Supply Chain Management

Operations Management: Processes and
Supply Chains
Thirteenth Edition, Global Edition
Chapter 15
Supply Chain Sustainability
Copyright © 2022 Pearson Education Ltd

Learning Goals (1 of 2)
15.1 Define the three elements of supply chain

sustainability.
15.2 Explain the reverse logistics process and its
implications for supply chain design.
15.3 Show how firms can improve the energy efficiency of
their supply chains by using the nearest neighbor (NN)
heuristic for logistics routes and determining the effects of
freight density on freight rates.

Learning Goals (2 of 2)
15.4 Explain how supply chains can be organized and

managed to support the response and recovery operations
of disaster relief efforts.
15.5 Describe the ethical issues confronting supply chain
managers.
15.6 Explain how a firm can manage its supply chains to
ensure they are sustainable.

What is Sustainability?
• Sustainability
– A characteristic of processes that are meeting
humanity’s needs without harming future generations

Sustainability
• Sustainability Challenges
– Environmental protection
– Productivity improvement
– Risk minimization
– Innovation

Supply Chains and Sustainability
Figure 15.1 Supply Chains and Sustainability

The Three Elements of Supply Chain
Sustainability
• Financial Responsibility
• Environmental Responsibility
– Reverse Logistics
– Efficiency
• Social Responsibility
– Disaster Relief Supply Chains
– Ethics

Humanitarian Logistics
• Humanitarian Logistics
– The process of planning, implementing and
controlling the efficient, cost-effective flow and
storage of goods and materials, as well as related
information, from the point of origin to the point of
consumption for the purpose of alleviating the
suffering of vulnerable people.

Reverse Logistics (1 of 2)
• Reverse Logistics
– The process of planning, implementing and
controlling the efficient, cost-effective flow of products,
materials, and information from the point of
consumption back to the point of origin for returns,
repair, remanufacture, or recycling.

Closed-Loop Supply Chain
• Closed-Loop Supply Chain

– A supply chain that integrates forward logistics with
reverse logistics, thereby focusing on the complete
chain of operations from the birth to the death of a
product.

Flows in a Closed-Loop Supply Chain
Figure 15.2 Flows in a Closed-Loop Supply Chain

Reverse Logistics (2 of 2)
• Financial Implications
– Fee
– Deposit fee
– Take back
– Trade-in
– Community programs

Energy Efficiency
• Carbon footprint
– The total amount of greenhouse gasses produced to
support operations, usually expressed in equivalent
tons of carbon dioxide (CO2)

Transportation Distance
• Route Planning
– Shortest route problem
▪ Find the shortest distance between two cities in a
network or map
– Traveling salesman problem
▪ Find the shortest possible route that visits each city
exactly once and returns to the starting city

Nearest Neighbor Heuristic
• Steps
1. Start with the city that is designated as the central location. Call
this city the start city. Place all other cites in an unvisited set.
2. Choose the city in the unvisited set that is closest to the start city.
Remove that city from the unvisited set.
3. Repeat the procedure with the latest visited city as the start city.
4. Conclude when all cities have been visited, and return back to
the central location.
5. Compute the total distance traveled along the selected route.

Four-City Traveling Salesman Problem
Figure 15.3 Four-City Traveling Salesman Problem

Example 1 (1 of 10)
• Hillary and Adams, Inc. is a privately-owned firm located

in Atlanta that serves as the regional distributor of
natural food products for Georgia, Kentucky, North
Carolina, South Carolina, and Tennessee.
• Every week, a truck leaves the large distribution center
in Atlanta to stock local warehouses located in Charlotte,
NC, Charleston, SC, Columbia, SC, Knoxville, TN,
Lexington KY, and Raleigh, NC.
• The truck visits each local warehouse only once and
returns to Atlanta after all the deliveries have been
completed.
Example 1 (2 of 10)
The distance between any two cities in miles is given below:

Example 1 (3 of 10)
• John Jensen, vice president of logistics, is worried about

the rising fuel costs and is interested in finding a route
that would minimize the distance traveled by truck.
• Use the Nearest Neighbor (NN) heuristic to identify a
route for the truck and compute the total distance
traveled.

