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Greening the Automotive Supply Chain: A Relationship Perspective

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Abstract

Purpose – This study seeks to explore the moderating impact of relationship conditions existing between a customer and its suppliers on the uptake and effectiveness of the customer's environmental performance requirements (otherwise known as "green-supply"). Design/methodology/approach – The study assesses the extent to which a supplier's environmental performance is influenced by its customer's environmental performance requirements when specific relationship conditions (investment, contracting and monitoring routines) are taken into account. Data were collected through a survey of first and second tier component manufacturers in the Australian automotive industry and analysed using linear regression and MMR. Findings – Suppliers were found to be more responsive to their customers' environmental performance requirements where increasing levels of relationship-specific investment occurred. As the level of investment in the customer-supplier relationship increased, suppliers become less likely to believe that they would be penalized for non-compliance with the customer's environmental performance requirements. Research limitations/implications – Survey data were collected in 2004 and are limited to the Australian automotive industry. The sample size available for the regression analysis also precluded the use of more comprehensive analytic techniques. Practical implications – The research offers new insight into the issue of how firms might improve the environmental performance of suppliers and the sustainability of their supply chain. Originality/value – Virtually no research exists on the actual effectiveness of green supply requirements when placed in context with the realities of inter-organizational dynamics. The findings suggest that traditional operations theory on inter-organizational performance improvement is just as relevant to the use of environmental performance requirements.
Greening the automotive supply
chain: a relationship perspective
Dayna Simpson, Damien Power and Daniel Samson
Department of Management, University of Melbourne, Australia
Abstract
Purpose – This study seeks to explore the moderating impact of relationship conditions existing
between a customer and its suppliers on the uptake and effectiveness of the customer’s environmental
performance requirements (otherwise known as “green-supply”).
Design/methodology/approach The study assesses the extent to which a supplier’s
environmental performance is influenced by its customer’s environmental performance requirements
when specific relationship conditions (investment, contracting and monitoring routines) are taken into
account. Data were collected through a survey of first and second tier component manufacturers in the
Australian automotive industry and analysed using linear regression and MMR.
Findings – Suppliers were found to be more responsive to their customers’ environmental
performance requirements where increasing levels of relationship-specific investment occurred. As the
level of investment in the customer-supplier relationship increased, suppliers become less likely to
believe that they would be penalized for non-compliance with the customer’s environmental
performance requirements.
Research limitations/implications – Survey data were collected in 2004 and are limited to the
Australian automotive industry. The sample size available for the regression analysis also precluded
the use of more comprehensive analytic techniques.
Practical implications The research offers new insight into the issue of how firms might improve
the environmental performance of suppliers and the sustainability of their supply chain.
Originality/value Virtually no research exists on the actual effectiveness of green supply
requirements when placed in context with the realities of inter-organizational dynamics. The findings
suggest that traditional operations theory on inter-organizational performance improvement is just as
relevant to the use of environmental performance requirements.
Keywords Environmental management, Supplier relations, Automotive industry, Green marketing
Paper type Research paper
Introduction
Organizations have become increasingly aware of the propensity for environmental
pollution incidents within their supply network to cost them in penalties, cleanup and
consumer backlash. As a result, minimum standards of environmental performance
have become increasingly prevalent in the purchasing contracts or guidelines of
multinational corporations for their local and global suppliers (Bowen et al., 2001a; Zhu
and Sarkis, 2004). This relatively new expectation for upstream suppliers goes beyond
the more traditional requirements of their customers to reduce costs and improve
quality and service (Lambert and Cooper, 2000). Prominent examples of such activity
include Starbuck’s Responsible Sourcing Guidelines (Starbucks, 2005), Ford Motor
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0144-3577.htm
The authors would like to acknowledge the support and involvement of the Toyota Motor
Corporation Australia, the case study suppliers, the Victorian Department of Innovation,
Industry and Regional Development, the Federation of Automotive Parts Suppliers and the
Tooling Industry Forum of Australia.
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International Journal of Operations &
Production Management
Vol. 27 No. 1, 2007
pp. 28-48
qEmerald Group Publishing Limited
0144-3577
DOI 10.1108/01443570710714529
Company’s requirement for all suppliers to certify to the ISO14001 management
standard and the inclusion of “supplier activities” in statements of environmental
responsibility for Toyota, BMW and Mitsubishi (Young and Kielkiewicz-Young, 2001).
This is matched by recent academic research which supports the potential
of customer-supplier relationships to influence the environmental performance of
manufacturing supply chains (Klassen and Vachon, 2003; Zhu and Sarkis, 2004;
Rao and Holt, 2005). At a time when global manufacturing industries face significant
constraints on the availability of natural resources and multiple threats to survival, the
imposition of environmental performance requirements represents a new and complex
pressure for the organization to manage.
The practice of extending production goals from customers to their suppliers as a
means to improve overall performance in a supply chain has been a growing field of
research for the past 15 years (Lamming, 1993; Krause et al., 2000; Liker and Choi,
2004). Organizations have used a range of supplier-relationship management styles to
improve production processes or introduce new technologies into the supply chain,
such as purchasing power (i.e. Walmart) and/or collaboration (i.e. Toyota) (Dyer and
Chu, 2003). Both modes of interaction have been successful in the past for achieving
more rapid and often inimitable process or product-based improvements. A small but
growing body of research has more recently explored the influence of a customer’s
relationship with its suppliers in regard to the extension of sustainability-based goals.
This process, known broadly as “green-supply,” is a potentially effective mechanism
for supply chain managers to improve the organization’s record on corporate social
responsibility, minimize reputational risks, reduce wastes and increase flexibility in
response to new environmental regulations (Green et al., 1998; Bowen et al., 2001a;
Melnyk et al., 2003). Most examples have included requirements to meet minimum
standards of environmental practice, certification to an international management
standard (i.e. ISO14001) or a general philosophy of supply chain stewardship.
The customer – as a major financial stakeholder – has significant potential to force
improvements to its suppliers’ environmental management practices, introduce
environmentally sound technologies, and collaborate with suppliers to share knowledge
and jointly develop more sustainable products and processes. From the customer’s
perspective this may require a more hierarchical approach to the issue of supplier
greening that is, expecting that some suppliers will be more or less responsive than
others. From a supplier’s perspective this may present both advantages and difficulties
in their attempts to meet a new and possibly under-developed set of environmental
performance requirements. From a government perspective this may require a more
collaborative approach to working with organizations as the challenge to meet the goals
of global sustainability increases.
Much research into external pressures on the organization’s derivation of
environmental responsibilities is considered from the perspective of public or
institutional stakeholders or the consumer. Only a small but growing body of research
explores therole of the major customer in a supplychain or procurement context. Even less
research considers the implications of the nature of the customer-supplier relationship on
the uptake and effectiveness of these environmentally-relevant supply requirements. That
is whether the presence of specific relationship conditions or management styles
between the customer and the supplier (i.e. purchasing power, governance mechanisms or
collaboration) might moderate the influence of these types of requirements.
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This research seeks to extend the small but growing body of knowledge surrounding
the introduction of environmental performance requirements into supply contracts or
statements of supply chain stewardship. The major contribution of this research will be
not just to explore the existence and application of such requirements but to explore the
influence of specific exchange conditions on their uptake and effectiveness. In
particular, the transaction cost framework after Williamson (1985) is employed to
describe these exchange conditions. The a-priori expectation of this research is that
supply relationship conditions that exhibit traits of high investment and governance
will provide for a more effective deployment of a customer’s environment-related
performance requirements. Such conditions are proposed to moderate the effectiveness
of any program of green supply between the customer and the supplier by increasing its
efficacy as the level of investment and governance increases.
