scheme is that we can arrive at a single sustainability index score for the overall supply chain as well as scores for each individual stage, thus helping to inform decision making at the strategic, tac4cal and opera4onal levels by organisa4ons inside and outside of the supply chain. From a strategic perspec4ve, large food retailer could use these results as incen4ve to build partnerships with food processors, for example, with the aim of increasing overall supply chain sustainability. The ra4ngs can help guide firms decisions about the use of recycled and less energy intensive materials. Policy makers seeking to understand and improve sustainability can examine what aspects of the processing stage make it more sustainable.

27 Limita=ons and opportuni=es Lack of sta4s4cal data on environmental and social issues Different units of measurement (physical vs. monetary) used at different stages in the supply chain More sta4s4cal data on agriculture and food processing rather then on wholesale, retail and food service Difficult to extract values for specific food products from aggregated data The assessment does not account for impacts of imported foods Data is not longitudinal to monitor the dynamics of the sustainability in the food supply chain Possibility of developing different scenarios - organic, processed food

28 References Yakovleva N, Sarkis J, Sloan T. Sustainable benchmarking of supply chains: the case of the food industry. Interna'onal Journal of Produc'on Research 2012, 50(5), Yakovleva N, Sarkis J, Sloan TW. Sustainability benchmarking in the food supply chain. In: Ulf Sonesson, Johanna Berlin and Frederike Ziegler, ed. Environmental Assessment and Management in the Food Industry. Cambridge: Woodhead Publishing, 2010, pp Yakovleva N. Measuring the sustainability of the food supply chain: A case study of the UK. Journal of Environmental Policy and Planning 2007, 9(1),

29 Potassium for food produc=on in the Global South Russia 19% Spain 2% Potash (K) produc4on, 2015e UK 1% USA 2% Belarus 17% Others 0% Brazil 1% Jordan 3% Israel 5% Germany 8% China 11% Canada 28% Chile 3%

30 Thank you! Dr Natalia Yakovleva, Newcastle University London Join us