Example 1 (4 of 10)
• Step 1
– Start with Atlanta and place all other cities in the unvisited
set.
▪ Charleston, Charlotte, Columbia, Knoxville,
Lexington, Raleigh
• Step 2
– Select the closest city to Atlanta in the unvisited set, which
is Knoxville.
– Remove Knoxville from the unvisited set.
– The partial route is now Atlanta-Knoxville which is:
▪ 214 miles

Example 1 (5 of 10)
• Step 3
– Scan the unvisited set for the city closest to Knoxville,
which is Lexington.
– Remove Lexington from the unvisited set.
– The partial route is now Atlanta-Knoxville-Lexington which
is:
▪ 214 + 170 = 384 miles
• Step 4
– Repeat this procedure until all cities have been removed
from the unvisited set.
– Connect the last city to Atlanta to finish the route.

Example 1 (6 of 10)
• Step 5 - Compute the total distance traveled along the
selected route
• Using Nearest Neighbor
– Atlanta
– Knoxville
– Lexington Total distance traveled is:
– Charlotte 214 + 170+ 398 + 93 + 116 + 279 + 435 =
– Columbia 1,705 miles
– Charleston
– Raleigh
– Atlanta
Example 1 (7 of 10)
• Use the Nearest Neighbor heuristic again to see if a

better solution exists:
Charleston – Columbia – Charlotte – Raleigh – Knoxville

– Lexington – Atlanta – Charleston
116 + 93 + 169 + 351 + 170 + 375 + 319 = 1,593 miles

Example 1 (8 of 10)
Charlotte – Columbia – Charleston – Raleigh – Knoxville –
Lexington – Atlanta – Charlotte
93 + 116 + 279 + 351 + 170 + 375 + 244 = 1628 miles

Columbia – Charlotte – Raleigh – Charleston – Atlanta –
Knoxville – Lexington – Columbia
93 + 169 + 279 + 319 + 214 + 170 + 430 = 1674 miles

Example 1 (9 of 10)
Knoxville – Lexington – Atlanta – Columbia – Charlotte –

Raleigh – Charleston – Knoxville
170 + 375 + 225 + 93 + 169 + 279 + 373 = 1684 miles

Lexington – Knoxville – Atlanta – Columbia – Charlotte –
Raleigh – Charleston – Lexington
170 + 214 + 225 + 93 + 169 + 279 + 540 = 1690 miles

Example 1 (10 of 10)
Raleigh – Charlotte – Columbia – Charleston – Atlanta –

Knoxville – Lexington – Raleigh
169 + 93 + 116 + 319 + 214 + 170 + 498 = 1579 miles
Of the 7 routes , the best one starts with Raleigh for a travel
distance of 1579 miles.

Freight Density
• Freight rates are based on the following factors:

1. The freight density
2. The shipment’s weight
3. The distance the shipment is moving
4. The commodity’s susceptibility to damage
5. The value of the commodity
6. The commodity’s loadability and handling
characteristics.

Calculating Break-Even Weight
• To determine the break-even weight between two

adjacent weight breaks, we define the following variables:
x = break-even weight
A = lower weight bracket
B = next highest weight bracket
C = freight rate relative to A
D = freight rate relative to B
(BD )
Break-even weight: x =
C

Weight Breaks and Freight Class ($/cwt)
Table 15.2 Example Matrix of Weight Breaks and Freight

Class ($/CWT)
greater than or equals to 20,000
Class < 500 (l bs) 500 (lbs) 1,000 (l bs) 2,000 (l bs) 5,000 (l bs) 10,000 (l bs)  left20,000
parenthesis(lbs)
parenthesis l b s right
50.00 34.40 28.32 24.25 23.04 17.58 15.74 10.47
55.00 36.94 30.50 26.12 24.82 18.93 17.41 11.58
60.00 39.59 32.69 27.99 26.60 20.29 19.08 12.69
65.00 41.94 34.64 29.66 28.18 21.49 20.27 13.48
70.00 44.64 36.86 31.56 29.99 22.88 21.94 14.59
77.50 48.10 39.72 34.01 32.32 24.65 23.85 15.86
85.00 51.90 42.86 36.70 34.87 26.60 26.24 17.45
92.50 55.89 46.15 39.52 37.56 28.64 28.38 18.87
100.00 60.27 49.77 42.61 40.50 30.89 30.77 20.46

Example 2 (1 of 5)
• One of the products produced by Kitchen Tidy is Squeaky

Kleen, a tile cleaner used by restaurants and hospitals.
Squeaky Kleen comes in 5-gallon containers, each
weighing 48 lbs.
• Currently Kitchen Tidy ships four pallets of 25 units each
week to a distribution center.
• The freight classification for this commodity is 100.
• Table 15.2 (slide 29) shows the freight rates governing
this shipment.