Literature review
Global warming, reductions in air quality, pollution of waterways and widespread loss
of biodiversity are but a few examples of the types of environmental impact that can be
attributed to the coordinated activity of organizations in a supply chain. Much of this
arises from manufacturing organizations that continue to produce large amounts of
unnecessary waste or emissions rather than investing in better technologies or
practices to prevent its generation at the source (Klassen, 2000; King and Lenox, 2002).
The use of more environmentally sustainable products or production processes are
often prevented from developing within an organization because of the external
pressure applied by customers to achieve the requirements of reduced cost, increasing
quality and faster delivery. Production of unnecessary waste or choices toward
lower-cost but environmentally unsustainable production alternatives are frequently
the responses to such supply chain pressures (Green et al., 1998).
In the practical realm, the inclusion of environmental performance standards in
supply requirements is marching ahead with only limited theory on the managerial
implications of this type of inter-organisational action. An opportunity exists for the
development of new theories of inter-organisational exchange using theories of
the organisation and supply chain management that would substantially inform this
new type of practical activity.
Customer-supplier interactions and environmental performance
Programs developed by business to “green” supplier activities or include
environmental performance requirements in supply guidelines are increasingly
evident in practice. Such initiatives are broadly referred to as either green-supply or
green-supply-chain in both the academic and practitioner literature. These have largely
included activities with suppliers such as:
.programs to reduce or eliminate materials used in manufacturing processes or
products;
.programs focused on the environmental compliance status and practices of
supplier operations;
.joint development of new materials, processes or other solutions to
environmental issues (Sarkis, 2003; Green et al., 2000).
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A recent body of academic research generates support for the theory that the
customer-supplier or supplier-supplier relationship may generate a range of positive
environmental outcomes (Klassen and Vachon, 2003; Zhu and Sarkis, 2004; Rao and
Holt, 2005). Communicating goals of sustainability or environmental performance
through the supply relationship has resulted in for example, collaborative waste
reduction, environmentally sound innovation, cost-effective and environmentally
beneficial solutions to production problems, and more rapid development and uptake
of environmental technologies. There is growing empirical support for the role of
the supply relationship in environmental performance management that extends
into the inter-firm setting.
In the antecedent work of Lamming and Hampson (1996), customer firms engaged
in collaborative dialogue with suppliers were better able to understand the
environmental impacts of their supply chains. Florida (1996) looked to
customer-supplier relationships that were already characterized by improvement or
learning activities:
... environmental improvements flow from ongoing joint efforts to improve productivity,
eliminate defects and reduce costs, rather than from direct offers to transfer pollution
prevention technology or organizational strategies designed expressly to eliminate toxins or
prevent pollution (Florida, 1996, p. 81).
Hall (2000, 2001) extended Florida’s (1996) work by finding that a collaborative
customer-supplier relationship often led to environmental performance improvements
in both the customer and the supplier firm. Geffen and Rothenberg (2000) found the
involvement of suppliers to be critical in the development and implementation of
environmentally sound technologies in automotive paint production. More recently,
Klassen and Vachon (2003) investigated the role of supply-chain-level evaluation and
collaboration activities on plant level environmental investment. They found that
greater customer involvement and scrutiny of suppliers tended to: “... capture the
attention of plant managers and encouraged greater environmental investment”
(Klassen and Vachon, 2003, p. 347).
The commonality across this body of research provides support for the hypothesis
that customers may be able to directly and indirectly improve a supplier’s
environmental performance.
Stakeholder management and environmental performance
Recognition and development of an organizational requirement to manage its impact
on the environment has developed largely in response to increasing levels of
government regulation and profile-raising of environmental issues by non-financial
stakeholders (politics, community and media) (Aragon-Correa, 1998; Hoffman, 1999;
Bansal, 2005).
An alternative perspective to that of the organization choosing to adopt a proactive or
socially responsible strategy and acting in advance of its stakeholders is to take the
perspective of Friedman (1970) and Egri and Pinfield (1996) thatthe organization’s choice
of environmental strategy has more to do with the needs of the organization’s financial
stakeholders. This somewhat un-romantic view of an organization’s social and
environmental responsibilities, takes the less popular position that organizations exist
purely for the sake of economic self-interest rather than to fulfill a set of social or altruistic
ideals (Smith, 1776; Friedman, 1970). As Egri and Pinfield (1996, p. 472) describe:
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From the perspective of organizational theory, environmental degradation becomes relevant
only when the performance of a focal organization and the welfare of organizational
participants are affected by such concerns.
For the organization to internalize a social or environmental responsibility it is
proposed that an initial condition of direct impact to, or influence on, the ecology of its
field or system must first occur.
Antecedent theory proposes that the organization’s response to the environmental
requirements of its external stakeholders will be influenced by its existing level of
environmental commitment (Hunt and Auster, 1990; Henriques and Sadorsky, 1999;
Aragon-Correa and Sharma, 2003). At the same time and within the context of this
research, the magnitude of this environmental commitment can be significantly
affected by the existence and persistence of an externally derived set of environmental
performance requirements. The form and magnitude of this influence however should
depend on which stakeholder claims relevance for its environment-related requirement,
and the power and level of involvement of that stakeholder with respect to the
receiving organization (Mitchell et al., 1997; Buysse and Verbeke, 2003).
Customer-supplier relationships
Inter-firm relationships are critical to the successful coordination of supply chains and
improvements in the performance of suppliers’ production capabilities (Lamming,
1996; Handfield et al., 2000; Scannell et al., 2000). The supply relationship is an
important channel for communicating customer requirements to suppliers and
achieving longer term goals of production (Lamming, 1996; Handfield et al., 2000;
Scannell et al., 2000). Managed supply chain relationships can often attain the types of
performance improvement and superior competitive advantage that are not readily
generated by open market transactions (Lamming, 1993; Burt and Doyle, 1993; Dyer
and Nobeoka, 2000).
In considering attempts to “green” suppliers as an issue of performance
management in the supply chain where a customer has a minimum performance
requirement or desires an improvement in performance from its suppliers such
environmental performance goals may be influenced by the same factors which
influence other supply chain level performance elements (i.e. quality, cost and lead time
reductions). The importance of relationship management styles or the “conditions” of
the customer-supplier relationship have been increasingly described as important
factors in the process of supplier or supply chain performance improvement (Cousins
and Stanwix, 2001; Handfield and Bechtel, 2002; Dyer and Chu, 2003).
All supply relationships tend to share the same basic principle of conduct
suppliers are required to meet performance or supply targets specified by a customer.
Where the purchasing side of the supply partnership (customer) intends to extract a
performance gain in a process, product or service being managed by its suppliers,
established and emergent theory suggests a variety of mechanisms or conditions to
achieve this end (Cousins and Stanwix, 2001; Handfield and Bechtel, 2002; Dyer and
Chu, 2003). These mechanisms or “conditions” that occur between a customer and its
suppliers provide a number of critical features structure for the interaction and
remedies for failure or non-compliance; a mechanism for power or influence over the
supplier; and a climate that promotes either adversarial behavior or collaboration (Ring
and Van de Ven, 1992). The literature remains unclear as to which mechanism or
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condition will produce the best results for a customer that desires to improve an
element of a supplier’s operations performance. For example, the competitive force of
the open market has been shown by some authors to be a successful mechanism to
improve performance amongst a pool of suppliers (Scannell et al., 2000). Other authors
promote the importance of a highly socialized and involved form of relationship for
generating more complicated types of performance gains (Dyer and Nobeoka, 2000;
Dyer and Chu, 2003).
An important consideration for the customer and supplier amongst these various
relationship choices is the transaction-cost framework first described by Williamson
(1975). Transaction-cost theory is useful for describing the coordination costs and
transaction risks of inter-organizational activities. Transaction cost theory in its
original explanatory frame, is primarily concerned with its central claim which is the
handling of transactions in a manner which minimizes the associated costs (Grover and
Malhotra, 2003; Williamson, 1975; 1985). An associated body of literature has used the
transaction cost theoretical frame to explore its implications for inter-organizational
performance improvement. The major tenet of this body of work has been the
proposition that as transaction costs increase and behavioral uncertainty decreases,
the mutual benefits of inter-organizational performance improvement will also increase
(Rindfleisch and Heide, 1997; Grover and Malhotra, 2003; David and Han, 2004).
Development of hypotheses
“Environmental commitment” is defined in this research as the willingness of an
organization to determine, articulate and manage it responsibilities toward the natural
environment. An underlying assumption of this study has been that an organization’s
overall level of environmental commitment will provide positive benefits to the
organization’s environmental performance. The relationship between environmental
commitment and use by the organization of a set of environmentally conscious practices
has previously been explored by others. These prior works have found increasing levels
of environmental commitment and greater occurrence within the organization of for
example, pollution prevention and incorporation of the environment in product design
and innovative practices (Buysse and Verbeke, 2003); being more inclusive of
environment-related stakeholders (Aragon-Correa, 1998); incorporating practices that
support pollution reduction (Sharma and Vredenburg, 1998; Klassen, 2001); more likely
to use environmentally conscious manufacturing practices (Bowen et al., 2001a, b); and
have an increasing intention to preserve ecological integrity (Judge and Elenkov, 2005).
Assuming, from the work of previous authors, that higher levels of environmental
commitment will lead to a greater likelihood of improving environmental performance –
for example through pollution reduction or environmentally conscious business practices
this study will assess the impact of an externally derived set of environmental
performance requirements on the organization’s level of environmental commitment.
During preliminary discussions with six automotive component suppliers as part of
this study, organizations were asked where their primary motivation to meet formal or
contractual environmental performance requirements came from, such as certification
to ISO14001. One response in particular illustrated the majority perspective of those
interviewed:
I’d say that we had to have it, because of the customer saying you have to have it if you want
to supply to us. That was pretty much the directive from Ford, Holden and Mitsubishi.
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It’s mandatory. Our social responsibility is always there but with these sorts of things unless
you have to have them ...because it does cost us a lot of money (Operations Manager, 2004).
Primary stakeholders such as the organization’s major customer are able to
influence the strategic choices of the organization (Miles and Snow, 1978; Pfeffer and
Salancik, 1978; Mitchell et al., 1997). In this study, the interest has been with the most
significant stakeholder for the organization’s survival its major customer because
of the inherent power of this stakeholder in the context of the organization’s supply
relationships. Already established in prior research is that higher levels of
environmental commitment is likely to generate higher levels of environmental
performance in the organization. The study’s first proposition is that the customer’s
environmental performance requirements will bear a relationship to the supplier’s level
of environmental commitment:
H1. The supplier’s level of environmental commitment is related to the
environmental performance requirements of its major customer.
To integrate the findings of this study with the work of previous authors, the
organization’s level of environmental commitment is assessed in relation to
the environmental performance requirements of its major customers. This initial
relationship is then assessed in the presence of a series of customer “conditions” that act
to inform the organization’s response to these environmental performance requirements.
Influence of the customer-supplier relationship
Where the influence of one firm over another is required with an aim to improve or
ensure a process, product or service, established and emergent theory offers varying
explanations for the most important factors for customers to consider when attempting
to extract performance gains from suppliers. Much of this literature relates to the
structure of the inter-firm relationship and the desired outcome of any improvement
initiative. As described in the literature review, all supply relationships tend to share
the same basic principle of conduct suppliers attempt to achieve, to the best of their
ability and willingness the specific performance targets required by the customer.
Customers often choose to use a range of measures to “encourage” their suppliers to
meet such performance requirements. The choice and success of these measures of
“encouragement” are often referred to as relationship “conditions” that determine its
power or influence over the supplier and its choices.
It is a major proposition of this study that suppliers will not only be influenced by
the environmental performance requirements presented to them by their customers,
but also importantly the magnitude of this influence will depend on the existing
conditions of the supply relationship. These conditions in the relationship will
moderate the impact that the customer’s environmental performance requirements has
on the environmental commitment of its suppliers. This moderating effect is described
through the study’s next three hypotheses.
Relationship-specific investment. Relationship conditions that promote
relationship-specific investment between the customer and the supplier particularly
in regard to the supplier having dedicated time, future goals, equipment or capacity to
the relationship potentially allow the supplier to be more “aware” of the customer’s
environmental reputation and value system. Higher levels of asset specificity between
the customer and supplier have been found by other authors to lead to positive
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performance gains for both firms involved in the exchange (Dyer, 1997; Handfield and
Bechtel, 2002). A remark made by an operations manager during preliminary interviews
conducted as part of this study highlights the potential importance of
relationship-specific investment to goals of environmental performance:
We’re fairly close to [our major customer ] so if they take a strong interest in a particular issue
it obviously affects us because we’re that closely linked to them we’ll have a look at what
we’re doing. A lot of people don’t really know who the hell we are but they know who [our
major customer ] is and if [our major customer ] had a big environmental impact somewhere
around the world, it could have a big impact on their sales. If we had a major environmental
incident, it would certainly affect our customer’s opinion of us ...” (Operations Manager,
2004).
Investment as a moderating variable has not yet however been investigated in regard
to environmental performance improvement. Asset specificity is the most widely used
measure for measuring the role of transaction cost theory in inter-organizational
relationships (David and Han, 2004) and it has been used again in this study. In this
study, the role of relationship-specific investment in the uptake of the customer’s
environmental performance requirements is described by the next hypothesis:
H2a. The presence of relationship-specific investments will improve supplier
response to the customer’s environmental performance requirements.
Governance or contracts. Contracts support asset-specific investments in that they
provide a form of governance between the customer and the supplier that not only
protects assets sunk into the relationship, but also identifies paths for dispute resolution
and outcomes for non-compliance (Williamson, 1975). Contracts are effectively a
safeguard against opportunistic behaviour and set clear boundaries for default on
contractual specifications between the customer and the supplier. At the same time that
contracts provide a mechanism of governance they also increase the ex-ante costs for
the relationship and in more recent literature they are described as increasing the
adversarial climate in the relationship and reducing trust (Ghoshal and Moran, 1996;
Liker and Choi, 2004). In this study, the role of contracts in the uptake of the customer’s
environmental performance requirements is described by the next hypothesis:
H2b. Contracts signed between the customer and the supplier will improve supplier
response to the customer’s environmental performance requirements.
Monitoring or assessment routines. Assessment or monitoring performs two important
roles in the supply relationship that of a monitoring mechanism to safeguard
asset-specific investments and also a mechanism to reduce information asymmetry
(Williamson, 1985; Stump and Heide, 1996). In more recent research that described the
role of customer evaluation in the context of environmental performance improvement,
Klassen and Vachon (2003, p. 347) found evaluation activities to have a positive impact
on the level of investment in environmental management by suppliers:
More specifically, customers who implement supplier audits, establish formal evaluation
processes, and offer feedback to suppliers are likely to see positive changes in how suppliers
regard environmental issues. The greater direct scrutiny by customers likely captured the
attention of suppliers’ plant managers and encouraged greater environmental investment.
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As described by one operations manager during discussions with component suppliers
as part of this study, assessment routines allowed their organization to better
comprehend their own environmental performance and what their customers required
of them:
[Our major customer ] made us have a good look at what we’re doing in terms of how does it
impact the environment and what are some of the environmental benefits of what we do.