Example 2 (2 of 5)
• In an effort to be environmental responsible, Kitchen Tidy
asked their product engineers to evaluate a plan to convert
Squeaky Kleen into a concentrated liquid by removing some
water from the product which would allow the engineers to
design a smaller container so 50 units can be loaded on each
pallet.
• Each container would weigh only 42 pounds.
• This would reduce the product’s freight density and the reduce
the freight class to 92.5.
• What would the savings in freight costs be from the new
product design?

Example 2 (3 of 5)
• Current Product Design:
Weekly shipment = (Number of pallets)(units per pallet )(pounds
per unit )
= (4)  (25)  ( 48) = 4,800 pounds
– Break-even weight (Freight Class = 100)
(30.89)
(50)  = 38.14 or 3,814 pounds
(40.50)
**The shipment qualifies for the lower freight rate**
– Total weekly shipping cost
(48)  (30.89) = $1,482.72

Example 2 (4 of 5)
• New Product Design:

Weekly shipment = (Number of pallets)(u nits per
pallet)(pounds per unit)
(2)  (50)  (42) = 4,200 pounds
– Break-even weight (Freight Class = 92.5)

(28.64)
(50)  = 38.126 or 3,813 pounds
(37.56)
**The shipment qualifies for the lower freight rate**

Example 2 (5 of 5)
• New Product Design:

– Total weekly shipping cost
(42)  (28.64) = $1,202.88
– Savings = $1,482 − $1,202.88 = $279.84 per week

Transportation Mode (1 of 2)
• Major Modes of Transportation

1. Air freight
2. Trucking
3. Shipping by Water
4. Rail
• Intermodal shipments: mixing the modes of
transportation for a given shipment, such as moving
shipping containers or truck trailers on railcars.

Disaster Relief Supply Chains
• Organizing for Disaster Relief

– Disaster – A serious disruption of the functioning of
society causing widespread human, material, or
environmental losses which exceed the ability of the
affected people to cope using only its own resources.
▪ Human-related
▪ Natural
▪ Some allow for more planning time than others
▪ All put pressor on relief operations

Humanitarian Supply Chain Operations
Figure 15.4 Humanitarian Supply Chain Operations

Managing Disaster Relief Operations (1 of 3)
• Understand that the timetable and ultimate customer for a

supplier changes rapidly.
• Design the supply chain to link the preparation activities
to the initial response activities and the recovery
operations.
• Link disaster relief headquarters with operations in the
field.

• Life Cycle of Disaster Relief
1. Brief needs assessment
2. Development of initial supply chains for flexibility
3. Speedy distribution of supplies to the affected regions
based on forecasted needs
4. Increased structuring of the supply chain as time
progresses: supplies arive by fixed schedule or on request
5. Dismantling/turning over of the supply chain to local
agencies.

• Supply Chain Management Challenges

– Design implications
– Command and control
– Cargo security
– Donor independence
– Change in work flow
– Local infrastructure
– High employee turnover
– Poor communication

Supply Chain Ethics (1 of 4)
• Buyer-Supplier Relationships
• Facility Location
• Inventory Management

• SA8000:2014
1. Child Labor
2. Forced or Compulsory Labor
3. Health and Safety
4. Freedom of Association and Right to Collective Bargaining
5. Discrimination
6. Disciplinary Practices
7. Working Hours
8. Remuneration
9. Management Systems

• Examples of Unethical Activities

– Revealing confidential bids and allowing certain
suppliers to rebid
– Making reciprocal arrangements whereby the firm
purchases from a supplier who in turn purchases from
the firm
– Exaggerating situations to get better deals
– Using company resources for personal gain

• Facility Location
– May affect the natural environment
– Energy efficiency
– Need to balance financial and environmental
responsibilities
• Inventory Management
– Just-in-time (JIT) system
– Periodic review system (P-system)
– These may increase inventory costs to the firm
Managing Sustainable Supply Chains (1 of 3)
• ISO 14001:2004: a series of environmental standards

developed and published by the International
Organization of Standardization.
• Areas covered include:
– Environmental Management System
– Environmental Performance
– Environmental Labeling
– Life-Cycle Assessment

• ISO 26000:2010: a series of international guidelines to help
organizations effectively assess those social responsibilities
that are relevant and significant to their mission and vision
• Key underlying principles:
– Accountability
– Transparency
– Ethical behavior
– Respect for stakeholder interests
– Respect for the rule of law
– Respect for international norms of behavior
– Respect for human rights
1. Develop a sustainable supply chain framework.