Their awards process was about showcasing all of the things that you’re doing and some of
it was going on but none of us realized so it wasn’t shared and communicated. They actually
had the framework to ask us “well what are you actually doing for sustainability and green
innovations” and it made us realize we’re actually doing a lot. With the other car companies
it’s just a matter of compliance and ticking the right boxes (Operations Manager, 2004).
The importance of relationship conditions that include the customer using an
Assessment routine such as a customer-derived list of specific performance criteria
for suppliers to follow is still a highly under-explored factor. The possible
importance of assessment to the understanding or evaluation of a customer’s
environmental performance requirements is extended in this study through the final
hypothesis:
H2c. Use by the customer of supplier assessment will improve supplier response to
the customer’s environmental performance requirements.
Conceptual model
In extending the body of research devoted to green-supply, this research explores
specifically the role of the transaction relationship between a customer and its
suppliers and its influence on the communication, uptake and delivery of supply
chain level environmental performance requirements. It seeks to explore both the realm
in which environmental performance requirements are to be effectively met the
organization and the mechanism through which they are exchanged the
customer-supplier relationship.
At a strategic level, a supplier’s environmental commitment will be influenced by
the environmental performance requirements of the stakeholder of interest the major
customer. An increasing environmental commitment in the supplier organization is
proposed to also have a positive relationship to increasing environmental performance.
Assuming from the work of previous authors that higher levels of environmental
commitment will lead to a greater likelihood of improving environmental performance
for example through pollution reduction or environmentally beneficial operational
practices this study will assess the impact of an externally derived set of
environmental requirements on the organization’s level of environmental commitment.
This model is shown in Figure 1.
The model suggests that under conditions of an existing supply relationship there
will be a primary relationship between a customer’s environmental performance
requirements for its suppliers and the supplier’s own commitment to its environmental
responsibilities. This relationship will then be moderated by conditions of the
customer-supplier relationship. The model is tested using the Australian automotive
industry as its case.
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The Australian automotive industry
The global automotive industry provides a unique case for exploring the influence of
supply relationships on environmentally-relevant performance indicators because of
the range of approaches to relationship management evident in practice. It is also one
of the few global industries that contains numerous examples of customers requiring
suppliers to meet minimum standards of environmental performance.
Four major motor vehicle assemblers operate manufacturing and assembly hubs in
Australia Ford, Toyota, Holden and Mitsubishi. The Australian automotive industry
produces large passenger motor vehicles, light commercial and sports utility vehicles
(ABS, 2005). The industry has over 200 individual component manufacturers and
around 500 smaller firms providing tooling services and other firms that provide
specialist automobile services. The Australian industry supplies mainly to the
international markets of South Korea, USA, Canada, Japan and China.
Australian-based industry makes up 65 percent of the inputs to domestic
automotive production. The remaining 35 percent of inputs are mainly imported
parts and components sourced from Japan and the USA. The sector produces around
5 percent of the global motor vehicle market. In 2002-2003 imports of vehicles were
$14bn and imports of components and parts were nearly $6bn (ABS, 2005). Australia
has become a truly globalised production market through de-regulation of the industry,
a stable economy and its position and political/economic relationships with the
growing automotive markets of the Asia-Pacific.
Methodology
Sample and data collection
Following Snow and Thomas (1994) and Wacker (1998), this study used a mixed
method approach to the development of new theory, to better develop the study’s
hypotheses and ground a set of constructs for empirical testing. An initial study was
undertaken involving preliminary discussions with operations managers and
purchasing managers at six first tier automotive component supplier firms in the
Australian manufacturing base. These discussions involved semi-structured
interviews and shop-floor tours (after Yin, 2003). This was followed by an industry
Figure 1.
Conceptual model
SUPPLIER Environmental
Commitment
CUSTOMER
Environmental
Performance
Requirements
Customer-Supplier Relationship
Conditions
Investment (H2a)
Contracts (H2b)
Assessment (H2c)
MODERATORS
H1 Greening the
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survey mailed out to an up-to-date mailing list of first and second tier suppliers in the
Australian automotive industry.
Survey items and appropriate measurement scales were developed after DeVellis
(2003). Scales and items used in the questionnaire, analysis techniques and final results
are described in the following sections. The final method of survey delivery and
collection was selected as suggested by Dillman (1999). The research sample was
sourced from two known industry databases with up-to-date memberships. Database 1
contained all first and second tier component suppliers in the Australian automotive
industry (200 contacts) obtained through the Federation of Automotive Products
Manufacture. Database 2 contained all tooling firm suppliers in the Australian
automotive industry (200 contacts) obtained through the Tooling Industry Forum of
Australia. The instrument was distributed by both mail and e-mail.
Of the 400 surveys distributed, 56 usable surveys were returned for a response rate
of 15 percent. Other research into green supply involving surveys have used a sample
size of similar proportion to this research. Rao (2002) in particular produced significant
findings of green supply with a sample of only 52 firms and Bowen et al. (2001a) used a
sample of only 24 firms (with two sets of respondents within each firm). To assess the
possibility of differences between early respondents, late respondents and
non-respondents, a comparison of the demographics of the survey respondents was
made to the demographics of the larger population (after Armstrong and Overton,
1977). In Table I a comparison is made of the key demographic features of the survey
population and those of the respondents.
Of the 55 respondents in the survey sample 82 percent of organizations were either
manufacturing or component suppliers. 80 percent of organizations had less than 320
employees in their Australian operations and the average number of employees was
232. According to 2004 figures, three automotive brands (Toyota, Ford and Holden)
held over a 50 percent share of the Australian automotive market (AIG, 2005).
The export figure of 36 percent shown in Table I is expected to reflect the dominance of
these three brands in the volume of exported product shown as a gross amount for the
Australian industry. The average figure of 12 percent of exported product for
those remaining in the industry is expected to be a fair representation of the average
automotive supplier rather than any of the larger employers such as the assembly
firms. On the basis of a comparison between the expected demographics of the survey
population and the demographics of those that responded, it was concluded that the
responding population was representative of the larger and target population.
Non-response was attributed to “lack-of-interest” bias only (Armstrong and Overton,
1977).
Demographic variable Population
a, b
Survey respondents
Average number of employees Between 60 and 500 232
Dominant type of organization Component manufacturer Component manufacturer
(82 percent)
Average volume of exported
product
36 percent (including main
assemblers)
12 percent (not including main
assemblers)
Notes:
a
ILO (2004);
b
AIG (2005)
Table I.
Population demographics
and respondent
demographics
IJOPM
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38
Measures
Multi-item scales for the survey were developed from both the case study findings and
the work of previous authors. A draft survey was pre-tested with Toyota Motor
Corporation Australia purchasing staff, six first tier automotive component suppliers
and academics. The final instrument used a 5-point Likert scale (1 ¼not at all; 3 ¼to
some extent; 5 ¼to a very large extent). Final measures used for the analysis are
summarized in the following. Each measure was extracted using factor analytic
techniques after Hair et al. (1998) and Tabachnick and Fidell (2001).
Environmental commitment. A measure for environmental commitment was drawn
from the findings of previous authors (Banerjee, 2002; Aragon-Correa, 1998; Buysse and
Verbeke, 2003) and the evidence presented by the supplier case studies. This was intended
to capture an aggregate measure of the supplier’s underlying commitment to its
environmental responsibilities using a scale which indicated environmental commitment
as expressed through the organization’s policies, values and employee awareness
programs. The extracted scale for environmental commitment is shown in Table II.
Customer’s environmental performance requirements. A measure for the customer’s
environmental performance requirements for its suppliers was derived from three items
developed largely during the preliminary study. Firstly, a measure of the customer’s
explicit or contract-based environmental performance requirements wasused to indicate a
minimum expectation from suppliers (i.e. compliance to the ISO14001 management
standard). Secondly, a measure of the customer’s more implicit or less tangible
environmental performance requirements – such as its own values or policies that the
supplier might try to emulate – was used to indicate the customer’s policy or position
statement with regard to its environmental responsibilities. Finally, a measure of the
customer’s actual commitment to its environmental performance requirements for
suppliers was used to indicate the extent to which suppliers expected the customer to
penalize them for non-compliance with say ISO14001 or other contract-based
requirements. The extracted scale for customer’s environmental performance
requirements is shown in Table III.
Conditions of the customer-supplier relationship. To explore the effect of supply
“conditions” on the relationship between the customer’s environmental performance
requirements and the supplier’s environmental commitment the analysis includes three
moderator variables. These include variables for Investment (after Handfield and
Bechtel, 2002; Krause et al., 2000), Contracts (after Heide and Stump, 1995) and
Assessment (after Krause et al., 2000 and Klassen and Vachon, 2003). The individual
moderator variables for Investment,Contracts and Assessment are shown in Table IV.
Description
Factor loadings
(rotated) MSA
Cronbach
a
Bartlett’s
test
1. Our firm has a clear policy statement urging
environmental awareness in every area of the
business 0.826 0.701 0.891 p,0.001
2. Protecting the environment is a central corporate
value in our firm 0.916
3. At our firm, we make a concerted effort to make
every employee understand the importance of
environmental management 0.851
Table II.
Extracted scale for
environmental
commitment
Greening the
automotive
supply chain
39
Data analysis
Returned surveys were analysed using linear regression analysis with SPSS V.12. Data
were checked first for normality assumptions using normal probability plots and tests
for kurtosis and skewness. Items were reduced into relevant scales using factor
analysis (principal component with a varimax rotation) and factor loadings of less than
0.65 were excluded (Tables II, III and IV). Tests for multi-collinearity were completed
using variance-inflation and tolerance factors. Overall, significance of the regression
model was assessed using the test statistics of standardized (
b
) co-efficients, standard
error of the co-efficient, Fand adjusted R
2
. A final moderated multiple regression
(MMR) analysis was used to test H2a-2c after that described in Baron and Kenny
(1986) and later in Aguinis (2004).
According to Hair et al. (1998) a minimum number of 50 observations is required to
conduct a factor and regression analysis. The main problem associated with a small
sample size in statistical analyses described by Hair et al. (1998) and other authors
(Tabachnick and Fidell, 2001) is the inability to detect statistically significant
relationships that only appear in larger samples. Alternatively, larger sample sizes
attract heightened sensitivity in that normally weak relationships can appear more
significant than they would in a smaller sample. Techniques can be used to add confidence
to the statistical findings arising from a regression analysis ora MMR analysis on a small
sample size. These include an additional methodology such as qualitative interviews or
case studies either pre-survey or post and confining the number of variables in any
analysis to a minimum number so as to maximize the degrees of freedom (Hair et al., 1998).
Although small sample sizes suffer from problems of generalisability and low statistical
power, any highly significant relationships found during an appropriate statistical
analysis often can prove more robust than when found in a large and statistically sensitive
sample (Hair et al., 1998; Tabachnick and Fidell, 2001).
Description
Factor loadings
(rotated) MSA
Cronbach
a
Bartlett’s
test
1. Our major customer requires us to achieve
ISO14000 certification 0.923 0.663 0.762 p,0.001
2. Our major customer has a clear policy statement
on their commitment to the environment 0.847
3. Our major customer would withhold our supply
contract if we did not meet their environmental
performance requirements 0.677
Table III.
Extracted scale for
customer’s environmental
performance
requirements
Investment We dedicate and reserve equipment and capacity specifically to maintain this
relationship
Contracts We have signed an extensive agreement (or contract) with this customer
specifying price, quality and lead-time
Assessment This customer assesses our operations (e.g. questionnaire) from time to time
Table IV.
Individual moderator
variables
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Results
The primary relationship which is proposed between the main construct supplier’s
environmental commitment and customer’s environmental focus is articulated through
H1. The results of the regression analysis for H1 are shown in Table V. In Table V,
standardized co-efficients and adjusted R
2
values are provided to describe the results
of the analysis.
The results of the regression analysis show no statistically significant relationship
between the supplier’s level of environmental commitment and the customer’s
environmental performance requirements. At the item-specific level, one variable
contributed most of the predicted variance in the relationship between the
supplier’s environmental commitment and customer’s environmental performance
requirements supplier certification to ISO14001 with the remaining two items
predicting much less.
The second stage of the analysis involved including a series of condition variables
as moderators of the primary relationship described by H1. Using MMR analysis, the
results of this analysis which describes and tests H2a-2c is shown in Table VI.
In Table VI, standardized co-efficients are shown for the regression analysis for
each of the moderator variables Investment (H2a), Contracts (H2b) and Assessment
(H2c) along with adjusted R
2
values, change in adjusted R
2
values between the
un-moderated and moderated models and the Fstatistic.
Environmental
commitment
Independent construct
b
Adj. R
2
Customer’s environmental performance requirements
Customer requires us to achieve ISO14000 certification 0.314 0.063
Customer has a clear policy statement on their commitment
to the environment 0.075
Customer would withhold our supply contract if we did not
meet their environmental performance requirements 20.048
Notes:
*p,0.05; **
p,0.01; ***
p,0.001. Standardised co-efficients are shown as
b
values
Table V.
Testing H1 – regression
analysis of environmental
commitment and
customer’s environmental
performance
requirements
Environmental commitment (Y)
Environmental performance
requirements (X)
Moderator variables (Z) DR
2
Fstatistic
Investment: we dedicate and reserve equipment and
capacity specifically to maintain this relationship 0.104 7.15 **
Contracts: we have signed an extensive agreement
(or contract) with this customer specifying price,
quality and lead-time 0.015 0.87
Assessment: this customer assesses our operations
(e.g. questionnaire) from time to time 0.028 1.59
Notes:
a
p,0.1; *p,0.05; **
p,0.01; ***
p,0.001. Standardised co-efficients are shown as
b
values
Table VI.
Testing H2a,2b and 2c
MMR analysis of
customer’s environmental
performance
requirements when
moderated by
relationship conditions
Greening the
automotive
supply chain
41
In the MMR analysis, the primary regression relationship between the environmental
commitment construct and the customer’s environmental performance requirement
construct becomes statistically significant for the Investment model (change in adjusted
R
2
is significant at p,0.001) but not for the Contracts or Assessment models.
Discussion
As other authors have described, the environmentally committed organization can be
more reliably considered to have well-developed systems and practices of
environmental management, have higher levels of environmental performance and
be more likely to respond to its customer’s environmental performance requirements.
For the customer’s environmental performance requirements, the presence of
Investment between the customer and the supplier provided a significant influence on
the response of the supplier to its customer’s needs. In the analysis a measure of
transaction-specific investment or asset-specificity (termed Investment) was provided
by the item We dedicate and reserve equipment and capacity specifically to maintain
this relationship. This represented sunk assets for the supplier that as they were
increased, also decreased their value as re-deployable assets. In the relationship
between the customer’s environmental performance requirements and the supplier’s
environmental commitment, the Investment condition as a moderator proved highly
significant as a predictor of variance in the environmental commitment construct
(significance of the change in adjusted R
2
value – p,0.01).
The influence of the customer’s environmental performance requirements on the
supplier’s level of environmental commitment was not significant unless specific
customer-supplier relationship conditions were also present to moderate the supplier’s
response. The customer’s environmental performance requirements were not
accommodated in a homogenous manner across all customers as might have been
expected from the findings described by previous research, but were instead dealt with
by the supplier in a more heterogeneous manner according to the importance of the
customer-supplier relationship.
In the absence of customer-supplier relationship conditions that is without
any “legitimacy” for the customer’s environmental performance requirements, as
assessed by the supplier the relationship described by hypothesis H1 was not
significant.
The process of supplier performance improvement can often involve a long-term
cooperative effort by the customer including new equipment, supplier training and
deployment of customer staff into the supplier’s plant. It can also take a low
involvement form whereby the customer relies on the competitive force of the market
to extract performance improvement (Krause et al., 2000; Scannell et al., 2000;
Handfield et al., 2000).
Going back to Williamson (1975) and the original transaction cost framework it is
the existence of either transaction-specific investments and/or contracts that both
minimises supplier opportunism from the customer’s perspective and has positive
performance implications for the relationship. As described in the literature review,
higher levels of asset specificity between the customer and supplier have been found
by other authors to lead to positive performance gains for both firms involved in the
exchange (Dyer, 1997; Handfield and Bechtel, 2002).
IJOPM
27,1
42
The findings described in this study support the importance of asset-specific
investments in the relationship between a customer’s environmental performance
requirements and their potential to improve the supplier’s commitment to its
environmental responsibilities. Without Investment the supplier appears much less
likely to be responsive to the customer’s requirements for environment-related
performance improvements.
These findings are supported by observations made during earlier discussions with
operations managers in Australian automotive component supplier firms such that
suppliers were desirous of emulating or adopting their customer’s environmental
practices especially where the supply relationship was described by the supplier as
being most critical to their firm’s survival.
Conclusions and further research
Encapsulating environmentally relevant goals, practices or technologies within supply
requirements bears significant potential for large organizations to impart new
knowledge to their under-resourced suppliers. It provides a modus for organizations to
extend their goals of corporate social responsibility, communicate their commitment
to such goals and provide a leadership role to their suppliers.
The major finding of this research was that the customer’s environmental
performance requirements can have a positive influence on a supplier’s strategic level
of commitment toward its environmental responsibilities. The presence of relationship
conditions that promote greater levels of financial commitment between the supplier
and the customer relationship-specific investment is expected to increase this
influence. Increasing levels of the supplier’s strategic environmental commitment is in
turn expected to have a positive impact on the supplier’s environmental performance.
A practical application of these findings may be that customers consider the
application of any program of green-supply in a hierarchical manner such that critical
or strategic suppliers receive more intensive assistance or development with their
environmental performance. Non-strategic suppliers, particularly those that provide
more commodity goods or are sourced on a market basis, could be required to certify to
a basic level of compliance such as an industry management standard (ISO14001). This
provides the customer with a minimum assurance of risk management and
environmental performance without the associated transactional investment. At a less
tangible level our study suggests that customers should remain conscious of the old
adage “Do as I say and not as I do” such that suppliers may become less responsive to
the customer’s environmental performance requirements where the customer does not
demonstrate a level of commitment toward its environmental performance that
exceeds its own requirements for the supplier.
Ideally a customer intending to upgrade the environmental performance of its
suppliers could consider that its suppliers are initially likely to wait for the customer to
determine their environmental responsibilities for them. With time these suppliers will
develop these competencies and determine their own strategies or responsibilities. The
customer’s goal for those organizations involved in its supply chain should be at a
minimum, to reduce their overall waste burden or generation of pollution in both
hazardous and non-hazardous forms. This has a dual purpose of both decreasing the
organization’s actual or potential impact on the environment and also reducing costs
for supply chain stakeholders.
Greening the
automotive
supply chain
43
The exploratory nature of this study has provided for the development of a more
rigorous conceptual model that may be applied to further studies of the implications of
supply greening. Of particular interest will be the use of the revised model and
hypotheses to a larger sample size or different industry. Many additional questions still
remain surrounding the relationship factors that might support, influence or degrade
any customer or supplier-driven program of supply greening. This study has been able
to provide some empirical support for a number of potential new theories in a large and
under-developed field of research. Customer-driven programs of green-supply remain a
potentially powerful tool for reducing the environmental impacts of product supply
chains in addition to the influence that other non-financial stakeholders (government,
community, employees) may have.
Limitations
The conduct of this research is limited to the Australian automotive industry and its
constituents. Although this industry is populated by a number of global assemblers
and many organizations supplying internationally, the study’s participants operated
and resided within the Australian cultural context. Equally, this industry operates and
supplies almost entirely toward the provision of only automotive goods. The analysis
and findings of this research should be considered with respect to this context.
The quantitative findings describe the results of an analysis based on
55 organizations that responded to an industry-wide survey (out of a possible
397 organizations). Whilst it is still possible to detect significant effects and make
reasonable assumptions with respect to hypotheses with a sample of this size, it limits
the ability to establish any causality or more complex relationship (i.e. mediation or
path models). Equally the sample size is too small to analyze any more complex
scenarios such as a path scenario or latent constructs. The techniques used aim to
explore basic relationships and maximize confidence in the potential for causality only.
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Corresponding author
Dayna Simpson can be contacted at: dsimpson@unimelb.edu.au
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... Widespread concerns in recent times over climate change impacting on manufacturing, transport and supply chains have seen a greater sense of urgency for adaptive change in GreenSCM literature (Cousins, Lamming, & Bowen, 2004;Geyer & Jackson, 2004;Bansal, 2005;Handfield, Sroufe & Walton, 2005;Hervani, Helms & Sarkis, 2005;Power, 2005;Preuss, 2005, Rao & Holt, 2005Zhu, Sarkis & Geng, 2005;Vachon & Klassen, 2006;Simpson, Power & Samson, 2007;Kolk & Pinkse, 2007;Lee, 2008;and Walker, Di Sisto & McBain, 2008). To encapsulate recent Green SCM trends, the following section outlines key findings from these GreenSCM academic publications from 2004 to 2008. ...
... Some important themes of 2007 concerned the significance of customers as green supply chain drivers (Simpson et al, 2007) (government, community, employees (p. 44)." (2007) purported that a company's environmental strategy was in influenced highly by key stakeholders in control of critical resources. ...
... Table 1 provides a chronological flow of recent conceptual thinking on GreenSCM leading to the present through articles by authors Cousins et al (2004), Geyer and Jackson (2004), Rao and Holt (2005) Simpson et al (2007), Kolk and Pinske (2007), Lee (2008), and Walker et al (2008) Place Table 1 ...
... This scale has been used by several other authors (e.g. Demeter, Simpson, Power, & Samson, 2007;Lai & Wong, 2012) proving good with respect to internal validity. In particular, we asked respondents to rate how stakeholder pressures influence the firm's environmental management practices, specifically related to employees, customers, regulators, competitors, and the community, on a four-point scale (1 not at all; 5 to a greater extent). ...
... In addition, Ellram et al. (2008) emphasize that the relationship between the customers and the manufacturers can lead to sustainable organizational performance. Simpson et al. (2007) added that the collaboration level of customers has a significant relationship with environmental and social sustainability performance. Similarly, researchers such as Chang and Taylor (2016) and Joo and Shin (2017) found a significant relationship between customer involvement and sustainable performance. ...
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The growing competition within manufacturing practices has motivated organizations to upgrade their conventional production system to smart, sophisticated systems. This study evaluates the impact of lean manufacturing practices (LMP) and industrial revolution 4.0 technologies on sustainability in the food and beverages industry. Past literature has revealed that lean practices significantly affect sustainable performance. However, the integrated effects of lean manufacturing practices and IR 4.0 technologies on sustainable performance have not been examined empirically. In order to fill the void of this gap, this study intends to have a preliminary investigation of the combined effects of LMP and IR 4.0 technologies on sustainable performance, specifically in the food and beverages industry. Furthermore, the study aims to confirm the future direction of the food industry that is recently employing new technologies in its manufacturing systems. This study is underpinned by the theories of contingency and practice-based view by highlighting the contributions of operations management practices to implement successful strategies in enhancing sustainability performance in food and beverages companies through performance variations. This study extends the current literature on IR 4.0 technologies and lean manufacturing practices as enablers of economic, environmental, and social sustainability. Also, the study provides implications and future direction for industry consultants, practitioners, and academicians.
... In addition, Ellram et al. (2008) emphasize that the relationship between the customers and the manufacturers can lead to sustainable organizational performance. Simpson et al. (2007) added that the collaboration level of customers has a significant relationship with environmental and social sustainability performance. Similarly, researchers such as Chang and Taylor (2016) and Joo and Shin (2017) found a significant relationship between customer involvement and sustainable performance. ...
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The growing competition within manufacturing practices has motivated organizations to upgrade their conventional production system to a smart, sophisticated systems. This study evaluates the impact of lean manufacturing practices (LMP) and industrial revolution 4.0 technologies on sustainability in the food and beverages industry. Past literature has revealed that lean practices significantly affect sustainable performance. However, the integrated effects of lean manufacturing practices and IR 4.0 technologies on sustainable performance have not been examined empirically. In order to fill the void of this gap, this study intends to have a preliminary investigation of the combined effects of LMP and IR 4.0 technologies on sustainable performance, specifically in the food and beverages industry. Furthermore, the study aims to confirm the future direction of the food industry that is recently employing new technologies in its manufacturing systems. This study is underpinned by the theories of contingency and practice-based view by highlighting the contributions of operations management practices to implement successful strategies in enhancing sustainability performance in food and beverages companies through performance variations. This study extends the current literature on IR 4.0 technologies and lean manufacturing practices as enablers of economic, environmental, and social sustainability. Also, the study provides implications and future direction for industry consultants, practitioners, and academicians.
Purpose Sustainable supply chain management (SSCM) ensures integration of socially, environmentally and economically feasible practices in entire supply chain. SSCM principles can be implemented to improve efficiency and productivity of a system by different attributes of the system. The purpose of this article is to identify the most appropriate existing (SSCM) framework that can be implemented suitably in Indian smart manufacturing industries. Design/methodology/approach Validity and reliability analysis on the existing SSCM frameworks was carried out with the help of empirical data collected using questionnaire survey methodology from various Indian smart manufacturing organizations. The empirical data were gathered from various experts from top- and middle-level management in different smart manufacturing organizations across the country. Further, factor analysis was carried on the collected data to estimate the unidimensionality of each SSCM frameworks. Cronbach's alpha value was used to assess reliability of each framework. Subsequently, the frequency distribution analysis was done to obtain familiar elements in the segregated frameworks based on validity and reliability analysis. Findings The work observed that only five SSCM frameworks have shown unidimensionality in terms of the elements or constructs. The work further found that these segregated frameworks have not shown sufficiently high level of reliability. Additionally, this work attempted frequency distribution analysis and observed that there were very few elements which were being repeatedly used in numerous frameworks proposed by researchers. Based on the findings of this work, the work concluded that there is acute need of a new SSCM framework for Indian smart manufacturing industries. Research limitations/implications This study gathered empirical data from 388 Indian smart manufacturing organizations. Thus, before generalizing the findings of the study across the sectors, there is a possibility of some more explication. Originality/value The main purpose of this article is to explore the feasibility of the existing SSCM frameworks in Indian smart manufacturing sector. The study also assumes that the manufacturing managers and executives may have the complete understanding on the existing sustainable manufacturing frameworks and a chance to executing proper suitable framework in the respective manufacturing organization.
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In this paper, we use the term “co-opetition” to describe situations where competitors collaborate on value-creating activities to reduce their R&D costs, improve expensive development processes, increase the effectiveness and efficiency of their green product development, and increase supply chain sustainability. We use a game-theoretic approach to see how co-opetition affects the price and environmental quality of green products and understand the impact on participating companies. By considering two common collaboration strategies, i.e. investment sharing and innovation sharing, and comparing them with a non-collaborative strategy, independent development, we are able to provide competing firms with managerial insights on the pros and cons of these collaboration strategies. We find that the innovation sharing strategy produces the most expensive products, as well as the products with the highest environmental quality. Additionally, we find that the independent development and investment sharing strategies can lead to products with inferior environmental quality, depending on the competitors’ demand sensitivity to their quality and price. When the consumers’ quality responsiveness is relatively greater than their price responsiveness, the independent development strategy should be avoided. Furthermore, the innovation sharing strategy provides the highest profits for the firm, whereas the independent development strategy leads to the lowest profits. Lastly, numerical experiments illustrate that the outcomes of collaborative strategies are robust under demand uncertainty, but not necessarily under nonlinear demand.
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A key strategic challenge for buying firms is to extend environmental management across the supply chain. This requires a strong environmental commitment on the suppliers' side. Adopting the supplier perspective, this study employs regression analysis with bootstrapping procedures to examine a contingent causal process model of the influence that two major green supply chain management practices widely adopted by buying firms in their relationships with suppliers, t, environmental assessment and environmental collaboration, exert on supplier environmental commitment, and the moderating effects of supplier perceived relationship attractiveness and supplier perceived justice. Results from a survey of 237 Chinese suppliers across multiple industries reveal that, while environmental collaboration positively influences supplier environmental commitment, the impact of environmental assessment is not significant. However, our moderation analysis shows that supplier perceived relationship attractiveness has a positive moderating effect on the influence exerted on supplier environmental commitment by both environmental assessment and collaboration, and our moderated moderation analysis reveals that both the above moderating effects are in turn positively moderated by supplier perceived justice. Focusing on the role of suppliers' perceptions, the study sheds light on the psychological context of the suppliers' choice to commit to the environmental management initiatives of their buying counterparts.
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Purpose The purpose of this paper is to investigate the potential synergy between companies’ sustainable supply chain management (SSCM) activities and their supply chain resilience (SCRES). The authors propose hypotheses about the impact of buying companies SSCM activities on the inflicted damage by unexpected supply chain disruptions and the recovery time afterwards and test these empirically using data from companies during the global COVID-19 pandemic. Design/methodology/approach The authors investigate a sample of 231 of the largest publicly traded companies in the European Union with 4.158 firm-year observations. For the analysis, the authors generate variables capturing the companies’ intensity and years of experience of their SSCM activities targeted at the supply chain and run regression analyses on the inflicted damage due to the COVID-19 pandemic and the recovery time after the disruption. Findings Buying companies’ SSCM activities have a positive effect on their SCRES. The damage inflicted by unexpected supply chain disruptions is lower when companies have higher levels of SSCM and longer experience with it. The recovery time afterwards is significantly reduced by longer experience with SSCM efforts. Research limitations/implications The authors suggest SCRES is reinforced by transparency, situational awareness, social capital and collaboration resulting from companies SSCM activities translate into increased SCRES. Practical implications The authors show that companies with superior SSCM are more resilient in a crisis and conclude that, therefore, companies should invest in SSCM to prevent future supply disruptions. Originality/value To the best of the authors’ knowledge, this is the first empirical study analyzing a data set of multi-industry companies, linking their SSCM activities to SCRES during the pandemic.
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Purpose The growing relevance of environmental sustainability calls for identification of factors that contribute to green innovation and build green corporate reputation. Drawing on the resource-based view theory, this study aims to explore the influence of green logistics knowledge, green customer knowledge, green supplier knowledge, green competitor knowledge, non-supply chain learning on green innovation and green corporate reputation. Design/methodology/approach This study adopts the quantitative research method where questionnaire is used to gather data from managers of the sampled 208 small and medium enterprises (SMEs). The structural equation modelling is used to analyse the survey data and test the proposed hypotheses. Findings The findings reveal that non-supply chain learning, green customer knowledge and green competitor knowledge have both direct and indirect impact on green innovation and green corporate reputation. However, green supplier knowledge and green logistics knowledge directly impact green innovation but indirectly impact green corporate reputation through green innovation. Originality/value Despite the growing literature exploring the relationship between learning, innovation and reputation, their literature in emerging economies remains underdeveloped. This study provides empirical evidence to confirm the role of non-supply chain learning and green supply chain knowledge in building green corporate reputation and developing green innovation of SMEs in an emerging economy.
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This article analyzes survey data to explore how companies with specific supplier development programs overcame common pitfalls in assisting their suppliers improve their performance. The authors provide a process map for deploying supplier-development initiatives. After identifying critical commodities and suppliers, a cross-functional team meets with top managers at the supplier firms to discuss areas of improvement as well as key metrics and cost-sharing mechanisms needed to evaluate the success of the effort. Lastly, firms need to monitor and modify their supplier development strategies, as appropriate. The survey data indicate that organizations generally experience three types of pitfalls, mostly in the final stages of the process. Supplier-specific pitfalls stem from a lack of initial commitment. Companies can avoid these by using evaluation systems that compare measurements and performance among suppliers, holding kaizen events at supplier sites, identifying cost-saving opportunities through target pricing, and designating a supplier employee to ensure that buyer-supplied training is put into practice. Tying a supplier's performance improvement to receiving future orders is a particularly dramatic way to get the attention of managers at a supplier. Same buyers also offer their resources to suppliers, such as providing personnel support for some period of time to improve operations or building training centers for supplier use. Buyer-specific pitfalls also stem from a lack of commitment. Consolidating purchases to one or a few suppliers is one approach to creating the volume needed to justify investing in a supplier-development effort with the remaining suppliers. Examining how these suppliers impact the quality of products or using total-cost-of-ownership data can yield further proof of the benefits of supplier development. Buyer-supplier interlace pitfalls originate in the areas of trust, alignment, and communication. Although written contracts may be important, some buyers rely more on close relationships rather than on contracts to build trust. Others use "expectation road maps" to tell suppliers where they are going and better ensure buyer/supplier alignment. Financial incentives, "designed in" supplier products, and expected contract renewal are also incentives for gaining a supplier's commitment to a supplier-development effort.
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In this article, we attempt to distinguish between the properties of moderator and mediator variables at a number of levels. First, we seek to make theorists and researchers aware of the importance of not using the terms moderator and mediator interchangeably by carefully elaborating, both conceptually and strategically, the many ways in which moderators and mediators differ. We then go beyond this largely pedagogical function and delineate the conceptual and strategic implications of making use of such distinctions with regard to a wide range of phenomena, including control and stress, attitudes, and personality traits. We also provide a specific compendium of analytic procedures appropriate for making the most effective use of the moderator and mediator distinction, both separately and in terms of a broader causal system that includes both moderators and mediators. (46 ref) (PsycINFO Database Record (c) 2012 APA, all rights reserved)
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Over the past decade, transaction cost theory (TCT) has received considerable attention from researchers in various disciplines of business. Unfortunately, the rich theoretical base of TCT has seen limited application in the operations and supply chain management research. This article seeks to change that by providing a cogent synthesis of TCT, its assumptions, constructs, and propositions. It also summarizes existing empirical work in management and other disciplines that draws from the TCT perspective and examines relationships in manufacturing organizations. A measurement model of transaction costs is subsequently presented using data from 203 manufacturing firms in the OEM electronics industry. Guidelines and recommendations for researchers are then presented regarding both the uses of the theory and its measurement. It is hoped that this study will stimulate work in the important areas of inter‐firm relationships that draw from this rich but underutilized theoretical lens, and thereby add another perspective to the knowledge base in related areas of the operations and supply chain management fields.
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This study examines the definition of theory and the implications it has for the theory‐building research. By definition, theory must have four basic criteria: conceptual definitions, domain limitations, relationship‐building, and predictions. Theory‐building is important because it provides a framework for analysis, facilitates the efficient development of the field, and is needed for the applicability to practical real world problems. To be good theory, a theory must follow the virtues (criteria) for ‘good’ theory, including uniqueness, parsimony, conservation, generalizability, fecundity, internal consistency, empirical riskiness, and abstraction, which apply to all research methods. Theory‐building research seeks to find similarities across many different domains to increase its abstraction level and its importance. The procedure for good theory‐building research follows the definition of theory: it defines the variables, specifies the domain, builds internally consistent relationships, and makes specific predictions. If operations management theory is to become integrative, the procedure for good theory‐building research should have similar research procedures, regardless of the research methodology used. The empirical results from a study of operations management over the last 5 years (1991–1995) indicate imbalances in research methodologies for theory‐building. The analytical mathematical research methodology is by far the most popular methodology and appears to be over‐researched. On the other hand, the integrative research areas of analytical statistical and the establishment of causal relationships are under‐researched. This leads to the conclusion that theory‐building in operations management is not developing evenly across all methodologies. Last, this study offers specific guidelines for theory‐builders to increase the theory's level of abstraction and the theory's significance for operations managers.
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As customers, the public and other stakeholders are increasingly demanding that manufacturing firms improve their approach to environmental management, some plants have moved to develop an orientation that is increasingly proactive. Synthesizing earlier,research, environmental management orientation is defined here to include system analysis and planning, organizational responsibility, and management controls. The relationship between a proactive orientation and two sets of internal factors, specifically the personal views of plant managers and plant-specific characteristics, was tested using survey data from the furniture industry. The production outlook for the plant was critical, with a favorable outlook fostering a more proactive environmental management, orientation. After controlling for plant-specific factors, personal views also were influential; an increasing emphasis on short-term economic value was related to a more reactive plant-level orientation. Thus senior corporate management can foster strong plant-level environmental management through a more balanced emphasis on economic and ethical values and continued investment in a plant's long-term viability.
Chapter
This chapter proposes a model describing why firms should invest in environmental supply chain innovation or ‘green supply’ activities. It argues that large high profile companies are under pressure from a wide range of stakeholders to improve their environmental performance. In contrast, small supplier firms are under less pressure, but are highly influenced by the demands of their customers. The model attempts to demonstrate that customer firms invest in environmental supply chain innovation because suppliers with poor environmental practices can expose the customer firm to high levels of environmental risk. However, implementation is dependent upon environmental pressure, firm capabilities and the degree to which customer firms are able to control their suppliers. The model is illustrated with a case study of UK supermarket retailer J Sainsbury Plc and five of their suppliers conducted over a four-year period in the late 1990s.
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Researchers and policy-makers have become increasingly enthusiastic about greening purchasing and supply management activities. In theory, greening supply should both limit environmental damage from industrial activities and deliver bottom-line benefits to implementing firms. However, compared with other environmental initiatives, few firms have implemented extensive green supply programmes. This paper seeks to resolve the apparent paradox between the desirability of green supply in theory and the slow implementation of green supply in practice. Using data from a recent series of interviews and a questionnaire in the UK, we examine the green supply practices adopted by particular types of firm and their performance implications. We cluster the operating units in our sample into four archetypal groups of green supply adopters and examine the characteristics of each group. We conclude that explaining the gap between the theory and practice of green supply requires looking beyond the aggregate pattern across firms. Firms are not ignoring the potential private benefits from green supply. On the contrary, they are rational actors playing to their own strengths and designing appropriate packages of green supply activities within their own corporate environmental, procurement and performance contexts.