2. Gather data on current supplier performance and use
that information to screen potential new suppliers.
3. Require compliance across all business units.
4. Engage in active supplier management utilizing ethical
means.
5. Provide periodic reports on the impact that supply
chains have on sustainability.

Supply Chain Management

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Operations Management: Processes and

Copyright © 2022 Pearson Education Ltd

15.1 Define the three elements of supply chain

Copyright © 2022 Pearson Education Ltd

15.4 Explain how supply chains can be organized and

Copyright © 2022 Pearson Education Ltd

Copyright © 2022 Pearson Education Ltd

Copyright © 2022 Pearson Education Ltd

Copyright © 2022 Pearson Education Ltd

Copyright © 2022 Pearson Education Ltd

Copyright © 2022 Pearson Education Ltd

Copyright © 2022 Pearson Education Ltd

• Closed-Loop Supply Chain

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Copyright © 2022 Pearson Education Ltd

Copyright © 2022 Pearson Education Ltd

Copyright © 2022 Pearson Education Ltd

Copyright © 2022 Pearson Education Ltd

Copyright © 2022 Pearson Education Ltd

• Hillary and Adams, Inc. is a privately-owned firm located

Copyright © 2022 Pearson Education Ltd

• John Jensen, vice president of logistics, is worried about

Copyright © 2022 Pearson Education Ltd

Copyright © 2022 Pearson Education Ltd

Copyright © 2022 Pearson Education Ltd

• Use the Nearest Neighbor heuristic again to see if a

Charleston – Columbia – Charlotte – Raleigh – Knoxville

Copyright © 2022 Pearson Education Ltd

93 + 116 + 279 + 351 + 170 + 375 + 244 = 1628 miles

93 + 169 + 279 + 319 + 214 + 170 + 430 = 1674 miles

Copyright © 2022 Pearson Education Ltd

Knoxville – Lexington – Atlanta – Columbia – Charlotte –

170 + 375 + 225 + 93 + 169 + 279 + 373 = 1684 miles

170 + 214 + 225 + 93 + 169 + 279 + 540 = 1690 miles

Copyright © 2022 Pearson Education Ltd

Raleigh – Charlotte – Columbia – Charleston – Atlanta –

169 + 93 + 116 + 319 + 214 + 170 + 498 = 1579 miles

Copyright © 2022 Pearson Education Ltd

• Freight rates are based on the following factors:

Copyright © 2022 Pearson Education Ltd

• To determine the break-even weight between two

Copyright © 2022 Pearson Education Ltd

Table 15.2 Example Matrix of Weight Breaks and Freight

50.00 34.40 28.32 24.25 23.04 17.58 15.74 10.47

55.00 36.94 30.50 26.12 24.82 18.93 17.41 11.58

60.00 39.59 32.69 27.99 26.60 20.29 19.08 12.69

65.00 41.94 34.64 29.66 28.18 21.49 20.27 13.48

70.00 44.64 36.86 31.56 29.99 22.88 21.94 14.59

77.50 48.10 39.72 34.01 32.32 24.65 23.85 15.86

85.00 51.90 42.86 36.70 34.87 26.60 26.24 17.45

92.50 55.89 46.15 39.52 37.56 28.64 28.38 18.87

100.00 60.27 49.77 42.61 40.50 30.89 30.77 20.46

Copyright © 2022 Pearson Education Ltd

• One of the products produced by Kitchen Tidy is Squeaky

Copyright © 2022 Pearson Education Ltd

Copyright © 2022 Pearson Education Ltd

Copyright © 2022 Pearson Education Ltd

• New Product Design:

– Break-even weight (Freight Class = 92.5)

Copyright © 2022 Pearson Education Ltd

• New Product Design: